New Condo Investors in Toronto Face Growing Risk that Rent Won’t Cover Expenses

This is an interesting article on the carrying costs of residential condominiums.  The underlying message is that carrying costs including realty taxes, maintenance fees and debt service are now higher for investors as property value and interest rate increases are rising faster than rental rates.

There are many other investment vehicles available for Real Estate investors including mixed use and multi-residential properties that offer better returns.  Although these types of investment require a little more management, I expect they won’t be subject to the same risk as the resiendital condo market.
Read the CBC article here, or here for Globe and Mail Subscribers.

King Street Pilot Data Seemingly Contradicts Complaints From Business Owners

Toronto officials say data from debit- and credit-card machines show total consumer spending inside the city’s King streetcar-priority zone is in line with the rest of the city – even though some King Street restaurateurs complain the pilot project is killing their businesses.

 

 

Business owners in the area have teamed up to protest the pilot project, saying it drives their customers away. Data analysis by the city tries to prove these claims unfounded, considering seasonal factors and a particularly cold January, but does this take business demographics into consideration? Some businesses rely heavily on available street parking and don’t see as much business from pedestrian traffic, while others strive under the new pilot.

In either case, streetcar traffic on King Street has undeniably improved, with 25 percent more riders during the morning rush, 27 percent more in the evening, and 16 percent more riders overall.

Read the full article from the Globe and Mail

Evaluating Creditworthiness

 

In the many strip malls  nationwide, owners might deal with one supermarket or big box store – a rated tenant – and dozens of smaller businesses that are non-rated tenants.

Although nonrated tenants such as restaurants, nail salons, boutiques, and office tenants may be creditworthy, no existing methods consistently and accurately rate these tenants. As with banking, real estate leasing does not have foolproof strategies to make credit decisions.

Despite the lack of a credible rating process to judge credit, landlords execute leases with nonrated tenants every day. In fact, these tenants make up the vast majority of commercial leasing tenants

How do you determine creditworthiness for a nonrated tenant? What factors should be considered for tenants existing under a larger parent company? Being diligent, mitigating risk, and staying solvent are key to establishing the right agreement with a nonrated tenant.

Read more on the topic here

Real Estate Asset Protection

 

Ownership of real estate has many benefits from an investment and tax standpoint. There is downside risk, however, since the value of real estate holdings may be significant and can be used to cover damages awarded in a lawsuit. Therefore, it’s important to consider asset protection strategies relating to real estate holdings in order to minimize such risk.

This piece covers insurance and best practices for holding real estate and protecting your assets.

Find the full article here

5 reasons to love the Bloor W bike lane project

On Wednesday, May 4th, City Council voted to install a pilot bike lane on Bloor St W, between Shaw St. and Avenue Rd.  The lanes have now been in place for a couple of months.   The pilot will be monitored for 1 year.
Top 5 reasons to build bike lanes on Bloor St even if you don’t ride a bike:

  1. Most patrons of the Bloor Annex don’t drive there. 90% of patrons in the Bloor Annex arrive by walking, cycling or transit.
  2. Customers arriving by bicycle spend more money and increase retail sales. Portland State University researchers found that customers who arrive by bike spend 24% more per month than those who arrive by car. After the construction of a protected bike lane on 9th Ave in New York City, local businesses saw a 49% increase in retail sales.
  3. We can get the city moving. More than 80% of the time, Bloor St has 2 lanes of parking and 2 lanes of car traffic, treating half the roadway like a parking lot. Installing bike lanes would retain those 2 lanes of car traffic and 1 lane of parking. We can give Torontonians more transportation options and get the city moving.
  4. Torontonians want to ride more often. Over 70% of Torontonians would cycle more if infrastructure were improved. People are already biking in droves on Bloor. Adding protected lanes would allow drivers and cyclists to co-exist in their own safe, predictable space.
  5. If you build it, they will come. Study after study demonstrates that after protected bike lanes are installed on main streets, cycling volumes increase significantly. Cycling volumes nearly tripled on Adelaide after protected bike lanes were installed. And motor vehicle volume flows as before.

Here is a link to the on-line article from Cycle Toronto

Cloud based Property Management solutions for do-it-yourself owners.

 

Why Use Property Management cloud based solutions?

As a property owner, you know the name of the game is organization. You have to manage lease applications, rent payments, maintenance requests and listings of vacancies, among other things. Whether you’re using a pen-and-paper manual method or a handful of programs to get the work done, there’s an easier way. Online property management software helps to automate many of your chores. Most rental property management software comes in the software-as-a-service (SaaS) format, which means you don’t need to install software on every computer used in your office. In the cloud-computing environment, all you need is a web browser and an internet connection.

The best property management software is efficient, has features that foster better communication between tenants, owners and property managers, and lets you manage rent and vendor payments all in one place. Propertyware, AppFolio and MRI Software are excellent examples of what to look for in an online property management solution.

Here is a link to a review of the most popular platforms.

 

How are Realty Taxes calculated fo mixed-use buildings in Toronto?

This update is from the City of Toronto Website.

 

2016 Property Tax Rates

Your final 2016 property taxes consist of a City levy, education levy and transit expansion levy.

Residential Properties

The City levy has been calculated by multiplying your property’s 2016 phased-in assessment by the City’s tax rate, as approved by Toronto City Council.

The education levy is calculated by multiplying your 2016 phased-in assessment by the education tax rate, as set by the Province of Ontario.

The transit levy is calculated by multiplying your 2016 phased-in assessment by the transit tax rate, as approved by Toronto City Council.

Multi-Residential, Commercial and Industrial Properties

Properties that are subject to a tax increase will continue to be protected by capping.

The annual allowable tax increase (cap amount) will be calculated based on 5 per cent of the previous year’s Current Value Assessment (CVA) multiplied by the applicable tax rate.

Properties with tax decreases will continue to have a portion of their tax decrease withheld to fund the cap on properties subject to increases.

Here is a link to the City of Toronto Website showing the tax rates for 2016 and information on future targets for reducing rate hikes for commercial properties.

Ontario Gets Failing Grade for Commercial Property Taxes

Nov 24, 2015

property taxes
The Globe and Mail reports that the C.D. Howe Institute has handed out report cards on Canada’s business property taxes – and Ontario gets a failing grade.

The Toronto-based think tank’s third annual business-tax-burden report gave Canada’s biggest province “Fs” for both the simplicity and transparency of its business property tax structure. Prince Edward Island was the only province awarded straight “A’s.”

The study graded provinces as well as the largest city in each province on two matters: How straightforward their tax structures are (the ideal being a single effective tax rate for all business properties, based on valuations no older than the previous year); and how easy it is for prospective investors to find and understand public information on the tax structure.

“Ontario has arguably the most complex, opaque, unaccountable and inequitable provincial [business property tax] regime in Canada,” the report said. “It levies [tax] rates that differ by municipality, by property class within a municipality, by property within a property class and even by component of a single property’s assessment.” It added that Ontario’s structure for assessing property values “results in a constant assessment lag of approximately four years.”

When property and land-transfer taxes are included, the study found that Saskatoon has overtaken Calgary as the city with the lowest overall tax burden on new business investment. Montreal is the highest-taxing city.

 

 

Artscape – Making Housing More Affordable for Artists on Queen W.

Sept. 24, 2015

One of the ugly truths about gentrification is that those that start the process of urban renewal are eventually displaced as the neighbourhood becomes pricier.  This is certainly the case for the artists who were located in the live/work loft buildings in the area known as the Queen West Triangle which area borders Queen W. on the North, Dovercourt on the East and Dufferin to the West.

Known as the SoHo effect, artists living in the area were being threatened to be displaced by new construction condo development.

artscape triangle lofts

Artscape, working with a local organization called Active 18, the City and the condo developer took over the administration of 70 units in the development.  Some were rented out, but for me, the remarkable thing they accomplished was to introduce a mechanism where those in the arts community could buy units at below market prices in order to avoid being displaced.   In order to assure that the buyer of the units do not simply sell them at market value down the road, Artscape instituted a system based on the Option for Homes model, a non-profit program operated in conjunction with the Canadian Mortgage and Housing corporation (CMHC).  Artscape offered the unit to those earning a living as full time artists at market value but with a second mortgage for 25% interest and payment free. In return any increase in value over 5% per annum would be shared equally between the unit holder and Artscape. The second mortgage made the cost of ownership affordable and ensured that the owner of the unit could not sell without Artscape’s consent. Buyer of units must come from Artscape’s waiting list and meet the Artscape criteria which has income thresholds supported by tax documentation (Artscape).

Artscape Trinity Lofts, with the sale of condominium live/work spaces for artists at more affordable prices, was the first project of its kind for Artscape.  Although the original owners just moved in this year, and it is therefore too early to establish how the resale of units will work in practice, it appears that the model will ensure that the arts community will have sustainable affordable housing in the area.

Bathurst Street – Built Form and Land Use Study.

June 10, 2014

The City has been working with stakeholders to come up with a plan to amend the zoning on Bathurst Street to allow for, in some cases, higher density and mixed uses.  The street has been divided up in to 8 different areas that the city feels have unique characteristics.  Different recommendations are being made for each area.

Bathurst Street Study Area

The proposal from City Planning is:

  • Intended to reinforce existing character and function of Bathurst Street
  • Respect and conserve the cultural heritage,
  • Ensure appropriate transition between new development & existing housing &  uses in Neighbourhood Areas
  • Supports fine-grain Pedestrian Shopping Areas in Mixed Use Areas

This can have a major impact on property values on Bathurst Street as well as major arteries in the immediate area. Please contact me to discuss how this could impact your properties value.

City Planning will be recommending draft Official Plan policy to implement the Built Form and Land Use Study. You may have received a notice in the mail for an Official Plan Amendment Statutory Meeting to be held on June 17th 2014. However, the Statutory Meeting for the Official Plan Amendment will now be held on August 12, 2014 and a new meeting notice will be sent out.
At the June 17 Toronto and East York Community Council meeting, City Planning will be recommending changes to the zoning by-law for retail and service uses based on the attached study by toronto PLanning:  Built Form and Land Use Study.