Blog › May 2015

How to Find the Perfect Mortgage Helper Property

If you're looking for a home with a separate suite, there are lots of things to consider

House with basement suite separate entrance

A mortgage helper property is a home with a suite that can be rented out to tenants. Typically, the owner lives in the main part of the home while the tenants occupy a separate area with its own facilities such as a bathroom and kitchen space.

Mortgage helpers are a very attractive option for homebuyers who want to step up into a nicer property that they couldn’t otherwise afford, or are looking to take a big bite out of their monthly mortgage payments.

How exactly do lenders gauge the added value of a home with a rental suite? Typically, 50 per cent of the rental income goes against your debt service ratio, and the lender will want to see a tenancy agreement before closing.

Find the Right Space for the Tenant You Want

As you search for a home, you’ll probably be focusing on the space that works just perfectly for you, but if you’re thinking of bringing in tenants, you need to find a suite that meets the needs of the kind of tenant you want to attract.

You should be looking for a home in a neighbourhood with a high demand for rentals that is close to the amenities they may rely on, such as public transit connections, schools, shops and services. Properties located close to universities can make sense even if you don’t plan on renting your suite to students. It could make your property more attractive to future buyers who want to tap into a dependable rental market.

Look at trends in the area before converting a property to include a suite. If you buy an executive home in an upscale neighbourhood and put in a mortgage helper suite, you could find it harder to sell at the right price if most buyers in the area aren’t looking for that. There may be ways to work around this though, for example if you create a space that could also house a nanny or be used as an in-law suite.

Do your Due Diligence with Existing Tenants

If you’re lucky enough to find a home you love and it already has tenants in the rental suite, it could save you a lot of hassle. You get to reap the financial rewards of your new suite as soon as you buy the property, and you can skip all the effort of finding tenants.

It’s still important to do your due diligence because it can be very difficult to remove existing tenants. Take a look at the suite. Do the tenants take pride in their home and keep it clean? Request a copy of their rental application. Consider asking your Realtor to arrange a meeting between you and the seller to discuss their relationship with the tenants.

You will be bound by the terms of the tenancy agreement between the tenants ant the previous owner, so make sure you read it thoroughly. Find out what the renters currently pay each month. If you think they are paying too little, be aware that you can only increase the rent by an allowable percentage per year.

Stick to Your Comfort Level

Having a suite in your home should be a benefit, not a source of major stress. Staying within your comfort level means being able to manage financially during vacant periods, or if you have to settle a dispute with non-paying tenants.

How do you feel about common entrances, a shared garage or laundry facilities? For some homebuyers, especially those with kids, having separate entrances is high on the priority list. Test out the noise transfer between your spaces, and look into the hot water system to make sure you don’t have to worry about running out of hot water.

Ask a Realtor about your municipality’s approach to authorized and unauthorized suites. In most areas, you’ll see many more homes with unauthorized suites on the market than authorized ones – but again, the decision comes down to what you are comfortable with.

The Long-Term Advantage

Renting out a part of your home to tenants is a big decision, and some buyers may feel a little unsure about taking that step. One of the great things about owning a property with a suite is that you don’t have to rent it out, but if times get tough, you’ll have that revenue generator to fall back on.

Everyone’s parents are getting older. Owning a home with a suite means there’s an opportunity down the road to have parents move in to help raise a child or offset the mortgage. There are many benefits of owning this type of property, even if having tenants is not part of your short-term plan.

Densification in Vancouver: Some (Land) Assembly Required

As the City tries to increase density, rows of for-sale signs mark where land is being assembled for development – but not all those blocks have been rezoned for density

Metro Vancouver is growing... we’re expecting an additional million people to move here over the next 25 years. To prepare, the region’s municipalities are adding density. Neighbourhoods that have traditionally been zoned for single-family detached homes are being transformed into communities with condominiums and townhouses. It’s a trend that has visions of dollar signs dancing in some homeowners’ eyes.

Many neighbours are banding together to sell their properties as land assembled lots. While this is happening throughout the region, it is especially apparent along several major arteries in Vancouver including Cambie, Oak, Granville and 41st where the for-sale signs are lining up, row upon row. The assumption is that when owners sell together, they will receive a higher price for the assembled land than they would individually. But how realistic is it to think that the value of your home could double or even triple because of potential redevelopment?

Seeking Unsuspecting Buyers

Michael Geller is a local architect, planner and property developer who has worked on land-assembly projects since the 1990s.

“The City has an overall plan that will allow some single-family lots to be redeveloped as apartments,” he said. “In some cases, developers tried to quietly assemble these sites themselves. Residents thought they might get better deals if they worked together.

“Now we have a situation up and down Cambie where lots are being assembled, but the current city plan isn’t to rezone all of them. It’s startling to me to see Realtor signs – sometimes five or six in a row – in locations I know the City has no plans to rezone now or in the immediate future. Realtors are hoping to find unsuspecting buyers who think it is logical for these places to be redeveloped.”

Further East

While Vancouver’s West Side is the area where most land assembly real estate speculation is taking place, there are pockets in East Vancouver that are also undergoing change. The Norquay Village community is one example. Here the 18-unit Slocan Villa townhouse complex located only a minute’s walk from a SkyTrain station will replace the torn-down detached homes. Further down Slocan Street, closer to Kingsway, another four properties have been assembled. Jackson Ng is the real estate agent who helped put together the latter deal.

“The first four lots north of the lane are zoned for an apartment building,” he said. “The buyers purchased the first house four or five years ago and held onto it as an investment property. I listed the three homes next to it as part of a land assembly. The owners received offers substantially over their assessed value because they worked together.”

Tricky Negotiations

Ng cautions that successful land assemblies do not come together overnight. The number of stakeholders makes negotiations significantly more difficult than a single transaction as each family has different needs. Each needs to find a new home to go to, which Ng describes as the hardest part of the transaction.

“It definitely requires teamwork between the owners,” he advised. “You need an agent who is working for you – not the buyers. Some Realtors are over-promising and under-delivering in order to get your business. My advices is to work with someone who’s realistic about what you’ll be able to achieve.”

Not Just the Suburbs

Densification is also happening at a fast pace in the city’s downtown core. In the Hornby Slopes neighbourhood, Grosvenor Americas is taking a rezoning proposal forward to the city for parcels of land at Hornby and Pacific. The site includes the heritage Leslie House, which will be restored and used as a community amenity building. The company’s senior vice-president and general manager, Michael Ward, anticipates the redevelopment will eventually see a residential tower between 30 to 40 storeys plus a handful of townhouses to replace the site’s derelict buildings.

“There’s a renewed sense of interest in Hornby Slopes and we see it as a great place to be involved,” said Ward. “When you buy and develop land you’re taking huge risks. There are a lot of unknowns around construction and marketing costs and there’s also uncertainty about density when you have to rezone a property. The profits are commensurate with the risks but certainly not double or triple what you pay. They’re probably far less than people think.”

Regarding land assemblies, Ward notes they have been happening “forever” and warns that homeowners are taking the chance that the City will “upzone” the properties.

“Speculation is not a great way to run a development business,” he said. “Those can be dangerous games to play.”

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Location Vs. Amenities Vs. Schools: Picking the Right Neighbourhood to Buy In

Each person’s perfect community may differ from the next, but there are many common features

Vancouver single-family home neighbourhood street

One person’s ideal home is likely to be different from another’s, but there are many features that will be the same. There are needs and wants that are similar in all people, and the desire to find the right community for one’s lifestyle is no exception. Distance from amenities is one of the most popular community features in the Lower Mainland, for example. But traditional features such as distance to schools are often important as well.

So how do you balance all those needs and desires and distil them into one neighbourhood that is ideal for you?

When you enter the real estate market to buy a property, it’s very important to be mindful about where you are buying. What does this community bring to the table? What is the history of the housing market within this area? Will there be a demand for my home when I go to resell it? All these are critical factors to look at when searching for the right place to live.

Lifestyle is Key to Happiness

Feeling like you are part of a community is critical to happiness, and often you can address this by buying into the right neighbourhood. If you cycle everywhere in the city, buying near the PNE might not be the best spot for your life. When you have a family of five, it’s important to look at what schools are nearby and whether or not they will address your requirements.

Sometimes just a good old-fashioned walk around the area will give you a great sense of what it would be like to live there. Is there an unusual amount of vacant land? If so, it’s a good idea to research who owns the land and to see if there are any plans to use it. Imagine buying a home only to find out six months later a highrise building is going up to obstruct the view you fell in love with. It happens more than you’d think!

Access to parks, recreation, shopping, restaurants and coffee shops is another key factor to a great neighbourhood. In Vancouver, areas like Cambie VillageMain Street and Sunrise/Hastings are currently experiencing a big upswing in new businesses in the area. Established areas like the West End, Commercial Drive and Kitsilano always have something to offer their residents and are more well known.

Location Wins, Every Time

When it comes to resale value, a good rule of thumb is the more central the property is - the more it will appreciate in value over time. Vancouver city is actually quite small when you compare it to other world cities, so anytime you can own land in a market with high demand and low supply you are putting your money in a good spot.

If you buy a home with direct access to parkland, this can be a great feature for the present as well as the future. Buying too close to a school is often times frowned upon by buyers as it could have some potential noise drawbacks. But if you are set on having your children attend a certain school it might be your only option.

Seek Advice When Needed

Most people in Vancouver know where they want to live, or at least have a general idea. When people are moving to the city from elsewhere, this is often where these tips will come in handy. Search out people who know the areas you are thinking about and ask questions.

Research, research, research is what I tell my clients. This is the most important purchase of your life – don’t leave anything to chance.

Making the right choice to buy in the right neighbourhood will ensure that you are happy in your home, which is very much the name of the game when buying real estate.

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Why Strata Documents Don't Have To Be Daunting

The big stack of documents you have to comb through when buying a condo can be intimidating – but it doesn't have to be, says local agent Barry Magee

The prospect of buying into a strata unit is all too familiar for Vancouverites, and with good reason. The price of land continues to skyrocket due to a demand level that has a voracious, unquenchable appetite, and for many who wish to live in urban areas, condos are the only option. Fortunately most residents of our fair city are more than comfortable with the restrictions involved with shared living. Stress over condo strata documents

Buying into a condo doesn't have to be overwhelming, and when it comes to strata documents it really is about consumers being protected and making sure the building isn't facing any major issues.

Depreciation Reports

Condo buyers are very well protected in Vancouver and the rest of BC, largely due to strict government regulations. Depreciation reports need to be done every three years in BC. This expense ensures that there are no big surprises for new owners, and current owners can address and serious issues facing their building. Buildings with four or fewer units aren't required to have a depreciation report, and a strata council can decide not to conform if 75 per cent of owners don't want to incur this expense. Learn more about the requirements in BC here.

Navigating a depreciation report can be quite challenging, so it's important to have as many eyes on it as possible. The key component you'll want to address is any future work that needs to be done to the building. If there are three or four major projects recommended to be completed in the next 10 years, it might be time to reconsider the purchase or to negotiate a further discount from the purchase price.

Building Financials

Going over the year-end financials of a building will reveal what type of expenses your building incurs year after year. Are there any items that stick out like a sore thumb? Buildings require consensus between owners to add any new expenses to the docket, so if you notice a number of questionable items you could be dealing with a condo board that likes to spend.

Contingency is important when buying into strata, many people don't realize that strata's have first dibs on your money - even before property taxes and your mortgage! When you buy into a building, try and buy into a building with a high financial reserve. As a rule of thumb, $5000 per unit for a wood framed structure and $10,000 per unit for a concrete building is a good rule of thumb.

Learn From the Minutes

Reading through the strata council minutes can be a little tedious, but it's an important component of making an informed purchase decision. Do your fellow owners take action when something needs to be done or do they defer to another time? There is no worse course of action than trying to avoid issues in a building, in my opinion. Deciding if the council is proactive or reactive is one of the primary reasons to go over the minutes.

Strata minutes shouldn't be overwhelming or daunting, but it is important to have several people go over the documents on your behalf – including a real estate professional or two. Consumers in BC are very well protected, but leaving anything to chance when it comes to a real estate purchase is extremely foolish.


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No Overvaluation or Overheating in Vancouver Despite Prices

Local housing market deemed at low risk of seeing a real estate price correction, according to house price analysis by CMHC 

Vancouver at sunsetDespite having the highest residential real estate prices in the country, Vancouver’s housing market is not overvalued and is very unlikely to see a correction, according to the Canada Mortgage and Housing Corporation (CMHC).

The CHMC’s latest House Price Analysis and Assessment report, published April 30, considers the “incidence, intensity and persistence” of four key risk factors that suggest potentially problematic housing market conditions.

Those factors are:                  

  1. overheating of demand in the housing market (demand significantly outpacing supply);
  2. acceleration in the growth rate of house prices;
  3. overvaluation in the level of house prices; and
  4. overbuilding of the housing market (supply significantly outpacing demand, which can reflect excess new construction and/or a decline in demand for existing homes).

The CHMC said that in Vancouver “none of the individual risk factors are currently detected”.

Despite high Vancouver home prices, demand for housing across the price spectrum is supported by a growing population and growth in personal disposable income,” said the report.

“First-time home buyers focus on lower-priced options in suburban locales. At the upper end of the price spectrum, high-net-worth residents, and those who have gained equity in their homes, are more likely to buy single-detached homes in central locations and luxury property."

The report added that high house prices do not necessarily equate to overvaluation. “Overvaluation is present in a housing market when house prices remain significantly above the level warranted by fundamental drivers such as land supply, income, population, and interest rates … For example, average prices in Vancouver exceed the national average, although no overvaluation is detected. In comparison, average prices in Québec are below the national average and overvaluation is detected.”

The CHMC said that overvaluation in Regina and Winnipeg means that those markets are at a high risk of correction.