All Forum Posts by: Gary McGowan

@Roy N. Yes, you are correct... If the property has undergone a "cosmetic" change IE: windows, paint, bathrooms, floors, kitchens it would most likely slide under the radar and not fall into HST provisions.

@Dave Vogt

Where are you buying properties for 100k?

If in Canada, are you paying HST on the flip? I know of a handful of Investors/Flippers here in Toronto where the CRA has just come done on them with a HST bill. HST is due because there was extensive renovations done to the property. The argument is > What is extensive renovations???

HST is due on the difference. Selling Price - Purchase price - any HST applicable costs = X

This can really eat into your profits...

@Roy N. great post and exactly why I went on my little rant... You posted more info in your post than the article could ever dream of. Well done!

There is some crazy stat out there that suggests only 7% of Canadiana own a second property and of that 7% only 2% own more than 5... To my point, many people tell you that the only way to go is to have all these Corps and that just isn't the case.

As for Accountants fees... The pricing would be different all over the country. Here in Toronto that is a fair price...Knowing you always get what you pay for.

You mentioned Family trusts and yes it costs money today but it will save your family thousands down the road. If you are looking at holding a large portfolio you need to be looking at Family Trust.

For Financing the rules change daily and this is the case today. My clients have seen the Corp lending policies change right in the middle of their deals. Commercial financing will always be different than residential. Borrowers that are buying 4-plex or smaller will see residential mortgage lenders require much more liquid capital when borrowing in a Corp. RBC for a while required you must have an additional 150k (above your down payment and closing costs) in liquid assets before they would lend to you. RBC does have some great products for Investors as you noted residential financing for 6 units or less!

Great info back and forth... Hopefully Investors can look at this post and realise that a lot of questions are needed when talking to their Lawyers and Accountants.

No,

Best to know 3 things.

What is the ARV? (know or work with someone who knows the market)

How much will the renos cost including holding costs, closing costs and murphy's law costs?

What is the min profit I want to make?

Bonus: Is this a property I can exit quickly?

Of the 100s of Canadian Real Estate Investors that I know, have worked or partnered with not one of them have their Real Estate Business's set up with a Three Tiered system. American trainers will come to Canada and preach this system then train their Canadian trainers to do the same thing.... Don't listen to them and here's just a few reasons why.

This cost thousands to set and the majority of investors will never need a Corporation for their investing. There are so many costs to this which people never think of...

When buying a property in a CORP the min down payment the lender requires is 25% usually more (not the normal 20%). There are also very few Lenders who will lend to CORPs making your financing even harder.

It also cost a min $2,500 for each CORP to file your taxes every year.

Most investors will buy 2-5 properties in Canada and your cash flow for this type of CORP structure wouldn't even cover your accountants bills every quarter.

Yes, you can hold properties in CORPs to protect yourself but you have to sign a personal liability on the corp anyways so someone could still come after you. Our laws are sooooo different here in Canada and from province to province. Please do your homework first before thinking about this type of structure.

Yes, talk to a Savvy Real Estate Accountant and Lawyer to protect yourself but the Three Tiered system is a waste of time and only makes money for the accountants and lawyers who push this structure.

If you are thinking of transfering your property (which you already own) into a corp....$$$$ Here in Ontario and BC, perhaps some other provinces this is deemed as a sale. So guess what??? The government wants their money. You will have to pay Land Transfer Tax on the Fair market value of the property. In Ontario (outside of Toronto) on a $400,000 property that's $4,475... Ouch, just to get the property into a corp plus all your legal fees.

my Canadian 2 cents.

Nothing against my American friends I'm sure this works great for them in their Country.

I would say at first glance it would not help your loft sell fast. Although you have to look at all the info. What else is for sale in that price range? How does it compare? What is the lowest you can sell for and make a profit? If you can't sell it will the rent carry the property? When you sell your property how can you make yours stand out from the crowd? Can you add something that others wouldn't have? Does it include any parking?

Are you referring 70% ARV - repairs = purchase price If so NO. Our market in the GTA is too strong for that. You can find properties that require work but there are always more than one buyer willing to buy it. 70% of ARV does come up from time to time but it is very rare. Handyman specials typically sell within the first couple of days of being listed, even if it's on or off the MLS. I just sold one this weekend where I had the seller and the buyer (exclusive listing).

That is an odd response from a Real Estate Expert... Not all true..

There is no magic number what the property is listed for or what it sells at only that the Lender must be able to prove they sold it at fair market value as was noted above.

In Ontario the norm is Power of Sale and in Alberta the norm is Foreclosure.

As for finding multi plex buildings being sold by the Banks it is very rare. Usually there is secondary financing on the properties. The second lender will step in and take over the property. They do not want to risk losing their investment. I have been approached on occasion to pick up a property this way or the second lender has asked me to help find a buyer. In most cases the properties are in rural areas and are not a great investment.

As for owners of the buildings.. It can be anyone... The larger the building most likely a REIT or Corp will own it. Deep pockets, Yes as you will find it difficult to get financing on the property. Usually a short term higher rates and 40% down. You can use this to your advantage and rehab the building and raise the rents. Most lenders in this sandbox will want to see the building running optimally for 18-24 months at which time you can refi at the new value and pull most of your investment out.

Welcome @Sid Hathiramani to the Canadian side of BP...

Feel free to connect with me. I've done a lot of different strategies in the GTA. I own number of properties and I'm always looking to buy more.

Hi all,

Every month I host an Investors Meetup where we I bring in Speakers who specialise in real estate. You will never be sold anything and there is no cost.

February Investors Meeting is going to be a great one. I have invited York Region Regional Councilor John Taylor to come and speak to us. I had the pleasure of spending an hour with him in December and I was very impressed with his knowledge of the area and the opportunities that we have as investors to take advantage of. In John's words "We need more Rentals because we are not keeping up with the demand". All successful investors take the time to understand what the local governments are doing and how they can leverage this information. This could be your inside track.

This month we are very honored to have Regional Councilor John Taylor coming to share with us some of the great things Newmarket and York Region are doing to move forward and to attract businesses and people. John is also going to share with us from a Government point of view the HUGE need to for added rentals in the area. Did you know the the annual budget for York Region is 1.3 Billion !? That is more than most areas in Canada. York Region is home to over 42,000 businesses (employers) – Ontario’s 2nd largest business center after the City of Toronto census division (Statistics Canada CBP ’12). That’s Incredible !!!

Local Investor Sandra Shuffler will be sharing with us her experiences as she legally added a second suite to her Investment property in Newmarket this past year. Sandra will cover some of the highs and lows of converting a single family home to a two income producing property. Come and listen to Sandra and learn from an Investor just like you.

When: Wed, Feb 19th, 2014

Where: 16945 Leslie St. Unit 27-29

Newmarket. ON

Keller Williams Realty Centres, Brokerage.

Time: 7:00 – 9:00 pm As always Starbucks Coffee Served at 7:00 !

Who is the Investors Meetup for?

Anyone that has bought, sold, holds or is just starting to look at Investment Properties. As always we provide a learning environment for all levels of Investors. We are all in this together and the more we can help each other the better opportunities we will have to succeed. You never know who you will meet and they could have the answer or solution to what you are looking for.

If you want more info you can always send me a pm.