Mark Loeffler: Real Estate Investor Blog

There continues to be an alarming amount of public discussion about the confusion caused by the Harmonized Sales Tax – with one major media outlet recently equating it to the panic caused by Y2K. 

Remember that scare, when planes were doomed to fall out of the sky, bank balances would drop to zero and computerized life as we knew it would grind to a halt?

One key difference, though, was that companies, businesses and even governments prepared for Y2K well in advance – for many months, if not years – to ensure they were ‘Y2K ready.’

Who was ‘HST ready’? Were you? Was your realtor? If the continuing press coverage and a recent poll from major Canadian realty Royal LePage is any indication, the answer is an emphatic “no.”

It’s easy to blame the Ontario and BC governments for not educating consumers enough about the new tax. But for an industry involving the biggest purchases in consumers’ lives, and due to be potentially seriously impacted by the new tax, the real estate and housing sectors did surprisingly little in advance to help their customers understand how the HST may or may not affect them.

The home building community didn’t help much, either, as there was no major HST communications effort or campaign before July 1. Moreover, some developers further clouded the matter by trying to put a marketing spin on the new tax, promising “HST included!” in advertising material – on deals where the HST didn’t even apply.

No wonder the public is still scratching their heads.

Even the Canadian Real Estate Association’s new TV campaign doesn’t mention the HST, nor does the web site the association updated to correspond with the launch of the new commercial. Yes, CREA is a national group, whereas the HST applies only in BC and Ontario. But these are the two largest markets, with the highest prices, where business has really felt the pinch and where buyers and sellers are left confused and vacillating. Some even believe the chill has spilled over into provinces that didn’t even implement the HST.

Whether you’re a prospective home buyer or investor, take the onus and educate yourself on this important matter. Make sure your realtor knows – and truly understands – the HST and how it applies or doesn’t apply to your deal. And if he or she doesn’t know, maybe it’s time for a new realtor.

Take the HST bull by the horns.

In the meantime, here are a few important links that you may find useful:

http://bit.ly/DaBIK

http://bit.ly/X2q5H

http://bit.ly/cYCyGl

http://bit.ly/aOZRIW

A funny thing happened on the way to writing today's blog - I had an interesting chat with someone I met last night.

More on that in a minute.

The Canadian Real Estate Association (CREA) has launched a new national TV commerical, featuring technology never before used in Canadian television advertisting.

Shot in high-definition, the new commerical is called "Faces" and it highlights the value realtors bring to people's lives in home buying and selling.

In the 30-second ad, men and women discuss their experiences with realtors, and while they talk, their faces continually change, morphing into a new person with another story.

Also available for viewing at howrealtorshelp.ca, the commerical is visually intersting and even funny, I find, but the subject matter really isn't.

Realtors provide an invaluable service to home buyers and sellers, whether those people are first-time or move-up buyers or investors.

Let me pause here, for full disclosure:  I am a Realtor, so I must declare my bias.  But I am also a real estate investor. before I got my license, I completed dozens of deals using other licensed Realtors.  Why?  Because they had the local market knowledge and expertise in the area I was buying in.

Today, even though as a Realtor myself, I can and do complete my own transactions, for out-of-town properties, I almost always consult and often contract another licensed Realtor.  Why? Because they are on the ground and in the trenches in that market and are up to speed on all the local developments.  They have expertise that I might not have.

Many of the investors I know - in fact, almost all of them - use a similar approach.  This, despite as experienced investors with dozens of deals behind them, they could choose some of the "for sale by owner" options or discounted services available.

Instead, they choose with full-service Realtors.

How do Realtors help?

• They provide local market expertise
• Have knowledge of local developments and demographics
• Using the Multiple Listing Service, can generate invaluable comparables on properties bought and sold
• Help buyers with their home search
• Help negotiate offers
• Provide referrals for other real estate professionals, such as lawyers or inspectors

Now back to my chat from last night.  I met a fellow, a Realtor, at a function, and he was telling a story about his latest clients - a professional couple that wanted to put in an offer on a two-bedroom condo.  The building was not directly in but close to a very undesirable part of town.

He recalled how he advised the couple of his concerns for the area (the location, location, location agrument) and the building (having already sold units there previously).  Armed with comparables that showed almost no appreciable value increase in the last four years, he further tried to appeal to the couple - both teachers - to help them see the financial realities of the property.  Still, to no avail, and the couple remains intent on going ahead with the offer.

Realtors can and do help home buyers and investors, but that's tough to do if people don't want to help themselves.

Some learn that lesson the hard way.

Promising "new life on the inner habour," development company Hines has been named winner of the competition to design Bayside Toronto, a major waterfront revitalization project at Queens Quay East.

The centrepiece of the 10-acre site, right on Lake Ontario between Parliament and Sherbourne, is a 1,700-condo unit project with mixed use - rooftop gardens, retail and other commercial and office space.

Even at a time when condo sales in Toronto are taking what could be more of a summer breather, it's a project that has the condo community all a-Twitter, and everyone from the mayor's office to realtors excited.

To be sure, waterfront condos, particularly in such a prime - though long underutilized - location, will be in high demand, and could well prove to be good long-term investments.

But before anyone runs to Bayside pen-in-hand or calls Hines looking to pre-book the pre-booking, let's remember this is a long, long-term project.  Waterfront Toronto began discussing potential land uses seven - seven - years ago, and started talking to developers in 2008.  Four companies submitted proposals in November.

If the plan is approved, construction won't begin until 2013, with full project completion scheduled for 2021.

Long-time GTA residents may recall how long it took for another popular Toronto condo community - the former 'motel-strip' along Lakeshore, east of Park Lawn - to make its way through the approval and development channels.  Too many years to count.

Bayside, Toronto's new great neighbourhood? Maybe. But Investors and other home buyers might want to consider looking elsewhere in the meantime.

There's an old joke that in the GTA we have only two seasons - winter and construction.  For anyone with the misfortune of having to commute along the Gardiner Expressway past the Jameson Ave. Bridge reconstruction this summer, traffic is no laughing matter.

While it's great that Toronto is growing at the rate it is, often the number one destination for immigrants, or new Canadians, many of whom move into all those new condos being built, either as owners or tenants, congestion is increasingly becoming an issue.  If you've ever been to Los Angeles, you know the traffic in around that city can be brutal - any given time, any given day, any direction.

Is it any exaggeration to say that the GTA is approaching this level? The highways and transit systems that service the area are simply not expanding at a rate sufficient to support this growth.  A recent global survey of transit and congestion proved as much, ranking Toronto dead last of 19 major cities.

All of this puts an increasing emphasis, for investors or buyers of primary homes, on selecting properties that are within reasonable distance to important infrastructure such as highways and mass transit.

We all want to live within a reasonable commute of where we work, or whatever our vocation.  And in terms of real estate, it's well documented that the closer property is to mass transit, the greater the potential increase in value.

My friend, fellow investor and real estate author and president of the Real Estate Investment Network (REIN), Don Campbell, sums it up perfectly when he says: "Distance is now measured in minutes, not kilometres."

REIN's research shows that for properties located within 500 metres of stations along new transit lines, value enhancements can be 10 to 20 per cent higher than for homes outside this distance.

The GTA's commuter woes are not likely to improve significantly any time soon, since the provinicial government recently rescinded previously-committed $4 billion in funding for public transit.

Now, it's become a major issue in the Toronto mayoralty race. The candidates all pretty much agree that we need improvements, and most promise to address the issue if they win the October 25th municipal election.  Some are blindly committing to new or expansion projects, without divulging how they plan to pay for it - no small point since new subway lines cost an estimated $300 million per kilometer to build.

While this particular discussion focuses on Toronto, proximity to mass transit is a determining factor to keep in mind no matter what city you're buying in.

By the way, the Jameson bridge project began in May and is scheduled for completion in November (though who would be surprised if it went beyond that date?).

Just in time for winter.

How does that joke go again?