Should I sell first or should I buy? Strategies in a hot market!

The Ottawa real estate market is hot, hot, hot. We are wayyy down on inventory. Sellers are afraid to list in case they can’t find a home they love. They’re also worried that they can’t afford to carry two homes if they buy before they sell. This is completely reasonable. It’s harder to find a home you love than it is to sell in a seller’s market. The low inventory that means your home will sell quickly also makes it hard to find something. And if you can’t afford to buy until  you sell, you could be trapped. When a market is this hot, you can’t  ask a seller to agree to a clause that allows you to sell your home before you finalize your purchase (a right of first refusal) as they won’t do it. It would tie up their property in a market where they can get a quick sale.

What’s the solution?

Luckily, there are a few!  You can put an offer in on your dream home with a long closing date, and as long as your property is listed soon and is priced right, you shouldn’t have any problems selling. Is there a risk? Yes. It’s possible that your home won’t sell; this hot Ottawa market may cool down quickly if there’s a trade war or an election call, and both appear to be looming. If you’re risk-averse, like I am, you may not want to take that chance.

Here’s the strategy I used instead. I put a HELOC on my home. That’s a Home Equity secured Line of Credit, with interest only payments. You can borrow up to 65% of the value of your home, provided you meet the banks’ criteria for borrowing and have enough equity in your home to make it worthwhile.

The HELOC gives me access to enough cash to be able to buy something I like before I have to sell: I like to renovate, so I can go ahead and  buy, and do whatever work needs to be done before moving in, with interest only payments. Once I’m ready to move in, I can do that, and then stage my current home for sale. I won’t be living in it anymore so it will be easy to stage and my dog and cat will be in the new home, so I won’t have to stress out about them either.

The costs of a HELOC were only $505 in legal fees, including taxes, as my mortgage broker, Robyn Oliverio, paid for the appraisal. That money is accessible as long as I own this home, and I pay nothing else unless or until I draw on it.

What if the HELOC isn’t big enough for the home you want to buy? Well, even with a HELOC, you can still take out a conventional mortgage on the new house. You  might be stuck with a mortgage for a year, or you  might be able to take out a mortgage that is fully open at a higher interest rate. For myself, I’ll cross that bridge when I come to it.

If you don’t want to pay interest, or can’t afford it, that’s fair too. In those circumstances, you really don’t have an option but to sell first and either get bridge financing to cover the new property, or sell, get your money from closing, and find a place to stay  until you find your dream home.

The good news is that once you have a firm deal on your home, you qualify for bridge financing to carry your new property without any of the mortgage stress test rules applying, so that part is a lot easier.

The only risk in buying a home based on the sale of your current one is if the sale of your house doesn’t close because the buyer fails to advance funds on the day of closing. We are seeing more of that, because buyers are putting in offers without financing clauses and then finding out they don’t qualify. There are things we can do, like requiring buyers to be pre-approved, to minimize that kind of problem.

Although these days, to be honest, I almost prefer to have my sellers accept an offer that has a financing condition in it than a clean one without a financing condition, because then we’ll know quickly if they have financing approvals or not, instead of finding out on the day of closing that things have gone south.

The good news, though, is that there are plenty of qualified buyers out there anxiously looking for their dream homes, and if your home is properly presented and priced, and has to go back on the market because of a collapsed deal,  it shouldn’t have any problem selling. I’ve had that situation twice in the last two years; luckily, I was able to re-list and re-sell both properties quickly.

So, there are strategies for dealing with a hot seller’s market AND finding your dream home: talk to your realtor.

 

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Finding a great tenant!

I am a landlord myself and I sometimes am asked by clients to help them find a tenant. I am constantly meeting people who are not happy with the calibre of tenants they’ve had, and who have had to do a lot of work when the tenants finally moved out. I have never had that issue: all my tenants looked after my property as if it was their own, paid their rent on time, and were a pleasure to deal with.

Here are my tips to finding a great tenant:

First of all, make the unit as nice as possible. Being able to present a fresh, clean unit that shows well is huge. As you can tell from my blog, I renovate whatever I have to. I  redo cracked tile flooring, make sure the paint is pristine, buy new appliances if needed, and install new backsplashes and lighting. I will update the electrical and plumbing, replace old baseboard heaters with new ones, and replace old hot water tanks. Not only does this let me charge top dollar, but I don’t have to worry about the unit I’m renting being unsafe. This is a huge selling point too!

Once you’ve fixed it up, set a rent that reflects its condition. I recently rented my unit in Hunt Club for hundreds more than the comparables, and I had a line up of prospective tenants. I want high calibre tenants, and a higher rent attracts more of them.

Meet your prospective tenants in person. A lot of landlords farm this out to their realtors or property managers to do. I think that’s a mistake. You can tell a lot about a person by meeting them face-to-face. Did they show up on time? Are they enthusiastic about your unit? A tenant who loves your place is eager to move in and it shows. Your ideal tenant will show up on time or early and get you all the paperwork you want ASAP. They want your rental, and they’re anxious to hear from you; they don’t let things sit. Someone who can’t be bothered to show up on time, answer emails promptly, or provide documents when you ask for them, is probably going to be equally indifferent about paying your rent on time.

Get a credit report. This is the single most important document in a tenancy. A score above 600 is good, above 700 is great. One in the 800s is extraordinary!  I recently met a prospective tenant with a credit score of 848 — that’s the highest I’ve ever seen!

A high credit score tells you that the prospective tenant pays their bills on time and always has. A credit report that shows a history of late payments, collections, or even bankruptcies means you have a person who has had problems managing their budget.

It’s not fatal: I would consider renting to someone trying to build or rebuild their credit, but it is a giant red flag. It means you and the prospective tenant need to talk about whether they can afford the unit or not, and what will happen if they over-extend themselves. It’s not good for them to be evicted for non-payment of rent, and certainly not good for you. On the other hand, someone who has sacrificed other bills during tough times so they can  pay their rent can be a very good tenant.  I want context, and I want them to tell me about it before I find out in the credit check.

Call the tenant’s references, and especially their previous landlord.Don’t rely on reference letters alone. I ran into a prospective tenant who had a pretty good reference letter. When I actually called the landlord, it turned out there had been a fire in the unit, caused by the tenant. Ask if the tenant paid on time, what condition they left the unit in, if there were any issues during the tenancy and what rent they were paying. This is a big one: if the previous rent was much lower than what you’re asking you want to make sure they can afford it.

Some people insist on seeing employment information and proof of income, and insist the tenants be professionals.  I don’t. I’ve heard plenty of horror stories about professionals who were horrible tenants.  I know of one mortgage broker who rented to a lawyer who stopped paying rent because he knew it would take months to evict him. I’ve heard of others who complained about everything. Don’t get hung up on what someone does for a living; it’s irrelevant. What’s important is what kind of tenant they are.

As for employment information, I usually do call employers for references, but the credit report pretty much tells me everything I need to know about how someone manages their money. The last employer reference I got for a tenant of mine was unequivocal: “they’re good people,” the employer said. “Simple people, but hardworking.” That was all I needed to hear.

The bottom line is that there are only three things you really need to know about any tenant:

1) that they will pay your rent on time (which is why you get the credit report to see how reliable they are when it comes to paying bills, and make sure to call their previous landlords);

2) that they won’t damage the unit (which is why you ask their previous landlords what condition they left the unit in) and

3) that they won’t disturb other tenants (which is why you ask if there were any issues).

When you start super-imposing criteria like they have to be single, or have no pets, that’s going to restrict your tenant pool unnecessarily, and may land you with a human rights complaint as well. I don’t care if my tenants have pets, as long as they are well-behaved, and I’ve never had a problem.

So, to summarize, I look for someone who is enthusiastic about my property, cooperative, reliable and has a great credit rating or a good explanation if they don’t, and a plan for moving forward.  So far every tenant I’ve ever had has been terrific, and so have the ones I’ve picked for my clients.

One more thing: I make sure I’m a great landlord too. I give my tenants  gifts when they move in, like a bottle of wine and chocolates, or most recently, for tenants who loved the kitchen, a cookbook holder. I usually pop around at Christmas with something for the tree. Many of my tenants have become good friends.

I make sure we establish the rules ahead of time for what they can and cannot do (for example, my units are professionally painted, so I don’t want them painting the walls, but I’m fine with them hanging pictures.)

I make sure to respond immediately to any problems. And I let them contact my other tenants for references  if they want to, so that they can ask them what I’m like as a landlord too. I get tenants who treat my property well because I vet them carefully, and treat them well, and that makes all the difference.

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Renovating an investment condo: my budget! (and great news – it’s RENTED!!!)

So, finally had a chance to sit down and figure out my costs of this renovation. I had a $10K budget. I’m still waiting for a final invoice from Alex that will include drywall repairs to the powder room, but I’ve included his quotes on powder room floor, backsplash and tile flooring in these numbers:

Electrical (all new baseboard heaters, pot lights, repairs) 1870.00

Plumbing (new shut off valves, shower head/fittings, install HWT) 900.00

HWT/pan 388.69

New shower head/fixture 305.37

Tiles/tiling (kitchen backsplash/laundry room floor) 1470.99

Kitchen/BR cabinets reface, new panels, soft-close hinges:  3167.14

Cabinet knobs and pulls 254.18

Curtains, rods  and blinds 295.66

Lighting 620.78

Paint 75.48

Powder room tile and grout 391.38

Alarm system 150.00

Mirrored doors 1011.74

Misc. 77.31

TOTAL 10,978.72 plus HST

So, I came in about 10% over budget but my original budget didn’t include doing that powder room floor or fixes to the alarm system, so I’m pretty happy. And this is some of what I got for my money, in terms of before and after: a very nice transformation!

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The impact of Staging: Before and After shots of my new listing

I have a new listing in Laurentianview that needed a little updating to get it ready for sale. We had a very small budget. I decided the money was best invested in a little paint and dry wall repairs (just a wall here and there) and in staging.

I rent furniture and stage properties myself so that my clients aren’t hit with the thousands of dollars it can cost to stage a house. Here, the furniture rental was under $700 and you will see the impact in a moment.  It took me about 10 hours yesterday to get it all done, but I don’t charge my clients for my time: I figure I’m going to get the commission and I enjoy doing it.

The living room had an outdated valance and sheers, but the windows were very high because of the great room/vaulted ceiling. I asked Cedric Poon, my contractor on this one, to remove the valance – we were able to match that wall paint perfectly when the old valance was removed. I bought two new curtain rods from HomeSense ($60 plus HST) for the patio doors and this big window and Cedric used his laser to make sure the height of both matches.

I was super impressed with Wayfair: I ordered 108″ long white sheers with grommets on the weekend and they arrived on Monday.  Cost, including taxes and delivery? Under $ 72. Here’s the before:

sherbourne valance

sherbourne LR before

And here’s the after (that white “buffet” comes from the bedroom set; we took off the mirror):

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The dining room had an interesting but dated light fixture. Once again, there was a valance over the windows and also over the patio doors. The dining room also had one very bright blue wall: we painted that out with the same wall colour as on the other walls. I don’t know how I did it because we didn’t know the exact paint colour but it turned out I’d matched it perfectly, so Cedric didn’t have to paint the entire walls. Here are the before shots:

sherbourne light

sherbourne blue wall

sherbourne dining room valance

Here’s the “during” shot, where Dom and Ben from SmartChoice brought in the dinette set for assembly. I wanted the dinette set up so that we knew how low to hang the new light fixture): note the new curtains over the patio doors:

sherbourne DR beforeAnd here’s the after:

sherbourne DR after

The room was totally transformed by that new light. I got it at Rona for around $ 150. The rug is mine — I kept renting it from SmartChoice and finally asked Sylvie how much to buy it; I think it was around $ 150 and I use it all the time. The table and chairs were rented from SmartChoice as part of that overall $ 700 cost I mentioned. The “buffet” is the chest of drawers from one of the rented bedroom sets. The art is mine.

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Finally, there were a couple of bedrooms that I wanted to stage as well. One was yellow and one was periwinkle. I think they turned out great!

In the yellow room, I removed old sheers, leaving only the blinds, otherwise, the room is unchanged. All the  soft staging items and lamps are from my store of stuff for staging (I have a storage locker at Dymon), but the beds and end tables in both rooms were rented from SmartChoice:

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And in the periwinkle room, I used some great art to tie things together and replaced the old rod pocket sheer curtains with white grommet curtains from my stash of decor items for staging.

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So that’s the value of staging! This lovely property will have three Open Houses this weekend (with agents from my office hosting). It’s located at 574 Sherbourne, and is listed for $ 659,900. Drop by and see it in person!

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Renovating an investment property – Day 30 – 298 Briston Private is now for rent!

Well, the work is done – I did a little light staging at Briston Private today and popped it up on Kijiji for rent. We’ll see what kind of response I get! I’m asking $1800/month which includes water and there is no HWT rental because the tank is owned. One parking spot right out front and tons of visitors parking. If you know anyone, feel free to pass that info along!

But I know you’re here to see all those “after” pictures, so here you go!

 

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Renovating an investment condo: Day 27 – new powder room tiles!

Well, things at the condo had to take a back seat for a week, given my pup’s ruptured disc and the ankle I sprained carrying him in from outside. Damn, this has been a tough winter — five months of brutal! But luckily, Alex, my contractor, has carried on and things are almost finished.

We changed out the lighting in the powder room as the old ballast was on its last legs and the room was very, very dark.

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I replaced it with pot lights, one over the sink and one over the toilet. This was more complicated than I thought as we had to completely rebuild the bulk head. But the room was much brighter, and I took the opportunity to swap out the blue paint for the same colour that we used in the laundry room (Sherwin Williams, Rhinestone).

And then, and just when I thought we were ready to wrap things up, the new brighter lighting revealed that toilet had been leaking and that the tiles had some cracks. If you know me at all, you’ll know that kind of thing drives me bonkers, so I went out and bought tiles at Lowes ($1.29/tile) and asked Alex to quote me on a new floor.

When Alex removed the toilet,  he discovered the seal was held in place with plastic bolts, which really isn’t a good idea because those can break so we added  that to the list of fixes.

I didn’t want to remove the pedestal sink, so we tossed around how to proceed, and Alex suggested I tile over the existing tiles.

I’ve only done that a few times: normally, we prefer to remove the tiles down to the plywood, install new plywood and start over. But here, it turned out the existing tiles had been laid over linoleum. To tear all of that up and lay new plywood was going to mean the floor was higher than the bottom of the pedestal for the sink, and cause transition issues. We agreed the simplest solution was to glue down new tiles.

This required Alex to put down a primer first so the glue has something to grip. And of course, I had to find time to get over there to paint the spot behind the toilet (which I did, after these pictures were taken: note the new colour):

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While I dealt with my dog, and a crazy week work-wise, Alex started work on the tiles.

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And here’s where things are at now:

 

Briston flooring 1

I just spoke to Alex and apparently he just finished grouting (I picked a white grout that matches the white in the tiles) and will do the baseboard quarter round tomorrow. I’ll meet him there at noon to make sure we’re all done, start clearing out the various stuff I have left there, and get some pictures so I can get this listing ready to rent!

Of course, no renovation is ever completely done!  There are a few small kitchen details to address and Chris from R & C Cabinetry will be back on Monday to finish those up.

And I discovered after all our electrical work was done that the front door bell doesn’t work: Mark Dods will swing by when he’s in the area to fix that. And then (I hope!) it will be ready for someone to move in and love!

I’ll post the before and after pics this weekend along with details of my budget and how I made out.

 

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Renovating an investment condo – Day 17 – new cabinet doors!

My new Shaker doors arrived last Friday but Chris and Rebecca from R & C Cabinetry were booked so today was the day for the install. We had a little confusion because I thought Chris was picking up the trim paint and he thought Swedish Door Co., who supplied the doors for the cabinets, would be including it. Anyway, I managed to track down a quart of paint in the same finish from Bond’s on Bank Street and got to them so they could finish their work.

Here’s the before:

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And here’s the after:

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Here’s another before:

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And after:

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And yet another:

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And after:

Briston cabinet doors 2

Don’t they look great? All new soft close hinges as well. Chris and Rebecca did a great job and are highly recommended!

I was painting the powder room on Sunday and realized the tile floor was cracked in places (we put in better lighting in the form of pot lights to replace an old fluorescent bulb and that’s when I could see the cracks.)  I’ve asked Alex to retile it — I’m using these black and white encaustic tiles from Lowes so it will be a little gem when we’re done. He’ll start tomorrow. Which means I’ll be over budget a little, but once I get started, I want to do it right!

And for those of you have asked, little Scout is recovering very well! He is still confined, but is wagging his tail and standing up on his own. Surgeon says it will take him 6-8 weeks to fully heal, but he’s very happy with the progress he’s making so far!

 

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