One of Jim and Richard’s listings was featured as a Done Deal in the Globe and Mail. The four-bedroom row house at 642 Wellington St. W hit the market in November and sold in 9 days for $250,100 over asking price. Here is the article posted in the Globe and Mail.

642 WELLINGTON ST. W., TORONTO

ASKING PRICE: $899,900

SELLING PRICE: $1,150,000

TAXES: $4,245 (2016)

DAYS ON THE MARKET: NINE

LISTING AGENTS: Jim Burtnick and Richard Silver, Sotheby’s International Realty Canada

The action: When this four-bedroom row house hit the market in November, there were few comparable houses to compete with it in the highly desirable niche neighbourhood west of downtown. Seven visitors submitted offers, including one that added $250,100 to the list price.

“I didn’t go crazy to underprice it,” said agent Jim Burtnick.

It’s a classic home in a triple A location right downtown. There are a lot of people who don’t want to go in a condo, so this is an opportunity to take a house and put your own touches on it.

What they got: The brick façade and stained glass windows of this 1,798-square-foot Victorian are prominent features dating back to 1892. The formal living and dining rooms have crown mouldings and tall baseboards.

For 80 years, the same family occupied the dwelling. They had replaced the roofing, some windows and wiring, and maintained a second kitchen on the upper floor above the main one. The latter has access to the basement, back deck and 15-by 64-foot grounds.

The agent’s take:

The thing that really lends itself to renovation was it has a full three storeys with high ceilings on each floor. And the other redeeming feature was the original staircase banisters that could be restored nicely, so I could see a nice mix of old and new in there.

Originally posted in the Globe and Mail, written by Sydnia Yu.

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Here lies Walter Fielding. He bought a house, and it killed him.

In the classic Tom Hanks movie, the Money Pit, Hanks’ character Walter and his wife buy a dilapidated mansion with the plan to renovate the property and move into their dream home. After an abundance of escalating setbacks, the renovation nearly ruins their marriage and leaves them homeless. Indeed, the above quote nicely sums up how a lot of people feel about buying a fixer-upper. Months of stress and hard work could grind to a halt with little to show for all the work.

But with the right amount of planning, a decent budget, and a reputable contractor, a fixer-upper can be a viable option for many potential homeowners.

According to real estate professionals like Richard Silver and Jim Burtnick, whether you’re planning on selling the property in the future or remaining there to live, if you’ve got the time and money, a fixer-upper can be a great way to get more value for your cash.

The Right Kind Of Person

It’s difficult to say just how many fixer uppers are on the market at any given time. After all, the definition of what needs updating can vary widely depending on the buyer and seller, but most people agree there’s value to be found out there.

Still, many real estate professionals warn that it takes a special type of person to take on such a project. According to Jim Burtnick, Broker, SVP of Sales at Sotheby’s International Realty Canada, the fixer-upper in this market is where the oportunity lies: 

The fact of today’s society is that people are so busy with their work life, their family life, that not a lot of people have the stomach or the inclination to take on a fixer-upper project. They’re just too busy. So there is less demand for those types of properties. So with less demand obviously you get it at a better price.

A lower price isn’t the only reason for homes that may require some extra attention. As Richard Silver of Sotheby’s International Realty Canada points out, one of the main benefits is that you can customize the building to your standards.

You can change it inside to be very traditional, you can make it very modern, you can put in a brand new kitchen and bathroom and all the things. So there are benefits.

Planning Is Key

If buyers decide to fix up a home, there are a number of things to consider first, depending on what they’re trying to achieve. If the goal is to flip the house, concentrate on areas that are going to add the most value. An updated kitchen will add a lot more value than a new HVAC unit, according to Burtnick.

Burtnick says the first thing owners should do is sit down and determine the scope of the work.

Are they renovating everything or just the bathrooms? Which items will require professionals? Kitchens and bathrooms usually involve specific expertise like plumbing and electrical work, but if you’re putting up a fence or deck, that’s probably something you can do without consulting a professional.

Make sure to set a budget. Burtnick says he’s seen too many people blow through their money and over-capitalize the property. Otherwise, you may end up with an aesthetically lopsided home.

You want to have a consistent type of finish throughout the house so there’s no sense in having a brand new, ultra-modern kitchen and a bathroom with old vinyl flooring and fixtures. You want to make sure you have a consistent feel throughout the house.

Before beginning the renovation, make sure to look into building permits as well. In the City of Toronto, it’s the homeowners’ responsibility to make sure they’re following all the applicable building codes. All of that information can be found on the City of Toronto website.

The Right Person For The Job

There are a lot of risks that go along with fixing up a home. According to Silver, one of the best ways to mitigate that risk is by finding a decent contractor:

I think there’s a lot of people out there who could take advantage of you, so you really have to know the marketplace. Or you have to find somebody you can trust.

One issue now though, according to Burtnick, is that the best contractors are often booked as much as a year in advance. In Toronto, the renovation business has proven to be a strong marketplace so there are more new entrants vying for business. That can make it difficult to judge their skill and experience level.

To do this properly, you’re going to spend a lot of time interviewing contractors.

It’s up to the homeowner to do their due diligence, according to Burtnick. They should make sure to get referrals from friends who have gone through renovations, obtain references, and make sure the contractor is properly insured.

Also, make sure contractors aren’t subcontracting out the work, according to Burtnick. While it’s not illegal to farm out jobs to other workers, it can create major headaches for the homeowner.

What you’ll get is one contractor coming into bid on the business, but he doesn’t indicate to you that he’s just winning your business and sub-parceling it off to other contractors. You want a contractor who is responsible for all of the job and has direct control over that. When they start subcontracting it out they’ve lost control of it.

Contract With the Contractor

Making sure there’s a strong contract in place will help things run smoothly.

Outline the work that needs to be done, says Burtnick. That may include sketches, blueprints, or CAD drawings. It should include an estimate for the entire project, a payment schedule, and a clause to cover any extra expenses.

If you’re going through the project and decide you want to use granite instead of the ceramic tile that was agreed upon that, you’ve got a clause covering the extra costs that are bound to come up.

The contract should include the full legal name of the contractor’s company, their business address, HST registration number, phone number, and City of Toronto contractor license number. The homeowners’ full name and the job site address should all be included.

Burtnick says you always want to have an estimated start and finish date within the contract as well. But don’t worry if those move around. In general, he says double the amount of time you think it will take you to finish a job.

Those have to be somewhat flexible because things come up such as weather. But just a general guideline is important.

Prepare For Stress

Both Burtnick and Silver warn that renovations aren’t for the weak-willed. They take a lot of patience and planning. If not dealt with properly, they can be detrimental to relationships and even end marriages. 

If you don’t want to end up like Walter Fielding, plan ahead and make educated decisions.

Indeed, for many professional couples, a fixer-upper probably doesn’t make sense, says Richard:

If you have a husband and wife and they have a couple children and both work, they’re not going to have the time to do a fixer-upper. It just doesn’t make sense for them to put in the time.

Silver says he has some experience with this, having taken on a similar project himself in the mid-80’s.

I bought from a builder. I made some changes. He started building and I was on that site every day. I became somebody who yells and I never yell. But I learned to yell.

If you’re in the market for a fixer-upper but don’t think you have the stomach for it, Richard says there are other options. A new construction home that hasn’t been built yet isn’t necessarily the same thing, but buyers do have a bit more control over what the home will look like.

But fixing up a house can be nerve-racking, asserts Silver.

You don’t know if you’re doing the right thing, you don’t know what the market wants, and you don’t know if the market’s going to change and you could be caught.

In Toronto’s current housing market, finding good value can be a challenge. Prices continue to rise, properties get smaller, and every day more people are seemingly priced out of the market. For many buyers, a fixer-upper may be the last vestibule of hope for finding property in the city. That is if they can stomach it.

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TorontoStoreys.com asked a couple of Toronto real estate agents, including Richard, about their wishlist for Christmas. The question was:

If you could ask for one thing in GTA real estate, what would it be?

So what does Richard want this year? It’s more about what he doesn’t want.

At a time when we need more rental properties to be built in the marketplace, the provincial government’s move to insert rent controls will stifle the building on new rental properties. I would hope that they would lift any restrictions on rent control. They have always caused more negative damage than positive change.

The government needs to streamline the building process so that more units can be built. More supply usually helps to smooth out the market in terms of price. Forget rent controls and encourage building … that will be more positive for the marketplace.

Rent controls and their potential impact on the market are a very hot topic in the city. We wrote about it in our of our recent articles, you can find it here.

Read the rest of TorontoStorey’s article here.

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Jim was recently interviewed by Jill Mahoney from Globe and Mail about the effects of Foreign Buyer’s Tax on Toronto. Here is an excerpt from the article: 

In all, 3.8 per cent of homes sold in the city of Toronto were to buyers who were not citizens or permanent residents between mid-August and mid-November, down from 5.6 per cent for the previous three-month period.

In the wider Greater Golden Horseshoe region, 1.9 per cent of residential properties were bought by people from abroad, down from 3.2 per cent.

The government’s data come amid continued debate over the role of international capital in the Toronto area’s real estate market.

Some analysts and home buyers believe wealthy foreign buyers are pushing prices beyond the reach of many local residents, while the real-estate industry argues the main challenge is strong demand and a shortage of housing supply, rather than small numbers of non-citizens.

Foreign purchases began to fall in the vast area around Toronto after Premier Kathleen Wynne’s government introduced its tax in April, according to Finance Ministry figures. Before the move, the real estate market appeared to be overheating, as average home prices soared to nearly $1-million in the Greater Toronto Area. After the tax, the market entered a downturn.

The government on Wednesday said the overall housing market “continues to show stable growth,” while noting that Greater Toronto Area home resales fell 13.3 per cent and the average price dropped by 2 per cent last month from November, 2016.

Real estate agents who work with foreign buyers said many are waiting out the market’s turbulence.

“[The tax] forced everybody to the sidelines for no other reason than psychological because it was new and they wanted to see what kind of an effect a government intervention like that was having,” said Jim Burtnick, a Toronto broker who works with international clients

People want to make sure that they’re not catching a falling knife, that the sky’s not falling, and once they realize fundamentally nothing’s changed and everything’s pretty stable, I think you’ll see that it’ll pick up again.

Mr. Burtnick said foreign investment could also be down because some buyers are finding ways to avoid paying the tax, such as by registering properties in the names of relatives who are Canadian citizens or permanent residents. “People are generally pretty resourceful,” he said.

If you are interesting reading the rest of the article, head to The Globe and Mail site and read it here. 

Toronto’s Kingsway is 20 mins to downtown, surrounded by beautiful nature, rivers and walking trails. Its outdoorsy vibe, beautiful architecture, mature trees and manicured lawns make it a perfect family neighbourhood.

It is the perfect choice for people looking for little more space than what’s typically offered in the downtown core, with a bit of backyard, community feel and great schools.

Find out more about Kingsway in the video below.

Rent control is one of those thorny problems that seems like a great idea but inevitably fails to deliver. Today, we’re going to cover why rent controls have been implemented, and why they pose unique long-term consequences for Toronto.

What are rent controls?

First, let’s clarify what rent control actually means, and then how it’s been implemented in Toronto.

Rent control is a system implemented by a government to restrict how much and how often a landlord can increase rent. In Toronto, how much a property’s rent can be increased is decided annually by the Ontario Government based on the consumer price index, or CPI. Essentially, rent-controlled properties cannot be increased more than inflation, cannot be increased by more than 2.5 per cent, and can only be increased every 12 months.

Traditionally, rent control has been in force in Toronto. But then in 1997, the conservative government under Mike Harris eradicated controls on new buildings. Anything built after November 1991 wasn’t subject to rent control guidelines.

However, they basically grandfathered in any building built before November 1991, leading to what’s usually called ‘the loophole’.  If it was constructed before 1991, then rent controls were in effect. After 1991? It was not in effect.

Well, it worked—with rent control removed on new buildings, dozens of condo towers and housing highrises started going up, and rental and housing supply increased significantly.

Fast-forward to 2016/2017 and again, Toronto is in a housing crisis. There’s simply not enough rental property for everyone who wants it, and prices reflect this scarcity. We’ll get into the economics in a minute but what was driving this crisis wasn’t arbitrarily high prices, but rather a tremendous influx of new people to the city.

With pressure mounting for change, the provincial government reversed the 1997 decision. Now, rent controls were back on for everyone.

The case for rent control—what they tell you

Rent control seems like a good idea because of inelastic demand. People need a place to live and so they’re usually willing to pay extraordinary prices to keep their homes. For example, imagine that your favourite brand of liquid laundry soap suddenly increased their prices by 1500 per cent. You’d probably just stop buying that brand. Even if every liquid laundry soap increased their prices by 1500 per cent, you could always buy powdered laundry soap or even a natural alternative.

In short, your buying behaviour is heavily influenced by price, that is, it’s elastic.

With rental property though, this is far less accurate. People are generally willing to give up many other things before they move out of their homes, even as rental prices increase. They are very insensitive to price, and thus, the demand is fairly inelastic. No matter what, they want their home.

Obviously, just like a drug dealer can jack up the price of cocaine and not see a significant drop-off in sales, so too can landlords potentially increase the price of rental property without significant risk of losing tenants.

So rent control is positioned a bulwark against the inherent greed of landlords (or so the story goes). By limiting the rental increase amount, rent is stabilized, and people can live in their homes. By keeping up with inflation and having provisions in place so that landlords can increase rent both between tenants and if they make significant improvements, they continue to make a tidy profit without devastating tenants.

So goes the argument for rent control.

But that’s not the whole story.

Everyone wants to live in Toronto.. and who could blame them??

The supply side of rent control

So far we’ve looked at demand. But the second important thing to consider is supply—who is building new buildings for tenants, and how does rent control affect them?

When rent controls are in place, developers and investors are significantly less likely to drop the serious wads of cash needed to break ground on a new building.

Why?

Two reasons. If the developer is planning on managing a property and continuing to hold it on their books, their potential return on investment is far lower. What’s more, developers might end up in a position where other costs increase but they’re unable to increase their revenue, resulting in losses.

According to Jim Burtnick, SVP of sales at Sotheby’s International Realty Canada, landlords already experiencing this problem with rising property taxes, water, and hydro bills eroding their ROI.

Second, if a developer is planning on selling the building as condo units, it’s a much harder sell to those looking to use them as investment properties. Since that’s a major market in urban centres, it makes the building more difficult to sell which in turn makes them more difficult to build. Jim Burtnick tells us:

If we didn’t have these foreign investors buying condos pre-construction, first of all these buildings wouldn’t be going up as quick as they are because they need to typically get to a 70-75 per cent threshold of being preconstruction sold for a developer to get financing.

Without investors purchasing condos pre-construction, Toronto would have far less housing stock than it does and be in a far worse off position then it currently is.

By making them more difficult for developers to sell pre-construction by limiting the potential ROI, rent control negatively impacts the total units available in the short- and long-term. And therefore, harms renters.

Toronto by Lisa De Jong

(unintended) consequences

Now we all know that a supply/demand graph is a great place to start, but often doesn’t tell the whole story of any property market conundrum. Human nature, government policy, and international factors all play a role.

And rent control is no exception.

When rent control is implemented, there are two significant unintended consequences. First, because rents can only be raised in line with government policy annually, BUT can be raised as much as landlords want between tenants, renters are extremely reluctant to move.

For example, the Financial Post reported an anecdote about how Norah Ephron (net worth: $15 million) lived in a rent-controlled apartment in New York City for years, paying a mere $1,500 p/month in rent rather than a market estimate of $12,000.

According to Jim:

Tenants have no incentive to leave… because they know their rent [increases] are capped at 2.5 per cent.

The point is that rent control discourages people from moving around different properties, thereby reducing the flexibility of the market and reducing vacancy rates.

To sum up:

• Rent control is used to lower the cost of rent for renters over time and provide a stable, shock-proof rental environment.
• The idea is to separate the rental market from the property market to better serve renters who are at the mercy of landlords (in theory).
• In reality, rent controls disincentivise investment and thus limit supply of new rental accommodation
• Rent control also stops people moving around, further reducing vacancy rates.

The result? Rent control actually harms the rental market.

A better way

Rent control is the tool of choice for politicians because it’s a surefire way to capture votes. That’s why it’s so often the chosen solution for housing challenges in cities like Toronto.

The problem is it doesn’t work. So is there a better way?

According to Jim, the solution is really all about the basic economic equation – increasing supply faster than demand increases. With 100,000+ new immigrants every year to Toronto and long-term projected GTA growth of 42 per cent by 2041, demand isn’t going anywhere.

We need to foster an environment that attracts new investment and facilitate developers doing what they do best – breaking ground on new buildings.

In short, the best way we can serve the expanding rental market in the long term is a significant increase in how many houses there are in Toronto.

And the best way to do that is to make it easier for developers to do what they do best—the government just needs to get out of the way.

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