Newsworthy

After months of rising rental vacancies, it seems that Toronto’s rental market is finally rebounding on par with easing COVID-19 restrictions in Ontario. Rental market numbers in Toronto are now resembling pre-pandemic levels and average monthly rents are increasing month-over-month as demand picks back up.

Buying and Selling

The largest property bubbles in Canada have officially begun to deflate. Home prices in Toronto have risen since last month, but not nearly as much as they needed to to maintain the bubble momentum. Meanwhile, in Vancouver, prices have remained relatively stagnant. This indicates that there are less people rushing to purchase real estate in these markets. With that said, home prices aren’t expected to return to affordability any time soon.

Investing

Though luxury home sales are in the midst of normalization in markets across the country, real estate experts in Montreal say that demand for luxury properties in the city remains strong. In part, this is because there is so little supply. Strain on Montreal’s luxury market is expected to intensify when international travel resumes and foreign investors return to the market.

Money Matters

Though Canadians are purchasing properties in great numbers, a recent survey from RATESDOTCA and BNN Bloomberg revealed that many Canadian homeowners are financially unprepared for the expenses associated with homeownership. The survey indicated that 40 percent of homeowners don’t have savings to cover unexpected costs such as emergency home repairs.

Building 

The Bank of Montreal (BMO) has announced a $12 billion investment into Canada’s stock of affordable housing. The BMO’s financing will be put towards purchasing, developing, renovating, and maintaining affordable housing of all types, including social housing, community housing, shelters, and housing for vulnerable populations.

Predicting

The rental market has finally returned to some semblance of pre-pandemic normalcy, and this means that the market could very quickly teeter into a demand-heavy imbalance once again. In a recent article for Global News, realtors across Canada recommended renters lock down their leases in anticipation of the increasingly competitive market. In the coming months, students will resume in-person post-secondary schooling and Canada’s borders will reopen leading to more immigration and more foreign activity in the rental market. These factors, coupled with chronically low rental inventory, will not only make it tough to snag rental housing in the near future, but will add further challenges to rental affordability.

The post News & Insights on Canadian Real Estate Investing—Aug 9, 2021 appeared first on Crescendo Equity.

Newsworthy

Following peak activity in March, Canada’s housing market is cooling down rapidly. According to a report by TD economist Rishi Sondhi, this decline owes to tighter stress test rules, sinking bond yields, and eroding affordability. That said, home sales are still remarkably strong and are on track to surpass 2020’s numbers.

Buying and Selling

In spite of the fact that conditions are cooling in Canada’s overall housing market, real estate is booming in small cities and towns throughout the country. Big-city-dwellers migrating to smaller cities and towns is a trend that was spurred by the pandemic, but experts expect that the trend will persist as people continue to seek better affordability and value when it comes to real estate. 

Investing

According to a survey by Royal LePage, 13 percent of homeowners in the Greater Toronto Area, 14 percent in Greater Vancouver, and 12 percent in the Greater Montreal Area own more than one property. And 64 percent of those secondary property owners in the GTA, 65 percent in GV, and 35 percent in the GMA are collecting rental income. Royal LePage’s findings also revealed that young buyers are more inclined than ever to capitalize on the real estate market by investing in property.

Money Matters

In Canada, the annualized inflation rate was 3.1 percent in June, down from 3.6 percent in May. Despite the slight decrease, a 3.1 percent rate is still above the Bank of Canada’s target. Moreover, analysts say that abnormally high inflation rates could be here to stay given Canada’s slower rate of economic recovery following the COVID-19 pandemic.

Building 

Toronto-based startup, Promise Robotics, is bringing emerging technologies to the home building industry. The company is tapping into the modular construction method, using automation, advanced manufacturing, cloud computing, and artificial intelligence (AI) to speed up the home building process and add affordable housing to the market faster.

Predicting

Though the word unprecedented has been thrown around an awful lot lately, real estate conditions during the pandemic were, in fact, unprecedented. But what goes up must come down. We are now in the midst of a steep decline, but this is not necessarily cause for concern if you have a vested interest in Canada’s housing sector. For some context, let’s refer back to Rishi Sondhi’s housing update. He writes that: (a) less demand in the interim will give the supply side a chance to catch up, (b) population growth (fuelled by immigration) will pick up very shortly, which will play a part in driving demand back up, and (c) it’s estimated that Canadian households have over $240 billion in excess savings and the latest Bank of Canada Survey of Consumer Expectations suggests roughly ten percent of these excess funds will be used towards down payments. In the meantime, Canada’s real estate market is in a good place to weather the descent.

The post News & Insights on Canadian Real Estate Investing—August 3, 2021 appeared first on Crescendo Equity.

Newsworthy

In an effort to supplement Ontario’s stock of affordable housing, the Government of Canada has announced an investment of nearly $120 million to help build a 26-storey multi-residential and energy-efficient building in Brampton, Ontario. The building will provide affordable rental housing to more than 300 local families.

Buying and Selling 

Canada’s luxury real estate market is on fire and sales have exceeded pre-pandemic levels. This is attributed to increased buying and selling activity as well as soaring valuations that are resulting in more properties being considered “luxury.” That said, some experts speculate that the foreign homebuyers’ tax will cool down the luxury real estate market, making it more affordable for local buyers.

Investing

Canadian real estate investor, serial entrepreneur, and author Kosi Stobbs has launched his first online course entitled Canadian Real Estate Investor Mastery. The six-week course is geared at anyone who wants to gain knowledge in expanding their real estate portfolios. 

Money Matters

Statistics Canada has updated the consumer price index (CPI) basket weights. The update includes an increase to the Shelter component. Starting in June 2021, the Shelter component of CPI will represent 30.03 percent of the CPI basket weight. Increasing the Shelter component is expected to push inflation lower, implicating rental costs, homeownership costs, and energy costs to varying degrees.

Building 

Romy Bowers, who is the new chief executive of Canada Mortgage and Housing Corp., has identified that new construction is the solution to rising housing prices. That said, experts and previous research agree that in order to expedite new housing construction, land-use planning processes must be fixed at a bureaucratic level.

Predicting

Commercial real estate company CBRE says Canada’s office sector will experience a post-pandemic economic upswing. As Canada recovers from COVID-19, industrial demand is picking back up, and as such, office vacancy increases are easing in markets throughout the country. With that said, we also know that many companies have realized that working from home can be advantageous, and as such, working from home is here to stay. So, in short, will offices fill back up? Yes, to some extent, but the office market segment will still be a tricky place to be for commercial investors.

The post News & Insights on Canadian Real Estate Investing—July 26, 2021 appeared first on Crescendo Equity.

In this article, we debate the pros and cons of furnishing your rental unit and some best practices to observe when doing so.

Furnishing your rental property: key takeaways

• The main advantage to furnishing your income property is that it allows you to charge approximately 15 to 20 percent more in monthly rent. Furnishing enhances the look and feel of your units, making them more attractive to prospective renters. You can also target the business travel segment by furnishing your rental.
• The main downside to furnishing your rental is the upfront cost. You will also have to shoulder the expenses associated with the wear and tear of the furniture, cleaning the furniture between tenants, and replacing the furniture in the event that it is stolen, damaged, or becomes outdated. There’s also no accounting for personal taste, so there is always a chance that prospective renters won’t like the way you’ve chosen to decorate.  
• The key to furnishing a rental is to use pieces that look high-end, but won’t break the bank. It’s best to stay away from items that (a) are very expensive, (b) will be difficult to replace, and/or (c) have sentimental/emotional value. 
• While you should keep your costs low, you don’t want to sacrifice quality. Whenever possible, shop for items on sale. You can also consider second-hand items from online marketplaces, moving sales, garage sales, and estate sales.
• When furnishing a rental, aim to provide the basics. Avoid overcrowding and stick to a few basic furniture items, one or two pieces of artwork, and minimalistic lighting fixtures for each room. Avoid any furniture that’s visually bulky or too big for the space. 
• You’ll want to keep track of each furniture piece, its market value, where you purchased it from, and its condition. You should also take pictures of each piece before a new tenant moves in. You can then provide a copy of this record to your tenants, so that they are aware of how much everything is, should anything go missing or incur damage.
• Include a stipulation in your lease agreements that clearly states that tenants will be held liable for lost and/or damaged items.  

Pros and cons of furnishing your rental property

Pros:

• You can charge more rent for a fully- or partially-furnished unit. According to sources like Zumper and Apartments.com, landlords can typically charge 15 to 20 percent more for a furnished long-term rental. This is because you are adding value to your unit and saving your tenants the cost and hassle associated with furniture shopping. As such, units that are furnished usually have a competitive edge on the market.
• You can control the aesthetics of your units by furnishing them. If you choose to, you can give all your entire property a cohesive feel by using similar or complementary furniture in all your units. This can be advantageous when prospective renters are touring your rentals because you can enhance the look and feel of your units using furniture and decor. 
• You can target the business travel segment by furnishing your rental. People who travel for work tend to have a budget to cover their living expenses, so they can typically pay a premium for rent.

Cons:

• You’ll end up spending more money upfront by furnishing and decorating your units. You will also have to shoulder the expenses associated with the wear and tear of the furniture and cleaning the furniture between tenants. You will also have to deal with replacing any pieces that are damaged or stolen or become outdated in terms of style.
• There’s also no accounting for personal taste. Even if you choose furniture pieces that are relatively neutral, a prospective renter could decide against renting with you if they (a) don’t want furnishings, or (b) don’t like what you’ve selected for the unit.

Best practices for furnishing your rental property

Find pieces that look expensive (but aren’t expensive)

The key to furnishing a rental unit is to use pieces that look high-end, but aren’t actually too expensive. While you definitely want you units to look nice, you can’t control how well your tenants take care of the furnishings, so it’s best to stay away from items that (a) are very expensive, (b) will be difficult to replace, and/or (c) have sentimental/emotional value. A good rule of thumb is to shop on sale.

If you’re going the retail route when furnishing, a good place to start is IKEA, where you’ll pay a pretty reasonable rate for simple and functional furniture. Some other retailers that have similar offerings to IKEA include Structube, Parliament Furniture, and The Brick. 

Shop second-hand

If you’re on the hunt for a bargain, a great avenue to explore is used furnishings. Craigslist, Kijiji, and Facebook Marketplace are all great places to shop around for furniture and decor of all types, and if you’re lucky, you might even be able to score some items for free. You can also shop around for some high-end items at moving sales and estate sales. With anything second-hand, make sure you thoroughly sanitize the items and repair them if necessary.

With that all said, be very wary of second-hand soft furnishings and upholstered items. Anything with a fabric element is prone to bedbugs and other types of pests. These types of items are also tougher to get completely clean.

Keep it simple

When furnishing a rental, it’s not necessary to provide more than the basics. Overcrowding the unit with furnishings and accessories could end up making the unit feel smaller than it is. Additionally, you want to give prospective renters the chance to personalize the unit to a certain degree. 

When decorating your rental, stick to a few basic furniture items, one or two pieces of artwork, and minimalistic lighting fixtures for each room. Avoid any furniture that’s visually bulky or too big for the space. 

Document pieces and their conditions 

Once you’ve picked out and purchased all of your furnishings, your next step should be to create an inventory. You’ll want to keep track of each furniture piece, its market value, where you purchased it from, and its condition. You should also take pictures of each piece. You can then provide a copy of this record to your tenants, so that they are aware of how much everything is, should anything go missing or incur damage. And make sure to inform tenants—in writing—that they will be liable for anything that’s stolen or damaged. To be safe, you can include this stipulation within your leasing agreement.

Invest with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post Furnishing Your Rental Property: Pros, Cons, and Best Practices appeared first on Crescendo Equity.

Newsworthy

Following the unprecedented real estate conditions throughout 2020 and thus far in 2021, Canada’s housing bubble is now the second-largest housing bubble in the world. Additionally, home prices in smaller Canadian cities are rising much faster than home prices in major metropolitan areas, such as Toronto and Vancouver. 

Buying and Selling

Statistics released by the Canadian Real Estate Association indicate that national home sales and new listings are cooling off, following record-breaking numbers in March 2021. With that said, experts from the Toronto Regional Real Estate Board caution that this recent slowdown will be short-lived due to the resumption of immigration and foreign buyers in the coming month.

Investing

Investors currently account for 20 percent of home purchases in Canada, with a slightly higher share in Toronto and Hamilton. Investor-induced market activity is being driven by low vacancy rates and the nationwide housing shortage.

Money Matters

In Canada, the vaccine rollout is well underway, economic activity is rebounding, and there are signs of national inflation. As such, analysts believe the Bank of Canada will start raising its record low-interest rate as soon as next year. 

Building 

In Canada, commodities linked to construction have registered moderate to drastic cost increases across the board. The most dramatic costs increases include softwood lumber (169.4 percent year-over-year and 30.5 percent over the past three months), veneer and plywood (126.5 percent/year-over-year and 38.1 percent/over three months), and motor gasoline (128.5 percent/year-over-year and 22.6 percent/over three months).

Predicting

Today, more than two-thirds of the Canadian population have received at least one dose of the COVID-19 vaccine. This bodes well for the Canadian economy. As Canada’s employment sectors, university system, and tourism industry all begin to rebound from the effects of the pandemic, immigration into Canada is expected to pick up. This will no doubt intensify the need for both short-term and long-term housing, as foreign investors, buyers, and renters enthusiastically return to the Canadian market.

The post News & Insights on Canadian Real Estate Investing—July 19, 2021 appeared first on Crescendo Equity.

Today on the blog, we share some best practices to observe when it comes to real estate financing, including some preemptive things that you as the borrowing can do to impress your prospective lenders and boost your odds of securing the financing you need.

Commercial real estate financing: key takeaways

• Do get your finances in order and figure out your borrowing needs. Your borrowing needs should be based on your down payment amount, current financial commitments, and cash flow projections. 
• Do research your lending options. Ideally, you want a fixed-rate mortgage or the option to convert to a fixed-rate mortgage down the line to protect against interest rates fluctuations. 
• Do consider getting a pre-approved loan. With a pre-approved, you won’t waste time and energy shopping around for properties that are simply out of your budget.
• Do be prepared for standard lender’s conditions and to submit certain documentation, including a credit report, up-to-date financial statements, a business plan with financial projections, information on your investment and property management teams, details about the property, and, in some cases, an environmental assessment and a building inspection.
• Do consult with a mortgage broker who is well-versed in commercial financing. A broker with commercial experience will know the ins and outs of structuring a commercial real estate loan and will have tried-and-true knowledge of the best mortgage products for real estate investment or asset acquisition needs.
• Do allow plenty of time to secure financing. It’s not uncommon to take six weeks (or more, should due diligence issues arise), to get a final commitment from a lender. 
• Don’t expect financing based on projected income. Commercial real estate financing is based on the actual and current net income of the property, so your lender will need to know how much revenue the property is currently producing. Future rent projections are not typically factored in.
• Don’t compare residential real estate financing to commercial real estate financing. Not only are there more costs to consider with a commercial real estate deal, but the costs also tend to be much higher than they would be if you were purchasing a property for residential purposes. 
• Don’t forgo formalized lending protocols if borrowing from family, friends, or colleagues. It’s important to stick to formalized lending protocols regardless of your personal relationship with the lender. Your loan agreement should be legally binding and stipulate the loan type, repayment plan, interest rate, and default protocols. 

Get your finances in order and create a plan to allocate your cash flow

Before approaching third parties about financing, your first step should be to make sure your financials are in order. The financial information you present to a potential lender will more or less decide whether it’s in that third party’s best fiscal interests to lend to you. In other words, you want to show a prospective lender that your company is profitable and has growth potential—and moreover, that you have concrete, actualized numbers to back those claims up.

Beyond preparing your financials, you’ll also need to map out your borrowing needs. This should be based on your down payment amount, current financial commitments, and cash flow projections. And make sure you’re being realistic about financial forecasts. Unforeseen costs can quickly add up and eat up profit in the year following an acquisition. It’s a good idea to consult with an accountant regarding any financial particulars.

Research your lending options and consider a pre-approved loan

There are a variety of financing options that are available for real estate investors, with a mortgage loan being the main type of financing available to assist with a commercial real estate purchase. With this type of loan, you’ll want to consider the interest rate. If you’re offered an adjustable loan, a variable loan, or an interest-only loan, keep in mind that you will be negatively impacted should interest rates rise. Ideally, you want a fixed-rate mortgage or the option to convert to a fixed-rate mortgage to protect against interest rates fluctuations. 

Some more variables to consider are the bank’s terms, including the loan-to-value ratio, the amortization period, and the bank’s flexibility for loan repayment. A pre-approved loan is also an avenue worth exploring. By going the pre-approved route, you won’t waste time and energy shopping around for properties that are simply out of your budget.

You can find out some more financing options to consider as a real estate investor through the Business Development Bank of Canada.

Be prepared for standard lender’s conditions

There are certain documents and conditions that most, if not all, lenders will require before they will even consider you for financing. For instance, investors are typically expected to submit a credit report, so that the lender can evaluate how the borrower has previously handled any credit accounts. You should also be prepared to provide up-to-date financial statements, a business plan with financial projections, information on your investment and property management team, and details about the property, including the type of building, its age and current condition, and its resale potential.

Additionally, some financial institutions require an environmental assessment and/or building inspection to reveal any major work the property will need to be brought up to spec.

Consult with a mortgage broker who is well-versed in commercial financing

As markets for mortgages have become increasingly competitive, the use of a mortgage broker to facilitate loans between the investor and lender has become more popular. If you are planning on using a mortgage broker, it’s important to use someone who has prior experience with commercial real estate dealings. Ideally, the broker will be doing commercial financing on a full-time basis. A broker with such experience will know the ins and outs of structuring a commercial real estate loan and will have tried-and-true knowledge of the best mortgage products out there for real estate investment or asset acquisition needs.

Allot plenty of time to secure financing

Real estate financing takes time. Not only does it take time to find a lender that’s a good fit (and then, to open a line of communication with that lender), but it takes time for a lender to process the conditional information that we’ve mentioned above. As such, it’s not uncommon to take six weeks (or more, should due diligence issues arise), to get a final commitment from a lender. Bear this in mind if you’re dealing with an investment that’s time sensitive.

Expect financing based on projected income rather than actual income

Unless you’re applying for a pre-approved mortgage, you’ll need to provide the lender with the financial information of the income property at hand, in addition to your own financials as an investor or investment company. And while you most definitely should prepare financial projections for the property (based on variables like what you plan on charging for rent and if there will be secondary revenue sources, etc.), commercial real estate financing is based on the actual current net income of the property, not the projected income. In other words, your lender will need to know how much revenue the property is currently producing.

Compare residential real estate financing to commercial real estate financing

Residential real estate and commercial real estate are two very different worlds. When it comes to financing, not only are there more costs to consider with a commercial real estate deal, but the costs also tend to be much higher than they would be if you were buying a property for residential purposes. For instance, in addition to lender and broker fees, a commercial deal might involve costs associated with a commercial appraisal, an environmental report, and legal fees, which can cost thousands and aren’t really necessary when purchasing for a residential purpose. Additionally, costs will be incurred if the commercial property needs to be brought up to spec in any way. All of these added expenses will affect your borrowing needs.

Forgo formalized lending protocols if borrowing from family, friends, or colleagues

Not all lenders will be a bank or an official lending body. In some cases, your lender might be someone you know on a more personal level, such as a family member, friend, or colleague. While there are definitely benefits to going this route—for instance, flexible repayment terms and a lower rate of interest—borrowing from someone close to you can quickly go south. As such, it’s important to stick to formalized lending protocols regardless of your personal relationship with the lender. Your loan agreement should stipulate the loan type, repayment plan, interest rate, and default protocols. Always consult with a lawyer or accountant to ensure that the loan has been structured in a way that’s fair and makes sense for all parties involved.

Invest with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post Dos and Don’ts of Commercial Real Estate Financing appeared first on Crescendo Equity.

With the similarities between the technology scene in California and Ontario being what they are, it’s no wonder that Ontario has been coined the “Silicon Valley of the North.” While Silicon Valley employs nearly 380,000 technology workers along its Highway 101, the region along Ontario’s Highway 401 is home to approximately 1,000 companies, employing 280,000 and bringing in over $30 billion annually to the international economy. And while Kitchener-Waterloo-based tech companies have spurred national attention, groundbreaking technology innovation can be found in cities throughout Ontario.

Ontario is quickly becoming a global leader in technology innovation. In this article, we explore the factors driving this reputation and some standout tech innovation activity in the province.

Technology innovation in Ontario: key takeaways

• Ontario has a rich and diverse pool of tech talent. One reason for this is because Ontario has a strong university system, which results in local talent and contributes to innovation at early-stage companies. Canada also has strong rates of immigration, bolstered by government-backed initiatives that encourage skilled newcomers to settle in the country.
• In terms of invested capital, Canada is the third-most productive tech ecosystem in the world. This partly owes to the availability of angel investors and government-backed funding programs. 
• Canada has a low cost of living, as well as a government-funded healthcare system. This can be advantageous to Canadian tech companies because the cost burden of healthcare doesn’t fall on the shoulders of the employer, giving tech companies a leg-up when it comes to realizing revenue. 
• Technology companies founded in Canada are thriving. For instance, Wealthsimple and Clearco (formerly Clearbanc) are sitting at $5-billion and $2-billion valuations, respectively. The same goes for tech companies that were created elsewhere and have expanded operations to Canada. For example,  Shopify,  Nuvei Corp., and Instacart have market capitalization rates of $182-billion, $10-billion, and $54 billion, respectively.

Unparalleled local talent 

One of the main factors driving Ontario’s tech giant status is the fact that the province has a rich and diverse pool of talent, at both the professional and intermediate level. This owes, in part, to Canada’s stance on immigration, which we will explore more in the next section. Another factor that bolsters the talent pool is the strong university system.

Some of Canada’s top post-secondary institutions for tech innovation include the University of Waterloo, McMaster University, Western University, University of Ontario Institute of Technology, and Niagara College Research & Innovation. With so many capable candidates being educated in institutions right here in the province, tech companies have the opportunity to recruit locally, contributing to the revolving door of innovation at early-stage companies.

And while there is certainly competition for tech talent in Ontario, there’s far less rivalry than there is in California or New York.

Strong rates of immigration

It’s no secret that immigration is a fundamental pillar of the Canadian economy. Immigration is also a fundamental pillar of Canada’s technology scene. As such, the Canadian government is actively finding ways to attract foreign tech talent. One example of this is the Global Talent Stream, launched in 2017, which connects Canadian employers with highly-skilled foreign talent. Another is the Temporary Foreign Worker Program. These programs differ from other visa programs in that, in terms of processing time, workers can be admitted into Canada in as quickly as a month.

Canada’s stance on immigration starkly contrasts that of the US. Under the Trump presidency, immigration policies were tightened, giving Canada the edge when it came to top global talent and capital. Today, Canada has six times as many skilled immigrants compared to the US. More granularly, 80,000 tech jobs were created in the Toronto-Waterloo Corridor alone between 2013 and 2019. That’s more than the US tech giants—San Francisco, Seattle, and Washington—combined. More recently, Canada has welcomed 70,000 new permanent residents so far in 2021. This is in keeping with an announcement made last year by the federal government, which expressed plans to bring over 1.2 million new immigrants into the country over the next three years.

By not only growing but diversifying the pool of professionals in the tech space, Canada is making itself privy to different points of views, skill sets, and approaches, all of which can be incredibly advantageous when it comes to creative, out-of-the-box thinking and the development of innovative products and services.

No shortage of funding

According to StartupBlink’s 2020 global startup ecosystem rankings, Canada now has 2.9 percent of the top 1,000 technology ecosystems globally. And with regards to return on invested capital, Canada is the third-most productive tech ecosystem in the world. 

This partly owes to a variety of public and private/angel investors, including but not limited to the Federal Government’s Venture Capital Action Plan program and Canada’s Venture Capital And Private Equity Association. More granularly,  the Ontario Emerging Technologies Fund (OETF) has invested 105-million, combined with a partnered investment of 350-million, into innovative, high-growth, private, Ontario companies. And in June, the Government of Ontario announced that they will be committing $100-million towards a new fund focused on supporting high-potential tech companies in the province.

One more factor to consider is what it costs to employ a workforce. Not only does Canada have a lower cost of living than California, but Canada also has a government-funded healthcare system. This way the cost burden of healthcare doesn’t fall on the shoulders of the employer, giving tech companies a leg-up when it comes to realizing revenue. 

The evidence is in the dollars

Now, let’s talk numbers. Shopify came to Canada in 2006. Today, it has reached a market capitalization of $182-billion and has a revenue of 2.93 billion USD. And Nuvei Corp., which came to Canada in 2003, has a market cap of $10-billion. Meanwhile, Wealthsimple and Clearco (formerly Clearbanc), both of which are Canadian companies, are sitting at $5-billion and $2-billion valuations, respectively. Finally, Instacart, which was built by a graduate of the University of Waterloo, came to Canada in 2017. Today, Instacart has a market capitalization of $54 billion and a revenue of $1.5 Billion USD.

Technology innovation activity throughout Ontario

• Google launched its first Canadian accelerator in Kitchener-Waterloo in 2020. The company has expressed plans to open three new Canadian offices and hire 3,500 people by 2022. Additionally, Google is currently running a Women Founders accelerator and a Black Founders program. 
• Google’s sister company, Verily Life Sciences, expands to Kitchener-Waterloo. Founded in San-Francisco, Verily is a medical device company. The company plans to hire 30 to 40 people for its Kitchener-Waterloo hub. Verily will be looking to fill engineering, user experience, research and design, data science, and product management roles.
• BlackBerry has partnered with the University of Waterloo to launch an innovation program. Blackberry was founded in Waterloo in 1984. More recently, they have announced a multi-million dollar program geared at fast-tracking the development of research and technology into market-ready products.
• Dialpad Inc. has announced plans to expand its employee presence in Canada. Dialpad is an industry leader in Artificial Intelligence, Natural Language Processing, and Automatic Speech Recognition. They are hoping to hire in the Kitchener-Waterloo area.
• Hamilton has seen a growth of 35 percent in its tech labour force over the course of five years. There are roughly 17,800 tech workers in Hamilton and companies in the region are known for their work in autonomous vehicles, digital media and gaming, and life sciences.
• McMaster University’s Innovation Park set to establish iHub. This will be due to a $10-million investment from FedDev Ontario. iHub will be an integrated automotive, aerospace, and advanced manufacturing network.
• VI-grade’s STATIC Simulator installed at the McMaster Automotive Resource Centre. The simulator will help with the creation of components and control systems that will be used for powertrain electrification, autonomous driving systems, human-machine interfaces, and driver monitoring systems.
• Amazon will be bringing a fulfillment centre in Hamilton. The fulfillment centre will bring over 1,500 new jobs to the city.
• London is home to some of the fastest-growing technology companies in North America. Last year, eight London businesses made Canada’s Top Growing Companies list, including Paystone, Mobials, Northern Commerce, and Digital Echidna.
• CARFAX will be recruiting for hundreds of highly skilled workers and local talent. After relocating their headquarters to London in 2019, CARFAX has expressed plans to expand and is hiring for a variety of positions.
• Niagara-based Proptech startup Tenantcube joins Accel’s Accelerator Program. Tenantcube is a software solution to handle all property management for property owners​, managers, and investors. This is a move that will attract notable investors and key players in the segment.

The bottom line: tech innovation will have far-reaching benefits across Ontario communities

Like growth in any sector, technology innovation in Ontario is bound to be extensively advantageous to the province’s communities and industries. Because of the massive opportunity tech innovation has to add jobs to the market, the province will be a great destination for immigrants and interprovincial migrants alike in the years to come. As for real estate, housing demand—and particularly rental demand—in submarkets such as Kitchener-Waterloo, Hamilton, London, and Niagara will not only persist, but deepen, as newcomers flock to these regions in search of employment or to spearhead undiscovered tech innovation in communities that can support it.

Invest with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post “Silicon Valley of the North”— Tracking Technology Innovation Activity in Ontario appeared first on Crescendo Equity.

Today on the blog, we talk about how your investment goals should factor into how and where you invest your money, as well as the pros and cons of investing in real estate versus starting a small business. 

Real estate investing: key takeaways

• The main way to make revenue from real estate investing is through rent collection. Additional ways a real estate investor can maximize NOI and produce revenue is through parking fees, laundry services, storage fees, billboard/signage fees, and vending machines. 
• Real estate investing can be less time-consuming than running a business. This is especially true if you choose to invest with a partner or a REIG. The barrier to entry is also quite low in terms of the learning curve. 
• Real estate investing requires capital upfront, in the form of a down payment and any expenses required to bring the property up to spec. Real estate investing is also contingent on availability, as well as the state of the market. Additionally, initial revenue produced from a real estate investment is typically put towards financing or put back into the investment, so investors might not see profit for upwards of years.

Starting a business: key takeaways

• It can take anywhere from months to years for a business to become profitable and profitability largely depends on the startup costs. To become profitable, the revenue produced by the business must exceed all invested capital and operating expenses, including rent or mortgage, incorporation fees, inventory, marketing, website development, insurance, payroll, and taxes.
• The capital required for starting a business varies based on the nature of business. The ecommerce model is becoming increasingly popular amongst business owners because of the low startup costs. If you choose the ecommerce route, you can start up with very little in terms of upfront investment.
• There’s a lot of variety as far as the types of businesses you can start. Market research is the first step in discovering and filling a gap in the market.
• Starting and running a business can be incredibly time-consuming and the learning curve can be steep. Things like branding, marketing, product development, customer service, and cultivating an online presence are not inherent and may require you to (a) take the time to learn new skills, or (b) hire professionals and employees. Additionally, competitors pose an ongoing threat to any business.

Defining your investment goals

Real estate investing and small business ownership have their upsides and downsides. As such, before you consider investing your time, capital, and energy into either, take a moment to consider your investment goals and what you hope to get out of the venture. 

Some questions you can ask yourself include:

• Are you hoping to generate consistent income, accrue wealth, or build a brand?
• How much capital do you have readily available to dedicate to your investment?
• How much time can you allot to building, growing, and maintaining your investment?

Hashing out this kind of information from the outset will help you to choose the investment avenue that suits your future goals, as well as your current lifestyle and financial circumstances. 

For example, starting a business is typically more time-consuming than investing in a singular real estate deal. So, if you know that you won’t have a lot of time to dedicate to your investment, you might want to consider investing in real estate over investing in a business. 

We get into some more pros and cons of each investment avenue below.

Investing in real estate

How do you turn a profit?

The main way in which investors realize profit from a real estate investment is through regular rent collection. There are also a few secondary ways income property owners can bolster profit, including parking fees, laundry services, storage fees, billboard/signage fees, and vending machines. 

For investors that are in the market for an income property, there are a few ways to assess the potential profitability of a prospective real estate investment. One of the most popular metrics is capitalization rate (cap rate), which represents the rate of return on a real estate investment property based on the income that the property is expected to generate. The cap rate metric considers the property’s net operating income (NOI) and its current market value. In general, you want to maximize your property’s NOI, be that through rent revenue or secondary revenue. If your NOI rises, so will your cap rate.

Pros of investing in real estate

As we’ve mentioned above, getting in on a real estate deal tends to be significantly less time-consuming than getting in on the ground floor of a business. This is especially true if you choose to invest with a partner or with a real estate investment group (REIG). In these cases, you have the option to either divvy up the responsibilities or invest as a silent partner, leaving the property management tasks to the REIG.

If you’re running an income property without the help of partners, your responsibilities will vary depending on the needs of the property and your tenants. With that said, outside of collecting rent, the most time-consuming aspects of running an income property would be handling tenant turnover and dealing with expected and unexpected maintenance and repairs.

Another enticing aspect of real estate investing is that the barrier to entry is quite low. Even if you’re completely new to the world of real estate investing, the learning curve is approachable and there is plenty of information available online and through books and podcasts. Additionally, real estate agents can provide plenty of invaluable guidance and leasing agents and property managers can be hired to handle some of the more tedious and time-consuming aspects of running a commercial property.

Cons of investing in real estate

While it’s a misconception that real estate investing is reserved for the wealthy, it’s true that it does tend to require some degree of capital up front. How much capital depends on your investment strategy, the lending environment, your credit score, and the financial particulars of the deal. In any event, if you’re purchasing an income property, you should expect to pay at least a 20 percent down payment. With that said, if you plan to live in one of the units, you can put down less. How much less depends on the number of units in the property.

Another potential drawback of real estate investing is that it’s contingent on availability, as well as the state of the market. For instance, an economic downturn can negatively affect occupancy and put downward pressure on rents. Meanwhile, an economic boom can lead to an oversaturated and competitive market.

Finally, with real estate investing, initial revenue is typically put towards financing or put back into the investment. In other words, the investment might not become profitable for upwards of years.

Starting a business

How do you turn a profit?

It can take anywhere from months to years for a business to become profitable and profitability largely depends on the startup costs. So, if you’re operating out of a storefront, it will take much longer to become profitable compared to running an ecommerce business. 

To become profitable, the revenue produced by the business must exceed all invested capital and operating expenses. Again, it can take some time to overcome startup and ongoing expenses such as rent or mortgage, incorporation fees, inventory, marketing, website development, insurance, payroll, and taxes, amongst more.

Pros of investing in a business

The capital required for starting a business varies based on the nature of business. For instance, a brick and mortar business can require significant capital upfront, either in the form of monthly rent or a down payment. If your strategy involves purchasing a storefront rather than renting, the financing structure would resemble that of a real estate purchase. With that said, the ecommerce model is becoming increasingly popular amongst business owners. If you’re going the ecommerce route, you can start up with very little in terms of upfront investment.

There’s also a lot of variety as far as the types of businesses you can start. The market is flush with undiscovered and undersupplied niches, so as long as you do your market research, it’s completely possible to discover and fill a gap in the market.

Cons of investing in a business

Starting and running a business of any size and type can be incredibly time-consuming. And while it’s completely possible to run a passive online business, the time you put into things like branding, marketing, product development, customer service, and your online presence can end up correlating to the success and growth potential of the business. 

There can also be a pretty significant learning curve involved with starting and running a business. Things like branding, marketing, product development, customer service, and cultivating an online presence are typically not inherent and may require you to (a) take the time to learn new skills, or (b) hire professionals and employees.

Finally, competitors pose an ongoing threat to any business. Even if you have cornered the market, there’s no guarantee that new competitors won’t pop up and deplete your market share. Because of this, the longevity of a business often has a lot to do with how quickly and strategically a business can adapt to the evolving needs of consumers. 

The bottom line: do your due diligence and invest smart

Differences aside, there are also many advantageous similarities between investing in real estate and investing in a small business. If done pragmatically, with a foundation derived from thorough market research and analysis, both investment avenues can lead to opportunities for expansion and growth.

If you’re investing in real estate, your market research should involve assessment of the economic, employment, and educational health of the areas in which you’re shopping for property. This kind of information can be found anecdotally, by networking with professionals with similar investment goals, and via resources such as the Canadian Real Estate Association (CREA).

If you’re investing in a small business, it’s important to know about your competitors, market share, sales channels, consumer demographics, industry trends, and branding and advertising concepts.

And for both investment avenues, it’s critical to take into account your risks and factor them into your strategic and financial plans. If you don’t consider and manage possible risks from the outset, one hurdle can end up derailing all of your hard work and future plans.

Invest in Real Estate with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post Investing in Real Estate Versus Starting a Business appeared first on Crescendo Equity.

Successful real estate investing should stem from high ethical standards. Today on the blog, we talk about four ways in which real estate investing can be a socially responsible enterprise.

Ethical Real Estate Investing: Key Takeaways

• Real estate is regarded as an ethical investment avenue because it fulfils an essential and universal need for housing. 
• Real estate investors can play a part in the economic recovery of deprived communities by developing and renovating housing in these areas. Improving a community’s housing market can lead to further economic growth.
• A socially responsible investor thinks beyond the building. Capital upgrades geared at energy efficiency can reduce a building’s carbon footprint, while ensuing long-term cost-savings and improving the property’s performance on the market.
• Affordable rental units are crucial to an inclusive housing market, but Ontario is in the midst of a housing supply shortage. A socially responsible investment choice is to add affordable housing to markets with low median income and chronically unanswered housing demand. Government-backed housing benefits exist to incentivize developers to focus on supplying and improving the quality of affordable housing in Canada.
• Investors should maintain fair and honest standards for their tenants. While annual rent increases are fair and legal, things like raising rents without proper notice, evicting tenants without cause, violating housing laws, and ignoring the reasonable needs of your tenants and the surrounding community are unethical and could end up harming your reputation as an investor and your relationship with your tenants.

Why Real Estate is an Ethical Form of Investing

Real estate is considered to be one of the most ethical forms of investing. At a fundamental level, real estate is regarded as a positive investment because it fulfils an essential, indiscriminate, and universal need for housing. Moreover, if you’re a serial investor or are running a real estate investment business, there is latitude to make ethical and environmentally responsible choices that will not only enhance the value of your investment, but enhance the lives of your tenants and the community at large. 

Socially Responsible Ways to Invest in Real Estate

Revitalize Emerging and Neglected Areas and Underperforming Properties 

Real estate investors and developers can play a huge part in the economic recovery of deprived communities. In emerging and/or neglected neighbourhoods, for instance, investors and developers have the ability to supplement and improve the quality of housing stock on the market, attracting people to move to those communities in greater numbers and potentially spurring further economic growth.

The key to this strategy is to identify areas that are already on track for economic growth, such as up-and-coming communities, communities where the job market is poised for future growth, and/or areas where there is chronic unanswered demand for housing. Real estate will be more affordable to acquire in emerging communities and your investment stands to have a more immediate social impact. 

Invest in Eco-Friendly Retrofits and Strategic Capital Improvements

Being a socially responsible investor requires you to think beyond the building. This means making investments that will reduce your building’s footprint on the planet. Energy-efficient upgrades include installing a tankless water heater, utilizing a programmable or smart/learning thermostat, switching to multi-pane windows, and making sure your roofing and insulation are in working order at all times, amongst more. 

As an added perk, strategic capital upgrades that encourage energy efficiency can also improve your property’s performance on the market by making it more attractive to prospective tenants. Energy efficiency can also ensue long-term cost savings.

Supplement Affordable Rental Stock

These days, one of the most efficacious ways to fulfill a social purpose while investing in real estate is by creating affordable and accessible rental supply. Rental units are crucial to an inclusive housing market. They pose an affordable and stable housing option for those who can’t afford to own property. But Ontario is in the midst of a deepening rental crisis. A rental market report from the Federation of Rental-Housing Providers of Ontario (FRPO) predicts that Ontario will register a shortage of 200,000 rental units over the course of the next decade. 

To help add supply to markets that sorely need it, investors can target areas with low median income and chronically unanswered housing demand. Meanwhile, government-backed housing benefits exist to incentivize investors and developers to focus their efforts on affordable housing. For instance, the National Housing Strategy, launched by the federal government in 2018, provides funding and financing geared at creating new affordable housing supply, as well as modernizing existing supply. 

Maintain Fair and Honest Landlord-Tenant Standards 

Real estate investing is a business and should be treated as such. So, as important as it is to consider social implications when and where you invest, it’s also important to be profitable. As such, something like raising rents—though it may feel unfair from the standpoint of your tenants—simply comes with the territory. Moreover, it may be necessary to absorb operating expenses such as property taxes, insurance, and building maintenance.

Conversely, things like raising rents without proper notice, evicting tenants without cause, violating housing laws, and ignoring the reasonable needs of your tenants and the surrounding community are not only unethical, but could harm your business, your reputation as an investor, and your relationship with your tenants.

Invest with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post Ethical Best Practices for Real Estate Investing appeared first on Crescendo Equity.

In this article, we examine the factors that are causing construction costs to surge and the consequence to Canada’s housing market.

Cost of construction in Canada: Key takeaways

• In 2021, Canada’s sales-to-new listings ratio has remained in the 60 percent range. This indicates that there are more potential buyers than available housing inventory on the market. 
• Because of the disparity between demand and supply, more buyers are opting for new construction. Approximately one in four homes on the market today are new builds. Historically, that ratio has been one in ten.
• Unanswered demand for housing has resulted in steep competition for both new and pre existing homes and costs for both are rising.
• In Canada, lumber prices are up 340 percent year-over-year. The cost of gypsum is up 7 percent from a year ago, steel mill products are up 18 percent, and copper is up 27 percent. There are also increased tariffs on crucial components like steel, aluminium, rebar, and concrete.
• The cost of land is rising. The price for a single lot of land is up 11 percent and new lot supply is down 20 percent from a year ago. 
• Canada’s construction sector is in the midst of a worker shortage. About 257,100 construction workers are expected to retire throughout the course of the next decade. Only 227,600 workers are expected to enter the construction labour force during that same period.
• Rising demand for housing in combination with rising commodity prices and a worsening labour shortage is adding thousands of dollars to the cost of building a home.

Rising demand for housing

In spite of the effects of COVID-19, there is plenty of healthy demand within Canada’s housing market. According to the Canadian Real Estate Association, the national sales-to-new listings ratio was 62.4 percent in April 2020, 64 percent in March, and 65.4 percent in February. Though the SNLR has declined slightly month-over-month, these numbers tell us that Canada’s real estate market is favouring seller’s, indicating that there are more potential buyers than available inventory on the market.

Because of the disparity between demand and supply, more buyers are opting for new construction than ever before. According to numbers via CNBC, approximately one in four homes on the market today are new builds. Historically, that ratio has been one in ten. 

With so much unanswered demand for housing, competition is steep and prices for both new and pre existing homes are on the rise. 

Surging commodity prices

We’ve written before about commodities and how prices of copper, zinc, nickel, and gold rose to their highest levels in a decade last spring, but we yet haven’t addressed the commodities that are linked to construction. In Canada, we’re seeing soaring lumber and wood panel prices in combination with increasing tariffs on crucial components like steel, aluminium, rebar, and concrete.

There are a few reasons why construction commodities are rising in price. On one hand, an article published last year by Global News states that demand for building material has been intensified by the COVID-19 pandemic, with many people homebound and having the time to take on home renovations. A recent report from RE/MAX revealed that more than half of Canadians renovated their homes in 2020 to enhance their lifestyle during lockdown, or to increase its market value for the purpose of sale. And on the supply end of things, many North American mills have been forced to pause or reduce production during the pandemic, which has resulted in a sizable material shortfall. 

According to Random Lengths, lumber prices are up 67 percent this year alone. They’re also up a whopping 340 percent year-over-year. Moreover, the cost of gypsum is up 7 percent from a year ago, steel mill products are up 18 percent, and copper is up 27 percent. Meanwhile, the price for a single lot of land is up 11 percent and new lot supply is down 20 percent from a year ago.

A shortage of skilled labourers

According to On-Site Magazine, there are approximately 1.4 million persons employed by Canada’s construction industry. Though that number may seem large, it’s no secret that the construction sector has been in the midst of a labour shortage for some time, owing, in part, to a lack of interest in the industry from students and young workers. 

Moreover, this shortage is going to deepen. According to BuildForce Canada, about 257,100 construction workers, accounting for roughly 22 percent of Canada’s construction labour force, are expected to retire throughout the course of the next decade. Meanwhile, only 227,600 workers are expected to enter the construction labour force during that same period. 

With less skilled workers on the job, it takes longer for projects to be completed and some projects are canceled altogether. Additionally, physical distancing requirements and workflow interruptions caused by the pandemic caused labour productivity to suffer, contributing to supply chronically falling short of demand. 

The cost to Canada’s housing market

Rising demand for housing in combination with rising commodity prices and a worsening labour shortage is adding thousands of dollars to the cost of building a home. According to the National Association of Home Builders (NAHB), surging lumber prices have added $35,872 to the price of an average new single-family home and $12,966 to the market value of an average new multi-family property. Unprecedented prices are also causing builders to postpone or delay projects. According to the Ontario Home Builders Association, rising costs are contributing to an average delay in housing construction of about six weeks.

This upward pressure is expected to continue as the Canadian economy recuperates from the pandemic. On one hand, low interest rates will spur consumer spending, leading to large purchases such as real estate. This will deplete supply and drive up demand for new housing. Meanwhile, Canada’s immigration plan is expected to bring in hundreds of thousands of newcomers in need of all types of housing. 

One way property owners can offset the high price tag associated with building materials is by recycling old material for their home building or renovation plans.

With all of this said, there’s more emphasis than ever before on preserving pre existing housing stock. Not only is acquiring older stock far more affordable than building new, but in many cases, buildings constructed decades ago are made of materials that would be far too expensive to use today, such as concrete. Older properties also tend to have more generous square footage. Because of their “good bones,” older buildings also lend themselves well to retrofitting.

Moving forward and considering the trajectory that housing demand will take in the coming years, developers will have little choice but to keep building new, but there’s also the opportunity to optimize the old. Capital renovations can be made to older stock to not only bring those assets up to spec, but improve their marketability and performance potential, all with the hope that decades-old stock can remain active for decades more.

Invest with Crescendo Equity

The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.

The post Costs of Construction is on the Rise — Here’s What That Means for Canada’s Real Estate Industry appeared first on Crescendo Equity.