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Discover the Joys of Downsizing

Retirement Through Real Estate

Sometimes the cost and effort to take care of our homes can start to weigh on us. Cleaning gutters, mowing the lawn and shoveling snow can make downsizing feel like an attractive option. The idea of downsizing however, can lead to many conflicting emotions. What are the options when it comes to retirement and how could we best use our real estate to help us reach our goals?

What is the #1 thing we hear from our clients after they downsize...
               They wish they had done it sooner.

What are some common barriers for downsizers?

1. Leaving a much-loved family home
The emotional connection with a home is the top psychological hurdle in making a move. Even if selling the home has been on the table for a while, the reality of leaving a loved home for both the seller themselves along with extended family can be an emotional process. Understanding these affects and focusing on the financial and lifestyle benefits of the transition will help with the ultimate decision. 

2. Facing a daunting decluttering task
Let's face it, most of us accumulate a lot of stuff! The longer a family lives in a home usually equates to more accumulated possessions and memories to deal with. The act of sorting, packing and discarding our possessions can feel overwhelming. 

Starting early to declutter and organize the home is a great place to start. Also having professional help can be just enough to get over the initial hurdle and get the process moving. 

Linda at Out Of Chaos is a fantastic resource. They are experts in home organization, decluttering and moving services. They have helped many of our clients get a jump start on their home.

3. Selling your home comes with a cost
There are certainly costs involved in selling your home, such as moving costs and real estate fees. The benefit however is that if it has been your primary residence you will not pay the capital gains tax. Should you decide to gift your home to your children you run the risk of getting the asset taxed at probate or triggering the capital gains tax at the time of transfer. It is important to understand the tax ramifications of real estate transfers and speak with an accountant to help with estate planning early. When it comes to large gifts, it’s important to realize that there is no gift tax tax in Canada. Often selling your home free of capital gains and then gifting an early inheritance is an excellent strategy.

4. Change can be hard
Some of us are better at change than others. New surroundings and a change of environment can be healthy but it can also be challenging. It is always best to make the change before you need to. If forced into selling a home due to finances or health issues it will always be harder. A positive attitude and excitement about a fresh start goes a long way in ensuring the move will be a success!


What are some of the benefits of downsizing?

1. Increased Leisure - With a smaller property comes fewer possessions and also the convenience of outdoor areas that are low or no maintenance

2. Lifestyle Benefits - Living in a more walkable location, or in a property that you can simply 'lock and leave' 

3. Financial Freedom - Selling a large family home, opens up possibilities such as overseas travel, creating passive income, diversity of investments or simply a more comfortable retirement

4. The Gift Of Time - More quality time with grandchildren, family and friends

5. Social Engagement - Surrounding yourself with a likeminded supportive community to enjoy activities, hobbies and events which helps to maintain a sense of purpose and companionship for retirement


What other options are available outside of an expensive retirement home?

With the price of retirement homes these days, it is no surprise that people are getting creative. The Global News article about the retired couple who booked 51 cruises back to back because it was cheaper than a retirement home is certainly a creative approach! See the news article here if a World Cruise sounds like your ideal transition from home ownership. Extravagant travel aside, there are many additional options to consider when it comes to transitioning from your much-loved home and downsizing. Here are a few ways that we have been able to help our clients with their real estate and retirement goals. 
 

55+ Living on the North Shore
There are multiple opportunities on the North Shore when it comes to 55+ communities. These apartment buildings provide 1 or 2 bedroom units which cater to this demographic. The condos are typically slightly under market value due to the age restriction. Safe and low maintenance, this provide an opportunity to get involved in events and activities along with a fabulous connection to community. 

SOMERSET GREEN - 121 West 29th/ 2800 Chesterfield Ave, North Vancouver
VISTA 29 - 188 West 29th St
QUEENSBROOK - 678 West Queens Rd
RIDGE PARK GARDENS - 2059 Chesterfield Ave
EDGEMONT VILLA - 3151 Connaught Crescent
HIGHLAND HOUSE - 3088 Highland Boulevard
BALMORAL HOUSE - 960 Lynn Valley Road
KIRKSTONE GARDENS - 2020 Cedar Village Crescent

For more information on what listings are currently available in these 55+ buildings specifically, please contact us.

Multi-Family Homes with Suites
Due to affordability for the next generation, we are seeing many more families opt to pool their money and purchase a multi-family home. These detached homes with suites provide separation and independence for parents, children and grandchildren while still having the benefit of close proximity to help when needed. This can also be the perfect way to pass on generational wealth through real estate.

For more information on what listings are currently available for detached homes with suites specifically, please click here

Purchase of Multiple Properties for Inheritance Gifts and Passive Income
Passive income is a huge component of retirement. Some people are lucky to have a workplace pension, many are not. Having your wealth tied up in your primary residence can affect the ability to pay your day to day living expenses required once your income is reduced. Selling the larger family home and purchasing two properties is a fabulous way to diversify by living in one and renting the other for passive cashflow. This way you are still holding your equity and not diminishing your wealth with consumer expenses. If being a landlord isn't a priority, creating a 'rent to own' option for a child might be the perfect solution. By gifting the money and having your child purchase the condo, you're setting up the next generation with an affordable living arrangement, saving the wealth transfer taxes and creating passive income for yourself. 

We have helped many clients with this concept. Please contact us to find out how we can help!

Reverse Mortgage for Creating Passive Income Through Investment
Reverse Mortgages have received a bad reputation and rightfully so. With high interest rates quietly depleting your equity, home owners have found themselves in less than ideal situations. Taking equity out of your home to pay for day to day expenses is not recommended. A more advantageous use of a reverse mortgage however is to purchase a secondary investment property and create cashflow. That cashflow could pay your living expenses all while maintaining your equity in real estate and allowing you to stay in your home. This could also give you the opportunity to pass some of your wealth to the next generation early and create a 'rent-to-own' scenario for children as explained above. As with all things mortgage, we defer to the experts. Keegan Casidy is one that we trust. Having an excellent mortgage broker who can explain the pros and cons of this strategy is an absolute must! 

Keegan Casidy - Keegancasidy.ca


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So You Want To Own A Vacation Rental?

The rental market is a hot topic these days. Rates are skyrocketing and the desire for generational vacation rental properties is at an all-time high. It’s the dream, isn’t it? Having your own lakefront cottage or ocean front condo to enjoy yourselves and then earning money on it when you don’t want to be there. When we talk about long term real estate investments, the debate between purchasing a vacation rental vs a long-term occupied rental is an interesting one. Most people view the vacation rental as the slam dunk.  After 16 years of owning and operating my own vacation rental I might have some advice which you may want to hear before diving in. Here is a real number case study on the advantages and disadvantages of both options along with some pro tips in case you are thinking of investing.


The Numbers

I love numbers. Hold onto your seat because you are about to geek out with me. Here is a simple income statement which reflects the same 2 bedroom, 2 bathroom beachfront townhouse in a desirable, quaint beach town on Vancouver Island. It’s simplified for your viewing pleasure. It is only the income vs the operating expenses. I have not included a mortgage or mortgage interest expense as that would be different for everyone depending on the size of the mortgage. These examples are also self-managed. If you wanted to hire a property management company you would be looking at additional expenses. I will break down each category and explain the differences you see in the numbers.



Revenue

Let’s start with the good stuff. For this specific vacation rental it has a 9 week (summer) peak season in which it rents for a top dollar price of $2400 per week. The remaining months are a mixed bag of snowbirds, locals needing a weekend away and month long retirees looking for a good deal off season. The $35,619.74 accounts for renting the unit 36 weeks in 2022 which is 70% occupancy and averages out to $989 per week or $3950 per month. Compare that to the long-term numbers of $31,200.00 which equates to a conservative $2600 per month for a more traditional full time yearly rental.


Expenses

The numbers will vary depending on how you run your rental. I’ll break down some of the main points.

Accounting and Legal – We run this vacation through an incorporation so arguably this expense is higher due to those fees. You could simplify the costs here however if you want to hire a bookkeeper to track your rental you would easily be looking at this cost.

Advertising and Promotions – The vacation rental requires quite a bit more money devoted to this. Your typical VRBO yearly fee is around $700 for the flat rate or you can pay by booking with a higher percentage rate. For a traditional rental you would need minimal advertising dollars when posting on free (or close to free) platforms such as Craigslist and Facebook.

Credit Card Charges – Part of the expenses through vacation rental booking companies such as VRBO and Airbnb is credit card charges. They will charge the guest and you reimburse them the cost of processing the transaction. This fee is non-existent with a long term rental as you would likely be looking at etransfers.

Insurance – Another big factor in expenses. Operating a vacation rental can prove tricky on insurance. Many insurance companies do not want to deal with season properties or high turnover locations. Rates are significantly higher and may be limited to a certain maximum number of months in which you are allowed to rent your property. Insurance for long term rentals is still prudent however you would also require each tenant to carry their own insurance so as the owner your expense is minimized.

Interest and Bank Charges – Similar across the board for monthly bank fees and etransfer fees.

Supplies – You are responsible for basic supplies for a vacation rental in order to make everyone feel at home. You don’t want your guests to have to buy the necessary items. Everything from toilet paper to laundry soap and even a little welcome gift of wine and chocolates to set your rental apart. Remote batteries, lightbulbs, vacuum bags, replacement dishes, another set of salt and pepper shakers (because the last ones were stolen again)… the list goes on. These costs can add up over the course of the year. For long-term rentals the tenant is responsible.

Property Taxes and Strata Fees – These will be the same expense for either type of rental.

Repair and Maintenance / Cleaning – Another large expense to consider is cleaning. Vacation rentals get professionally cleaned each time they turn over which could be every few days. The cost of the cleaning is passed onto the guest and in this example would be included in the revenue however it does come off your bottom line. Reliable cleaners can also be challenging to find, especially in small resort destinations. If you don’t live near your vacation rental you need to find a strong support team to help you with any emergencies and maintenance. This can come at a cost. Long-term properties also present some maintenance needs but significantly less. As the landlord you are still responsible for major appliance repairs and replacements so they would fall into this category. In addition to that we code security under this expense. With a short term rental you would want some type of an alarm system to ensure the property is secure during off peak season and between guests.


Telephone – We still have a land line in our vacation rental for emergencies. This is not a necessity however we think out of town guests appreciate being able to call locally if needed. Again this would not be a requirement for a long-term rental.


Travel and Entertainment – This is one of the perks of a vacation rental. You can visit the property and write off your travel as an expense. You can get away with this a bit easier since you are running a small business essentially. You will need to physically go to the property to maintain it and check on it periodically. I haven’t included this expense in the long-term side. You would not need to go to the property nearly as often. It could be years between each tenant.


Utilities – Short term guests need internet, TV, power and heat. Long-term tenants pay their own.

So with all that said, we can see from this example that although the income is higher on the vacation rental we would potentially do better running it as a long-term unfurnished rental due to the operating costs.


Additional Food For Thought

Personal Use – This is both a pro and con. Pro, you get to use it! Con you don’t earn money when you use it. Keep in mind that you will always want to visit your own vacation rental during peak season. It is the most desirable time to be there and after all you bought it to use it yourself. This can impede on the profitability.

Cleaning and Maintenance – You will hire cleaners in between each guest however there is always a list of things which need to be addressed on a yearly basis and as the property starts to age. Minor repairs, maintenance and supply restocking is unavoidable. You may find that on your ‘vacation’ at your personal vacation rental you suddenly find yourself working.

Taxes and Bookkeeping – Vacation rentals have become so popular that even the government has gotten in on the fun. Many municipalities now require you to collect and remit taxes, PST and MRDT, on short term rentals. You could also be required to register for a GST number, once your rental starts to earn over 30k/yr, and start collecting GST. There is also the addition of the Vancouver Empty Home Tax and the Vacancy/Speculation Tax. Both of these require homes to be rented out for more than 6 months per year with 30 day minimum terms. If you own in specific areas, you will be charged taxes on the rentals due to the fact it is short-term. This adds a much more labour intensive element and penalties can be hefty. If you are not fancy with numbers you will need to hire someone to help you.

Long-term Tenants – I will say a positive to the Vacation Rental is that you are not locked into a long-term rental rate. You have the option to adjust your rates whenever you like. Long-term Tenants can stay for years and with the government yearly restrictions on rental increases, you might be locked into a rate which you cannot change for a very long time. Rates can quickly get outpaced by inflated expenses and increased mortgage rates. One way around this is to opt into renting the location as a furnished long-term rental. Typically tenants stay for shorter periods because they are in a transitional place in life, (ie: divorce or new to town) and you would have the option to increase the rental rate in between each tenant.

Pro Tip to Maximize Revenue - My pro tip is to choose a Vacation Rental property with a longer desirable rental season or two seasons. Two examples of this are Whistler and Maui. Whistler has two distinct peak seasons in which it attracts guests but the off season is also desirable. Maui is very rentable most of the year. In the summer months the weather is fairly consistent all year round and with summer vacations in the summer, many families still choose to take the trip.

 

In Conclusion

You can absolutely make money at this. I am by no means ‘anti-vacation rental’. We love ours! We could market it more aggressively or even raise the rates to squeak out more income. There is potential for growth for sure. I will say, however, if you think you will be the Instagram Guru who is making 1 million on his vacation properties you might be disappointed. He is likely bringing in decent revenues but he won’t be keeping it all.

What I love about vacation rentals is that they provide a generational place for memories. There is certainly a difference in returning to a family vacation home over and over vs visiting a new rental each year. The connection which is created with the location and all of the years of happy memories is one of the most magical reasons to invest. You can also use the income earned, mainly other people’s money, to pay off the investment. In the end, making it possible to pass your little piece of paradise onto the next generation so they can enjoy it as part of your legacy.

   

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Ready To Take The Plunge?

Benefits of Single Detached Houses with Secondary Income Suites

I can appreciate that not everyone wants to be a landlord. However, the reality in this current market, is that a single detached house with an income suite is the easiest way to leverage out of a condo or townhouse and into a standalone home.

There has been a huge increase in homes with separate income suites on the market. This speaks loudly to our current housing affordability situation.  It also shows the strong desire that people still have to be able to own their own detached home. Here are some distinct advantages to being in a detached home by bridging the gap with a secondary suite. 

1. No More Strata – You might love your neighbours but I am not sure you love being in business with them. The reality of a Strata is often not as romantic as it first seemed. There are a lot of cooks in the kitchen and getting a large complex to all agree can be nearly impossible. If you are tired of the arguments, negotiations, monthly strata payment and lack of personal control it may be time to consider a standalone house.

2. Requiring Less to Qualify – Understandably the bridge between a townhouse or condo and a single detached house can be significant. The additional money needed to fund the purchase might be daunting. When purchasing a home with an income suite, the potential rental income is factored into the mortgage qualification and added to your income. What this means is that you will need less to qualify. Depending on the lender they may add up to 90% of the rental income into the equation.

This case study example provided by Keegan Cassidy of The Mortgage Group

Rather than needing $200k to qualify for a $1 million dollar mortgage, with the addition of the rental suite, the borrower only needs to earn $132.5k per year in household income. Please note these numbers change depending on interest rates but the general concept remains. Revenue from a secondary suite equals needing less to qualify

3.Space to grow – Secondary suites provide options. You may need the income now to pay the mortgage but down the road you may decide to use the suite for a multitude of different possibilities. These suites are fantastic for live in nanny’s, grandparents who are downsizing and would like to be closer to family, providing a safe and affordable space for a loved one who is ill, a teenager hang out and media room, additional guest accommodations, or possibly a way to transition a teen into a young adult by providing the space for them to learn to live on their own.  

It also does not have to be all or nothing. You can get creative. If you need some of the additional space but not all of it, possibly consider renting a room in the basement. If you have a local college or university near your home, affordable housing is always needed for students. Room rentals can go from $600 - $800 per month and can often be tax free.

4. Passive income for retirement – We are not often thinking this far down the road. Sadly most people will need to sell their primary residence and downsize at retirement. The cost of keeping the house without earning income from a job can become too expensive. A bonus for homes with income suites is that you can go back to renting out the suite. The passive income earned offsets the cost of property taxes and utilities and can sometimes be the deciding factor of whether or not you can stay in the home that you love for your golden years.

5. Cost of moving – Moving is expensive. By the time you add in property transfer taxes, real estate commissions, lawyers and movers these costs can be high. By purchasing a home with a secondary income suite you can have all of the options that you need for many years to come and help limit the number of moves you make in your lifetime.

If these concepts make sense to you, it may be time to consider the plunge. With over 20 years of experience in single detached homes with secondary suites, I specialize in properties with purpose. Have a look at the 'Properties' tab of my website to find single detached homes with suites currently on the market in North Vancouver.
Give me a call to start your search today. 

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5 Tips to Attract the Best Tenant for Your Rental Suite

Congratulations! You own a home with a rental suite! Maybe you have recently upgraded from a condo or townhouse or possibly you have added the suite for extra passive income. If being a landlord is new to you, you may be a bit nervous about finding the right tenant. 

Renting a suite which is located within your own home is understandably a bit of a different beast. Even though the unit is separate, there is an element of shared space. Whether that is shared laundry, utilities, outdoor space, an awareness of sounds coming from your vents or just running into each other as you come and go.

You will want to put in the added effort to ensure that you find the right fit for your home and for your family.

Here are 5 of my top tips to get you started.

1. ADVERTISING

Be specific with the advertising and expectations – the more specific you are the clearer the expectations. This is your home. You set the rules. Aside from the typical, quiet, respectful tenant, no smoking/vaping, no pets - be clear with what you are offering and what you are looking for in a tenant.

Don’t have room in the driveway – street parking only,
Don’t want to share your backyard – no outdoor space,
Concerned that your dog and kids will be too loud – owners are a young family who live upstairs and cannot guarantee an abundance of quiet.

The clearer the expectations the less complaints you will receive. There is no template. Lay all your cards on the table and be transparent. If they don’t agree with your terms then they are not the applicant for you.

Disclaimer * -Please note - As a landlord you cannot discriminate.

From the Government of BC website -
‘A landlord cannot refuse to rent to a tenant based on their race, colour, ancestry, place of origin, religion, marital status, family status, physical or mental disability, gender, sexual orientation, age or lawful source of income.’

Ensure that any advertising criteria stays well away from Human Rights requirements.

2. PRICING

Set your price on the lower end of the price range to entice more applicants – I know you want to get top dollar and depending on the rental market you might. If however, you would like a number of candidates to choose from so that you feel you can make the best choice for your home and for your family then make your price very competitive.

More applicants = more choice. The better choice you make up front the less headaches. Finding an excellent tenant is worth its weight in gold. Also if they realize they are getting a good deal they will respect your expectations and potentially stay longer.

3. THE INTERVIEW

Keep them talking.
When you book showings for potential tenants don’t cut your timing short. The key is to keep them talking. You will be surprised what you will learn and what they are willing to tell you if you chat them up. Hand them the tenant application during the showing with a pen. This way they sit down and start to fill it out if they are interested in applying.

This is just as much an interview as it is a showing. Ask them about themselves, why they are moving, what they liked or disliked about their last place and get to know them. If possible have a second person with you during the showing. They will offer a different approach to the questions and they will also get a sense of whether the applicant would be a good fit.

4. THE INTERVIEW EXIT

After the Interview, walk them to their car – full disclosure, I read this one in a book. Believe it or not, the condition of someone’s interior of their car is a very good indication of how they will treat your suite. Think of your own car, is it approximately the same cleanliness of how you keep your house? Most very clean people have a very clean car. The reverse is also true. Walk them to their car at the end of the interview to thank them for coming and take a peek. You will be glad you did.

5. REFERENCES

Check their references, employers and social media – Always. Make sure you speak with people directly. Call them, don’t email them. The trick to references is often what they don’t say. Read between the lines. Ask if they would ever have them back as a tenant. If they hesitate or skirt around your questions you may need to pass.

Make sure you not only get a previous landlord reference but also a job reference. Find out how they are as an employee. Are they respectful, on time, professional and trustworthy? These are personality traits that will cross over to being an excellent tenant.

Lastly, check their social media. I realize that no one wants to feel like a creeper. Social media is however a public platform that you can verify. The smart applicants will have private accounts however a surprising number of people still have open accounts that you can view. Just know that this tip goes both ways and be prepared to have your social creeped as well while they are deciding if you would make a good landlord.

BONUS TIP

A lot of landlords are nervous about young tenants. I understand the concerns. I will say however that in my experience young tenants have been terrific. These are young adult’s age 18 – 20 who are leaving their family home for the first time. Typically the parents are highly engaged and will often email on behalf of their children to help them apply. Connecting with the parents provides an extra layer of accountability.

Young tenants tend to be less demanding. My guess is that they don’t know what to ask for and they are just so happy to be out on their own that they don’t dare complain. They also tend to be quite respectful. I always refer to ourselves as their ‘upstairs family’. This creates an extra level of rapport and they know they have an extra set of parents around if they ever need.

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