Our prediction for the next up-and-coming neighbourhood

This blog post was originally published on the Credit Canada Blog.  For more than 50 years, Credit Canada has helped millions of Canadians overcome debt problems and improve their personal money management skills.  Options is delighted to have been a guest blogger.  View the original blog here.

So you want to buy a home in a big metropolis city like Toronto, but housing prices are through the roof. What options do you have? You could buy a place with a friend or family member. You could wait it out. You could buy a home outside of the city, far away from your work and social circles. Or, you could buy a less expensive home, within the city, in an up-and-coming neighbourhood.

Heintzman Place, Toronto's Junction neighbourhood

What is an “Up-and-Coming” Neighbourhood?

Up-and-coming neighbourhoods are urban areas that are undergoing revitalization. They’re still affordable, diverse, and possibly on the brink of becoming hot-spots. All they require is a bit of time and the right combination of investments before they completely transform and their appeal becomes widely appreciated.

Predict the Neighbourhood

Buying in an up-and-coming neighbourhood does require a bit of research. It’s important to be clear about your needs and risk tolerance since nothing is guaranteed. Do you like at least some aspects of the current character of the neighbourhood? Is the neighbourhood convenient for your lifestyle? Do you value living in a mixed income community? You’ll need to predict how the neighbourhood will change and if those changes will come soon enough to match your expectation. To help with the challenge of predicting the future of a neighbourhood, here’s a tip: choose a developer with a strong record of success, building in up-and-coming areas ahead of the curve.

Options for Homes, now a Credit Canada partner, has over 23 years of experience building thriving communities.

Options for Homes is a non-profit developer of condominiums, helping people achieve their dream of becoming homeowners by passing along cost-savings and offering down payment support through the Options Down Payment Loan and Pay It Forward model.

The Junction and the Distillery Districts in Toronto were both up-and-coming areas, and are now among the most sought-after locales in Toronto. What’s the other thing they have in common? They’re neighbourhoods that Options for Homes selected for developments early enough to pass along great savings to their purchasers.

Options for Homes empowers people to become homeowners, and contributes to neighbourhoods becoming more diverse, inclusive, and dynamic.

Track Record

The Distillery District

One of Options' first developments was in Toronto's historic Distillery District. The three-phased project resulted in the Mill Street, St. Lawrence, and Parliament Square Condominiums. It was completed in 2001 – just two years before the neighbourhood was transformed to an arts, food, and entertainment hot-spot. Before Options purchased the land for the development, the area was industrial and mostly forgotten. In the last decade, homeowners in these condos have had their homes appreciate more than 12 times the purchase price. Even with this equity growth, many homeowners don’t plan on selling, preferring to remain in one of Toronto’s most dynamic cultural centers.

The Junction

Heintzman Place is another Options development that has contributed to a revitalized streetscape now lined with design stores, indie coffee shops, must-try restaurants, and craft breweries in the Junction neighbourhood. This former railway centre is now attracting droves of prospective home buyers and our purchasers were there first. As the largest of Options’ 12 developments to date, this condominium community formerly known as the Village by High Park consists of two towers containing 643 beautiful suites, and boasts a rooftop terrace with spectacular views as well as solar hot water heating and an in-house car sharing service.

Weston Farmer's Market

What does Options for Homes predict will be the next hot neighbourhood?

Weston Village

Don’t write this neighbourhood off because it isn’t in the downtown core – travel time from the Weston GO station to Union is just 17 minutes, and Options’ newest development, The Humber, will be located only a two-minute walk away. Situated on the banks of The Humber River, this condo will provide spectacular views of the city from almost any suite on the upper floors and easy access to nearby parks and trails along the riverfront.  
From the nearest intersection at Weston Road and Lawrence Avenue West, you’re less than two minutes from the 401 for easy access across the top of the city east or westbound. 
When enjoying your neighbourhood you’ll encounter the people, culture and cuisine of a vibrant Spanish, Somali, Italian, Portuguese, Jamaican and Tamil community. If you enjoy cooking you’ll love the fact that Weston boasts one of the best and longest running farmers’ markets in the city. 
Contributing to the demand for this area is Artscape, which will open the Weston hub in 2018 - featuring art exhibits, creative programming spaces, artist live/work lofts and an outdoor area for public gatherings.

With these changes we believe Weston Village has all the right ingredients to become the city’s next “it” neighbourhood and deliver some good appreciation to Options’ purchasers.
This condominium community is expected to begin sales in early 2018.

The Humber, Options for Homes

Options for Homes is a non-profit organization that has been providing home ownership opportunities for 23 years. To learn more about how you can get yourself an affordable home in the next “it” neighbourhood, visit www.optionsforhomes.ca

Top 5 ways to spot an up-and-coming neighbourhood

Our friends at Credit Canada invited us to guest blog about up-and-coming neighbourhoods this week. Check out our prediction for the next best place to buy in Toronto’s housing market and get the most bang for your hard-earned buck: https://www.creditcanada.com/blog/buying-up-and-coming-neighbourhoods

What is an up-and-coming neighbourhood?

Options has a pretty strong track record when it comes to finding neighbourhoods right before they become coveted places to live (think: the Distillery District, the Junction, Lawrence and The Allen, Main and Danforth).

Up-and-coming neighbourhoods are areas that are on the brink of becoming hot spots but are still in transition.

Buying in one of these areas means:

1.       Great prices. Without high demand, the market responds with lower prices. (Remember that supply and demand curve in economics class?) Options purchasers have saved up to $10,000 on the prices of their homes thanks to the lower land costs these neighbourhoods offer.

2.       Higher resale values. Building equity for your family’s future can be more pronounced by buying in an up-and-coming area. When others start to notice how great your new neighbourhood is, prices start to climb with the increased demand (there’s that supply and demand curve again).

Our top 5 secrets to spotting an up-and-coming neighbourhood:

1.               Family-run businesses

Do you see a bunch of mom and pop shops? This is an area that has yet to become attractive to high-paying brands. Eclectic retail is a sign that land is still affordable.

2.                  Train tracks

Options developments in the Distillery District, the Junction, Lawrence and The Allen, Main and Danforth, and Weston all have something in common beyond their new-found it-factor (and the fact that we built there before they were cool): train tracks. Land by the tracks is traditionally seen as less desirable,  and is often the last to be developed. Finding tracks might lead you to an up-and-coming area – and lower taxes.

3.                  Proximity to transit but further from downtown

When we built the first three condos in the Distillery District in the ’90s, a 15-minute walk to downtown was “far.” Find an accessible neighbourhood that is perceived as just outside of comfortable reach and still has frequent transit andas the city grows, so too will your equity.

4.                  Little-known neighbourhoods

When you mention the neighbourhood, do your friends respond with blank stares or “I can’t picture that intersection”? This could be a sign that you’re onto something. Neighbourhoods that aren’t in-demand now could be next on Toronto’s hot neighbourhood list.

5.                  Artists

Ever chasing inexpensive studio space and inspiration, artists are your people to watch to find up-and-coming neighbourhoods. Not to mention, your new home will be in the middle of a richly-woven cultural fabric.

Check out our prediction for the next up-and-coming neighbourhood!

Whether you’re a first-time buyer or just looking for a great new place to call home at a reasonable price point, an up-and-coming neighbourhood is a great option – and now you know how to spot one. We’re always here to help with your search.

FIRST TIME HOME BUYERS

How to Prepare to Purchase Your First Home

Buying your first home will most likely be the biggest purchase you’ll ever make. Many people take a long time to make the leap because they're uncertain about their finances, credit ratings, the general affordability or how the whole process works.

Since Options for Homes has been developing condo communities and helping first time home buyers realize the dream of home ownership for 23 years we thought we’d share some of our knowledge and experience, to help you move forward sooner towards your home ownership goals.

1. GET CLEAR ON YOUR FINANCES
We can’t stress enough how important it is to get clear on how much money you have coming in, and how much you have going out. Knowing where you stand with your finances is a crucial first step but it’s not one to be afraid of or to avoid. Information is power and having a clear picture of your current finances up front will give you the information you need to make a solid plan to purchase your first home.

Write down the honest details of your financial situation, including; 
    
Income

1.       Your annual household income from all sources

2.       Any changes you may foresee to your income

3.       Contingency fund, i.e. If your household is made up of only one income and if something were to change, do you have savings to cover your mortgage payment for 3 – 6 months?

Establishing how stable your income is will help you assess your ability to afford mortgage payments. It is useful to have an idea of what your total debt service ratio (TDS) might be. This is usually a percentage that represents the amount of your annual income required to pay your debts, including your mortgage. Your total debt service ratio should be less than 40%. It is not set in stone and calculated slightly differently by different lenders so be sure to consult with a mortgage lender to determine how that lender will calculate your TDS.

Debt
Record all debt owing to credit accounts, leases, or other payments and total up how much you pay monthly to service this debt.

Can you pay off this debt? If not, what can you do now to start paying off your debts? (While not incurring further debt!)

It is definitely not advisable to take on any further debt if you plan to purchase a home. This includes not applying for any credit cards, taking on a new car loan or lease, or buying any big ticket items with credit.

What is Your Credit Score?
Do you know your Credit Score? A credit score is a number between 300 and 850 with 850 being the highest (best) credit rating possible. It is dependent on a number of factors and lenders will look at your credit score as part of your mortgage application process. You can learn more about credit scores here.

Most people don’t realize they should be keeping an eye on their credit score by checking it once or twice a year (but no more frequently than that as it dips slightly every time you pull it). You can get your current credit score in minutes, online for free at Borrowell, www.borrowell.com or, for a small fee at Equifax, www.equifax.ca

A credit score of a minimum of 680 is usually required to get a mortgage pre-approval. Consult with a mortgage lender for more information about credit scores.

Good News!
One advantage to purchasing a new construction condo is that due to construction timelines, you may have time to improve your credit rating before you need to come up with the funds to close on your purchase.

If you have a low credit score or damaged credit, there are ways to rehabilitate your credit. Get in touch with our partner, Credit Canada for more information.

Down Payment Funds
Your down payment amount is a crucial factor in purchasing a home. You will be required to pay a minimum of 5% of the purchase price of your home towards the down payment. In order to avoid paying CMHC (Canada Mortgage and Housing Corporation) insurance premiums, which can cost you thousands of dollars, you will need to make at least a 20% down payment.

The great news is that at Options for Homes, we offer a down payment loan of up to 15% to help you avoid these premiums and also lower your mortgage payments.

Take some time to consider how you may be able to save more money to put towards your down payment as this will go a long way in helping you with affordability!

Funds for Closing Costs
We recommend you budget for between 2% and 5% of the purchase price for closing costs on a new construction condo. It is usually less, but it’s best to have a cushion.

Closing costs may include provincial and municipal land transfer tax, HST, lawyer fees, title insurance, property taxes, maintenance fees, home insurance and any adjustments.

First time buyers in Ontario may be eligible for up to $7,725 in provincial and municipal land transfer tax rebates. They may also be eligible for a federal tax and HST rebate.

There is also a first time home buyer program designed to help with affordability called the Home Buyers Program which allows you to use up to $25,000 of RRSP savings, per person, towards the purchase of a new home.

2. GET A MORTGAGE PRE-APPROVAL

The next step should be to get a mortgage pre-approval. This will save you valuable time by clarifying exactly how much you can afford to pay for a home. It is advisable to shop around for a mortgage. You may want to consult directly with a traditional bank for your financing needs or, with a mortgage broker, and preferably both.

There are many different types of mortgage “products” out there and it takes careful consideration on the part of your mortgage advisor to help you fin d the best product for you and your family’s unique situation.

The main components of a mortgage to consider are: Interest rate, type (fixed or variable) and term of the mortgage. However, also very important are the “3 Ps”: Prepayment, Penalties, and Portability.

These last three things can be as important as, or even more important than the interest rate.  For example, if you think you may inherit a large sum of money in the next year or two and want to put it toward your mortgage, you may want to ensure that prepayment is an option that is available to you in your mortgage terms. Or, if you think you may want to or need to move and sell your home before the mortgage term is up, what will the penalty be? Or, will you be allowed to port (carry over) your mortgage to another home purchase before the mortgage term is up without penalty?

These are questions that should arise in conversation with your lending agent or mortgage broker.  A traditional banking will discuss and offer mortgage products specific to that bank, while a mortgage broker will typically be able to offer mortgage products from many different lending institutions. The mortgage broker’s fee is typically paid for by the lender, not you, the borrower.

Once you receive a pre-approval for a mortgage or a commitment letter from your lender, you can then begin to search for and choose your new home. It’s important to be clear on the expiry date for your pre-approval. Typically a mortgage pre-approval is valid for a set amount of time (for example: 4 months).

It’s also important to note that a “Pre-approval” is not the same as an Approval! You are pre-approved as a borrower up to a certain amount of money however, the home you will purchase has not been selected at this point. The full application process takes place once you have selected a home to purchase.

Note: For Options for Home purchasers, our partners at the Bank of Montreal offer a capped mortgage rate guaranteed for 36 months. TD offers a 24-month guaranteed mortgage rate, and Meridian offers the same for 18 months.

3. CHOOSE A HOME!

With a clear understanding of your personal finances and a pre-approval in place you are now in a position to start shopping for your new home. Now that you have a good idea of what you can afford, you won’t waste valuable time looking at homes that are out of your budget. Or perhaps you’ve discovered you can afford more than you had previously thought! Be careful not to overextend yourself though. The goal is not to be “house-poor,” but “well-housed”.

When considering how to select your new home, you may consider some of the following:

Location, proximity to work and leisure activities, access to highways or public transit, current and planned future neighbourhood amenities, schools, amount and cost of home maintenance, and the projected resale value in the future to ensure you are growing equity in your home.

If you’re buying a condominium apartment consider if you will need parking or a locker. Are you willing to pay higher maintenance fees to have amenities like a pool and gym? Or do you want to keep costs down and avoid buildings with extra amenities because you probably won’t use them anyway? Of course we’re biased at Options since this is what we build and how we are able to offer the price and the lowest maintenance fees for new condos in the city.

When you’re in the market for a new home you may wish to engage a Realtor to help you select homes to view, negotiate and write offers on your behalf, advise you on the conditional period and connect you with other resources.

When buying with Options for Homes, we have Purchase Consultants and a Client Support Team to guide you through the entire process of selecting a unit, writing and signing the agreement of purchase and sale, and reviewing and preparing closing documents. Since there is no negotiation on the price of our new construction condominium units, most purchasers find they don’t require the services of a real estate agent.

4. MAKE AN OFFER

Once you have selected a home to purchase you will sign a Purchase Agreement outlining all the terms of the purchase as well as any other required documentation.

Deposit Funds
When you sign a Purchase Agreement your deposit payment is due right away. This amount goes towards your down payment on closing and is considered your show of “good faith” to follow through on the purchase by paying the balance of the purchase price on the closing date. Initial deposits are generally 5% of the purchase price. With Options 5% is all you ever need to put down to purchase. Other developers may require another 5-15% deposit before closing to complete a purchase.

Cooling Off Period
For a new construction home or condominium there is a 10-day cooling off period during which time you may change your mind and back out of the deal, and your deposit will be returned to you.

When purchasing a resale property, you may be able to negotiate on the price or, you may be in competition with other buyers. In either case, there is no cooling off period when purchasing a resale property. A firm, accepted offer to purchase a resale property is legal and binding.

5. MOVE IN TO YOUR NEW HOME!

Closing Day
The big day is finally here! On your closing day your pre-arranged mortgage funds will be transferred to the vendor to pay the balance of the amount owing on the purchase of your new home and you will receive the title / deed to your home. With keys in hand, you’re ready to move in!

There are many things to consider when preparing to buy your first home. We know it can seem daunting but it is also very exciting. We hope this guide helps to give you the information you need to begin moving toward your home ownership goals and to realize “it IS possible.”  At Options for Homes, we are here to help you every step of the way and you can find out more by attending our free Condos 101 events held twice monthly around the city.

AFFORDABLE OWNERSHIP HOUSING, DID YOU KNOW?

Did you  know?

Canada has a housing crisis, and affordable ownership housing offers several solutions. Here are just a few...

1. Relieves Rental Shortage - Every affordable home ownership unit purchased by a middle-income renter frees up a unit of affordable rental housing. 

2. Captures land appreciation - Affordable home ownership is the only form of affordable housing that can capture land value appreciation, using it to fund more affordable housing. 

3. Creates its own fund - When affordable home ownership developments use shared appreciation mortgages (SAMs) and revolving funds, the home ownership model does not rely on on-going government financial support or free government land.

4. Lowest default rates - Affordable home ownership programs have a low default rate of less than 1%. In the private ownership market the default rate is higher, at 2% – 3 %.

The National Housing Strategy Must Support Affordable Home Ownership

   Home ownership creates the kind of financial security that benefits Canadian families and Canada as a whole. It supports the economy of cities; it helps people prepare for their retirement; it frees up affordable rental housing in tight urban markets; and it builds a stable middle class. Canadians value the opportunities and security home ownership creates.

   Unfortunately, for many Canadians, home ownership is a dream increasingly out of reach. Home prices are increasing rapidly, yet median incomes are not. The Toronto Real Estate Board reported that home prices are up 23% from just last year. This trend keeps younger Canadians, low income families with children, and key workers further away from home ownership. There are more than 200,000 middle income earners (teachers, social workers, paramedics, nurses, etc.) who want to own a home but are unable to access the private ownership market (Canadian Urban Institute, 2016).

   Non-profit ownership housing organizations, like Options for Homes, are working to remedy this issue. While the Options model doesn’t rely on government funding, we can be even more effective with increased support form the federal government. The National Housing Strategy, set for release in early 2017, must include a scaling up of affordable ownership housing - not just affordable rentals -  for a comprehensive solution.

RECOMMENDATIONS: ACCESS TO CAPITAL AND ACCESS TO LAND

 

1. ACCESS TO CAPITAL

A significant barrier to scaling up production of affordable ownership housing involves access to funds for land acquisition, pre-construction costs (including consulting fees), marketing, and municipal permits.

The federal government should provide a $250 million revolving loan fund that would provide both short and long term project equity and be available to qualified non-profit producers.

The loans would be seeded by government, replenished by paybacks and require no ongoing financial commitment from government.

2. ACCESS TO LAND

Provincial and municipal governments should establish and administer an Affordable Housing Land List and identify actionable public lands suitable for sale to registered non-profit housing organizations.

The key benefit of public land being sold to non-profit housing producers is so they can acquire it at an ‘appraised market value’ prior to it being placed on the open market, allowing them to defer payment for the land for a period to be negotiated between the non-profit housing organization and the government. This enables non-profits to access land, while the government also receives full value for the asset.

Scaling up ownership housing initiatives addresses many of the reoccurring themes and issues outlined in the federal What We Heard summary – establishing a broader continuum of affordable housing for a variety of needs and markets, and improving access to housing, especially for first-time home buyers. Our hope at Options for Homes is that the National Housing Strategy does indeed support low and middle-income families ready to achieve the goal of homeownership and the non-profit affordable housing providers that are ready to help.

- Heather Tremain, CEO Options for Homes

CITY OF COLOUR

At Options, we pick the neighbourhoods we build developments in knowing that there is something special about each. We respect the character of these communities, and the lifestyles of the neighbours. With any new condo development, the construction process can take up to two or more years. That’s two years of big machines, holes in the ground, beams, bricks, and piles of dirt. Let’s be honest, it can be disruptive. But at Options, we feel it’s important for us to honour communities. While we build, we don’t want to undermine the appearance of the neighbourhood – we want to enhance it! That is why we decided to partner with The PATCH Project (Public Art Through Construction Hoarding), and East York-based artist, Monica Wickeler, to create an art piece on the hoarding of #TheVillageByMainStation.  In Monica’s words, “the piece, [“City of Colour”] intends to showcase hope and optimism, and the transformation of homeownership: the progression of feelings towards joy and success.” This piece of community art will cover the construction behind it, and for the next year will make Trent Ave. a more vibrant, attractive street in the vibrant, attractive East York community. Thanks to the community members and everyone who came together to make this happen.

For more info, check out:  http://thepatchproject.com/projects/city-of-color/