Tue. May 24th, 2022

In a September video on Instagram, Sahil Jaggi stood outside a brick house, one of more than a dozen homes he owns in Toronto, talking about profits.

The real estate investor explained to viewers that he spends about $ 3,000 a month on the property, while reaping about $ 7,000 in rent. The home, Jaggi later told Stjernen, is leased by two groups of students, who then sublet two basement rooms.

“I’m going to keep this property for the long term because it’s a great cash cow,” he says in the video.

Jaggi is among a growing cohort of people who own several properties in the city, a group that in recent years has overtaken first-time buyers as the largest slice of Toronto’s home buying market, according to a recent report from Teranet.

As recently as 2016, Teranet — Ontario’s title search and registration provider — found the most common kind of person who bought a home in Toronto was a first-time buyer. But from 2016 to 2018, things changed.

Several homeowners — a group that includes real estate investors as well as those who own a vacation home as well as a vacation home — became the most common type of home buyer throughout the city. This year, between January and August, Teranet found that owners of multiple properties accounted for 29 percent of Toronto purchases, bringing first-time buyers to 28.5 percent.

And across the country, Equifax Canada has noticed a multi-year increase in people with more than three mortgages with an increase of 7.7 percent between June 2020 and June 2021.

Experts say it is difficult to identify the exact impact of the shift, and several warned against drawing a straight line between increased investment activity and skyrocketing prices, pointing to other factors such as a growing population and low interest rates. While some believe that investors are taking away the supply from potential homeowners looking for their primary residence, others say they have the potential to provide the necessary rental supply.

Jaggi has been creating homes in the city for more than a decade. He owns 17 properties — one of which closes this fall — most single-family homes and all but one in Toronto.

He sees older, smaller houses, often bungalows on larger plots of land; he renovates some, builds on others and divides some into several rents. Jaggi told the Star that he only resells when he is sure he has “juiceed out” the maximum economic value from this property.

He is open about the great profits he has made by buying Toronto homes. He believes his current party is worth $ 23 million and offers examples such as a home near Yonge and Finch, which he says he bought for $ 700,000, put in around $ 800,000 and sold for $ 2.6 million.

“If you buy something that is (undersupplied), which are detached houses, in the long run, you will do better,” Jaggi said in an interview.

He is not blind to the imbalance that can create. It is easier for an investor like him to buy an extra property than for a first-time buyer to buy their own home, he said, noting that accumulating equity through real estate meant his money grew faster than just saving.

“It does not surprise me,” he said of the growth in investor activity in recent years.

But he suggested that governments could implement better policies to address housing affordability and supply concerns. Governments were ultimately responsible, he argued, for any negative consequences of the increased real estate investment activity seen in the last few years.

“Why would we not use that opportunity? It is not up to people to stop their growth as businessmen. It is up to the policy to protect people and protect affordable money. ”

The value of homes has risen in Toronto and beyond, where Royal LePage recently reiterated its prediction of an annual price increase of 16 percent. If true, house prices across Canada will have risen 33 percent between June 2020 and the end of 2021, Star reported.

That escalation has put an advance payment increasingly out of reach for many first-time buyers, as the gap between incomes and house prices has widened. A report to City Hall in 2019 noted that the median household income in Toronto increased 30 percent from 2006 to 2018, when the cost of owning a home increased by 131 percent.

Experts say the exact degree to which investors have influenced this growth is unclear. John Pasalis, president of Realosophy Realty, presented it as a kind of chicken-or-egg question: did the rise in investors lead to rising house prices, or did rising prices attract more investors?

Either way, he sees the rise in ownership of more homes as yet another challenge facing aspiring buyers seeking their own home, especially within the competitive single-family home ball.

“It takes stock from the market for people who just want to buy a home and start a family and be there in the long run,” Pasalis said.

Like Jaggi, Pasalis noted that investors were often attracted to homes on average or below average, where they saw potential to increase property value. With more capital available, Pasalis said investors could often be more aggressive in bidding wars.

“The investor outbid the two or three other buyers competing for this lovely home — or a little below average who need a little more work — it’s actually possible,” he said.

Jessica Bell, housing critic for the Ontario opposition NDP, believes the trend toward more multi-home ownership is worrying. “When investors can and do outbid first-time home buyers, it means first-time buyers are referred for rent, and that drives rental prices for everyone overall,” she said.

Both she and Parkdale-High Park City Councilor Gord Perks believe that many renters see owning a home as a path to stability, noting that it eliminates worries about being evicted — which can happen in situations like a landlord, who sells or wants a device for their own use. Bell offered the example of a family with young children. If they owned their home, she said, they could be sure that these children could stay at a particular school and make friends in their area.

The answer, Perks said, is not just about making home ownership more achievable, but about creating better quality and more stable rental housing, including social housing as cooperative housing. When more homes go to owners of multiple properties, he said wealth was further concentrated. “As long as where we live is a commodity, people will wonder about it and get rich from it.”

Earlier this year, a plan by a Toronto-based owner-developer to buy $ 1 billion in single-family homes for use as rental properties was met with outrage that a company could profit from Canada’s ongoing housing problems and further limit supply to first-time buyers.

However, Avery Shenfeld, chief economist at CIBC Capital Markets, says that while investors who buy homes and then leave them empty can be a wound to deliver if they lease them, he believes it could solve another problem by creating the necessary family rental options.

“They are helping to serve another important market, which is the housing market for those who cannot get an advance payment together,” Shenfeld said. “Many Canadians will find that renting is their only option, and having some single-family homes for rent is an important niche in the market, which at this point is very much leaning towards smaller units that are not suitable for a family. ”

From the last census report, just over half of Toronto households owned their homes – 53 percent against the 47 percent who rented. Of homeowners, 61 percent lived in detached houses, semi-detached houses or townhouses, while 87 percent of tenants were in apartments.

Real estate agent Sohail Mansoor says he first invested in Toronto’s condominium market when he moved from his first owned home. Instead of selling it, he decided to rent it out. Over the years, he collected several apartments and eventually sold two to afford his own house. He told the star that he and his wife currently have an investment apartment with their home.

He noted that there was some variation in investment situations, including cases of adults buying homes for elderly parents or parents buying homes for their children. The appeal to investment real estate, as Mansoor sees it, was that it felt safer than putting money elsewhere.

“There is what we feel is a safe investment and something that is stable in the long run, as opposed to potential volatility in the stock markets and other things,” Mansoor said.

Still, he has seen clients in search of their own home in Toronto who have become frustrated, he said, feeling that their opportunities in the market were just too limited to lock anything in place.

“I think certainly (increased investment) is contributing to the problems at the moment with housing shortages,” he said.

However, he believes there is more to the equation, but notes that some older properties are in a state where they require extensive renovations to be in livable shape. Not everyone has the time or money to do that kind of renovation, he said, especially someone who barely got an advance payment.

“I think the real problem is that there is a lack of property, period. And there is a lack of properties that appeal to end-user buyers, ”he said.

Next year, Toronto will see the introduction of a new employment tax that will add a financial sanction to anyone who leaves a property vacant for more than six months a year. The province has encouraged models like co-ownership to get more people in the market.

The federal government promised a slate with housing movements at the last election, from a tax on housing that is reversed within a year, to revising the tax rules for “large business owners and speculators trying to amass large portfolios of Canadian rental housing” with hopes of slow down profits.

NDP critic Bell believes all levels of government need new policies and rules to deal with Toronto’s affordable crisis, which calls for more tenant protection and new tax measures for investors.

Jaggi agrees with the latter – says he does not understand why investors like him are no longer taxed, and suggests that officials impose rising property and land transfer taxes for each additional home.

He believes that real estate investors can play some positive roles in the market and argues that dividing a single-family home into several rental units can bring more density in neighborhoods. But here, too, he aimed at existing policies and processes – saying that anyone wishing to divide a single home into multiple entities risked being caught in lengthy approval processes.

If the city wanted to help with affordable prices, he and Shenfeld both pointed to zoning rules, arguing that officials should pay more attention to increasing the overall housing supply.

“(Investors) are not the only bad guys here,” Jaggi said.

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