Is it Better to Rent an Apartment or Condo in Ottawa?

The Ottawa Citizen recently looked at two of the latest trends happening in Ottawa's housing market that happen to coincide with one another: a drop in rental real estate construction and, just like everywhere else in the country, an increase in condo construction. These two trends have led to another trend: landlords that no longer buy apartment buildings to rent out, but one or two single condo units. And that has led to tenants-to-be wondering whether they should rent out of a condo, or a traditional apartment building. So, what's better?

It all really depends on what you're looking for, and how much you're willing to pay for it. According to The Ottawa Citizen, the rental rates on condominiums can be 30% - 40% more than when you're renting from a commercial landlord in an apartment building. This is because in addition to the Ottawa mortgage the owner must pay, there are also homeowner's association fees and additional condo fees that will be added to the rental price. What you don't get in a budget-friendly condo rental price though, you will get in convenience and modern amenities.

Those condo fees pay for things like gyms, swimming pools, and in some cases, even laundry service, and you'll have access to all of those as a tenant in a condominium; they might be hard to find in a traditional apartment building though. Condo units are also generally much newer than those in apartment buildings, and they often have many different upgrades, modern appliances, and contemporary layouts. Most Ottawa condos are also located very close to the downtown core; so whatever you don't find inside the building you'll be sure to find outside of it.

Renting a condo isn't perfect though. Common rental issues can sometimes become confusing in condominiums though because a third party comes into play - the homeowner's association. If something goes wrong in the condo, who's responsible, and who is the tenant to contact? Is it the owner or the association? And if it's the association, how quickly is the repair going to be made? While property management companies will most likely respond to any tenant concern or issue right away, the same might not be true for homeowner's associations. This is because these committees are used to dealing with owners and expect owners to fulfill certain responsibilities on their own. While they may make some exceptions for tenants, that still doesn't mean that they will be the priority.

Whether want to rent a condo unit or a unit out of an apartment building will depend on your preferences and your budget. But, what about the flip-side? And what if you're trying to decide between buying a condo unit, or an entire apartment building? Nothing has really changed there. While condo construction goes up, prices are going to at least remain steady, if not drop slightly. But buying an entire building can also have fantastic returns, even if it is a bit more expensive initially. In either case, the longer you own the more home equity you'll build, and the more profit you'll reap.

How to Choose REITs

On Friday in our mini-series about REITs in Canada, we looked at the different types of REITs you could buy. But there's a lot more to choosing a REIT than just knowing whether you want one that deals in retail space or one that's directly tied to Canadian mortgages. Just like any other shares you're thinking of purchasing on the stock market, there are a few other important factors you have to take into consideration.

The first thing to consider is the geographical location of your REIT - is it just in one area of Canada, or does it hold properties in many different areas? Choosing a REIT that has a large portfolio, with properties in many different locales throughout the country is the best way to ensure that you'll be investing in a diversified REIT. If a property in a struggling area does poorly, another one in an area that's faring much better will be there to pick up the slack; unlike if you focus on only one area, where you'll need to hope that the economy does well.

Just like any other stock you're interested in, you also need to take a careful look at the people running and operating it. Does the management team have a lot of experience in the real estate market and mortgages? How long has the company been in business for? Experience isn't something that should be taken lightly when it comes to investing in REITs, and a good team will know which markets perform the best and which types of REITs will deliver the most profits. In addition to that, a company that's been around for awhile will also know how to manage their REITs and distribute their profits, making the transaction that much more seamless for you.

Lastly, you cannot forget that REITs are usually bought, sold and traded on the stock market. Because of this, you need to take into consideration the general feeling of the stock market at the time you want to invest. If investors are feeling good about it, now might be a good time to invest in REITs. If the economic outlook is shaky however, people tend to shy away from the stock market, choosing more stable investments instead. A good broker (that's stock broker, not your Toronto mortgage broker,) will be able to tell you more about the REIT companies when it's time to buy your REIT, and how well they've done so far and how experienced they are.

Now that you know what a REIT is, the different types you can invest in, and even what to look for one when considering these investment vehicles, now it's time to look at just how REITs are expected to do in 2012. Come back on Friday, when we'll wrap up our mini-series by taking a look at the immediate future of REITs in Canada. So make sure you come back then - the outlook is bright!

3 Options for Getting a Mortgage with Bad Credit

Truthfully, you have lots of options for getting a mortgage with bad credit. While you're most likely going to pay higher interest rates, bad credit doesn't always automatically mean you're doomed when it comes to buying a home; and once you start looking, you'll find there are options you never even thought of, or knew of. But among those many there are a few that often outshine the others, and prove to be the best way to get a mortgage with bad credit. Here are the three best ways to get a mortgage with bad credit.

#1: Starting with a larger down payment
This is the best way to get a mortgage with bad credit. Generally you need 20% of a home's purchase price as a down payment before lenders will even consider you. Some will allow you to still obtain a mortgage with less, but you will need to buy mortgage insurance, which can come at a cost of thousands of dollars a year. But pay over 20%, and as much over as you can, and lenders are going to look more kindly on you. By paying more now, lenders have to loan you less; and that's always good for them.

#2: Get a private mortgage
You can find corporations and individuals that might be willing to offer you a private mortgage. Essentially, they act as the lender and loan you the money to buy the home. They in turn, make mortgage payments to you every month. Just because a private mortgage is much different than a conventional mortgage, in that you have a lot more room to wiggle and maneuver, you still need an actual mortgage contract and all proper paperwork set in place.

#3: Work with a Toronto mortgage broker
A Toronto mortgage broker can point you in the direction of lenders that are willing to offer mortgages to people with bad credit. They can also tell you how much of a down payment those lenders will need before they will offer you a mortgage. And they can also guide you towards their entire network of private lenders, that don't advertise their services nearly as much as traditional lenders do.

Are you in the Habit of Spending Money?

At a time when the government keeps warning us about record-high household debt levels, and people can't seem to save more than they spend, the Everyday Money blog brings us an interesting post about a book written by David Krueger. The book is called "The Secret Language of Money" and in it, the author points to research done at the University of Hertfordshire that shows this compulsive need we have to spend might just be a bad habit.

That research was done on a number of people of all different personalities and asked them to change their behaviour for an entire day. So a shy person would be super outgoing for a whole day, while an outgoing person would try to be quieter for a whole day. In addition to that, for two days every week throughout the study they also had to completely break their normal habits and routines and do something completely different, whether it was eating differently, or just taking up a different hobby for a day. The study went on for four months and there were some interesting results, mostly that the majority of participants lost weight.

What does the study prove about money though? Some may question the relevance of the study, or what behaviours (outside of eating and exercising) have to do with losing weight, or what losing weight has to do with saving money. But, the research might show that we are indeed, creatures of habit. And that perhaps by breaking the habit of spending money, we'll actually save more.

Think about it. What if you could get into the habit of making coffee at home every morning instead of stopping at Tim Horton's along the way? What if you could get in the habit of putting "found money" towards the principal on your secured line of credit? Or what if you could get in the habit of saving your change, for an entire year, and annually putting that money towards the principle on your mortgage. Imagine how much money you could save on interest alone, not to mention paying off your mortgage faster!

Maybe it's true. Maybe if we could just start forming better habits, even if they're not major changes that we have to make every day, we really could lower our debt and start saving more money. What do you think? Are you simply in the habit of spending money?

The Different Types of REITs

On Monday we began our mini-series on REITs, real estate investment trusts. In that post we talked about how REITs are like shares that can be bought and sold on the stock market. We also talked about how there are several different kinds of REITs you can choose to invest in. What we didn't touch on was how exciting it can be to decide which type of REIT you want to invest in, taking all factors into consideration such as the market they represent, and watching how that market is doing in the Canadian economy.

Retail REITs
Retail REITs currently represent around one-quarter of all REITs in Canada and are by far the most popular type of REIT. These REITs invest in shopping malls and retail outlets and whenever considering a retail REIT, the investor first needs to look at the retail industry and how it's doing. If the sector is doing well, there's a good chance that REITs will also do will; however, that's not the only thing you need to take into consideration when looking at investing in real estate REITs. Because real estate REITs rely on income from tenants' rent, it depends on the actual tenant renting out the building the REIT is invested in. Strong tenants with little risk are usually grocery stores and home improvement stores.

Residential REITs
Residential REITs are invested in apartment buildings and sometimes, manufactured housing. People who want to invest in these REITs should look at the rental market and see how well it's doing before investing. Because rental markets do well in cities where housing availability is low, big cities such as Toronto and Vancouver are great places to invest in residential REITs.

Healthcare REITs
Healthcare REITs are particularly interesting, especially right now, because they are directly tied to Canada's healthcare system and more specifically, the funding available for it at the time. Currently, as Canada's baby boomers continue to age and place heavier stress on the healthcare system, healthcare REITs are particularly interesting to watch.

Office REITs
Just as residential REITs invest in apartment buildings with multiple tenants, office REITs invest in office buildings with multiple business tenants. When investing in office REITs, the investor needs to consider things such as economic conditions, the unemployment rate, vacancy rates, and the area that the REIT is in.

Mortgage REITs
These types of REITs represent about 10% of the REIT market in Canada and instead of being tied to commercial or home equity, they are directly tied to the mortgages on the property. Currently, Canada mortgage REITs are a great investment because the interest rate is so low, giving investors the best return on their money. However once interest rates rise, returns on investment do also decrease.

Once you've decided to invest in REITs, your next step is to look at the different markets they represent, decide which one you're most interested in, and which one is faring best. While taking all these factors into consideration might sound overwhelming, it's actually one of the most fun parts of investing in REITs. It's all about making predictions, following trends, and keeping up with the news in different markets - then just deciding which one you like best!