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How HST is handled when buying with a partner

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Andrew speaks with Mehrdad about finding a great investment in downtown Toronto for under $450K and why starting prices aren’t always what has been advertised for certain projects.

TRANSCRIPT 

Andrew: Welcome to the Ask Andrew podcast, real questions from real condo investors. You ask, I answer.

Hi, and welcome back to the Ask Andrew podcast. On today’s episode I spoke with Merhdad, and Merhdad had a great question around what is the deal with starting prices in a condo not being the same as advertised. So, often you’ll see signage or you’ll hear ads or you’ll see something in the newspaper starting from 199 or 299 or 399, whatever that number might be. But when you actually get to the sales office, these numbers are sometimes very, very different. So, what is happening there? We talked about that and we also talked about some other things like, is it still possible to find a condo downtown for under $450,000? We also talked about HST and how HST is handled when you are buying with a partner.

So, stay tuned to today’s episode to listen to those questions and answers and more. If you’d like to be a guest on the Ask Andrew podcast, if you have questions that you’d like me to answer, just go to AskAndrewPodcast.com and click Ask Me A Question. And I’d love to hear from you and chat with you. So, without further ado, here is my conversation with Miradad.

Andrew: You wanted to ask me some questions about opportunities coming up for condo investment?

Speaker 2: Yes, looking at pre-construction, and yesterday, actually I attended  Condos’ launch page. I’m still gonna think that I could go with any other selection. I still did the whole worksheet thing but I the price range may be a little above my budget. But I just wanna think one of these new condos are negotiable. So I was wondering if you could give me some advice in terms of location. I’m basically looking for something in downtown maybe. And then its gonna be a high demand for that. So do you have any advice, any projects that you know of,?

Andrew: Yeah, yeah. Sure, sure yeah. We can certainly talk about that. Just before we jump in Merhdad, just to let you know, I’m actually going to be recording this phone call.. The reason why I’m doing that is because I’m, I don’t know if you’re listening to my podcast right now. Yeah if you know about my podcast. I’m starting a new podcast and its gonna be called “Simply Ask Andrew” and  its just phone calls like this where people like yourself are interested in condo investing just ask me questions about anything they want.  So I may or may not actually end up publishing this phone call as part of that new podcast, but …

Speaker 2: That’s what I was gonna ask actually if its not really something that’s not worthy of publishing. Yeah, but that’s totally fine and if you wanna go ahead and you think its a conversation that you wanna keep it on your podcast, yeah by all means.

Andrew: Perfect. And, obviously, if I do publish it I won’t … It’ll be confidential of who your identity is. I’m not gonna say who you are obviously. Great. So your question … You’re wondering about investing downtown. You’re looking at condos, for example, which is launching now. Prices are maybe out of reach for you. You’re wondering what other options are coming or what you should do. Is that a fair summary of your question?

Speaker 2: Yes and then I think the first question before we start having that conversation that I had in that. One of the things that surprises me, because that was basically the first VIP launch event that I attended … From what I understood doing my research online, I can from $300,000 something. Probably like a small suite and then above … But then when I was actually at the event she just wanted $530-something, so I was like “Is that something that happens all the time? Is that a nice way to]?” Do you have any information about that?

Andrew: Yeah. So, that’s a good question. You thought you saw somewhere the prices were starting from $300’s. You got there, prices are starting from 500’s. That could be a couple of things. One is the information you saw before was just not true. Sometimes agents or people will advertise condo projects coming up –I see this all the time — where they’ll  starting from such-and-such a price, $299 or $399, whatever the number is, but I don’t know … The number’s not true. There are no units at that price and I don’t know why sometimes agents just get it wrong. To be honest, they put the wrong numbers out there. It could be that. It could also, in some cases, be developers could start spreading word about a project that its coming soon and the prices are gonna be starting from X. And then as time goes by, especially in a very hot market like this, prices are rising rapidly. So sometimes, we see situations where the developer intended to start them at that price, but the market is so hot in the weeks leading up to it that they actually just raise the prices across the board.

Speaker 2: That was the that I got from the whole event. I thought this was a hot project and everything, but I kinda felt like the developers didn’t really need to do anything in terms of the marketing because they were already interested. I’m pretty sure its gonna be sold out in a few days maybe. Yeah maybe that was kinda the reason for that, but …

Andrew: Again, I don’t know what you saw … Just for your information and to answer the question, another possible reason is just that there are units starting from a lower number. But the particular agent event that you went to with particular agents there, the units that were allocated to them to sell, they didn’t get any of those units that are the lower price. So, the cheapest unit that they had was much more than that, but that doesn’t necessarily mean there aren’t cheaper units available in the building technically speaking. So, there some possible reasons for that. But generally speaking, if you’re looking downtown Toronto core pricing … I mean $400,000 today as of time recording this conversation: end of October 2017 … $400,000 is sort of the entry-level point to get into really anything downtown.

Speaker 2: Yeah but I was hoping that I could probably find something [inaudible 00:07:10] $500 maximum maybe. And if its near ..then maybe  maybe I could go a little above $510 maybe…

Andrew: Yeah so that’s good to know. So, if you can go up to $500 then that’s gonna increase your options a lot. I talk to buyers all the time that … They’re trying to get something around that 400 or less mark. And a year or two ago I would give them plenty of options to choose from, but unfortunately those days are gone and the starting point is…. So a few weeks ago we did have some units as low as $299 in Regent Park in Due East Condominiums.

Speaker 2: Yeah I know about that actually.

Andrew: That was a great option there. Unfortunately, there’s no more units left there right now. There may be another release coming up. That might be one to put on your radar screen and we can talk about that when the next release comes out. We don’t know when that’s gonna be. We don’t know what the prices are gonna be. But certainly there will be some units, not many but some, under $450,000. Another project coming up to put on your radar would be Social Condos at…

Speaker 2: Yes and that’s actually another one that I’m keeping an eye on, which I’ve heard that its gonna be released in October or early November. If I’m understanding correctly.

Andrew:I’ve got some of the information on that. It was today actually. I can send you some details after this call [inaudible 00:09:08]. Yeah we’re expecting … We don’t have prices yet, but we’re expecting prices will be probably starting in the low 400’s I would think. There should be a good … I’d say a decent selection of units available under $500,000. Again, not a ton, but there should be a decent selection available there. So, that one is one that a lot of people are excited about.

Speaker 2: That’s actually one of the first priorities of this time frame because I’m thinking whatever happens with this whole new mortgage. Maybe its better for me to find a contract for a pre-construction before the end of the year. I feel like the mortgage is not gonna be down until the closing date. Then I’m not sure if you’re an expert in this, but maybe there’s hope that they had grandfathered a rule or something. I’m not sure if you have any advice on that, so that’s why I feel like Social Condos, at this time, would be a great choice  if the prices are what you say.

Andrew: Yeah. No absolutely. Social condos is one that a lot of people ar excited about and the condos, as you mentioned, has got a lot of buzz and hype and its pretty much gonna sell out overnight too. But in terms of the mortgage rule, the new stress test specifically, we don’t know exactly how the government’s gonna handle it yet. They haven’t clarified on how the people who signed contracts before January 1 … Obviously there’s tens of thousands of buyers who bought pre-construction condos who have not closed on them. So, they haven’t clarified … Interestingly enough, they haven’t clarified on how … If they’re going to have to go through the stress test or not if they haven’t closed yet.

Speaker 2: Yeah I think that my mortgage broker actually invited me. It might be best to give me all the information, but a lot of it is not really clear. You have to make way to see are they going to actually …

Andrew: Yeah all the mortgage brokers that I’m talking to are saying the same thing. We don’t have all the details yet. Hopefully the government has some sense and makes it grandfathered to all the people who bought before. But don’t expect the government to always have common sense unfortunately. 

Speaker 2: But what’s your personal advice on this do you think? Do it before the end of the year just in case its gonna be better or does it matter if you wait until you find something that you think is gonna be better than what you have currently?

Andrew: No definitely my advice for somebody like yourself who’s looking to get something under $500 is don’t wait [crosstalk 00:12:12] They’re gonna keep going up, yeah. Even if this change comes in and even if it slows the market down, its not going to grind it to a halt or make the market go down by any means. So prices may … They may not go up as fast, but they’re still gonna continue to go up because there’s just such a supply shortage. So if you’re looking especially downtown under $500,000, I would say, just like we said, the days of the $300,000 condo are gone. The days of the $400,000 condo downtown are almost gone. Not quite, but almost gone. The market just keeps moving so waiting is not a good strategy in this current market.

Speaker 2: That why I’m trying to do my best during this month and hopefully by the end of November, hopefully find a contract and everything, but its becoming a little stressful for me not knowing what’s gonna happen with the mortgage. But at the same time, I know that one of the incentives of having an agent is that you can have an assignment into the contract. Just say that things aren’t gonna work out in, let’s say, four years, you would have the option to do an assignment. But I’m actually gonna be living in the place that’s my primary residence.  And that’s another interest. I’m probably gonna apply for the rebate, but I also have a cosigner for my mortgage, which is my sister.

And that’s another thing that I’m not sure if you have any information about or I should talk to my lawyer. Basically when I went on the [inaudible 00:14:07] website, based on their requirements, I would be eligible for that rebate. The only thing is if you have cosigner, someone said that both of you have to have stayed in that place as your primary residence, but because the cosigner’s my sister I can … As long as one of us would move into that place, it’d be like a [inaudible 00:14:30]. I think that’s what it is, but I’m not 100% sure so I’m not sure if you have any information about that.

Andrew: That’s a good question actually. I event ever encountered that scenario where a brother and sister buying a place, one moves in the other person doesn’t. Do you still get the HST rebate? I would assume that you would still get it. Even if you had to pay it upfront and get it back, but you probably shouldn’t have to pay it upfront. You should be able to just not pay it at all because you’re moving into it as a principle residence, but that would certainly be a question to ask a real estate lawyer of better yet somebody who handles HST rebates. I could put you in touch with my guy [crosstalk 00:15:17] who does HST rebates and he’s been through every scenario and he can answer that question. [crosstalk 00:15:27]

Speaker 2: I’d thank him beforehand, but I’m pretty sure that by the time I get to sign the contract and everything … Once I have my lawyer and then I’m just not gonna go through that and if there’s anything I’m gonna let you know if you have some lawyers or somebody you know that you could introduce to me, that would be another option because I haven’t chosen a lawyer yet. So I’m assuming that your guy would know some people.

Andrew: Yeah absolutely in terms of lawyers, HST experts, mortgage brokers … We’ve got lots of great people that we’ve been working with for years who are experts at all this stuff. So yeah we can certainly put you in touch with them when the time comes when you need those professionals. Not a problem at all.

Speaker 2: Okay that’s great. `[crosstalk 00:16:17] And speaking of HST, I have a problem with that the prices that are presented to us are regionally interest included. So does that mean that whatever deposit that we put in, like a down payment, that include the HST already or is it something that’s gonna be paid on the closing?

Andrew: Yes that you see quoted on every price list, 99% of them is HST-included. So that doesn’t necessarily mean you don’t have to pay some HST on closing, but it means that after you … Even if you have to pay the HST on closing, if you’re not moving into it, after you get the rebate back the number is the same if that makes sense. You might be out-of-pocket some, but you’re gonna get it back. [crosstalk 00:17:13]

Speaker 2: [inaudible 00:17:15] And you have like two years to do that before it expires. But the only reason that I’m asking is that is that something that I’ve already paid and I have to wait for the government to get it back to me or is that extra that I have to pay after the down payment? Is there an extra percentage for that or the whole thing?

Andrew: Yeah so generally speaking, if you are moving into this suite, you’re not gonna pay any HST on closing. If you are not moving into it and you are renting it out, then its an investment and then you do pay HST on … The purchase price you’re talking about, let’s say if its over $450,000, then you’re gonna pay $24,000 in HST.

Speaker 2: Okay

Andrew: If you don’t move into it.[crosstalk 00:18:17] If its an investment you’re renting out and your purchase price is above $450,000, you’re gonna pay $24,000 in HRT and then you’re gonna apply to the CRA to get that money back. And it usually takes about a month after you have applied to get it back.

Speaker 2: Okay. Good to know.

Andrew: Assuming that you’re doing it correctly and renting it out as per the CRA guidelines which you would be.

Speaker 2: Okay. So, that’s all great answers. Thank you so much. And I have a few different projects listed here on a sheet of paper, but most of them, at this point, I think are sold out. But I also have some questions about some of the new projects that I’ve heard about but I didn’t find much information online about them. So I’m wondering if I can just go through the list and you can just tell me if you know anything about any of those. That would be great.

Andrew: [crosstalk 00:19:15] Maybe just give me the list of projects you’re interested in. I’ll tell you if any of those are gonna fit your [crosstalk 00:19:21]

Speaker 2: I’m just gonna quickly name them because I’m actually looking at it right now. There’s one project called [inaudible 00:19:28] and that one is sold out at this point.

Andrew: Yeah. [crosstalk 00:19:35] There’s a second phase coming but [crosstalk 00:19:42].

Speaker 2: Yeah okay. If you already know that then I might have to scratch it off my list already. Yeah that should be a little high for my budget. And while I’m at [inaudible 00:19:56] because that’s a big one. [crosstalk 00:20:01]

Andrew: Yeah. You know Gerard by Crestford? I don’t know the details on when that one’s coming out yet or what pricing will be, but probably gonna be out of your price range. [crosstalk 00:20:15]

Speaker 2: Yes I can already be into that category I can tell. Okay and what about that 1 Young [inaudible 00:20:24] residence? [inaudible 00:20:25]

Andrew: Yeah 1 Young is … 1 Young is coming out, apparently in November. It potentially could have some units under $450. Its gonna be a massive building so I would think they’re gonna have some smaller suites. I would [crosstalk 00:20:49]

Speaker 2: Yeah there’s actually a conversation that I had yesterday with a friend. They’re like ” Well its definitely gonna be a higher demand building everything, but because its a higher demand its a higher [inaudible 00:21:01] than other units. You might be able to find something. You never know.” [inaudible 00:21:06] one that I had under my radar but again I’m not sure if time is very important here. Should I wait? Should I not? What do I have available at this time? I’m excited to see what the Social Condos [inaudible 00:21:18]. This one’s also another one that I’m looking at.

Andrew: I would say of the stuff that’s coming up I would say Social Condos is probably gonna be your best bet to fit something in your budget in the downtown core.

Speaker 2: Yeah that’s what I think too. I think I have probably more selection compared to this one. [inaudible 00:21:40] You never know. If it happens and I find something like the Social Condos, I would be happy. Bu if not, I think that’s gonna be my second plan just to see if I could find something in there.

Andrew: Again, generally my advice is if you can get anything downtown in your 400’s range, you should jump on it because its getting harder and harder. And the more time that passes by, [crosstalk 00:22:15].

Speaker 2: [crosstalk 00:22:27]

Andrew: Okay I gotta run to another meeting here but hopefully that was helpful. [crosstalk 00:22:24] Did you have any other final questions?

Speaker 2: No I think I got basically what I needed to talk to you about. S I appreciate all your answers and thoughts on everything. So I understand that I’m gonna be receiving updates about any project you’re working with and I’ll come [crosstalk 00:22:46] I’ll have to meet you again for the [inaudible 00:22:56]. And if there’s any other questions at that time, I’ll definitely let you know.

Andrew: Great, yeah. And like I said I’m definitely gonna follow up this phone call, send you what I have so far on Social Condos. And if anything else comes across my desk in the next little bit that fits your budget range, I’ll be sure to make a note and send that over to you as well. But definitely keep checking your inbox for my weekly email updates. That’s the best way to [crosstalk 00:23:24] stay on top of the opportunities. And I look forward to talking to you soon.

Speaker 2: Thank you very much.

Andrew: Have a good day. Bye.

Speaker 2: Bye.

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