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FREQUENTLY ASKED QUESTIONS

Is this a good building? Is this a good developer?

SOBA is going to be an amazing building in line with the long history of Brad Lamb buildings in Toronto.

 

What makes it unique compared to Lamb’s other building in Ottawa (Gotham lofts) is that this building offers residents more amenities such as a sexy rooftop pool and a gym. Amenities like this will attract higher resale and rental values.

 

From an investor’s standpoint, Brad Lamb’s buildings consistently are among the best performing buildings you can buy in – yielding some of the highest resale values and the highest rental values compared to all other buildings.

I personally have invested in multiple Brad Lamb condos so I am confident in recommending Lamb’s projects to my top investor clients.

What are the incentives being offered?

The incentives offered to investors right now are:

  1. 2 year rental guarantee
  2. Best cash flow of any rental guarantee program available in Ontario
  3. 2 year free property management
  4. Only 5% deposit
  5. Cash discounts off the purchase prices
  6. Capped development levies

Is the deposit really only 5%? Is there a catch?

There is no catch. The deposit the developer requires is only 5% deposit. Of course your lender, if you are getting a mortgage, will require the standard 20% down payment on final closing, however many investors may choose to fund this amount from a line of credit or other means so as to use less cash and gain higher leverage and ROI.

If you are unsure what strategy is best for your situation please contact andrew to discuss andrew@truecondos.com 416-371-2333

When is Occupancy Date?

Occupancy for most units in the rental guarantee program will be in January 2019. Some of the units on the highest floors will be a little bit after that.

When is Final closing?

There is no exact date but the developer is projecting approximately 4 months after occupancy for final closing to occur.

 

Final closing is when your mortgage kicks in and you pay your closing costs.

What are closing costs expected to be?

Exact closing costs are not known until final closing, however we have a pretty good idea to expect closing costs to be about half of Toronto’s current closing costs.

Why?

Only 1 land transfer tax in Ottawa compared to 2 in Toronto.

Development levies around half of what they are in Toronto right now.

Fewer other levies and fees in Ottawa compared to Toronto.

So on a unit of approximately $350k purchase price you are looking at around $10-15k in closing costs.

Do I have to pay HST? Is there a rebate?

Yes you will have to pay the HST rebate portion which is equal to about 7.8% of the purchase price.

Immediately after paying the HST to the CRA, you can apply to the CRA to get it back. It usually takes about 6 weeks to get it back. We can also help you with the application process to make sure you do it correctly and get back the full amount owed.

For more information about the HST rebate process when investing in new condos, check out truecondos.com/tag/hst-rebates

Will there be any issues with getting back the HST rebate?

Occasionally with rental guarantee programs there can be issues with getting the HST rebate back because of how the lease paperwork is done by the builder and it not meeting CRA’s rigid guidelines, however, this is not the case with SOBA’s rental guarantee program

There will not be any issues with this program as the lease will be done as per CRA’s requirements. For more details contact andrew@truecondos.com

What do you pay before final closing during the occupancy period?

You pay standard occupancy fees as in every condo project which consist of 3 things: your property taxes, your maintenance fees, and the interest only portion of the amount outstanding that you still owe the developer.

How does the rental guarantee work?

The developer guarantees a certain rental amount for 2 years (24 months).

The developer finds a tenant to rent out the units for you, and you get whatever the developer is able to get for rent. If there is a shortfall, the developer tops you up to the guaranteed amount. If there is a surplus, you get the amount all to you, even if it is higher than the guaranteed amount!

Is property management included?

Yes. The developer will manage the property for you. Nothing for you to do as the landlord save deposit rent cheques every month.

If there are any issues with the property, the tenant will call the developer, not you.

Who is responsible for repairs/damages in the unit?

The developer will act as manager to coordinate any repairs or fixes in in the unlikely event they are needed, so that the landlord does not have to worry about dealing with anything.

The cost of the repairs/fixes will fall under the same as category as any normal landlord-tenant lease: normal wear and tear is the responsibility of the landlord to pay for these items, anything caused by tenant negligence is the tenant’s responsibility to pay.

When does the rental guarantee start?

Most of the units will take occupancy in January. Some of the highest floors will be a little after that.

The developer will begin pre-renting out the units in fall 2018 with the goal of having all the units rented out already before occupancy in January so that you start getting cheques from DAY 1 of occupancy.

In the unlikely event that the developer is not able to pre-rent any particular units before the occupancy date, then the developer is allowed as per the contract up to 4 months to find a tenant for the suite before they are obligated to pay the investor the rental guarantee amount, however it is very unlikely that it would take anywhere near this long to find a tenant.

Ottawa vacancy rate for 2017 was 1.7%. Vacancy rate in the area around SOBA is much less.

It does not take long at all to find a qualified tenant in Ottawa, much like we are experiencing in Toronto.

Important to keep this in mind:

In any condo purchase, there is typically a delay of 30-60 days after you get occupancy until you are able to get a tenant to move in because you can’t advertise and show the property before you get the keys for it on your occupancy date.

In the case of SOBA, with the developer having access to and advertising the suites for lease months before occupancy, they have a huge head start and therefore the units will most likely all be pre-leased before occupancy begins, worst case you might have to wait a few weeks which is totally normal anywhere.

What happens if a tenant moves out in the middle of the 2 year period?

If your original tenant moves out during the 2 year guarantee period, the developer will re-lease out the unit at no charge. If there is any shortfall or period of vacancy, the developer will pay you the difference so that you always get your guaranteed amount for a full 24 months with no vacancy periods.

Best part: If they end up getting you a second tenant who pays you more than the guaranteed amount, you get the higher amount. The developer is not trying to nickel and dime you.

Is there an assignment clause?

There is no need for an assignment clause because the building is nearly complete. Occupancy is just a few months away which means you start earning cash flow sooner!

What happens after the 2 years are up?

After the 2 year rental guarantee period is over, you will just keep getting rent from the tenant who is in your unit.

The transition will be seamless and you will continue getting your rent each month.

Whenever that tenant decides to leave you can re-rent it to a new tenant on your own or you can hire someone from our Ottawa team to help you rent it for a standard 1 months’ rent fee.

Is Ottawa a good market to invest in?

You haven’t heard? Ottawa is the country’s hottest real estate market right now. After years of slow but steady growth, Ottawa is uniquely positioned to take a huge leap forward in the next few years.

 

With prices about half of that of Toronto, but average incomes higher than Toronto and a recession proof employment base of government employees, Ottawa is widely recognized by many experts as the #1 market to invest in Canada right now.

 

For more info check out these recent articles:

https://ottawacitizen.com/news/local-news/the-great-rental-hunt-two-ottawans-one-month-a-dozen-viewings-and-lots-of-frustration

https://www.huffingtonpost.ca/2018/05/02/ottawa-real-estate-booming_a_23425506/

https://www.theglobeandmail.com/real-estate/article-ottawas-red-hot-housing-market-is-countrys-most-active/

https://globalnews.ca/news/4223224/ottawa-housing-market-real-estate/

https://ottawacitizen.com/business/local-business/bidding-wars-and-madness-inside-ottawas-sellers-real-estate-market

Ottawa is so far away from where I live, will it be a hassle for me to own a rental property there?

This is a common question from investors.

The fear is that you will get a call at 3am to come fix a leaky toilet and you are a 5 hour drive away!

Rest assured, this will never happen.

The beauty of this opportunity is that it is completely handsfree for the investor. Nothing for you to do, everything is taken care of with 2 years rental guarantee and 2 years of free property management.

After 2 years you will continue seamlessly with the tenant who is in place. Nothing for you to do.

When your tenant eventually leaves and it’s time to rent out your condo again, we have our team in Ottawa who can take care of everything for you, just as we would in Toronto. Nothing for you to do, no need to go to Ottawa. No need to pay for expensive and unnecessary professional property management service

Again, the beauty of investing in brand new condos is that there is nothing to do. No work required. Years go by and many condo investors (myself included) never set foot in their investment units.

If an appliance breaks down, a simple phone call to a technician will solve the issue.

You can’t do this type of passive investing with other types of real estate like houses or commercial properties, but with brand new condos you can in most cases expect many years of never having any issues at all that require your physical presence.

This is the beauty of condo investing and why I do it, and why so many of my clients choose condos over other types of property.

Will these units provide positive cash flow?

The beauty of this rental guarantee program and the Ottawa real estate market in general is that it offers investors much better cash flow than you can get in Toronto right now.

The Rent:Price ratio is so strong with this opportunity that investors can expect positive cash flow from day 1 in most cases, but it will of course depend on what mortgage option you choose. We always recommend going with a variable rate mortgage with 30 year amortization.

Investors looking for good value and immediate cash flow should take advantage of this opportunity and add a unit at Soba to their portfolio as a great long term investment.

What floor plan should I pick?

Every floor plan available with this promotion is great for investment. These are the investor suites. Excellent layouts. Efficient. Smaller sizes for the most part. 1 bathroom in all suites to keep the costs down but not impact the rental rate.

Since the floor plans are all great, you should pick a unit that is in your budget range.

What if I want to buy a parking spot?

You can purchase a parking spot with units that are 604 square feet or larger. Parking is currently at $39,900. If you do buy a parking spot, the developer will increase your rental guarantee by $150/month.

What about Lockers?

Lockers are available on a first come first served basis for $3500. There is no additional rental guarantee amount if you buy a locker.

Why are these units still available? Didn’t the building start selling a few years ago?

Yes the building started selling a few years ago, it’s nearly complete now.

Unlike most builders, Brad Lamb (the builder) never sells out his buildings at launch. He always sells just enough to get construction financing, then increases their prices significantly and sells the rest closer to when the building is finished. Why? Because he knows he will get much higher prices for the units in the future.

In this case, he was able to secure construction financing at a lower than typical threshold (usually it’s around 70% but he secured it at Soba with less) so there are more units than usual available at the end of a typical project.

So what to do with this block of unsold units?

Until recently the Ottawa real estate market has been very slow over the last 4 years. Now in 2018, the Ottawa real estate market is finally recovered and is red hot. It’s a perfect time for the builder to sell off these units.

However, the builder also realizes that they have around 40 units to sell and with occupancy right around the corner, a short period of time to sell them.

So, they decided to put together a very attractive package that will be for a limited time and makes this a turn key, worry free investment for landlords.

The beauty of this building is that the floor plans are all fantastic. Square, wide-shallow layouts, bedrooms with windows, tons of glass, huge balconies, great prices. It’s a no brainer, and it WILL NOT LAST.

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