February 25, 2024 • 45 mins
In this revealing episode of Real Estate with Anisa Arra, an accomplished lawyer and founder of Ontario-based firm ALF LLP. Anisa shares invaluable details about her path from law school to owning a law firm and mastering the role of a lawyer-turned-business owner. Learn from her seasoned view on real estate law for investors and enjoy a peek into the fascinating world of civil litigation, construction law, shareholder disputes, and more.
The episode takes a sensitive turn as Anissa dives into the complex web of asset division in divorce. She discusses the protective role of prenuptial agreements, implications of starting a corporation, and chastens against drawn-out legal battles' psychological toll, especially on children.
As the conversation deepens, Anissa along with Reshma, enlightens us on real estate strategies involving corporations and joint venture partners. Discover how some clients leverage to invest in multiple properties and delve into critical aspects of creditworthiness and mortgage approvals for self-employed individuals. Their dialogue paints a fascinating picture of the vast potential in real estate.
Wading further into the vast domain of real estate, Anissa dissects condo-related regulations, legal complexities, and their implications for property investors. Drawing from professional experiences, she uncloaks unexpected challenges that tend to trip up first-time condo buyers. From low appraisals and interest hikes to surprising condominium regulations, this episode is rich with practical insights to guide an informed investment journey.
Benefit from an expert's perspective on lucrative property investment strategies and the wise use of borrowing in wealth creation. Whether you're a novice investor or a seasoned pro, this insightful episode offers a roadmap to success in the diverse real estate landscape.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Real Estate with Reshma in Canada, with your host,
Reshma Shaikh, your mortgage agent, with a mission to help you retire with at
least $100,000 of passive income.
Each episode features candid conversations with industry experts and real estate
investors, revealing the financial strategies that have set them apart and how
they are achieving their retirement goals. Let's dive into today's episode.
(00:23):
Hello, Anissa. Welcome to my podcast. How are you doing today?
Hi, Reshma. It's so great to see you. Thank you so much. How are you?
I'm doing great. It's great to see you as well. Would you mind introducing yourself to our listeners?
Sure. I'm Anissa Aram. I am a lawyer practicing in Ontario.
(00:45):
I also founded a law firm in 2017 and I've been running it ever since.
The name is ALAP. LLP. I currently also have a law partner and other lawyers and law clerks with me.
Gotcha. Is this your own firm? You started with your partner or someone?
I started on my own. I had this idea since law school.
(01:09):
Apparently, I kept telling my friends, I need to start my own law firm.
I don't even remember. They told me because I was so talking a lot about that
and eventually I decided to just go for it and here I am I've been doing it for six years now.
Wow that's amazing how is that experience like because it's also a business
(01:29):
right when you start your own business it's completely different than working
with another firm like as an associate I guess.
It is because if you work for someone you only You only have to worry about
doing a good job and going to work at a certain time and beginning a certain
time and meeting the expectations that they set for you.
(01:51):
For lawyers, it means usually being good in law, just having a good grasp of the legal arguments.
Writing properly communicating with clients properly and
just advancing in the legal field when you
are a business owner you also have to
learn how to bring in clients
(02:12):
especially when you're fresh out of law school as i was why
is someone going to go to you you have no experience right
so you have to learn get experience
and also get clients and how to
differentiate yourself there are a lot of lawyers out there why will
someone come to you instead of the lawyers
10 kilometers away from here so it's it's
(02:35):
a completely different skill and no one teaches room there's no
course for it for a lot of people that have
made it and they tell you jesus you should do it
recover five and do this and
attend this coach and talk to this person read these books
everything is it's very individualized
yeah there's a lot of a lot of
(02:56):
uh again as you said like a lot of books a lot
of mentors a lot of knowledge but you have
to put it all together so no one single person can tell you how to do it because
you're going to have a very different journey from someone else yeah exactly
like it has to be super tailored like in businesses but so you graduated from
(03:17):
law school and you started your own firm?
Yes. Oh, wow. That's amazing.
And so how did you like make yourself standard?
Like I know you're a investor focused real estate lawyer, right?
And you also practice law in business and also divorces and what else?
(03:38):
Civil litigation, construction law, construction liens, dispute between shareholders,
dispute between partners,
We also do some wells, obviously have a team now that specialize in different
areas of law and the business lawyer and real estate lawyer in the firm.
(03:58):
Especially when it comes to real estate investors because the
client will come to me i close the house or close
the property and they like the service and
they're like well i have this business agreement that
i am making with this person we're buying this property together i
need a partnership agreement so i would do that or i'm
divorcing now yeah can you help
(04:19):
me through that but we're friendly so just do the separation agreement well
i was even really good at criminal of law but it's
different the theoretical aspect of an area
of law and actual practice of it and once
i started practicing real estate law i i loved it
it was it was fun it was fast and you see the results right away yeah i think
(04:43):
yeah yeah each file might take you like because you're really coming at the
end right like probably a couple of days of work and then when you're done with
the transaction, right?
Yeah, so you're coming right at the end. A lot of the work has already been done.
So all you need to do is make sure that the deal the parties are closing is
(05:04):
a deal they wanted to make.
So doing the due diligence that everything has been done in accordance with
their original agreement.
So did they actually want the leak in the basement? Did they accept it or not?
Did they understand who was selling the property? Did they understand all the
implications from the transaction?
Was the agreements with the agents, the broker, was that clear?
(05:29):
And obviously searching the titles and making sure that there's nothing there
that they will end up with like a work order or something that they don't want
to deal with after closing.
Yeah, so let's talk about divorces and real estate.
So hypothetically, if someone is going through a divorce,
(05:51):
Like I heard like it's 50-50, all the assets are divided 50-50 and matrimonial
home is divided 50-50. So is that true?
Well, that depends on the length
of the marriage and whether the asset was purchased after the marriage.
So if you go into a marriage where significant assets, you can deduct the value
(06:16):
of those assets at the beginning of the marriage.
And the growth of the acid is divided.
So the idea behind this is that even if a spouse stays home and does nothing
to contribute to your wealth, there's still a value there.
They're maybe raising kids and maybe taking care of you.
(06:38):
Maybe they're inspiring you or maybe they're putting aside their own dreams
and wishes so you can succeed.
So instead of going into the nitty gritty before as to what happens inside people's home,
whether who actually helped and with what the court just
said you know what just 50 50 from now on so
whatever assets are bought during the marriage
(07:00):
or the growth of the assets brought into
the marriage are divided 50 50 however if
you want to protect those assets a lot of my clients will do marriage agreement
or prenup as most people know them to deduct to not deduct but to to have those
assets excluded from any family or division of assets.
(07:26):
Okay, so one option is for me to avoid that situation is to have a prenup, okay?
And the other one is, let's say, okay, I'm married and I'm going through a divorce.
And I have few assets, like even before getting married, and I have a business.
So what happens to the business?
Like, do I do 50-50 of the business?
(07:49):
Yeah. So let's say you have a business like you do now.
And in the course of the marriage, the business grows and you become a multi-millionaire. Oh, yes.
Your spouse has a claim to half of your business. Okay.
Let's say it went from a hundred thousand business to a $10 million business.
(08:13):
Right? Right. So most of the value was during the course of the marriage,
so they have a claim to it.
Same of 50% or we can negotiate on that percentage?
Everything you can definitely negotiate. But if you go to court and you don't
agree on any negotiation, usually the court would just equalize everything 50-50.
(08:35):
Unless there is some unconscionability or some type of argument that will show
that it would not be fair. Gotcha. Which is rare.
If your partner understands and you won't cause any problems in the relationship,
you can put the business in the prenup saying that the business will remain
(08:58):
yours even if the relationship breaks down or the marriage fails.
And that way you can protect it. You have a peace of mind that you will not
take your business and then hurt it. because if you lose 50% of your business,
you can't really purchase your business.
You have to get a loan to pay them out and that encumbers your business.
(09:20):
What if I buy my assets under a corporation?
Everything you own in a corporation, as a shareholder, they are entitled to those shares.
Oh, still? There is a wear on it. You can't buy it. No.
(09:41):
They know what you own you
can't hide them they can access everything shares pensions
rsb's buildings personal property
you've seen sometimes couples will just divide
like teddy bears or dolls everything right
so that's a lot of couples
(10:02):
i've seen lately are becoming more reasonable they
want to spend a lot of money in family law so they
will negotiate things between them in
a in a fair manner and i always believe that
you can agree to a more fair agreement than the court would agree to because
you understand your situation better the court will just not want to deal with
(10:25):
a lot of details and we'll just say 50 50 and that may not be fair yeah And
it will take a lot of money to get there.
Exactly. It takes thousands of dollars to get all the way to a trial.
So I highly recommend coming to an agreement.
And you have to understand that an agreement means that you both will be equally
(10:46):
unhappy about the outcomes.
You have to give up something, but it's worth saving.
Thousands of dollars in legal fees. Gotcha. Yeah. Yeah, I actually have a friend
and he went through a divorce and he basically sorted it out outside the court
or like even the lawyers were not involved.
He's like, you're not getting my matrimonial home. I'll just buy you a new home.
(11:09):
Just go stay there and take the kids, feed them.
I'll pay the child support that like just no hassle. Right.
Then court could never come up with a solution.
Exactly. Exactly. This creative solution, the court will not come up with them.
So it's always better to negotiate.
That's so that's so true and also like a lot
(11:32):
of a lot of the time kids are involved right like we have to think
about them as well because ultimately in most
cases what we are owning is to
for inheritance or like give it to our
kids right ultimately for most
people yeah yeah that's that's what they
work hard for so they can leave something to the kids a
(11:52):
legacy of home and it's unfortunately sometimes you'll
see couples that will engage in bitter divorce proceedings
and they don't realize that it affects the
children very negatively and it's important
to just settle everything and focus on the children because your
relationship is done but your relationship with the children will continue
for life yeah so exactly yeah
(12:16):
let's let's move on from the divorces there
i've seen
like uh even if someone opened a corporation they
bring in a jv partner and they do like gplb structure
or maybe shareholder structure and they just uh buy properties that way right
and scale that portfolio that way yeah but so that that corporation then will
(12:40):
after a few years that corporation will have its own income right so once a
corporation you can provide two two,
three years of financial statements and the corporation has their own credit
worthiness so they can be approved on their own.
For example, my business can be a borrower on its own whether or not the bank
(13:04):
would give me money because the company has money, for example.
Or a person has a restaurant or a new company that was just incorporated. They have no assets.
They have no money so they're worth nothing for the
bank you can't dissolve a company yeah
it's more difficult to declare bankruptcy than
(13:25):
just dissolve a corporation and say well i can't pay
it so yeah they can
go after it right so they have they usually take
personal guarantees from shareholders because these
new companies you can create them and close them very easily exactly
so like uh all the
banks like when when i do self-employed individuals or
(13:47):
like for business owners like a mortgage they we
always ask for articles of incorporation and
t1 generals or and also like we
need two years of statements business statements not two
years we need later six months of business statements but
we need two years of returns yeah exactly yeah
(14:09):
it's all about trust yeah
exactly and yeah they say the bank will only
give you money if you don't need it but if you really need it
you're not getting it yeah so i
was i was working for clients that had a lot of closings
and they're buying a man i'm like how like they
seem to have have unlimited funds like how is this possible and
(14:33):
then i would see that they would close on one property and then
refinance it or or
maybe you can refinance right away because you got
a mortgage you closed it but there would be like some type.
Of project like they would be constructing that so
they would get a construction loan so there's extra money or they.
Would have previous properties they would refinance usually through
(14:54):
a private loan get some money and then take that money and put it into another
property buy that property and then close it with a bank and then get a private
mortgage and use it to buy another property and it was just this leveraging of,
and at that time where now it's not the best time for real estate but at that
(15:17):
time real estate was just like within months property was growing in value so
you can pull money out right away.
So this was like so interesting for me and not a lot of people outside of the
real estate world understands how to leverage this capital to get cash out of
it and purchase more capital.
(15:38):
And then more and more and it's just it looks to
outsiders if you're so incredibly wealthy but you're
just borrowing money from these
properties and putting it into other property and you
just have all this debt but you also start building some assets
because there is also some leftovers so you
obviously will start with some type of cash from
(15:59):
your own and then it keeps growing that way and i
realized the power of borrowing money it's
hot that's how you create wealth by borrowing and
i grew up with parents who thought borrowing is bad
and they didn't want to own or owe anybody
any money and you create this idea that
debt is bad but there's actually good debt and it's
(16:22):
a debt that you invest so if you borrow it
let's say a five percent but you loan it
out 12 you're making making money that's good right
so real estate at certain times
grows really fast so if you're bored and
usually if though the times are those are
good times and the bank will lend you money lower interest rate so you get something
(16:46):
at three percent four percent five percent but real estate grows at 12 then
it's a no-brainer put it into real estate right exactly until until real estate started dropping.
But in the long run, I think prices always go up and appreciating value.
Real estate appreciates.
So as long as you're able to weather those short-term ups and downs, you should be fine.
(17:11):
So at that time, when I was starting
my own firm, I had invested in pre-construction about two years ago.
And around that time, right before well it
wasn't the same time i invested when i
started the firm but about two years later before covid
(17:33):
i think right before covid the property was finished
construction it was ready to move in and i closed it but the property had increased
by about 200 000 or 300 000 so i was able to close i had already put in a lot
of the money because you pay them through Through the years.
(17:54):
Right. So I only needed a small down payment to close. I took...
A bigger mortgage based on the i took a
private loan based on the current value instead of the
purchase value and i use that money yeah
because let's say it was let's use
small numbers let's say it was purchased at 300 000 it's
(18:17):
in toronto so there was no way it was 300 000 but by the
time i closed it was worth 500 so you have
already made 200 000 right so you
can get that money out and i use it to buy another property
yeah so we have the i have a
same product as well i think a couple of lenders uh
in this space play with that particular product
(18:39):
especially with that reconstructions and so
again with your numbers if you bought it with 300 if
that's the purchase price and if it is appraised
uh and uh over the over the next two
years it's appraised for 500 hundred thousand dollars and
as long as we get that appraisal report for that
500 i can get you 80 percent loan
(19:01):
to value for that 500 500k and it's not private it's not even private lending
it's private lender it's a b lender and yeah the premium or the interest rate
is like 0.5 or like one percent higher than a lenders so it's a really like
fair product i feel like and also So yeah,
like that 80% loan-to-value cannot be like more than purchase price.
(19:25):
And you can potentially get refunded all your deposits and you can just resect that money, right?
Yeah, yeah, it was. And I was fairly new to that. So I was like, wow, this is amazing.
And more people should do it. And I saw a lot of people struggling and renting
for life and can't save money for the down payment.
But the pre-construction could really solve that because you're putting in money slowly.
(19:49):
And usually most people are able to to
make the deposit and by the time sometimes they
take four years to yeah this is pre-construction properties
so by that time the property would have gone out in value yeah
exactly and sometimes a pre-con makes
sense like in your case you just started
your business and again you don't have two years probably
(20:11):
to show your income like if you go to a bank they'll ask for two years of returns
right and in that in that scenario i think pre-con makes sense by the time you
close it like you have your financials in order and the bank is like oh okay
everything looks good like we'll give you a loan on that right.
Yeah yes yeah so that that's
(20:32):
how i started my journey however timing is also
important the real estate was really good at that time right now
i am seeing clients struggling to close on their pre-construction properties
they have actually gone down in value because they
were sold during the pandemic when properties
were really high and now and now
they're they're not are appraised yeah exactly
(20:55):
yeah that's the problem i'm seeing too so if
someone bought a property for let's say a million dollars
and right now it's not
appraising for that million dollars anymore
like it was appraising when you bought it like one or
two years ago right now the appraisals
are coming in anyway sometimes 100 grand 200
(21:16):
grand less like if you got your appraisal at
900 000 you have to come up with the rest
of the difference of $100,000 from your own pocket and
that is a problem that's why
a lot of people are walking away from
their pre-constructions and they're willing
to assign it even even by
(21:37):
losing their deposits but what's happening is
even though people are even though like all these
people are assigning with like by losing
their deposits deposits the end consumer is not
buying it because the resale the resale market
is like again very discounted like they're like
we'll just buy resale price we resale homes why do.
(21:59):
We have to buy like new construction that's one part.
And other other parties again even if you are losing the deposit whoever is.
Buying that assignment sales still have to come up with the difference of that
appraisal report right and they don't have that kind of cash and there's just
a lot of things right now going on in that pre-con and assignment.
(22:22):
Yeah. The reason I said it is because I don't want people to think that this is like.
Like the gold rush you know like you still have
to think about things thoroughly before you invest
especially you put in a lot of money when you're buying real estate obviously
understand the risks and take
some measured and educated risks when it comes to investing and obviously do
(22:47):
not put all your savings into real estate unless you really believe in it but
i don't recommend it it can be a great way to build wealth it's probably one
of the surest ways to build wealth.
But it does come with its own risks and you
need to you need to understand them and maybe talking to
professionals like you yeah it's very
(23:08):
important before you make the decision exactly and
obviously like a lot of people didn't see the
market we came into right like one part of
it is yeah appraisals are coming in low that's one
part and the other part of it is like they're not not qualifying because of
the you know interest rate hikes right now but uh
all i can suggest you is suggest someone
(23:30):
is uh like if you're buying a
pre-construction don't go into that with
a goal that okay i'm gonna assign it someday go into that uh with multiple exit
strategies right maybe you wanna you make sure that you can close on it right
someday when when the closing comes or maybe you want to move into the property
(23:51):
or maybe you want to keep it as a rental property or maybe you want to assign it.
Always have that multiple exit strategies even when you're buying pre-con.
Yeah, that's very important. Assignment sales aren't easy because a lot of builders
won't allow an assignment. They won't allow you to list.
(24:12):
Even if they allow the assignment, you have to find the buyer through your own
resources. So you have to understand that most likely you will have to close or even lose a deposit.
And then after that, you can do whatever you want.
Yeah, understanding what the exit strategies are and what time and how possible
(24:35):
they are for every particular project.
Yeah. When you bought your pre-construction, what kind of due diligence have
you done? What did you look into the project?
What steps did you take to buy that? To be honest, I was still in law school.
And I did
(24:55):
not do any due diligence I just
saw that it was in a great location that it was growing
it was very close to distillery district
so and I saw the plans
it looked great so I was like I will
I'll buy it I love it and a lot
of my friends not a lot but some of my
(25:17):
friends also purchase in the
in the property and at some point we leave
like in the same building so it was fun
because i lived there for a year but i
did not do any deals and now i will read every agreement for the client i'll
tell them everything but i'm surprised how when i bought for myself i just signed
(25:37):
in the dotted line did not look back it turned out that it was it was a good
investment But normally you should read because these agreements are made for the builder,
are very skewed in favor of the builder.
They may have clauses there that you don't want to take on.
You need to know that on closing of a pre-construction, there will be amounts
(26:00):
added on the final price that is not finalized.
Included in the price so for a resale you
know like price is 1.2 million you have paid the
deposit subject to any property tax
adjustment or if it's a condo condominium fees
you know what you will pay plus land transfer tax
yeah in pre-construction there will
(26:22):
be an hst rebate added on
top of it because you are giving it to the builder you're not getting
in so that's twenty four thousand dollars yeah if
well and then development fees i
think it's capped at ten thousand dollars like i
don't know depending on twenty four thousand the hst rebates so
you're not going to leave in the properties and investment property you're
(26:45):
not getting that from your builders which has
to be added on top of a purchase price then you
have terrian and you you have development charges and
you have all kinds of charges meter utilities
and all of these things that
are included in the agreement some of the amounts are
missing that they are added on the purchase price on on the closing on the amount
(27:09):
you're closing yeah and people look at the number they're like what that's not
what i calculated but when i tell them from the beginning and that this is what you'll end up paying.
Then they're prepared.
And some of them can actually negotiate a development charge.
It's becoming more common now to cap them with a builder at zero, which was...
(27:33):
Unheard of before yeah before it used to be a
couple of 10,000 now the builders are negotiating more
because the market isn't great and i've
seen with few builders they start charging occupancy fees
and like that's like some i've
seen a builder was one of my friend uh bought.
(27:53):
A pre-con and she started getting charged for six thousand
dollars per month and for i don't know
how long we don't have closing date yet and she's
still paying that occupancy fee we just
don't know for how long so yeah so
this bothers people a lot my clients
some of them that don't understand they'll they'll
(28:15):
be like well i don't own the property and i don't want
to move in why do i have to pay this amount
to the builder they're not ready to transfer
title to me why are they forcing me to
occupy the the property and pay them
this occupancy it's because it's part of the agreement that
you sign and once you know that from the beginning then
(28:37):
you're prepared for it once the property is
ready for occupancy your unit every
unit gets completed at different stages of
the project and different times it's going to be a few months before
let's say units one to ten are finished and
then 20 to 25 so at that
(28:58):
time the unit is finished but you'll see that outside the
landscaping isn't finished and then things some things
aren't done yet and it's like you're going into the property and
so you have finished lobby but your
unit is done you have to take possession of
the property and in order
for you to get the hst rebate either you or a.
(29:20):
Family member needs to occupy if you rent it out you're
going to lose the hst rebate i mean you
can claim it later from the cra which we can do that
for the client but the builder will not give it to you in closing and
you have to come up with it on closing yeah and and the builder will pay will
force you to pay interest rate and on the unpaid amount of owing on closing
(29:44):
prorated property taxes and utilities and clients ask They're like,
why are we paying the builder interest if I can't pay you?
So I can't pay you the closing amount because you can't give me title,
but you want interest on this amount?
It's crazy if you think about it. Yeah. And there is a way out of it,
(30:05):
and it only happens when you sign the agreement.
You can tell, you can elect when you sign the agreement with the builder that
you will pay the closing funds in trust with the builders and to the builder's
lawyer on occupancy closing.
That way you don't have to pay any interest rate. Okay.
(30:27):
However, this is only achievable by people who have cash and money because you're
not able to take a mortgage on this property.
So you have to come up with a balance due in closing.
And also I've seen like, especially in like townhouses or like townhouses,
like you, if you want to rent out, you have to use their property management.
(30:49):
And also if you want to do Airbnb, like there are restrictions now.
The management i'm like oh wow like you
have to check all this like why do we have to go property management
these are bylaws yeah you're you're supposed
to read them people don't understand how limited
you are once you live in a condo you are buying
(31:11):
the common elements you are sharing the
common elements and you're sharing this condominium corporation
it's like shares in this corporation with the
other owners so there are rules that you have to abide abide and they're
in the bylaws and in different documents different condo
documents and you have to abide by them and if you if pets
aren't allowed what are you
(31:33):
gonna do right and you have a big dog that you've had
in the family for 10 years and you suddenly can't bring
your dog because there's a bylaw and you need
to know that that's not the property for you or if you're in
an airbnb which can be very lucrative but the
condo doesn't allow you need to know yeah i didn't
know they won't tallow pits in that's why uh in
(31:53):
my condos i have never seen a huge dog
there were always like tiny tiny dogs and the cats
it's probably in the bylaws like only this
oh yeah sizes are allowed yeah bait and size i guess oh wow that's a lot of
limitation but uh honestly like uh i had a few clients who bought reconstruction
(32:14):
and uh when i asked them to oh yeah send me the documents and and with the APS,
the APS is like 300 pages long.
I'm like, oh my God, what am I reading? Just tell me what's the purchase price
so that I can get you a loan for you.
I see that. So with experience, because I read so many of them,
I know exactly where to look, so I can read them much faster.
(32:37):
So it's important you ask the lawyer to do it because we know what to look for.
A lot of the language is just standard language and the moment we just see the
paragraph, we know what it says.
And we can also read the bylaws and all those and the status certificate to
understand better what's going on.
It's important to know because you can be blindsided. I bought a condo and I
(33:01):
wanted to Airbnb it and it got booked so fast.
And I had no idea it was not allowed. It was uncirculated. It got booked so
fast, like for the full month. And I was loving it.
And then they sent me a letter that you're Airbnb and you're not allowed it.
So I had to cancel all these listings and it just turned into a nightmare.
(33:26):
But if it was allowed, it would have been a great business for us.
Yeah, I think in whole Toronto, downtown, I think there are about 10 to 12 condos which allow Airbnb.
That's it. Out of all these condos, 10 and 12.
I don't know why i don't know why there's
restrictions because i haven't seen
(33:48):
any problems coming from people airbnb yeah
you know why because of a housing crisis they
think that if they stop doing airbnbs there
they think that we'll give chance to tenants a
long-term tenant to come and occupy it but i don't
think uh stopping short-term rentals is the
(34:08):
solution for the housing crisis for some reason no
it is building more yeah building more properties
not stopping airbnbs yeah yeah i
actually got i i got like in a couple of
clients or in a couple of scenarios again they bought a pre-con and they told
me oh this is the purchase place and when i ran numbers like during like very
(34:31):
preliminary stages just like rishma like uh can you see like like if you're
qualifying for this amount based on our income, I'm like, yeah,
good to go. Like send me the documents.
And once they send me the documents and I open the APS,
And again, as you said, we know what to look for. After seeing all the charges,
I'm like, that's not the number.
(34:53):
It's actually 60 grand more than what the purchase price is.
After all, you added parking, you added locker, and you added kitchen cabinets,
stuff like that. And now your purchase price is this much.
And they're like, yeah, they kind of were like, oh, wow, really?
That's a lot of money for some people. they're they're
(35:15):
seeing this because the lawyer is closing it and let's
say a couple of weeks before we see but
they will notify us like a month in advance at most of the
closing date it's hard for people to come up with 60
grand in a month they start borrowing from
family and friends but it's not a good position to be so it's
good to know in advance or say you know what this condo is
(35:37):
not for me because i'm not i don't have the kind
of cushion or those kind of reserves financial national
reserves you can get another condo where the terms
are different or better for you so i've
never bought a pre-con but when someone
is buying a pre-con the whole terms and condition and the agreement is solid
(35:58):
from day one when they got into agreement or they develop during the closing
i feel like they develop over time now that agreement is the four corners of
your agreement with the builder.
Now, from time to time, they may send you amendments to the agreement or letters.
(36:18):
I had a case when the builder was struggling to finish the construction.
So they were going around practically begging people, we're going to send you
this amendment to change the deposit structure.
Please put more money. You will help all of us.
And I told the client, you don't have to sign it. The agreement supersedes.
That was a deposit structure.
(36:39):
It is honestly the builder's problem that they can't finish the construction.
And it doesn't create a lot of confidence in the buyer that this builder can't
finish it and it's more money so maybe just get out of the agreement completely
because this is not a good builder and who knows maybe the property won't be constructed.
(37:00):
In in the best manner because they may
cut corners right because if they don't have
enough cash now this was my this
was my understanding but the clients were scared like why
why do we have to put put in more money this was in the agreement and.
Yeah that's the only agreement sometimes they will try and trick you to
sign amendments don't sign them so what
(37:20):
if uh okay what if i bought a and
the builder sent an amendment saying that
the closing date is moved four months after
now and also you know
the layout is different now and what you saw in
the beginning it's it's probably like 800 square feet
with the windows or whatever now the layout is different probably with
(37:42):
the the same space this happens right so will the
buyer have a like can he walk
away from that agreement because because of all
the appointments which happened so you always
have to go back to the actual agreement right they
have the days that are in the agreement they have days
that are there's a tentative closing there's a
(38:04):
firm closing there's outside occupancy closing there
are notice deadlines now the first
tentative closing can be two years before the
outside occupancy closing which is
a day that you can terminate the agreement and so they give themselves usually
a lot of range a lot of time to close right and rarely they will go outside
(38:30):
those limits but if they're asking for an amendment then they're trying to make a new agreement.
If they're sending you a notice that the closing has been pushed because of
delays, you always check the deadline.
If it's within those timelines, then they have the right.
Again, those agreements are in
favor of the builder. They probably have reserved all of the rights there.
(38:52):
But if they're asking please sign this so we can close on this day,
then they don't have the right.
They're asking you to agree to something that will limit your rights.
Don't do it because you can get a compensation sanction from Tarion for delayed
occupancy, you can get out of the agreement if it was a bad deal.
And with respect to your other question, I think you asked about what if the layout is different.
(39:14):
And I had a case exactly like that when it was a condominium in Muskoka,
like a cottages type of condominium.
And it turned out that there was a big window missing that was key.
They would overlook the deck of this property, and they would see the foliage
(39:36):
and the beautiful scenery, and it was just wall.
The client was like, this is not nice at all. Like, where's my window? This was key.
And they had reserved the right in the agreement to change the layout.
But the builder sort of understood because they would have an ongoing relationship.
(39:58):
Relationship this was a vacation home and they had some sort of create some
sort of club for this property and the owners would have to be members so they
agreed to offer some type of price reduction for the change but apparently could
not build the window there was some type of risk,
yeah well it all depends on the agreement they would give the right in the agreement
(40:21):
that the final construction will be different from the plans and they don't
say how different so So you may want to go back and say, well, can I put in here?
It can be different as long as this thing is there. It's very important, right?
Like I need big windows, right? So you can negotiate this agreement up to a point.
(40:44):
And if the builder doesn't agree, then it's up to you what you want to do.
But if you have it in there, you can really save yourself a lot of money on
closing. that you can either get out or request a price reduction.
So I recently talked with a client. He has the exact same issue that the layout
(41:05):
is completely different.
And he basically said that I want to get out.
And then sometimes these agreements, like builders pay a lot to get these agreements
written from very solid lawyers.
And the language is very ambiguous. u.s the buyer
(41:26):
might not have a chance to get out of that
even get out of the agreement even if the layout is
a little different they have to negotiate right yeah
it's very annoying when you read them you're like oh my god they
really did allow themselves so much room
to change things around but still
as a lawyer i will try and like line ways to interpret the language by like
(41:50):
tying it to different paragraphs in the agreement and representations made by
the builder and the intention of the parties to come to a different meaning, right?
That for these clients, this window is based on all of this other stuff.
This was the understanding. This window was real important.
(42:10):
So they agreed. They did negotiate it down, but they negotiated down quite a bit.
By the language alone, It was it they could they could do that.
So it was like I'll try but it seems like the others are saying that they can
do that and we'll just gonna do our best in the end of the day you try and try
(42:32):
because builders want to sell they don't want to have unsold units they don't
want to go back and sell to other parties and.
So you can negotiate quite a bit at that stage, but again, have reasonable expectation.
I have a client now who wants to lower the price by $300,000.
I'm like, this...
(42:55):
I don't know. It's just this builder would have lost his mind to agree to this
price reduction because they can sue you and it's okay.
It's always way around negotiating, negotiating
maybe like uh getting out of the contract might be
not your option but you can always like negotiate
and uh obviously give reach out
(43:18):
to anisa and if someone wants to reach out to you and it's like how how can
they do that if they need to reach out to me uh i will send you the details
so you can write them on the website on on the link of this podcast or the reel
that you you are sharing our video.
But if they go to alflp.ca, they will find me there and there is a contact form they can just submit.
(43:43):
Or they can just download the Aura app on their phones.
Google, either Google Play or App Store, A-R-R-A, or actually we have,
sorry, we have renamed it to ALF app.
It used to be the Aura app. I think it still might come up, but it's the ALF
app. and you can just reach out to us through the app.
(44:06):
Or to your own app on your own name.
Yeah, I'll put those details in the show notes if someone wants to reach out.
They can definitely like go there.
And thank you so much for coming on the podcast, Anissa. It's very nice to chat with you.
It was wonderful chatting with you and I look forward to seeing you at another event in person.
(44:28):
I know we hit it off right away. I know.
I'm a bit mad. Yeah. Hopefully, I will see you again soon. Yeah,
we'll definitely run into each other at another event.
Okay. Yes. Thank you for tuning into another episode of Real Estate with Reshma in Canada.
If you are looking to purchase a home and wondering what you are qualifying
(44:49):
for, you have a mortgage renewal coming up and you're looking for a second opinion.
Maybe you are planning to do a refinance, to pull out equity,
to buy another investment property.
If you want to finance your flip projects, we would love to help you fund.
Experience our complimentary budget planning and tailored solutions.
Until next time, keep learning, keep growing.
Welcome to Real Estate with Reshma in Canada, with your host,
Reshma Shaikh, your mortgage agent, with a mission to help you retire with at
least $100,000 of passive income.
Each episode features candid conversations with industry experts and real estate
investors, revealing the financial strategies that have set them apart and how
they are achieving their retirement goals. Let's dive into today's episode.
(00:23):
Hello, Anissa. Welcome to my podcast. How are you doing today?
Hi, Reshma. It's so great to see you. Thank you so much. How are you?
I'm doing great. It's great to see you as well. Would you mind introducing yourself to our listeners?
Sure. I'm Anissa Aram. I am a lawyer practicing in Ontario.
(00:45):
I also founded a law firm in 2017 and I've been running it ever since.
The name is ALAP. LLP. I currently also have a law partner and other lawyers and law clerks with me.
Gotcha. Is this your own firm? You started with your partner or someone?
I started on my own. I had this idea since law school.
(01:09):
Apparently, I kept telling my friends, I need to start my own law firm.
I don't even remember. They told me because I was so talking a lot about that
and eventually I decided to just go for it and here I am I've been doing it for six years now.
Wow that's amazing how is that experience like because it's also a business
(01:29):
right when you start your own business it's completely different than working
with another firm like as an associate I guess.
It is because if you work for someone you only You only have to worry about
doing a good job and going to work at a certain time and beginning a certain
time and meeting the expectations that they set for you.
(01:51):
For lawyers, it means usually being good in law, just having a good grasp of the legal arguments.
Writing properly communicating with clients properly and
just advancing in the legal field when you
are a business owner you also have to
learn how to bring in clients
(02:12):
especially when you're fresh out of law school as i was why
is someone going to go to you you have no experience right
so you have to learn get experience
and also get clients and how to
differentiate yourself there are a lot of lawyers out there why will
someone come to you instead of the lawyers
10 kilometers away from here so it's it's
(02:35):
a completely different skill and no one teaches room there's no
course for it for a lot of people that have
made it and they tell you jesus you should do it
recover five and do this and
attend this coach and talk to this person read these books
everything is it's very individualized
yeah there's a lot of a lot of
(02:56):
uh again as you said like a lot of books a lot
of mentors a lot of knowledge but you have
to put it all together so no one single person can tell you how to do it because
you're going to have a very different journey from someone else yeah exactly
like it has to be super tailored like in businesses but so you graduated from
(03:17):
law school and you started your own firm?
Yes. Oh, wow. That's amazing.
And so how did you like make yourself standard?
Like I know you're a investor focused real estate lawyer, right?
And you also practice law in business and also divorces and what else?
(03:38):
Civil litigation, construction law, construction liens, dispute between shareholders,
dispute between partners,
We also do some wells, obviously have a team now that specialize in different
areas of law and the business lawyer and real estate lawyer in the firm.
(03:58):
Especially when it comes to real estate investors because the
client will come to me i close the house or close
the property and they like the service and
they're like well i have this business agreement that
i am making with this person we're buying this property together i
need a partnership agreement so i would do that or i'm
divorcing now yeah can you help
(04:19):
me through that but we're friendly so just do the separation agreement well
i was even really good at criminal of law but it's
different the theoretical aspect of an area
of law and actual practice of it and once
i started practicing real estate law i i loved it
it was it was fun it was fast and you see the results right away yeah i think
(04:43):
yeah yeah each file might take you like because you're really coming at the
end right like probably a couple of days of work and then when you're done with
the transaction, right?
Yeah, so you're coming right at the end. A lot of the work has already been done.
So all you need to do is make sure that the deal the parties are closing is
(05:04):
a deal they wanted to make.
So doing the due diligence that everything has been done in accordance with
their original agreement.
So did they actually want the leak in the basement? Did they accept it or not?
Did they understand who was selling the property? Did they understand all the
implications from the transaction?
Was the agreements with the agents, the broker, was that clear?
(05:29):
And obviously searching the titles and making sure that there's nothing there
that they will end up with like a work order or something that they don't want
to deal with after closing.
Yeah, so let's talk about divorces and real estate.
So hypothetically, if someone is going through a divorce,
(05:51):
Like I heard like it's 50-50, all the assets are divided 50-50 and matrimonial
home is divided 50-50. So is that true?
Well, that depends on the length
of the marriage and whether the asset was purchased after the marriage.
So if you go into a marriage where significant assets, you can deduct the value
(06:16):
of those assets at the beginning of the marriage.
And the growth of the acid is divided.
So the idea behind this is that even if a spouse stays home and does nothing
to contribute to your wealth, there's still a value there.
They're maybe raising kids and maybe taking care of you.
(06:38):
Maybe they're inspiring you or maybe they're putting aside their own dreams
and wishes so you can succeed.
So instead of going into the nitty gritty before as to what happens inside people's home,
whether who actually helped and with what the court just
said you know what just 50 50 from now on so
whatever assets are bought during the marriage
(07:00):
or the growth of the assets brought into
the marriage are divided 50 50 however if
you want to protect those assets a lot of my clients will do marriage agreement
or prenup as most people know them to deduct to not deduct but to to have those
assets excluded from any family or division of assets.
(07:26):
Okay, so one option is for me to avoid that situation is to have a prenup, okay?
And the other one is, let's say, okay, I'm married and I'm going through a divorce.
And I have few assets, like even before getting married, and I have a business.
So what happens to the business?
Like, do I do 50-50 of the business?
(07:49):
Yeah. So let's say you have a business like you do now.
And in the course of the marriage, the business grows and you become a multi-millionaire. Oh, yes.
Your spouse has a claim to half of your business. Okay.
Let's say it went from a hundred thousand business to a $10 million business.
(08:13):
Right? Right. So most of the value was during the course of the marriage,
so they have a claim to it.
Same of 50% or we can negotiate on that percentage?
Everything you can definitely negotiate. But if you go to court and you don't
agree on any negotiation, usually the court would just equalize everything 50-50.
(08:35):
Unless there is some unconscionability or some type of argument that will show
that it would not be fair. Gotcha. Which is rare.
If your partner understands and you won't cause any problems in the relationship,
you can put the business in the prenup saying that the business will remain
(08:58):
yours even if the relationship breaks down or the marriage fails.
And that way you can protect it. You have a peace of mind that you will not
take your business and then hurt it. because if you lose 50% of your business,
you can't really purchase your business.
You have to get a loan to pay them out and that encumbers your business.
(09:20):
What if I buy my assets under a corporation?
Everything you own in a corporation, as a shareholder, they are entitled to those shares.
Oh, still? There is a wear on it. You can't buy it. No.
(09:41):
They know what you own you
can't hide them they can access everything shares pensions
rsb's buildings personal property
you've seen sometimes couples will just divide
like teddy bears or dolls everything right
so that's a lot of couples
(10:02):
i've seen lately are becoming more reasonable they
want to spend a lot of money in family law so they
will negotiate things between them in
a in a fair manner and i always believe that
you can agree to a more fair agreement than the court would agree to because
you understand your situation better the court will just not want to deal with
(10:25):
a lot of details and we'll just say 50 50 and that may not be fair yeah And
it will take a lot of money to get there.
Exactly. It takes thousands of dollars to get all the way to a trial.
So I highly recommend coming to an agreement.
And you have to understand that an agreement means that you both will be equally
(10:46):
unhappy about the outcomes.
You have to give up something, but it's worth saving.
Thousands of dollars in legal fees. Gotcha. Yeah. Yeah, I actually have a friend
and he went through a divorce and he basically sorted it out outside the court
or like even the lawyers were not involved.
He's like, you're not getting my matrimonial home. I'll just buy you a new home.
(11:09):
Just go stay there and take the kids, feed them.
I'll pay the child support that like just no hassle. Right.
Then court could never come up with a solution.
Exactly. Exactly. This creative solution, the court will not come up with them.
So it's always better to negotiate.
That's so that's so true and also like a lot
(11:32):
of a lot of the time kids are involved right like we have to think
about them as well because ultimately in most
cases what we are owning is to
for inheritance or like give it to our
kids right ultimately for most
people yeah yeah that's that's what they
work hard for so they can leave something to the kids a
(11:52):
legacy of home and it's unfortunately sometimes you'll
see couples that will engage in bitter divorce proceedings
and they don't realize that it affects the
children very negatively and it's important
to just settle everything and focus on the children because your
relationship is done but your relationship with the children will continue
for life yeah so exactly yeah
(12:16):
let's let's move on from the divorces there
i've seen
like uh even if someone opened a corporation they
bring in a jv partner and they do like gplb structure
or maybe shareholder structure and they just uh buy properties that way right
and scale that portfolio that way yeah but so that that corporation then will
(12:40):
after a few years that corporation will have its own income right so once a
corporation you can provide two two,
three years of financial statements and the corporation has their own credit
worthiness so they can be approved on their own.
For example, my business can be a borrower on its own whether or not the bank
(13:04):
would give me money because the company has money, for example.
Or a person has a restaurant or a new company that was just incorporated. They have no assets.
They have no money so they're worth nothing for the
bank you can't dissolve a company yeah
it's more difficult to declare bankruptcy than
(13:25):
just dissolve a corporation and say well i can't pay
it so yeah they can
go after it right so they have they usually take
personal guarantees from shareholders because these
new companies you can create them and close them very easily exactly
so like uh all the
banks like when when i do self-employed individuals or
(13:47):
like for business owners like a mortgage they we
always ask for articles of incorporation and
t1 generals or and also like we
need two years of statements business statements not two
years we need later six months of business statements but
we need two years of returns yeah exactly yeah
(14:09):
it's all about trust yeah
exactly and yeah they say the bank will only
give you money if you don't need it but if you really need it
you're not getting it yeah so i
was i was working for clients that had a lot of closings
and they're buying a man i'm like how like they
seem to have have unlimited funds like how is this possible and
(14:33):
then i would see that they would close on one property and then
refinance it or or
maybe you can refinance right away because you got
a mortgage you closed it but there would be like some type.
Of project like they would be constructing that so
they would get a construction loan so there's extra money or they.
Would have previous properties they would refinance usually through
(14:54):
a private loan get some money and then take that money and put it into another
property buy that property and then close it with a bank and then get a private
mortgage and use it to buy another property and it was just this leveraging of,
and at that time where now it's not the best time for real estate but at that
(15:17):
time real estate was just like within months property was growing in value so
you can pull money out right away.
So this was like so interesting for me and not a lot of people outside of the
real estate world understands how to leverage this capital to get cash out of
it and purchase more capital.
(15:38):
And then more and more and it's just it looks to
outsiders if you're so incredibly wealthy but you're
just borrowing money from these
properties and putting it into other property and you
just have all this debt but you also start building some assets
because there is also some leftovers so you
obviously will start with some type of cash from
(15:59):
your own and then it keeps growing that way and i
realized the power of borrowing money it's
hot that's how you create wealth by borrowing and
i grew up with parents who thought borrowing is bad
and they didn't want to own or owe anybody
any money and you create this idea that
debt is bad but there's actually good debt and it's
(16:22):
a debt that you invest so if you borrow it
let's say a five percent but you loan it
out 12 you're making making money that's good right
so real estate at certain times
grows really fast so if you're bored and
usually if though the times are those are
good times and the bank will lend you money lower interest rate so you get something
(16:46):
at three percent four percent five percent but real estate grows at 12 then
it's a no-brainer put it into real estate right exactly until until real estate started dropping.
But in the long run, I think prices always go up and appreciating value.
Real estate appreciates.
So as long as you're able to weather those short-term ups and downs, you should be fine.
(17:11):
So at that time, when I was starting
my own firm, I had invested in pre-construction about two years ago.
And around that time, right before well it
wasn't the same time i invested when i
started the firm but about two years later before covid
(17:33):
i think right before covid the property was finished
construction it was ready to move in and i closed it but the property had increased
by about 200 000 or 300 000 so i was able to close i had already put in a lot
of the money because you pay them through Through the years.
(17:54):
Right. So I only needed a small down payment to close. I took...
A bigger mortgage based on the i took a
private loan based on the current value instead of the
purchase value and i use that money yeah
because let's say it was let's use
small numbers let's say it was purchased at 300 000 it's
(18:17):
in toronto so there was no way it was 300 000 but by the
time i closed it was worth 500 so you have
already made 200 000 right so you
can get that money out and i use it to buy another property
yeah so we have the i have a
same product as well i think a couple of lenders uh
in this space play with that particular product
(18:39):
especially with that reconstructions and so
again with your numbers if you bought it with 300 if
that's the purchase price and if it is appraised
uh and uh over the over the next two
years it's appraised for 500 hundred thousand dollars and
as long as we get that appraisal report for that
500 i can get you 80 percent loan
(19:01):
to value for that 500 500k and it's not private it's not even private lending
it's private lender it's a b lender and yeah the premium or the interest rate
is like 0.5 or like one percent higher than a lenders so it's a really like
fair product i feel like and also So yeah,
like that 80% loan-to-value cannot be like more than purchase price.
(19:25):
And you can potentially get refunded all your deposits and you can just resect that money, right?
Yeah, yeah, it was. And I was fairly new to that. So I was like, wow, this is amazing.
And more people should do it. And I saw a lot of people struggling and renting
for life and can't save money for the down payment.
But the pre-construction could really solve that because you're putting in money slowly.
(19:49):
And usually most people are able to to
make the deposit and by the time sometimes they
take four years to yeah this is pre-construction properties
so by that time the property would have gone out in value yeah
exactly and sometimes a pre-con makes
sense like in your case you just started
your business and again you don't have two years probably
(20:11):
to show your income like if you go to a bank they'll ask for two years of returns
right and in that in that scenario i think pre-con makes sense by the time you
close it like you have your financials in order and the bank is like oh okay
everything looks good like we'll give you a loan on that right.
Yeah yes yeah so that that's
(20:32):
how i started my journey however timing is also
important the real estate was really good at that time right now
i am seeing clients struggling to close on their pre-construction properties
they have actually gone down in value because they
were sold during the pandemic when properties
were really high and now and now
they're they're not are appraised yeah exactly
(20:55):
yeah that's the problem i'm seeing too so if
someone bought a property for let's say a million dollars
and right now it's not
appraising for that million dollars anymore
like it was appraising when you bought it like one or
two years ago right now the appraisals
are coming in anyway sometimes 100 grand 200
(21:16):
grand less like if you got your appraisal at
900 000 you have to come up with the rest
of the difference of $100,000 from your own pocket and
that is a problem that's why
a lot of people are walking away from
their pre-constructions and they're willing
to assign it even even by
(21:37):
losing their deposits but what's happening is
even though people are even though like all these
people are assigning with like by losing
their deposits deposits the end consumer is not
buying it because the resale the resale market
is like again very discounted like they're like
we'll just buy resale price we resale homes why do.
(21:59):
We have to buy like new construction that's one part.
And other other parties again even if you are losing the deposit whoever is.
Buying that assignment sales still have to come up with the difference of that
appraisal report right and they don't have that kind of cash and there's just
a lot of things right now going on in that pre-con and assignment.
(22:22):
Yeah. The reason I said it is because I don't want people to think that this is like.
Like the gold rush you know like you still have
to think about things thoroughly before you invest
especially you put in a lot of money when you're buying real estate obviously
understand the risks and take
some measured and educated risks when it comes to investing and obviously do
(22:47):
not put all your savings into real estate unless you really believe in it but
i don't recommend it it can be a great way to build wealth it's probably one
of the surest ways to build wealth.
But it does come with its own risks and you
need to you need to understand them and maybe talking to
professionals like you yeah it's very
(23:08):
important before you make the decision exactly and
obviously like a lot of people didn't see the
market we came into right like one part of
it is yeah appraisals are coming in low that's one
part and the other part of it is like they're not not qualifying because of
the you know interest rate hikes right now but uh
all i can suggest you is suggest someone
(23:30):
is uh like if you're buying a
pre-construction don't go into that with
a goal that okay i'm gonna assign it someday go into that uh with multiple exit
strategies right maybe you wanna you make sure that you can close on it right
someday when when the closing comes or maybe you want to move into the property
(23:51):
or maybe you want to keep it as a rental property or maybe you want to assign it.
Always have that multiple exit strategies even when you're buying pre-con.
Yeah, that's very important. Assignment sales aren't easy because a lot of builders
won't allow an assignment. They won't allow you to list.
(24:12):
Even if they allow the assignment, you have to find the buyer through your own
resources. So you have to understand that most likely you will have to close or even lose a deposit.
And then after that, you can do whatever you want.
Yeah, understanding what the exit strategies are and what time and how possible
(24:35):
they are for every particular project.
Yeah. When you bought your pre-construction, what kind of due diligence have
you done? What did you look into the project?
What steps did you take to buy that? To be honest, I was still in law school.
And I did
(24:55):
not do any due diligence I just
saw that it was in a great location that it was growing
it was very close to distillery district
so and I saw the plans
it looked great so I was like I will
I'll buy it I love it and a lot
of my friends not a lot but some of my
(25:17):
friends also purchase in the
in the property and at some point we leave
like in the same building so it was fun
because i lived there for a year but i
did not do any deals and now i will read every agreement for the client i'll
tell them everything but i'm surprised how when i bought for myself i just signed
(25:37):
in the dotted line did not look back it turned out that it was it was a good
investment But normally you should read because these agreements are made for the builder,
are very skewed in favor of the builder.
They may have clauses there that you don't want to take on.
You need to know that on closing of a pre-construction, there will be amounts
(26:00):
added on the final price that is not finalized.
Included in the price so for a resale you
know like price is 1.2 million you have paid the
deposit subject to any property tax
adjustment or if it's a condo condominium fees
you know what you will pay plus land transfer tax
yeah in pre-construction there will
(26:22):
be an hst rebate added on
top of it because you are giving it to the builder you're not getting
in so that's twenty four thousand dollars yeah if
well and then development fees i
think it's capped at ten thousand dollars like i
don't know depending on twenty four thousand the hst rebates so
you're not going to leave in the properties and investment property you're
(26:45):
not getting that from your builders which has
to be added on top of a purchase price then you
have terrian and you you have development charges and
you have all kinds of charges meter utilities
and all of these things that
are included in the agreement some of the amounts are
missing that they are added on the purchase price on on the closing on the amount
(27:09):
you're closing yeah and people look at the number they're like what that's not
what i calculated but when i tell them from the beginning and that this is what you'll end up paying.
Then they're prepared.
And some of them can actually negotiate a development charge.
It's becoming more common now to cap them with a builder at zero, which was...
(27:33):
Unheard of before yeah before it used to be a
couple of 10,000 now the builders are negotiating more
because the market isn't great and i've
seen with few builders they start charging occupancy fees
and like that's like some i've
seen a builder was one of my friend uh bought.
(27:53):
A pre-con and she started getting charged for six thousand
dollars per month and for i don't know
how long we don't have closing date yet and she's
still paying that occupancy fee we just
don't know for how long so yeah so
this bothers people a lot my clients
some of them that don't understand they'll they'll
(28:15):
be like well i don't own the property and i don't want
to move in why do i have to pay this amount
to the builder they're not ready to transfer
title to me why are they forcing me to
occupy the the property and pay them
this occupancy it's because it's part of the agreement that
you sign and once you know that from the beginning then
(28:37):
you're prepared for it once the property is
ready for occupancy your unit every
unit gets completed at different stages of
the project and different times it's going to be a few months before
let's say units one to ten are finished and
then 20 to 25 so at that
(28:58):
time the unit is finished but you'll see that outside the
landscaping isn't finished and then things some things
aren't done yet and it's like you're going into the property and
so you have finished lobby but your
unit is done you have to take possession of
the property and in order
for you to get the hst rebate either you or a.
(29:20):
Family member needs to occupy if you rent it out you're
going to lose the hst rebate i mean you
can claim it later from the cra which we can do that
for the client but the builder will not give it to you in closing and
you have to come up with it on closing yeah and and the builder will pay will
force you to pay interest rate and on the unpaid amount of owing on closing
(29:44):
prorated property taxes and utilities and clients ask They're like,
why are we paying the builder interest if I can't pay you?
So I can't pay you the closing amount because you can't give me title,
but you want interest on this amount?
It's crazy if you think about it. Yeah. And there is a way out of it,
(30:05):
and it only happens when you sign the agreement.
You can tell, you can elect when you sign the agreement with the builder that
you will pay the closing funds in trust with the builders and to the builder's
lawyer on occupancy closing.
That way you don't have to pay any interest rate. Okay.
(30:27):
However, this is only achievable by people who have cash and money because you're
not able to take a mortgage on this property.
So you have to come up with a balance due in closing.
And also I've seen like, especially in like townhouses or like townhouses,
like you, if you want to rent out, you have to use their property management.
(30:49):
And also if you want to do Airbnb, like there are restrictions now.
The management i'm like oh wow like you
have to check all this like why do we have to go property management
these are bylaws yeah you're you're supposed
to read them people don't understand how limited
you are once you live in a condo you are buying
(31:11):
the common elements you are sharing the
common elements and you're sharing this condominium corporation
it's like shares in this corporation with the
other owners so there are rules that you have to abide abide and they're
in the bylaws and in different documents different condo
documents and you have to abide by them and if you if pets
aren't allowed what are you
(31:33):
gonna do right and you have a big dog that you've had
in the family for 10 years and you suddenly can't bring
your dog because there's a bylaw and you need
to know that that's not the property for you or if you're in
an airbnb which can be very lucrative but the
condo doesn't allow you need to know yeah i didn't
know they won't tallow pits in that's why uh in
(31:53):
my condos i have never seen a huge dog
there were always like tiny tiny dogs and the cats
it's probably in the bylaws like only this
oh yeah sizes are allowed yeah bait and size i guess oh wow that's a lot of
limitation but uh honestly like uh i had a few clients who bought reconstruction
(32:14):
and uh when i asked them to oh yeah send me the documents and and with the APS,
the APS is like 300 pages long.
I'm like, oh my God, what am I reading? Just tell me what's the purchase price
so that I can get you a loan for you.
I see that. So with experience, because I read so many of them,
I know exactly where to look, so I can read them much faster.
(32:37):
So it's important you ask the lawyer to do it because we know what to look for.
A lot of the language is just standard language and the moment we just see the
paragraph, we know what it says.
And we can also read the bylaws and all those and the status certificate to
understand better what's going on.
It's important to know because you can be blindsided. I bought a condo and I
(33:01):
wanted to Airbnb it and it got booked so fast.
And I had no idea it was not allowed. It was uncirculated. It got booked so
fast, like for the full month. And I was loving it.
And then they sent me a letter that you're Airbnb and you're not allowed it.
So I had to cancel all these listings and it just turned into a nightmare.
(33:26):
But if it was allowed, it would have been a great business for us.
Yeah, I think in whole Toronto, downtown, I think there are about 10 to 12 condos which allow Airbnb.
That's it. Out of all these condos, 10 and 12.
I don't know why i don't know why there's
restrictions because i haven't seen
(33:48):
any problems coming from people airbnb yeah
you know why because of a housing crisis they
think that if they stop doing airbnbs there
they think that we'll give chance to tenants a
long-term tenant to come and occupy it but i don't
think uh stopping short-term rentals is the
(34:08):
solution for the housing crisis for some reason no
it is building more yeah building more properties
not stopping airbnbs yeah yeah i
actually got i i got like in a couple of
clients or in a couple of scenarios again they bought a pre-con and they told
me oh this is the purchase place and when i ran numbers like during like very
(34:31):
preliminary stages just like rishma like uh can you see like like if you're
qualifying for this amount based on our income, I'm like, yeah,
good to go. Like send me the documents.
And once they send me the documents and I open the APS,
And again, as you said, we know what to look for. After seeing all the charges,
I'm like, that's not the number.
(34:53):
It's actually 60 grand more than what the purchase price is.
After all, you added parking, you added locker, and you added kitchen cabinets,
stuff like that. And now your purchase price is this much.
And they're like, yeah, they kind of were like, oh, wow, really?
That's a lot of money for some people. they're they're
(35:15):
seeing this because the lawyer is closing it and let's
say a couple of weeks before we see but
they will notify us like a month in advance at most of the
closing date it's hard for people to come up with 60
grand in a month they start borrowing from
family and friends but it's not a good position to be so it's
good to know in advance or say you know what this condo is
(35:37):
not for me because i'm not i don't have the kind
of cushion or those kind of reserves financial national
reserves you can get another condo where the terms
are different or better for you so i've
never bought a pre-con but when someone
is buying a pre-con the whole terms and condition and the agreement is solid
(35:58):
from day one when they got into agreement or they develop during the closing
i feel like they develop over time now that agreement is the four corners of
your agreement with the builder.
Now, from time to time, they may send you amendments to the agreement or letters.
(36:18):
I had a case when the builder was struggling to finish the construction.
So they were going around practically begging people, we're going to send you
this amendment to change the deposit structure.
Please put more money. You will help all of us.
And I told the client, you don't have to sign it. The agreement supersedes.
That was a deposit structure.
(36:39):
It is honestly the builder's problem that they can't finish the construction.
And it doesn't create a lot of confidence in the buyer that this builder can't
finish it and it's more money so maybe just get out of the agreement completely
because this is not a good builder and who knows maybe the property won't be constructed.
(37:00):
In in the best manner because they may
cut corners right because if they don't have
enough cash now this was my this
was my understanding but the clients were scared like why
why do we have to put put in more money this was in the agreement and.
Yeah that's the only agreement sometimes they will try and trick you to
sign amendments don't sign them so what
(37:20):
if uh okay what if i bought a and
the builder sent an amendment saying that
the closing date is moved four months after
now and also you know
the layout is different now and what you saw in
the beginning it's it's probably like 800 square feet
with the windows or whatever now the layout is different probably with
(37:42):
the the same space this happens right so will the
buyer have a like can he walk
away from that agreement because because of all
the appointments which happened so you always
have to go back to the actual agreement right they
have the days that are in the agreement they have days
that are there's a tentative closing there's a
(38:04):
firm closing there's outside occupancy closing there
are notice deadlines now the first
tentative closing can be two years before the
outside occupancy closing which is
a day that you can terminate the agreement and so they give themselves usually
a lot of range a lot of time to close right and rarely they will go outside
(38:30):
those limits but if they're asking for an amendment then they're trying to make a new agreement.
If they're sending you a notice that the closing has been pushed because of
delays, you always check the deadline.
If it's within those timelines, then they have the right.
Again, those agreements are in
favor of the builder. They probably have reserved all of the rights there.
(38:52):
But if they're asking please sign this so we can close on this day,
then they don't have the right.
They're asking you to agree to something that will limit your rights.
Don't do it because you can get a compensation sanction from Tarion for delayed
occupancy, you can get out of the agreement if it was a bad deal.
And with respect to your other question, I think you asked about what if the layout is different.
(39:14):
And I had a case exactly like that when it was a condominium in Muskoka,
like a cottages type of condominium.
And it turned out that there was a big window missing that was key.
They would overlook the deck of this property, and they would see the foliage
(39:36):
and the beautiful scenery, and it was just wall.
The client was like, this is not nice at all. Like, where's my window? This was key.
And they had reserved the right in the agreement to change the layout.
But the builder sort of understood because they would have an ongoing relationship.
(39:58):
Relationship this was a vacation home and they had some sort of create some
sort of club for this property and the owners would have to be members so they
agreed to offer some type of price reduction for the change but apparently could
not build the window there was some type of risk,
yeah well it all depends on the agreement they would give the right in the agreement
(40:21):
that the final construction will be different from the plans and they don't
say how different so So you may want to go back and say, well, can I put in here?
It can be different as long as this thing is there. It's very important, right?
Like I need big windows, right? So you can negotiate this agreement up to a point.
(40:44):
And if the builder doesn't agree, then it's up to you what you want to do.
But if you have it in there, you can really save yourself a lot of money on
closing. that you can either get out or request a price reduction.
So I recently talked with a client. He has the exact same issue that the layout
(41:05):
is completely different.
And he basically said that I want to get out.
And then sometimes these agreements, like builders pay a lot to get these agreements
written from very solid lawyers.
And the language is very ambiguous. u.s the buyer
(41:26):
might not have a chance to get out of that
even get out of the agreement even if the layout is
a little different they have to negotiate right yeah
it's very annoying when you read them you're like oh my god they
really did allow themselves so much room
to change things around but still
as a lawyer i will try and like line ways to interpret the language by like
(41:50):
tying it to different paragraphs in the agreement and representations made by
the builder and the intention of the parties to come to a different meaning, right?
That for these clients, this window is based on all of this other stuff.
This was the understanding. This window was real important.
(42:10):
So they agreed. They did negotiate it down, but they negotiated down quite a bit.
By the language alone, It was it they could they could do that.
So it was like I'll try but it seems like the others are saying that they can
do that and we'll just gonna do our best in the end of the day you try and try
(42:32):
because builders want to sell they don't want to have unsold units they don't
want to go back and sell to other parties and.
So you can negotiate quite a bit at that stage, but again, have reasonable expectation.
I have a client now who wants to lower the price by $300,000.
I'm like, this...
(42:55):
I don't know. It's just this builder would have lost his mind to agree to this
price reduction because they can sue you and it's okay.
It's always way around negotiating, negotiating
maybe like uh getting out of the contract might be
not your option but you can always like negotiate
and uh obviously give reach out
(43:18):
to anisa and if someone wants to reach out to you and it's like how how can
they do that if they need to reach out to me uh i will send you the details
so you can write them on the website on on the link of this podcast or the reel
that you you are sharing our video.
But if they go to alflp.ca, they will find me there and there is a contact form they can just submit.
(43:43):
Or they can just download the Aura app on their phones.
Google, either Google Play or App Store, A-R-R-A, or actually we have,
sorry, we have renamed it to ALF app.
It used to be the Aura app. I think it still might come up, but it's the ALF
app. and you can just reach out to us through the app.
(44:06):
Or to your own app on your own name.
Yeah, I'll put those details in the show notes if someone wants to reach out.
They can definitely like go there.
And thank you so much for coming on the podcast, Anissa. It's very nice to chat with you.
It was wonderful chatting with you and I look forward to seeing you at another event in person.
(44:28):
I know we hit it off right away. I know.
I'm a bit mad. Yeah. Hopefully, I will see you again soon. Yeah,
we'll definitely run into each other at another event.
Okay. Yes. Thank you for tuning into another episode of Real Estate with Reshma in Canada.
If you are looking to purchase a home and wondering what you are qualifying
(44:49):
for, you have a mortgage renewal coming up and you're looking for a second opinion.
Maybe you are planning to do a refinance, to pull out equity,
to buy another investment property.
If you want to finance your flip projects, we would love to help you fund.
Experience our complimentary budget planning and tailored solutions.
Until next time, keep learning, keep growing.
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