First Investment Property advice-Canada

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First Investment Property advice-Canada

Peter Davies
Vancouver, BC · Member since 2017 · 21 posts · 1 vote

hi forum members!

I would like a chance at gaining something extra for retirement which is in the next 10-15 years and had my eyes on the rental investment market. There are a few properties which have ok- not bad cashflow (up to $300 per month -8-12% CAP Rate) and I have been pre-approved for up to 220k. A few places like in windsor Ontario fall into that range. I don't have a HELOC option (as when I renegotiated my new 5 year mortgage term 18 months ago they instead gave me a basic renewal but with a really low variable 2.11 on my existing home. I was thinking of using a line of credit for the down payment of approx 35-40k as I don't have much available in savings towards a down payment and didn't want to break open my rrps's. My plan was looking at paying back up to 5k per year on the down payment (LOC). Of course I would need some contingency, and want to know if this still could be a good approach and anything else I need to factor in and to not over extended myself?

Appreciate Opinions and Thoughts

thanks

Peter from Vancouver, B.C.

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Peter Crisp
Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes
9y

I'm in Surrey, BC (also Peter) and I'd be happy to meet you to swap notes. I just sold a property in Windsor (a fourplex). I could have held it but I wanted to balance debt and cash out. Windsor is and always has been cyclical and while I wouldn't say it's over-priced, it's fully valued, the pickings are slim for good properties, and I see some downside risk as the auto sector cools off. I won't say that I'm a Windsor specialist but I know that market pretty well so if you want in I can make some suggestions. There are other markets in Ontario worth looking at also - I scan them regularly.

I think good property owners can do well in any market, but the tight rent controls which probably don't even cover inflation are a problem in Ontario and professional tenants in Ontario can make life miserable for Landlords. I'm looking at properties in Ontario, but I have more invested in New Brunswick for a few reasons and the lack of rent control is one of them (NB has other problems, but not this). As for BC, it's very hard to find much that makes sense except very far out. It is do-able but it's mainly in areas such as investing in new projects or pre-sales. In fact, the pickings across Canada are pretty slim at prices that make much sense to me. You can find them, but there are a lot of shoppers out there. A lot of investors are going to the States, but I don't know the markets well enough, I can't add value, and currency risk exists so I've stayed clear.

As for financing, I can talk off-line and share my experiences if that's helpful. You can do a lot with HELOCs but it's way easier to spend the money than pay down the loans, so you have to be careful.

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  • Matt Geerts
    Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
    9y

    Peter, a bank will not approve the use of an unsecured line of credit (ULOC) unless you take out those funds and leave them in your bank account for a couple months to show"history". Otherwise it is borrowed money and that's not allowed.

    You could always put your RRSP money to work in the real estate sector without taking it out. Lend to active investors at a good (for you) rate and earn the money tax-free in your retirement account (PM me if you want more details on how to do this).

    Are you planning to manage a rental in Ontario from BC? First thing first, you need to read the Ontario Residential Tenancies Act (RTA) and understand all of the ways that the government of Ontario has designed for tenants to totally destroy your retirement funds, then come up with a game plan to mitigate all of those risks and be prepared to act fast and heavy-handed in case anybody stops paying or messes up your property. I would point you anywhere but Ontario if you want to do remote rentals - again, I'd suggest that you just do passive investment (private lending) if this is the case.

    1Reply
  • Luc Boiron
    Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
    9y

    @Peter Davies I agree with @Matt Geerts about the long distance investing.

    If you are in Ontario, nothing wrong with investing here. But if you're doing it from BC, you're better off finding a small town in BC with more affordable home prices to invest in.

    0Reply
  • Peter Crisp
    Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes
    9y

    I'm in Surrey, BC (also Peter) and I'd be happy to meet you to swap notes. I just sold a property in Windsor (a fourplex). I could have held it but I wanted to balance debt and cash out. Windsor is and always has been cyclical and while I wouldn't say it's over-priced, it's fully valued, the pickings are slim for good properties, and I see some downside risk as the auto sector cools off. I won't say that I'm a Windsor specialist but I know that market pretty well so if you want in I can make some suggestions. There are other markets in Ontario worth looking at also - I scan them regularly.

    I think good property owners can do well in any market, but the tight rent controls which probably don't even cover inflation are a problem in Ontario and professional tenants in Ontario can make life miserable for Landlords. I'm looking at properties in Ontario, but I have more invested in New Brunswick for a few reasons and the lack of rent control is one of them (NB has other problems, but not this). As for BC, it's very hard to find much that makes sense except very far out. It is do-able but it's mainly in areas such as investing in new projects or pre-sales. In fact, the pickings across Canada are pretty slim at prices that make much sense to me. You can find them, but there are a lot of shoppers out there. A lot of investors are going to the States, but I don't know the markets well enough, I can't add value, and currency risk exists so I've stayed clear.

    As for financing, I can talk off-line and share my experiences if that's helpful. You can do a lot with HELOCs but it's way easier to spend the money than pay down the loans, so you have to be careful.

    3Reply
  • Peter Davies
    OP
    Vancouver, BC · Member since 2017 · 21 posts · 1 vote
    9y

    Matt, thanks for your reply.  I now understand the ULOC, and recognize the options you mentioned.  I will PM you on the 2nd point, as it seems an interesting option.

    I grew up in Ontario, but moved out here 20 years ago, and sure a lot has changed there since.  I was planning on using a Property Management Company to manage the place, but I hear what you are saying about Ontario RTA, and being quite tenant friendly. I can see what you mean with all the potential negative consequences and issues that can arise.

    0Reply
  • Peter Davies
    OP
    Vancouver, BC · Member since 2017 · 21 posts · 1 vote
    9y
    Originally posted by @Luc Boiron:

    @Peter Davies I agree with @Matt Geerts about the long distance investing.

    If you are in Ontario, nothing wrong with investing here. But if you're doing it from BC, you're better off finding a small town in BC with more affordable home prices to invest in.

     Thanks Luc for your input, not a lot in B.C  at least under $400k that can cashflow outside of the GVA, but I am expanding my search to include Vancouver Island and Eastern B.C.

    0Reply
  • Account Closed
    Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
    9y

    Hello @Peter Davies. I agree with some of the posts in this thread in that Ontario is exceptionally pro-tenant. That being said, I've owned several properties in Ontario over the last decade and they have all performed well. Finding a great PM is key; you need someone that understands the game and how to manage tenants that know how to work the system.

    I've recently shifted my focus to NB, which is more landlord friendly as pointed out by @Peter Crisp. Once you make the leap to owning property outside your market, it really doesn't make a difference if you buy 4h away or on the other side of the continent. Many investors only want to look close to home, and it's definitely a challenge to cash flow if you are looking at major markets in BC.

    Feel free to connect... sound like we could have a three-way chat with local BC folks looking to invest outside of BC.

    0Reply
  • Peter Davies
    OP
    Vancouver, BC · Member since 2017 · 21 posts · 1 vote
    9y
    Originally posted by @Peter Crisp:

    I'm in Surrey, BC (also Peter) and I'd be happy to meet you to swap notes. I just sold a property in Windsor (a fourplex). I could have held it but I wanted to balance debt and cash out. Windsor is and always has been cyclical and while I wouldn't say it's over-priced, it's fully valued, the pickings are slim for good properties, and I see some downside risk as the auto sector cools off. I won't say that I'm a Windsor specialist but I know that market pretty well so if you want in I can make some suggestions. There are other markets in Ontario worth looking at also - I scan them regularly.

    I think good property owners can do well in any market, but the tight rent controls which probably don't even cover inflation are a problem in Ontario and professional tenants in Ontario can make life miserable for Landlords. I'm looking at properties in Ontario, but I have more invested in New Brunswick for a few reasons and the lack of rent control is one of them (NB has other problems, but not this). As for BC, it's very hard to find much that makes sense except very far out. It is do-able but it's mainly in areas such as investing in new projects or pre-sales. In fact, the pickings across Canada are pretty slim at prices that make much sense to me. You can find them, but there are a lot of shoppers out there. A lot of investors are going to the States, but I don't know the markets well enough, I can't add value, and currency risk exists so I've stayed clear.

    As for financing, I can talk off-line and share my experiences if that's helpful. You can do a lot with HELOCs but it's way easier to spend the money than pay down the loans, so you have to be careful.

    Thanks Peter sharing your experiences. I had my eye on Windsor as well, but over the last several weeks had now been looking over like yourself to New Brunswick as a different option.  I'll PM you and see if we can meet up to share notes.

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    9y

    @Peter Davies

    Move along ... there's nothing to see here ;-)

    2Reply
  • Peter Davies
    OP
    Vancouver, BC · Member since 2017 · 21 posts · 1 vote
    9y

    @Chris Baxter, good to hear Chris you are looking out of B.C. too.  10-15 years ago much different numbers, I still have a clipping of a classifieds my Dad had and couldn't believe the prices then!  Sure, good idea for a three way see if I can set that up in the week to come.

    0Reply
  • Peter Crisp
    Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes
    9y

    IMHO there are no easy markets right now anywhere - NB ON or anywhere in Canada. For me, it's all about the deal and what value I can add. At the prices people are willing to pay for 'turn-key', I'd just buy a REIT and sleep better in a lot of cases. But every market has it's challenges. Windsor in 2008 was easy pickings for properties, but it came with 50% vacancy rates and low rents. I can still find way more deals than the money or time I have to invest in but it's just plain hard work to find them. I'm also interested in meeting sometime - in Coquitlam, Surrey or Vancouver. Perhaps in June past June 17th?

    0Reply
  • Jesse Fragale
    Investor · Toronto, Ontario · Member since 2016 · 50 posts · 15 votes
    9y

    In Toronto (and the GTA&H generally),  I have been the patient observer the past few months.  The good deals are getting harder and harder to find; personally and @ my brokerage shop.

    0Reply
  • Peter Davies
    OP
    Vancouver, BC · Member since 2017 · 21 posts · 1 vote
    9y

    Hi Peter

    I'll be going away on holidays till 25th June.  How about I PM you when I'm back, perhaps one option is to meet after 6pm sometime in that week. 

    thanks/Peter

    0Reply
  • Jordan D.
    Toronto, Ontario · Member since 2017 · 5 posts · 2 votes
    9y

    Hello,

    Just like Peter D. i have been looking into Windsor as my first investment property since I am priced out of the GTA and seemed like a good option. From reading this thread I see NB come up a few times. What markets would one suggest I look into keeping in mind i need the price to be under 300k; and or what I should be aware of if I do end up going to Windsor.

    PS. this is my first post so excuse me if i missed an earlier post that covers this.

    0Reply
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