Real Estate Investor · Edmonton, Alberta · Member since 2016 · 35 posts · 9 votes
While I appreciate BP is a U.S based platform, I am always curious how many investors in Canada is lurking on this board, and lots of opportunities were missed. While our group focus mainly in Alberta, we would love to network with investors out in BC, ON, MB, SK, and the eastern region.
I just like a show of hands to see who's active in this forum, and would like to focus on a Canadian cities for investment?
It all really depends on what your investment criteria is. You can buy for cash flow; or you can buy for appreciation (either forced through rehab and mgt or market appreciation); or you can buy a property that is a hybrid between these two. Personally, we prefer to buy in locations that will return cash flow, but also has appreciation. (Our investing criteria is at least 10-12% Cash on Cash returns annually). We currently have 1300+ units investing with this criteria. The only way I can see buying in Calgary or similar markets, is if you feel appreciation is going to be very high.
"The Real Estate Guys" basically say...live where you want to live and invest where the deals make sense.
I used to live in Calgary and now in the bay area. I was looking at MFRs in Calgary the last few months because one of my family members was thinking of investing. The numbers just don't look good. Here is an example, great apartments in good location, 3 blocks from SAIT, average rent is about $900, based on 45% expense ratio, cap rate is only about 2.65%. I will need to bring rent to $1100 to get a 3.24% cap rate. How do you justify paying 2.7M for this? It has an assumable mortgage at 1.9%, but unless you get more rent upside, it is not worth it. I poke around on Kajiji, $900 is about right for the current market.
@Chris Chang, what kind of numbers are you seeing in your Edmonton C neighborhood in term of cap rate & GRM?
@Haseeb Awan, what kind of numbers you are seeing in your area vs your US investment? I remember you asked about the bay area few weeks ago.
It all really depends on what your investment criteria is. You can buy for cash flow; or you can buy for appreciation (either forced through rehab and mgt or market appreciation); or you can buy a property that is a hybrid between these two. Personally, we prefer to buy in locations that will return cash flow, but also has appreciation. (Our investing criteria is at least 10-12% Cash on Cash returns annually). We currently have 1300+ units investing with this criteria. The only way I can see buying in Calgary or similar markets, is if you feel appreciation is going to be very high.
"The Real Estate Guys" basically say...live where you want to live and invest where the deals make sense.
@David C. It's too early to say because these are recently acquired but I am looking at around 20-25% COC. I am always interested in bay Area because I lived there for my startup and have decent network to raise funds in the area.
Markets with low cap rates can still be profitable. Using your numbers (let's say the market cap rate is 3%), by increasing 200 rent per unit per month, you have increased NOI by 36,000 annually (i.e 200x15x12). That increase equates to a whopping $1,200,000 increase in value of the property (i.e. 36,000 / 3%). So how do you justify paying 2.7M for this property? By selling it for 3.9M in 2 or 3 years. I would be happy with that.
Yes it is expensive getting into markets with low cap rates, but it can be very profitable getting out. You get more bangs for your value-add bucks.
@Immanuel Sibero I understand what you are saying, the issue is that this building already being stabilized, and rent may not have room to grow in the near future. The assumable loan is 1.9%, what do you do when it adjusts and you can only get a 3% mortgage? How do you know if you can bump rent up another $200/units when you have climbing vacancy in the market?
Also, the current going cap rate for this market according to the Colliers report is 5 to 5.25%. How do you justify buying @ 3.24% as you are paying a premium already?
Maybe local investors from Calgary can give us more insight.
Agreed, with cap rate of 5 and stabilized there's not much upside.
I read through the thread you referred to, wow... great stuff! Didnt realize you're part of a group that's crushing it out on the west coast :-) Good to meet you.
I'm new in RE and am fascinated by it. I'm in Dallas, TX so it's a little different out here. But I love to learn from the likes of you and @minh le and the rest. If my journey brings me to the west coast, I'll be sure to give you a shout :-)
@Immanuel Sibero, I used to think Bay Area was expensive with our low cap rate, but we had a huge run up the last few years due to raising rent, a lot of investors benefited from what you have described. The cap rate is low in calgary, but the cost of borrowing is also lower in Canada from what I have seen so far. Imagine you can borrow @ 1.9% for your TX MFRs, you will be laughing all the way to the bank :)
I look at the vacancy rate in Calgary, it is touching the 2009 & 1993 level, if you own MFRs and can survive this down cycle, assuming interest rate will stay at this level or lower, you will come out a winner. I think that's the reason why MFR sellers are not motivated to drop prices.
On the other hand, what if interest rates go into a different direction? Can you raise rent fast enough to cover your debt servicing? Calgary already had a huge run in rent increase by historical standard and is flattening out. I would love to hear from other Calgary investors.
@David C. Hey sorry it took me a while to response. I reviewed the apartment you were looking at, and the one we have available, our's definitely is better performing that the one listed for sale. Cap rate is around 5.6%.
I wholeheartedly support what you were saying, if the landlord can survive this recession, they will all come out stronger. We are in fact selling a few properties, that's 100% cash flowing, I know the rental market is a bit crazy right now, as the renter are taking their time to look at properties. However, with the new lending rules in effect, a lot more renters will also be renting for a while until they build up their cash to jump into their first property.
I"m in BC but invest in Ontario and New Brunswick... Looking forward to "meeting" more Canadians on the boards. I've been listening to BP Podcasts for a few years and finely decided to kick the online tires.
Live & invest in Sarnia Ontario here!!! Pretty stable market where housing prices are consistent, but with very little room for big profits. There are more buyers than houses right now, so demand has kept the market higher than it truly should be....hence my wait on buying anything. Looking for the right purchase is taking a while, but hopefully soon! Looking to multiple family dwellings now! They are even fewer than single family homes, and there is a large company in town that seems to be buying them all up before they even hit the market! Am a new-ish REI (only 4 years since my first rental home), with a lot of desire to learn & buy more!
I just moved from Toronto to Cardiff, CA, but still have a couple Multi-families in Toronto. Was a crazy hot market to leave, but hopefully things will be rolling in CA before long!
I am in Oshawa Canada. I run a company that specilizes in creating legal accessory apartments in the local regions. We have also just got into flipping houses, with our first project currently underway in Port Hope. If anyone is in the Durham or Northumberland area, I would love to network.
I'm in Toronto but have been investing in the US for several years. In case anyone's interested, I've formed a monthly meetup for folks in Toronto investing in the US. The next meetup is next Wednesday: