Updated almost 6 years ago on . Most recent reply
2% Rule within Canada
I have been scouring a lot of Canadian town and cities and have not come across any properties that rent at 1% of houses value let alone 2%. What are other Canadian's on this site doing about this situation or am I focusing my search in the wrong areas? I live on the west coast, so I have been primarily looking in the interior and Vancouver Island.
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As Randy said, the play is long term holds with good debt pay down and hopefully appreciation. I wrote a blog on here about the island possible being recession proof. https://www.biggerpockets.com/...
Port Alberni gets about as close as you can find to the 1% rule on the island. You can find 0.75-0.85%, but if you want a full 1% you will need to get creative with some value add. Prince George, Quesnel and Williams Lake areas you can find the 1% rule sometimes, but even there it is tough and the vacancy rate is slightly higher than the island, so it's a push.
The smaller island areas like Port Alberni will give you better cash on cash returns, but the larger hubs like Nanaimo and Victoria will give you more stability with property value.
Just because something doesn't meet the 1% rule doesn't mean it's not profitable, and as a matter of fact the more expensive the property, the less the 1% rule needs to apply. A $500,000 house bringing in $3,000 with a $1,600 mortgage payment will cashflow better than a $125,000 house bringing in $1,250 a month with a $400 mortgage payment. Even though the $500k house is only a 0.6%, it leaves $1,400 per month for expenses vs the cheaper house which hits the 1% but only leaves $850 for expenses.