Change my strategy/market?

Question

Hello all!

I am a Canadian investor with a duplex in Rochester NY and I am not sure if I should change my strategy and or market.

My long term strategy is to buy and hold but in order to scale, I need access to financing and that seems quite difficult for a Canadian investing in the states. From what I've read using the search function, the Canadian banks do not seem to lend for 4+ units buildings or at least not with favorable terms. I've also seen that there are some private and hard money that would do loans to foreigners but they seem much more expensive and they would probably kill the cash flow from the buildings i am looking into.

The duplex I own I paid for with my personal line of credit but that limits my buying power by alot.

The main reason why I invest in the states is simple, in my area in Canada, gross rent multiplier is about 16-20x, which is not ideal for cash flow.

So my question to you is this: does anyone think that it's worth it to get loans with higher interest rates and just go with my initial strategy? Or should I stick to 1-4 units where the Canadian banks are more open to lending?

Thank you in advance!

Frederic Babeux · Answer

@John Boychuk I am aware of the new laws that have been passed and currently only have month to month leases as I feel that is slightly less restrictive.

@Brian Dickerson I chose Rochester because it was the closest market that had decent prices on the housing stock, I found it quite convenient to be able to drive there (about 5 hour drive which I find not too bad). I've looked at some other midwest states such as Ohio and they seem to have newer buildings (most multi's I've seen are brick buildings, which I like). I'll have to do some more research on those other states! I know alot of Canadians invest in Florida because financing is easier there for canadians (but again, only for 1-4 units).

Thank you both for your feedback, I definetly have to do some more thinking!

Remington Lyman · Answer

@Frederic Babeux I love brick multifamily buildings. I have a 4 unit that is all brick in Columbus, Ohio. Unfortunately, all of my other properties are not brick.

Frederic Babeux · Answer

@John Boychuk

You are right that we still have to give the 90 days notice for someone who's been there for 2+ years (we currently have one tenant to whom we gave notice who's supposed to leave by end of february).

Correct me If I'm wrong but when you have an annual lease, you can't break it mid-lease, even with proper notice unlike month to month. So if a tenant doesn't really respect the property, you're stuck with him/her for slightly longer.

In my opinion the month to month lease has the same benefits as the annual lease but with added flexibility for both tenant and landlord. The only downside would be if a tenant leaves in low season but I think you can limit this somewhat by having a respectable property.

John Boychuk · Answer

I think Ohio is a great area for investment if you are looking to be within a relatively short drive.In regards to month-to-month leases, you are still required to give the resident 90 days notice if they have been there for 2+ years, 60 days notice if they have been there for 1+ year and 30 days notice if they have been there for less. Because of this, I continue to do regular leases.

What benefits do you have as a MTM lease with regards to the new laws that passed?

Brian Dickerson · Answer

@Frederic Babeux

Definitely agree with the previous post about changing your market. There are better markets (Midwest USA for example) with good quality tenants , newer houses, better returns and not the headache of the new NY laws.

John Boychuk · Answer

That's a tough situation. The safer route is to continue as you have been doing, however, if you are willing to network with a lot of United States investors, maybe you would be able to find someone that you could partner with on a few deals.

I would be cautious if you plan on buying anything in New York going forward, the recent laws that were passed have been extremely tenant friendly, and have made getting rid of non-paying tenants several times harder and longer than the previous process.

Side note: Rochester, NY is considering (heavily) rent control.