Hold or Sell?

Question

Hello everyone - I own a single family home in BC Canada which is currently my principle residence, and I also own a duplex that is a rental property in Ontario Canada.  I would really like to continue to invest, although with the interest rates, the restrictions and prices in Canada it is a challenge.  My question is, how and where do I purchase a second investment property? Do I sell the duplex in order to afford a larger multifamily property? I live in BC and properties here are extremely pricey with good appreciation.  BC and Ontario are the highest rents in the Country here for sure, but it is very challenging to make the numbers work for multifamily investing. When I purchased the full duplex, I inherited one side of the duplex tenants who are paying far below market rent, and new tenants on the other side are paying market rent. My mortgage payments on the duplex increased dramatically over the last year as well, and currently it is appraised at 720K with 4,100/mo rent. It was cash flowing until now when I have to re-finance at higher rate. Ideas welcomed!

Bjorn Ahlblad · Answer

I loved Muskoka. We had a cottage on Mortimer's Point for years. My wife is a California gal however and the winters would not work. Where in Muskoka are y'all from?

Shelley Peever · Answer

Oh wow! I went to High School with the Mortimer family! I am from Bracebridge, and my father still lives there. We grew up on the River and then Leonard Lake - I understand and agree about the winter - I live in Victoria BC right now, but have debated owning a lake front property in Muskoka - trouble is, with the changing Short Term rental situation, could be difficult to take on - I would love to go there in the summer for example.  Currently, I own a duplex in Bracebridge, and it has appreciated in the past 3 years, as well as it cash flows. Wondering how to do what you did regarding appreciation, still being able to manage the costs if it is a high value property, which of course it would also be in BC - the changing zoning here in BC is interesting, and we are seeing people buying the single family zoned properties simply because there is no more land here on Vancouver Island. I want to continue to invest, just have to be strategic. Thank you, and that is amazing that you know Muskoka and owned a property there.

Shelley Peever · Answer

Hello and thank you - I absolutely agree, which is why I bought the duplex, and it has been cash flowing until the rates increased and I am having to refinance. However, it also appreciated in value and will likely continue to appreciate.  I would really like to be able to find the cash-flowing properties in those hybrid markets - what area of Alberta? Edmonton? Thank you for taking the time to offer your insights.

Zorya Belanger · Answer

There's a reason investors are flooding into Alberta (and the US, though many more hurdles to get started there). It's hard for anyone to grow a portfolio with only negative cash flow properties (in growth markets). Though growth markets are attractive for the appreciation, I would balance it with some cash-flowing properties (in income markets), or properties in hybrid markets (where you can some cash-flow and some appreciation). I consider Edmonton a hybrid market right now.

Shelley Peever · Answer

Thank you for taking the time to send this feedback, much appreciated.

Nick Maugeri · Answer

Dayton, OH and Youngstown are both markets to explore for this. Less cashflow but more passive would be commercial assets. Other markets can appreciate more quickly and you can use real value-add strategies in larger units. Happy to discuss, feel free to reach out.

Shelley Peever · Answer

Hello Nick - I can appreciate this, thank you - sure sounds attractive.

Nick Maugeri · Answer

Sell it if the equity makes sense. You can trade that into the US for a 20+ unit

Shelley Peever · Answer

Hello and thank you so much for taking the time to reply with this fabulous feedback. I am interested in knowing, if you can share your strategy highlights regarding the fact that your properties are all doing well with respect to appreciation rather than cash flow, and I completely agree that travel would be required to pursue cash flow. Do you feel that Ontario Canada has any remaining appeal?  I am from Muskoka, and I have realized some good appreciation there, as well as Victoria BC. Of course, there are properties here that I believe will appreciate further, but buying them when they do not cash flow would be the challenge. Thank you again.

Bjorn Ahlblad · Answer

@Shelley Peever I would not rush into anything at this point. Sure, do your homework but don't sell any rentals until you are sure and have a plan. Big cities don't work any better here than in Canada. Rents have a lot of catching up to do. Land lord tenant laws in most of California and Wa state are pretty similar to BC.

If you plan on land lording on the west coast in Canada or the US you have to be prepared to travel if you want cash flow, as Theresa pointed out, and even then it will not be easy. I moved to the San Francisco Bay area 35 years ago from Toronto. We now live south west of Seattle and we have rentals here that we bought a few years ago.

WE did well with California properties, however little of it came from CF, it was all appreciation. But money is money as they say. Do your homework before you venture out. All the best!

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