Turn $100k into $5k/month positive cash flow

Shahriar K.

Homeowner · surrey, British Columbia · Member since 2013 · 98 posts · 8 votes

10y

Hi @Arthur Zaragoza Thats funny I was looking at greater Toronto area for properties since I might be moving there in the next 2 years :) any thoughts where to buy for $500,000 price range. As @Peter Crisp has mentioned you are coming from a very expensive place to a very expensive place. Nanaimo isn't so bad but its crazy the amount of land being developed there and new construction coming online. My dad still lives in Nanaimo and I go there every few month and can see the difference. As rental I am not sure if its great as a lot of new construction have a basement suit for rental and the rental market has become even more tough.

Peter whats your thoughts of downtown Surrey, do you think it will one day become Vancouver downtown? there are few high rises going up around Surrey central and I am sure there is more too come but I am not sure how this will effect SFH prices that are in the area.

One place I like is Chilliwack, there has been a decent population increase but the prices aren't mad yet. Maple ridge seems to be also a market that is going in the right direction and you can still buy properties with large lots, few of my co-workers have sold their condo and bought a house in maple ridge.

Shar

Carl Ebsen

Investor · Toronto, Ontario · Member since 2015 · 8 posts · 4 votes

10y

Hey Arthur. I live in Toronto as well so I feel you. Market here is nuts. I own commercial and residential properties in Ottawa. I would stay away from retail properties now and focus on multifamily. You should listen to the podcast on bigger pockets https://www.biggerpockets.com/users/ejevons

He invests not far from where your parents live and he's doing amazing. I think you have the right idea to invest in the USA since you also have the connections. Drop me a line if you ever want to grab a coffee.....I live at Front and Yonge St downtown. Carl

Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes

10y

Quick follow-up. I'm not sure if it's OK to mention specific properties and I have no ties to anyone in this way. Here's an example on the commercial listings - 515 Campbell Street, Nanaimo, BC. To me, it currently looks like a dog that can't hunt - an apparently vacant building that was a medical centre. It's been listed for a long time at $399,900. It's the kind of turn-around property I wouldn't touch because I don't have the right background, but it's an example of one that might just be re-purposed and be a good income generator for someone with a real estate and renovating background. Please use this as an example only!

-P

Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes

10y

Hi Shar,

Just saw your post and hopefully it helps Arthur also. I'll start with Surrey. SFR's have taken off in Surrey and while the prices haven't gone up as much as, say, Richmond/hot school districts, they have done well, and they've pulled ahead of MFR's over the past few years (I called that one right a few years back and bought a fixer-upper house vs a townhouse). I think the spread will stay there because there's a lot of MFR coming on line in Surrey (particularly North Surrey - can't speak for South Surrey/White Rock). I'm just not seeing price/rent ratios working for most of these developments and I can't count on price appreciation in either in the short-medium term. Long term, the whole downtown will be massively changed over the next decade so it could be a good long-term bet. Our rental house happens to be right downtown near the hospital and land/housing has shot up nicely, because not many SFR's other than, for want of a better word, 'crack-shacks' are left in the area. I think Nanaimo might even be safer, but there is a lot of development there also. I agree that Maple Ridge (partly because of the Skytrain line), and Chilliwack / Abbotsford and even Langley make more sense if you can buy a SFR. I'm just not sold on this idea that all Millennials want a 750 ft2 apartment near a Skytrain line so they can have lattes, which seems to be common wisdom based on very little research. Give me land over strata any day!

-P

Tom Stromar

Investor · Nanaimo, British Columbia · Member since 2012 · 60 posts · 5 votes

10y

Thought I would chime in about Nanaimo as it is my stomping grounds - after a peak in 2011 the prices were slowly deflating until the summer of 2013 (SFR down 8%, Condos down %20) at which point the trend reversed. Back then 5-6% cap was the norm. The flow of the market changed in 2015 - fewer listings, for more buyers, price appreciation accelerated markedly in the later half the year creating a new high. This has put quite a bit of pressure on the cap rates. The influx of people also drove down the vacancy rates and rents are creeping up a bit but there is a constraint there due to the nature of employment in the city.

Regarding 515 Campbell, it has some fairly significant challenges. The lower floor is entirely under height and the fellow that ran his GP practice hadn't done any improvements in decades. It's in 'total' need and is a *very* old building. It does have a lot of parking however. Commercial vacancy is quite high downtown Nanaimo as most of the businesses have clustered in the North end (although the city has a mandate to reverse this trend and has enacted no DCCs downtown, etc...)

A recent zoning change makes it possible to 'develop' a suitable SFR property to generating a 10-20% cash on cash return. This is what my partner and I are focusing on at the moment.

Samuel Sedore

Real Estate Agent · Kitchener-Waterloo-Cambridge, Ontario · Member since 2013 · 408 posts · 90 votes

10y

Originally posted by @Arthur Zaragoza:

Looking to turn $100k into $5k/month in positive cash flow in 1-2 yrs

Hi, I just sold my rental property and refinanced my primary residence. Now I have a bit over $100k to invest and would like to scale into a business. A few options I have been considering:

- New construction
- BRRR
- Commercial/multifamily
- commercial/retail/business/strip malls

My situation:

I live in Toronto, Canada where the market is very expensive, taxes and cost of living are high. I have a real estate license which works for my benefit however I would like to relocate with my family somewhere warmer near the ocean with a lower coast of living and enjoy a better quality of life and scale my business. I am considering the west coast in Victoria, BC or somewhere in Vancouver Island. I will be closer to my parents that reside in Seattle, WA. They also have plans to invest in real estate to help with their upcoming retirement and they are open to partner up with me.

I understand the Canadian to American dollar is at .7 to 1 right now however the ROI in the US seems better and I could also leverage my parents good credit to obtain financing.

I have around 5 years of industry experience as a (home owner, landlord and realtor) and would like to be hands on with the transactions, managing some of the rehabs and hands off with management.

Any ideas and recommendations would be greatly appreciated.

Thanks in advance.

I think you may hard pressed to turn that 100k into a 5k a month cashflow, I don't know Toronto but in my market you would likely command around 3-4k a month before expenses and that's a gem. Your best bet to achieve as close to the that cash flow as possible would be to grab a nice multi-family building, if you get it fully tenanted you can have some cash flow day 1 and work on inceasing rates from there.

Patrick Britton

Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes

10y

I think you are also going to be very hard pressed to turn $100,000 into $60,000 a year, because that's what $5000 a month in cash flow is.

In order to possibly do this you have to leverage that hundred thousand dollars several fold and your interest rate would have to be close to zero.

An alternative might be to purchase a dilapidated multifamily property or apartment building, fix it up and increase rents and then do some kind of long-term refinance.

3 Reply

Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes

10y

Tom, I'm glad that you stepped into this conversation for Nanaimo as I know enough to be dangerous! It's a very spread-out city with the big shopping malls way up the highway and the airport far south, and even the 'downtown' is spread out. I knew that the City was doing something to encourage downtown redevelopment but I didn't know the details. I looked into a duplex about a year ago and I thought about swapping the house we have in Surrey for the duplex in Nanaimo to diversify a bit from the Lower Mainland, but in the end decided not to act, partly because I didn't know the market well enough. Perhaps you and Arthur might find a project to work on together at some point? As far as 515 Campbell goes, it sounds like a long-shot unless you can somehow raise the ground floor up, which would be very expensive. At least I now know why it hasn't moved!

-P

OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

Hi Peter,

Thanks for all the feedback, it really opened my mind. I actually took a trip to BC a few months ago to research the market and to get a feel for it. We took the fairy from Anacortes USA to Sydney, drove to Victoria and stayed there over night. We really liked the Fairfield and Quadra St vibe. (I see potentials to do the BRRRR strategy there) I know Victoria is expensive (3rd most expensive market in Canada after Toronto and Vancouver) however the quality of life seems better there (to raise kids) with all that nature around. From Victoria we drove to Nanaimo to cross into the main land. We didn't have time to drive around or do anything there unfortunately. Once in the main land we stayed in Coquitlam for a few nights and visited multiple cities around including, New Westminster, Port Moody, Surrey, Abbotsford, Mission and Maple Ridge. To live we definitely liked Victoria best and to invest Maple Ridge seems like a good market.

I am open to rent out my house here in Toronto and give it a shot at the west coast for a few years, just need to figure out the logistics on what market is best to leverage first, US or Canada or both! : )

@Peter Crisp

Engineer · Surrey, BC · Member since 2015 · 50 posts · 22 votes

10y

Hi Arthur,

If I can be of any further help let me know. I don't mind scouting for properties close to home just to be helpful (e.g. Maple Ridge or Surrey) and it looks like Tom and others can help you out on the Island. Great to have Canadian connections we can rely on!

-P

OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

Hi Shahriar,

Thanks for your feedback, Toronto is great for investing however when you buy a property in the 416 area code you have to pay two land transfer taxes, one for the city of Toronto and the other provincial taxes, add another 2% into your closing costs. For $500k I would recommend in Hamilton or Burlington (nice cities to live and invest and easy access to downtown Toronto via the Go Train). I own property in the west end of Toronto near High Park and The Junction area, bought there 5 years ago when prices were around $400k. Toronto is a bit tricky because one street could be really nice and next street really bad, so you must find a knowledge realtor to work with and research the area before buying. Based on REIN research, they recommend buying next to the new LRT stations however some areas are not so great where they are being built. In the GTA, New market, Aurora, Markham or Stoufville are nice suburbs but a bit pricy already.

@Shahriar K.

Tom Stromar

Investor · Nanaimo, British Columbia · Member since 2012 · 60 posts · 5 votes

10y

Hi Peter - I originally moved over to the island 20 years ago (pre-R.E.) and I'm glad I've found myself here as the prices have not skyrocketed like back on the mainland and while difficult compared to south of the border, one's still able to buy a simple rental and get a positive cash flow which, when combined with patience yields the ultimate dividend.

Nanaimo's definitely an interesting place with a number of parallel markets in play. From the original locals who can't understand why a house would cost more than 100K to the Vancouver commuters and more recently, the increased Asian interest.

For myself, I enjoy it as a Vancouver Suburb - downtown vancouver is only 15 minutes away on a float plane but there's no traffic and the R.E prices are 2/3's lower.

Aurther - I'm not sure if you've got a plan of any kind set out but I agree with the other folks you'll probably need to build or grow into that sort of generation off of the 100K.

Even if you were to follow in our footsteps, you would be about 1400 a month (which I think is pretty good for the west coast)

Logan AllecBusiness Member

Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes

10y

$5k/month...that's $60k per year...off of $100k invested...OK let me know if you figure out something with a 60% annual return within 12 months.

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5 Reply

Daryl Foot

Contractor · coquitlam, B.C · Member since 2015 · 5 posts · 2 votes

10y

hello.

I live in Coquitlam and invest in maple ridge. Currently we own single family homes.

If you are interested we could exchange info and ideas. Would love to meet up with like minded people in my area of investment. However prices are rising way to fast and deals that make sense are hard to come by now. They are still there but few.

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

10y

Originally posted by @Logan Allec:

$5k/month...that's $60k per year...off of $100k invested...OK let me know if you figure out something with a 60% annual return within 12 months.

LOL no doubt! I was thinking the same thing - if anyone knows this secret let me know!

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OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

@Carl Ebsen

Hi Carl,

Thanks for your reply. I listened to the podcast that you recommended and it’s great. ‘Buy as many doors as you can under one roof’ concept is interesting. Some of the financing strategies he uses are great as well. How is the Ottawa market doing compared to Toronto? I heard it’s very good. Lets keep in touch for sure!

OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

@Tom Stromar

Hi Tom,

Thanks for sharing your insights to the Nanaimo’s market. Very interesting! I would love to learn more about the numbers for your new construction projects. One of my ideas would be to build a small purpose built rental, refinance and hopefully repeat the process a few more times until a reach my $5k/month in positive cash flow goal. Would that strategy possibly work in Nanaimo? I could defiantly raise more funds with my network of investors if needed.

OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

Hi Samuel,

Thanks for your feedback; I’ve been hearing great things about Kitchener-Waterloo. If I decide to stay put in Ontario I will defiantly reach out to you.

Thanks a happy new year!

@Samuel Sedore

OP

Real Estate Investor · Hamilton, Ontario · Member since 2015 · 28 posts · 9 votes

10y

Hi Patrick,

Thanks for your reply, my plans is to leverage the $100k multiple times until I reach my goal by using the BRRRR strategy. Your suggestion about fixing up a dilapidated building the refinancing long term sounds interesting; I will keep that in mind.

@Patrick Britton

Kory Hodgson

Real Estate Agent · Guelph, Ontario · Member since 2015 · 20 posts · 6 votes

10y

First to those laughing at the idea or $5k/month from $100k he said he wants to get there in a couple years, and instead of considering it impossible his is figuring out how to do it. I say well done for trying, it is the only way to accomplish great things. I work in the High tech field that is growing so fast in KW. It is definitely a great spot to invest. I also have my real estate license and own a few rentals, mostly in Hamilton. Feel free to reach out to me if you want to chat.

Alan Morrison

Grand Blanc, MI · Member since 2015 · 24 posts · 13 votes

10y

I have no experience, but from what I have heard, new construction is a real PITA!

Alan Morrison

Grand Blanc, MI · Member since 2015 · 24 posts · 13 votes

10y

Originally posted by @Kory Hodgson:

First to those laughing at the idea or $5k/month from $100k he said he wants to get there in a couple years, and instead of considering it impossible his is figuring out how to do it. I say well done for trying, it is the only way to accomplish great things. I work in the High tech field that is growing so fast in KW. It is definitely a great spot to invest. I also have my real estate license and own a few rentals, mostly in Hamilton. Feel free to reach out to me if you want to chat.

Your phrasing is excellent here! It reminds me of how Kiyosaki always says to look for the "how" instead of saying "can't".

Kory Hodgson

Real Estate Agent · Guelph, Ontario · Member since 2015 · 20 posts · 6 votes

10y

Originally posted by @Alan Morrison:

I may have recently read Rich Dad Poor Dad :)

Brent Coombs

Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes

10y

Originally posted by @Arthur Zaragoza:

Hi Patrick,

Thanks for your reply, my plans is to leverage the $100k multiple times until I reach my goal by using the BRRRR strategy. Your suggestion about fixing up a dilapidated building the refinancing long term sounds interesting; I will keep that in mind.

@Patrick Britton

Yep. $25k down on 4 (MF?) properties @$100k, but WORTH @$150k because you bought with a keen eye for below market-value properties that still positively cash flow after mortgage and expenses. Then, refinance 6 months later at 75% of their re-appraised correct values, gives you new FREE equity money to rinse and repeat!

Do the math. It's do-able. Just got to find under-priced good ones.

After the first time around, you will owe about $450k, but you will control property worth $600k = net $150k; an increase of 50% equity! Go get 'em!...