Newbie from Toronto, Ontario, Canada

[Chinomnso Nwamadi]

Hello everyone, my name is Chinomnso Nwamadi and this represents my first post on bigger pockets since joining. I have no real background in real estate. I am interested in getting started with real estate investing, particularly buy and hold strategies to generate monthly cash flow. I am curious about the New Brunswick market, particularly Saint John. I have read various posts from individuals currently investing in that province and would love to connect with people currently invested in the region.

[Trevor Gaal]

Welcome @Chinomnso Nwamadi

Saint John has some great opportunities, and many people are attracted to the lower purchase prices there. You could literally get a cash advance on a credit card and pay cash for an entire building in some cases, but you'd be flushing your money down the toilet! I don't recommend Saint John for beginner investors. There's just too many pitfalls. The buildings are super old and there's going to be unexpected problems to deal with and higher than normal maintenance costs, so you need to have some experience under your belt and some great teams in place locally.

Here's a couple things to watch out for:

Most buildings are not insulated well. It's not uncommon to see heating costs of $9-12k per year. So you think you'll eliminate the problem by buying a building where the tenants pay their own heat! Problem solved, right? NO! Here's the trap: You can't keep the tenants more than one year because their bills are insanely high, so they go rent a place that has heat included. You're left constantly turning over tenants, and if you're paying a property manager (which you will be) you're looking at a month vacancy plus half a month's rent for them to fill the vacancy. So now you're working on a 12.5% vacancy rate and now your building is cash flow negative!

Taxes are already VERY high, but if you make improvements, taxes can easily double. If you're buying a property that needs some fixing up you need to run your numbers based on the property taxes doubling. That's going to kill a lot of deals that you thought were great. Fail to account for this and you've just fallen into trap #2!

You'll also want to look into the water utilities closely!  80% of buildings are flat rate per month per door regardless of if you have vacancies (zero water usage) or not.

There's a fair amount of "hype" in the uptown area right now, and this has led to investors over-paying for properties. So even though you think the price looks amazing compared to other parts of the country, it's not the deal you thought it was when you have to pour 60k into necessary repairs that you find out about 5 months after you bought it!

The last thing I'll caution you on is this: There are neighborhoods that you absolutely do not want to invest in. Period! There are also certain blocks on certain streets that are a terrible area/investment. But if you go down 2 more blocks on the same street, it could potentially be a great investment. What I'm saying is that you really need to know the city extremely well! You can't always trust your Realtor, many of them just want a commission cheque to feed their family. Many out-of-town investors got sold properties they had no business getting into and now they're trying to dump them off on another inexperienced investor. You need to do your own research, you need to go there and see with your own eyes why you can buy a triplex for $45k, and why you need to run away from those types of "deals" as fast as you can!

If you do your research, have some more general investing experience and get a great team in place; contractor, property managers, Realtor, lawyer then you can do quite well in Saint John. I'm glad I had quite a bit of experience and also spent 3 months learning the market before I got into Saint John or I'd be having a really tough time with my properties there right now. There's better markets to invest in when you're starting out. My advice is either gain more experience, or really do your homework! Good luck!