München, Bayern · Member since 2016 · 20 posts · 3 votes
Hi there -
Just listened to podcast episode#214 of the podcast and was surprised by Joel Sherlocks statement that REI in Canada didn't made much sense for him/his company so they went to the US/Arizona instead..
We're currently located in Munich, Germany but have been all over the place in the past, spent a couple of years in NZ, and are now seriously thinking about moving to Canada (BC) and starting to invest in real estate (small rentals) there.
Any insights from local investors much appreciated - Does it make sense to invest in real estate in the BC/AL area these days, i.e. are there good deals to be found..?
Kelowna, BC · Member since 2015 · 51 posts · 19 votes
9y
Thought I would share a very recent transaction.
On May 1st I closed on a 4-plex in Vernon BC. It has all two bed, one bath units - all the same size. Has a shared coin operated washer / dryer in the building common area.
It is in a C class neighborhood, built about 1970.
Purchase price was 470k, plus about 10k in closing costs and I will put about 10k into repair/improvements.
At possession on May 1st only 1 unit was rented @ 800 - the tenant has been there 1.5 years.
I believe the market rent should be more in the range of $950.
I put an advert on Kijiji saying there would be an open house on May 4th and got about 35+ people replied. I screened some of them out right away from their initial contact.
About 15 people completed applications for units during the open house and rented the three available units at the $950.
With the purchase price, closing and repairs it comes to about $122,500 per door.
The building is structurally sound, tenants all have separate power meters - I supply the water in the rent (hot & cold), everything else is paid by the tenants.
Property taxes are about $3,300 and insurance is about $2,200.
So far I am very pleased with the deal, as long as I have picked some good tenants things should work out well.
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
9y
Thanks for that @Roy N. People often look at me funny when I can't spout the cap rates for properties I own. Realtors often ask "what kind of cap rate are you looking for?" and again, I get blank stares when I reply that cap rate isn't important.
In listings, agents present the best possible cap rate to attract buyers. If you look at the financials, you'll see that many expenses / income adjustments that should be included in the NOI calculations are omitted: vacancy, property management, maintenance, snow removal, anything done by the current owner, etc.
My advice...ignore cap rates and do your own financial analysis of any deal
Investor · Windsor, Nova Scotia · Member since 2015 · 128 posts · 34 votes
9y
@Account Closed - I'm on the East Coast (nova scotia) and have certainly found some great properties - from a cash flow perspective - outside of Halifax as well! As someone said - there's always deals for those who look!
Vancouver, bc · Member since 2014 · 19 posts · 11 votes
9y
Urban core investing is typically for the big pocketed companies. There are things you need to keep in mind on how they are successful.
1. Financing could be interest-only or equity financed, meaning very low carrying cost.
2. Development and densification is usually the goal, not buy and hold. millenials are a huge generation, much larger than gen X. They want to live close to downtown.
3. Rezoning. SFH lots that are rezoned to duplex or low rise will instantly get 50-100% return. This happened on Cambie, oak, king Ed, etc. Houses on busy streets that most investors would look over, all were offered 50-100% over market value and assembled into large lots for condos.
4. Almost all municipalities have underbuilt due to NIMBYism. Most land within a 5 minute drive of the downtown of major cities is under zoned and therefore under valued. Savvy investors buy for the rezoning, not the cash flow. The risk is higher and the returns are higher.
5. Buying in small towns to get a few hundred dollars a month is not the way to make money in real estate. Better to find a partner and buy urban, then rezone or wait until millenials put enough pressure on local politicians.
I hope I have been able to explain why billion dollar development companies see investment opportunities in low CAP rate areas, while average mom and pop investors get hung up on the 1% rule.
Residential Real Estate Broker · Kitchener, Ontario · Member since 2014 · 687 posts · 370 votes
9y
Thanks for this info guys. I have a builder planning to build a 6 plex in Milverton, Ontario which is not a major centre at all. Small town in Southwestern Ontario. And he felt he could get $1.2M based upon 6% cap rate. Yet so much more comes into the equation including the ability to finance it in a smaller centre, and would the rents really be as high as he is predicting, appreciation rate lower in small town etc.
I have recommended that he consider Kitchener or Waterloo or London even instead.
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
9y
@Roy Cleeves I had a chuckle when I googled Milverton and google comes up with a picture of a Menonite woman. Yeah, small-town. However, I saw a 6-plex in Hensell (a bit west of Milverton) sell at a 6-cap after only a couple days on market. At 1.2 million for a six cap, though, I run the numbers on this proposed build to about 1300+utilities. You will NOT get 1300+ in Milverton unless you are renting luxury 3-bedroom units with granite... even then I doubt it.
Then again, are you finding legitimate cash-flow at all in Kitchener or Waterloo? Even INSIDE london you'd better be prepared to rehab or convert to get decent cash flow now - that's why i'm trying to be more familiar with the surrounding towns. Generally speaking, if a realtor has touched it, there's no cash flow left.
Residential Real Estate Broker · Kitchener, Ontario · Member since 2014 · 687 posts · 370 votes
9y
@ Matt Geerts Thanks so much for this reply - I was working with 1200 as the rental and I agree - we won't get that from the Menonites and they probably won't live in this type of building - LOL.
Although the builder was planning to put in an elevator - can you imagine the cost over runs. LOL. Crazy. I am not interested in that area.
So I told him to look to build in KW area instead.