First investment advice

9 Replies

I am a single mom to a toddler who recently sold our condo in North Vancouver to rent something bigger with backyard access. I'm worried about leaving the sale equity doing nothing for too long and eventually getting priced out of the market, so I am looking to invest in either a pre-sale condo or property to rent and hold for a couple years before selling. The problem is that I'm pretty lost on where/what would be best for our situation. Ideally I'm looking to put 100k down on something under 450. I'm having trouble narrowing down from a pre-sale condo in say Squamish or the Fraser Valley, to a duplex or detached house in the Comox/Courtenay area. Parksville, the Sunshine Coast, and Chilliwack are also potential options. Does anyone have any recommendations on where to begin researching or whether advisors exist. Since many people on here seem to be well versed in the economics behind this, if you were in my position, which type of property would you choose and where? Not looking for a mind-blowing profit (though it would be nice!), but definitely looking for a safe option.

Hi Melanie, i am in a not-to dissimilar situation. I am single and have no kids, so have chosen to instead rent as cheaply as i can (on the north shore) while looking at out-of-BC properties for cash-flow investment. In particular i am looking in edmonton as there market has better fundamentals for this type of investment requirement. I have been watching squamish for quite some time, and for your budget you are priced out of pre-builts. Pre-builts are starting in the mid to high 5's and going north from there. Since the price is already quite inflated on these come the time to move in, you won't be able to rent it for anything close to the mortgage at $100,000 down, and this is assuming the housing market is in as good standing it is current day by time its developed, which is questionable if you look at the market fundamentals for Canada at large. If you are fixed on this area, Squamish, I would contact David Wiebe who has helped me a bunch and is a great agent in the squamish/whistler area. You are actually priced into a condo, specifically in the valleycilffe area, as i have seen nicer units (2-3 bd.) for for around your budget and below. Apparently it is quite common to pay under asking in the valleycliffe market too so you may get a 'deal'. Sorry, cant comment on the other markets you mentioned. Personally, i have seen a TON of listing activity for north vancouver recently and if this continues expect prices to start to follow in the downward trend, though how long this will take to become affordable (or if it ever will) is questionable. 

One last point, another option is to move the cash to something secure and at a 'decent' interest rate. I have my down-payment funds waiting with tangerine at 1.1%. If you don't have a savings account with them already, enjoy a 2% interest rate promotion for the first 6 months then 1.1% after that. Food for thought so you dont feel rushed. 

Melanie,

It doesn't sound like you want to be a landlord or start building a real estate cash flow portfolio. IF this true, then I would advise against buying an existing property and renting with all that entails and specifically against investing in the US as there are a number of complications / overheads (incorporation, taxation issues, etc.).

If you are convinced that local (or places you know) real estate will continue to appreciate buying a 'pre-sale' unit is not a bad idea just remember to account for the tax consequences when you sell as this will NOT be your primary residence. 

It is always a trade off between risk and potential reward. Where you land is very dependent on your personality and situation.

Oren

Hi Melanie, Luc and Oren both offer some good advice. Getting out of the market now, might be a blessing in disguise, as I believe the market in the lower mainland is turning, as Luc said. Detached houses have already had a slight drop, and condos have decreased in sales, and prices will probably follow, or at least taper off.

However, wanting to stay in the market is always a good idea, even if it's not in your local market. I have two friends that live in the lower mainland, that are selling their homes, while the market is at the top, renting in the lower mainland, and investing their money where they will either see the market continue to appreciate, or where they can cash flow. It's almost impossible to cash flow anything in the lower mainland, unless you are putting 50% or more down.

I live in Parksville, and just bought an investment house in Port Alberni (about 30 minutes away) The market here on the island is still climbing hard, and I believe, has a ways to climb to catch up to where it was in relation to the lower mainland. I bought an 11 year old house, with tile bathrooms, 9 foot ceiling, open concept, and mountain views, with a 1 bedroom suite for $255,000. Fantastic value if you compare it to the lower mainland, or even Parksville. Comox/Courtney is doing very well right now too, and will continue to appreciate, but is harder to rent out to cover the mortgage, as prices are higher than places like Port Alberni.

For myself, I like Port because I'm close, cheap enough that I can't see it coming down in value, and vacancy rates are extremely low now. I know you might not want the hassle of having a long distance rental, but we could work out a way for me to help you manage the unit, as I am going to Port fairly often anyhow. It would be a great place to park your money for a few years.

If you want to come check out the island market, let me know. I'd be more than willing to show you around.

Luc, Oren, and Jason - thank you so much for the thoughtful advice. The upside of a pre-sale in Squamish (was looking specifically at a one-bedroom in the Jumar) would be signing papers and then doing relatively nothing for a couple years. If the ski-resort ends up happening, renting out to labourers or selling upon completion could be viable options even if the market in the lower mainland tanks.

Renting, and renting out from afar would require more legwork along the way, but I have a bit of a better feeling about the island on the whole. Port Alberni was a fantastic suggestion. I will message you if I head out that way to scope things out. In terms of your rental house, do you think it will be easy to find tenants who are respectful, professionals?

I've heard a lot of people talk negatively about the quality of tenants in Port Alberni. Upon learning about Port for myself, I came to realize that the rental units available were as much as a problem as the tenants. The suites were horrible. No self respecting person would live in them. I bought a newer house, and the suites are beautiful. My rent will be much higher than the low end suites on the market, attracting the more desirable tenants. 

In the end, it's all about who you want for a tenant. Buy the cheapest, nastiest rentals on the market, slumlord style, guess who you're going to get for tenants. Focus on nice units, you might need a bit more money up front, but you don't have to deal with the nightmare tenants.

Hi Melanie, how much would the down payment to buy a pre-sale earn interest for 18 to 24 months?  $100K is a pretty healthy down payment for a $450K purchase price, that's 22% down and you'd only need to qualify for a $350K insurable mortgage. 

Have you considered the Tri-cities? There are condos in Coquitlam (e.g. Westwood & Town Centre) that offer amenities such as roof-top garden, playground, pool, etc. 

With a $100K down payment, I'd get an insured mortgage and purchase a detached or duplex, purchase price < $1m, that has a legal basement suite to rent, bearing in mind that the rental income can be used to qualify for a higher mortgage, live in it and later, keep it as an income property. 

Hello Melanie,
You have gotten some good advice from fellow BP’s. A $100,000 is a large down payment and you have many options to juggle. Have you thought about investing outside of Western Washington and going east? The Spokane’s MF market is doing well with a 1% and under vacancy rate it would not be a bad idea to look into. You could put $100,000 down and finance 100-150 and purchase a duplex or tri-Plex that would net you a significant amount in Spokane. If you would like me to send you a few properties I would be more than happy to.

Hello Melanie, 

I am an investor in the Tri-cities area and I can tell you that your 100K down on something under 450K is totally doable in Port Coquitlam.  I currently have two condos there in the downtown PoCo area that rent for $1450 and $1550 per month.  Both are around 600 sqft, 1 bed, 1 bath.  Rents in downtown PoCo are high and property taxes are manageable.  The tenants I currently have are 100% trouble free for over a year now.  I literally do nothing and just collect rent via e-transfer.  However, I did invest in making the condos really beautiful and trouble free when I first bought them, and I invested a lot of time into learning how to be a great landlord and how to choose amazing tenants.

I think that you are in an excellent position to buy a small condo like that in the downtown PoCo area.  With 100K down, you should be able to cashflow if you choose your property carefully.  At any rate, PoCo is appreciating in value thanks to the skytrain line that connects to Coquitlam, the development of the Freemont area, and the big recreation center developing there now.  For instance, I bought my first condo there in 2016 for 260K and now it is worth about 420K.

If you are looking for a good realtor in the tricities, I can recommend Krista Lapp with Royal LePage.  

I would recommend to always choose a realtor that is an expert in the area that you are looking.  That might mean switching realtors if you switch the area that you are looking in.  You want a local expert that knows the good neighborhoods vs the bad and knows what is going on currently and in the near future.

I can't comment on the other areas that you have brought up or the ones that the other posters have suggested since I am unfamiliar with them, but I figured I would chime in on what I do know.  Investing that money in a place that lets it grow well is another good idea that Luc brought up.  I would also agree with that option.  Vancity has 2.45% on a 15 month term deposit available right now.  If you don't need that 100K for 15 months and don't feel comfortable investing it into real estate, then that's a decent interest rate.  If you might need the money anytime, then 1.1% with Tangerine sounds great.  I should look into that one myself! (Thanks, Luc!)

A presale would be a good idea too (although it's a safer bet if you have a back up plan to rent it out instead of just selling it for a profit).  Make sure to pick one in an area that is rapidly developing and thus has a lot of potential.  Just watch where all the big developers gather in hoards and you should be in good shape since they put a lot of money into researching an area plus they change the area a lot themselves.  If you see developers abandoning projects in an area though, then you should run too.  

Good luck!

Marie

Oooh, I just checked out Tangerine and they have a promo on for 2.75% interest for the first 6 months in a regular savings account.  That would be a good idea if you wanted to just park your money somewhere for 6 months while you figured out what to do, right?

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