Specialist · Vancouver, BC · Member since 2016 · 63 posts · 7 votes
After being super motivated from Brandon's webinar and deciding to do this within the next 90 days.. I analyzed a bunch of properties in Vancouver that would be in my price range if I bring in a partner.
It's a crazy expensive market here..
Yes.. I know condo's are not the best investment properties, but due to price it does not leave me with much choice
Yes.. I know it is only $50 cashflow if I split it down the middle, but it's a start right?
Welcome to BP! Be sure to drop by the New Members Introductions forum and make a post letting everyone know a little bit about you, your experience and your real estate aspirations.
Have you considered looking outside the lower mainland for a rental - either over on Vancouver Island or further inland and north ... or even in another province?
Personally, I do not care for anything with HOA fees - SFRs or condominiums - as you are beholden to the (in)ability of the association to manage the maintenance of the property. Special projects and their accompanying fees often arise to deal with CAPEx requirements. A cash-flow of $50/month would not be sufficient to deal with your own internal maintenance of the unit, let alone a project levy by the HOA.
However, in some markets and for some folks condominiums make fine rentals (unless the HOA changes the rules about owner occupants), but the numbers need to make sense - after all of your operating expenses, you need enough NOI to service debt and fund a capital reserve (for those "oops" from the HOA.
One note of caution on the BP calculators: They are U.S.A. specific. You can use them to get a general idea of things, but financing is done differently (and interest calculated differently on residential mortgage notes) here in Canada. The calculator also mis-categorizes a couple of things (vacancy being one).
Thank you so much for your response Roy. And for sure I will introduce myself in the Newbie section later today. I'm super excited to be a part of BP.
I agree with you that anything with Strata /HOA fees are not the best investments. As risk increases when there is a lack of personal control. When I do my due diligence on the property I will ensure that the pipes and the roof would have been already done as those improvements would be detrimental to the deal if it was a $20,000 project.
When I crunched the numbers with the calculator, I have set aside 2% for CapEx and 5% and 7% for Management (for the future if I want to bring in a rental management company). If I add all those numbers up it would be $154/month. If I set that aside in another account it would be $1848/year.
As there are initial repairs of 10k already when I purchase the property. Would the $1848 in reserves be enough if we make the assumption that there are no major projects sanctioned by the strata in the upcoming 5 years?
And yes Roy, I have considered looking outside the lower mainland for a rental either in Vancouver Island or in the interiors. I'm just not as familiar with that market and need to find a way to familiarize myself with it. Any tips are appreciated :)
Is there another calculator that you would recommend for us Canadians?
Over here on Vancouver Island we still have a positive cap rate but it seems the Vancouver bug is spreading and we are seeing them get compressed.
Up here in Nanaimo the up and down rent for a house with a suite grosses from $1600 to $2200 and the purchase price range is 310k up to 500.
Another nice move over here is to purchase a property that has carriage house development potential. The return on the main house is standard but you can get some nice returns on the second auxiliary suite. 80k to develop and 700-1000 rent
Hey @Tom Stromar what are some areas of Nanaimo to focus on (or stay away from) for the price range you stated? whats the vacancy rates in NA? Major university, college or companies to buy near?
Vacancy has been dropping for awhile and is now quite low. Officially states 4% but in the trenches I would guess about 1.5% now. In fact in the sale market we have a severe shortage of single family homes. The university has been and, has plans to, expand rapidly. The extra demand from the university renters neatly keeps the vacancy really low surrounding the university. Homes in the 'University District' are usually a safe bet. This borders the area known as 'South Nanaimo' within which there are pockets that are best to avoid (substandard tenants, etc..) most of which are near the water.The Old City which envelopes downtown is normally fine below the 400 block. You'll need to be careful when vetting deals as some properties that look like screaming deals with high cap rates you'll find are in those dodgy areas.
Going upscale from there are Central Nanaimo, Diver Lake, Pleasant Valley, Uplands, Departure Bay, Hammond Bay and North Nanaimo, in that order roughly. It will be tough to find cash flow once you work your way half up that list however. That being said the speculative returns on the north shore have boggled my mind for the last 20 years so if that's your play, that's where you'll want to do it. (We're more cash flow type of investors)