London and Kitchener, Canada market saturated from investors?

22 Replies

Hi all,

Greetings from Toronto, Canada. I am new to the BiggerPockets forum and I think I am already addicted to this web place (specially to the podcasts). I started researching for the possibility of investing on my first rental property in the Kitchener and London Ontario, Canada area. But, while I've been researching, I find that there is the possibility that these markets could be already overflowed and saturated with investors renting houses or rooms in these markets. 

The following article talks about the saturated inventory of rental units for students in the Waterloo area. This article makes me think that investors seeking opportunities in the rental markets of London or Kitchener are late to the party. 

https://www.therecord.com/news-story/7102082-renta...

I am thinking more of entering into the single family or duplex housing as my first rental. But, now I am not too sure. If these markets are this saturated, I think that starting there is not a good idea.

I wanted to ask to any investor or realtor experienced on these areas if my thoughts have some fundamental truth?

Thanks in advance for the help. I highly appreciate it. 

Tinto

Hi @Agustin Loreto - It's not too saturated in either Kitchener or London, Ontario. There's low inventory currently, very low, but cash flow is still out there, the 1% rule can still be reached in London, and private deals will significantly increase your odds of finding properties like this right now. I can name dozens of investors that are profiting by flipping, BRRRRing, and buy-and-holding in London and Kitchener, myself included. Feel free to come out to a meetup here, 30-40 of us meet up monthly at London On FIRE (feel free to join our Facebook/Meetups.com group), our next meetup will be Tuesday, March 27th at 6:30pm. There is also a BiggerPockets that @Matt Geerts hosts monthly, definitely worth checking out.

Thanks Kellan, here's the link:

https://www.biggerpockets.com/forums/521/topics/54...

Welcome to the fun, @Agustin Loreto !

The podcasts are great, I highly recommend started at episode #1. I find the older ones to be more relevant to basics of the art of real estate. 

London is NOT overflowed with investors. You just need to stop looking at the typical MLS listings and typical realtors. There are a TINY minority of realtors that are worth talking to on this front. Come out to the meet-up tomorrow to find the right person.

News articles are a TERRIBLE place for valid information. Every article I read is about how we're crashing and there's no money in investing. All BS. Fear sells newspapers and gives people a reason to sit around and do nothing. Don't fall for it.

Prices are up 10% year over year in London and volume is DOWN 32%. There's no reason at all to think that prices will soon fall. However, it is tough to find the deals... but you've just met the right people.

See you at the meet-up tomorrow? 

PM me and I'll add you to my monthly email blast about the meet-ups. I have a nice cashflowing single available for wholesale right now at 25k under market value (rent ready) and it can be converted to a duplex or more if that's your thing. The deals are out there. 

Kellan, the 30-40 you're getting at FIRE, are they mostly real estate investors or is that a small part?

Kitchener is not Saturated especially for rental to families instead of students.  

Waterloo seems to be saturated for student units while not saturated for family rentals.  And Waterloo has a rental bylaw costing you extra as a landlord to get a license.

Thank you so much guys for the quick responses. And I am sorry that I was not able to answer faster.

I've been really busy. All this is a big transition. I work as a CG supervisor and as an Asset supervisor for an animation studio in Toronto (both at the same time). And all floor is in my shoulders.  Plus, I have two small kids. And to complete it all, I want to start shifting to a real state investment life until I can retire. But, I have the energy and the money to start. So, I keep telling myself.... Lets do this!!!!

Kellan P, thanks so much for the information. It makes me feel very positive about my possible options. I can already see the low inventory thing. I see it even in Toronto. I kept telling my wife that the best bet will be to find private deals. The thing is that I thought, how the hell do you do that. So I thought about starting here. I am so glad that I did. 

Matt Mckeever videos were key into me believing that this can be done. I believe he somehow leads the group? It will be great to meet you guys there. I will definitely go to the next meeting on March 27th. 


Matt, I've read a few of your posts here while I was researching. It's great that it was you one of the people that chime in to help me.  I would love to meet you tomorrow, but, as you can see, with my current job I have to plan ahead of time. In terms of the awesome property you have ready, it got me so exited. But, I tell you a bit of what's happening. After my wife and I got in the same page of investing, we decided to switch to renting and sell the house. Until my house gets sold in the week after march break, I have my hands attached. I sent  you a connect invitation so you don't forget to add me to the meet up list. I am not sure if that is what you call "to PM a person". 


Roy, thanks for explaining me in detail your thoughts about the Waterloo market. Your thoughts about the student market doen't fall as a surprise. Nevertheless, I am still interested in the single family housing market there. By the way, I didn't know about the license. is it really costly? I hope I don't have to take another driver's license type of test for that. Do you know if London also has this landlord license implemented?


Thank you all guys for the help again...


All the best....

Hey @Agustin Loreto I wouldn't be looking at markets from the perspective of are they saturated or not.

You're simply evaluating deals, does this make sense or not. If the deal makes sense you pursue it, if the numbers don't work you don't. How competitive or not the market is will be irrelevant at that point.

Thanks Jacob for your reply. I think that your thoughts seem to be in line with what Kiyosaki said in his book "you can find a deal in any market". I guess is just harder to find a deal. Jacob, so, I guess you are concentrated in Hamilton? How it has been working for you there?

Thanks again. 

https://www.canlii.org/en/on/onltb/

No input on th emarket you are looking at however before you consider investing I would strongly advise you study the government RTA and LTB web sites. The link above is access to board rulings in Ontario to give you some perspective on how Landlords are treated in Ontario.

Ontario is a nanny state and as such is very pro tennat. If you do not know the regulations insideout and backwards tennats will eat you alive.

Know the laws and how there are applied before you invest in Ontario.

@Agustin Loreto No problem. Ya I'm concentrated in Hamilton, 6 deals later, it gets harder to find value each deal. I've gone looking at properties in other markets quite a bit (St Catherines, Niagara, Brantford, London, etc). 


It's been hard to pull the trigger on deals if you don't have an intimate feeling on the neighbourhoods (that's been my experience at least). Haven't loved what I've found on MLS. There are good deals but they go in heavy competition.

Recently got a deal off-market at good value under contract. That took about 3 months of trying random things off market. By no means do I have it down to a science. 

I'd be happy to help you with anything Hamilton related as the rents here are very high, and still some neighbourhoods that are under the radar good value. 

Thanks Thomas for your insight. I have to accept that I have been so dived into learning how to put the numbers together to analyze if a property is a deal or not that I haven't given a thought to the landlord  state. This feels almost like a second career, but, it's kind of exiting. I will follow your advice and learn all that as much as I can.

Thanks Jacob for your help and advice. To be honest I have also looked into Hamilton, St Catherines, Niagara, Ottawa, and even Thunder Bay. The only one I've hesitated is Montreal because I understand they have a rent cap control. Actually, if Montreal could work despise the cap control on the rent it will be better, because I can work there in VFX or animation while I make the transition. But, I don't know. I would love to be able to invest in Ottawa. Maybe contacting wholesaling people is the way to go. 

I will definitely accept the help you are offering me. Thanks a lot. Judging by the synergy signature can I ask if you are a mortgage broker in addition of an investor?

Thanks again....  

Hi Agustin,

Why did you write that you'd love to invest in Ottawa? Can't you do it? This might interest you: https://www.newswire.ca/news-releases/ontarios-top...

Irrespective of the rent controls (which Ontario has as well if I'm not mistaken), my hometown of Montreal is a great place to invest. It's the biggest market in Canada that is not overpriced and it's an international city that gets more and more attention. It's recently been ranked best city in the world for students and second best city in the world for millennials. The economy has been doing much better lately and it's becoming a hot spot for artificial intelligence.

@Agustin Loreto I'm happy to help! I appreciate the compliment, too.

Hope to see you out next time!

@Agustin Loreto

"This feels almost like a second career"

It could be a second career, it is definatly a second job. Real estate investing is a very long way from passive investing and will require long hard hours out of your life to succeed. Be prepared. Success will come not only from hard work but also working smart. This is a business that must be operated as such. Tenants will challenge you at every turn. They have a very distinct advantage over landlords and will be your greatest threat to success. If you know the law, their rights and yours, you will have some defence. The key is to act swiftly in every tenant situation to reduce your risk of losses and train tenants to be what you need them to be to survive. There is a very steep learning curve so get yourself prepared.   

@Agustin Loreto Welcome to BP and goodluck on your journey! The other thing you might want to consider is house hacking as a beginner investor. It's a great way to live in your duplex or triplex and get a feel of what this means to you. I just picked up a 4plex here in MTL and i'm loving it, even though i mainly invest in mortgage notes in the US, it's always a good idea to diversify. 

At BP, you'll find everyone is willing to help, just make sure you execute and things will work out! 

Cheers

Hi Mike, 

Thanks so much for the help. So, you work in Montreal. How does house prices really compare to the rent prices in Montreal? How does that rent cap control works. Has been good for you in Montreal? 

I mentioned Ottawa, because my wife used to live there. I used to visit her there every weekend. And, to be honest, we love that city. It's a bit harsh in winter, but summer is awesome. And I like that university feel of it. I could have rentals there and simply retire there. 

No problem Matt. We'll keep in contact. 

Thomas, I have told my wife over and over that is not going to be easy, that we will have to work. But, eventually money should not be an issue anymore if we do it right. Nevertheless, I am still a bit scared about it. But, I am not going to back off. We are still preparing the house for sell. We will rent, mainly to invest the best we can and reproduce that money rather than siting on it. 

Now, I have also been thinking about the option of simply flipping houses rather than renting them for now. Judging by my experience, I already renovated two houses big time, plus, I used to be an architect in my home contry. This should come easier for us and postpone the rentals for a bit. But, the market in Canada seems to be kind of in "transition" or at least volatile because of the prospect of increasing interest rates and the doubt of the possibility of NAFTA been eliminated. I don't want to be a speculator with selling prices. But, for me the previous market paid off BIG TIME.

Thanks for the help Mazin. I actually considered heavily doing the house hacking. But, at the end we decided not to do that so we can have as much funds available to invest. We have also thought about getting a 4plex. But, we find that the prices for those properties In Canada are kind of brutal compared to what you get. My kids are small and I rather have some privacy for the family. I truly rather have a 4plex and  rent somewhere else.  But, I find that for a first investment with a full family, I rather start with baby steps and do a single filp or single rental for now. 

I am also open to invest in the US. But, I am not sure what are the tax and legal repercussions for a Canadian to invest in the US. I mean, taxes can be brutal here. 

Thanks to all for all the attention and help, I much appreciate it. And I hope I can repay you guys.

In my case, WE ALREADY ARE TAKING ACTION. WE ARE SELLING THE HOUSE NEXT WEEK AND THEN SIMPLY RENT. OFF WE GO

Wow, it's a 180 degree change. People and friends sometimes still look at us incredulous... like 

!! This dudes are crazy !! 

Agustin, I'm just about to start in Montreal and will concentrate on multifamily (6 units and above) so I'm not sure about houses and rents. As for the rent control issue, I just make sure I cash flow under the current rents so it's not that much of an issue. I'm interested in having a look at Ottawa as well it's not that far!

@Agustin Loreto In The Waterloo region that saturation is mainly in the student rental market.

With regards to regular rentals the bigger issue we have here is getting tenants out to increase rent, our market been moving so quickly market rent has increased around 10% a year in most cases and prices over 30%. The price appreciation combined with these longer term tenants is why nothing will appear to provide good cash flow at face value.

It's fair to say that you would not be able to track down very many deals around here unless you know where and how to look though, the limited amount of inventory means they don't last to long and any good deals I notice last a week at most on MLS.

SFHs are far too high risk now and will likely never cash flow. Flipping is growing riskier meaning time lines must be kept below 4 months start to finish.

The problem with finding cash flow in Ontario is you can not increase rents on inherited tenant meaning long term tenants are a albatross to investing here. If you do not have turn over every 2-3 years you are below market.  Allowable increases do not come close to covering increased costs.

Your best option by far is to house hack a multi. You get in with minimum down (not 20%) and you only have to stay for a year.  If you want to move forward you will need to decide between family comfort and profits. If your kids are young they will not know the difference and will be happy living anywhere. You are handycapping your ability to succeed by compromising on the wrong priority. Focus.

Thanks Mike for your comments. Please lets keep in touch to see how you do with your investments. 

Samuel, Thanks for your opinion.  Your thoughts are pretty much in line with Thomas. And, to be true, that's kind of what have crossed trough my mind. That, the rents are kind of not in sinc with the market pricing of the houses. But, That's kind of why I asked about the price rents in Montreal. Because they already have a rent cap pricing control and because Ontario added the 1.8 max rent increase per year. How do you keep up if they stay longer... And, if you have to move the tenant out in 2 to 3 years, it will not be long until there is another rule to control that too. Is that even legal, to move a tenant out? on which excuse?

Thomas, man..... you hit the nerve.... hahaha..... your comment was right on it. I like that. Specially when you say: "You are handycapping your ability to succeed by compromising on the wrong priority. Focus."..... Thanks for that. I will have to review all my thoughts while this conversation with you guys continues. 

Now, can you please clarify me something: when you say: "our best option by far is to house hack a multi." Please correct me if I am wrong. But, I thought that house hacking is buying a house and renting the basement or more while you live there. What do you mean with hacking a multy?

Thanks in advance again for the help....

Many investors will purchase a duplex as a example. By doing so you are able to live in one side, renting out the other, and you then only need a home buyers DP. After a year, assuming you have saved for another DP or can pull out sweat equity, you move on to the next one.  

As a investor you would need to put down 20%, as a home buyer it is 5%....I think ( I have not purchased a home in over 30 years).  The key obviously is achieving positive cash flow after you move out.  For every 100K in property value you will need to achieve 1K per month in rental income. The greater the number of units in the multi (up to 5) the easier it will be to achieve positive cash flow.

Thanks Thomas. You haven't bought a house in 30 years, but, I assume that you have bought investment properties? Or are you investing in a different type of investments?

Also, sorry for my ignorance, but what is a "a home buyers DP"?  Does DP stands for duplex?

Easy answer is there's not much you can do, with all the regulations in these provinces it's not really a free  market for rentals. Generally in a strong or popular market like Toronto/ Montreal etc your rent won't eat the cost through regular increased for many years, a lot of the investors make there money on price appreciation(speculation to but it simply). Achieving 1k per 100k purchase price is not really attainable in most of Ontario unless you focus on rougher area, which have their own problems. Timmins offers excellent cash flow potential for example. .5k per 100k in most parts of Ontario would be acceptable to an investor. 

House hacking is your best best,when you consider the rental rate you're already paying

@Agustin Loreto

DP= down payment

I have purchased income properties as resent as this year however that is entirely a different animal from a personal home/SFH.

You can easily find 1K rent /100K multi unit investment properties in C+/B- properties in most small to mid size cities away from major centers. They are not war zones just lower income blue collar. Avoid any/all tenants/applicants on any form of government assistance. 

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