First Property, Local or Remote?

Question

Hi,

I am looking to pick an area to start my first investment property. I live in Greater Toronto Area in Ontario and looking to invest around Hamilton, London, Waterloo/Kitchener area.

However, housing price there is around 500-600k for single-family homes. I will need 30%+ down to possibly break even on cash flow. Alternatively, I could go further (Sudbury, Winsor, or even cross-province to Saskatchewan/Alberta) to find <200k properties.

Question to my fellow BPer and experienced investors. As my first investment property, do you recommend starting somewhere local that I can visit when needing to? or do you have success stories to start remote with property management as long as the cash flow works out?

Thank you,

Eagle Yeh · Answer

Thank you all for your wise suggestions @Wade Woo, Account Closed. I am going to take the approach to find markets that make sense and learn the necessities to build a process to manage remotely through PM. Hope you also don't mind that I connect with you to learn more about RE.I have a family member in Calgary, AB, so I am also interested in investing there. Do you have any connection recommendations for a motivated real estate investor agent?

Roy Cleeves · Answer

Thank you Account Closed

I am happy to help you with choosing a location.  I have properties locally in KW and properties farther away in Nova Scotia and in Florida.

I do not visit the local ones any more than the ones farther away.  I use property managers for all units. cash flow is critical for your first property and you also want appreciation to help you regain funds for your next purchase.  Look for a balance.

Feel free to connect with me directly anytime and best wishes.

Phil Bailey · Answer

I'm a little biased here as I'm a realtor in London, Ontario, but if you do buy outside of your city I would highly recommend using a local agent.  I work with a lot of investors that have hardly ever been to my city and there are several red flags to watch out for in terms of neighbourhoods that some people miss if they use someone that doesn't understand the market well.

Wade Woo · Answer

@Eagle Yeh Find an area that is below the national average.  That way if the market turns negative then the downside risk is minimal.  Find the market with the best rent to price ratio in the best neighborhood in that market.  Find motivated sellers in the neighborhood.  A $50k investment can get you into a $200k rental property.  Find a partner who is willing to invest $10M of his own money to create an automated system with a team of 200 people.  How much do you have to invest with?  Connect with me to continue with discussion.

Account Closed · Answer

@Eagle Yeh welcome to BP! Invest where the numbers make sense, regardless of where you live. There is no need to live close to your investments, but I do recommend that you visit a market to build a team and to understand the local scene.  @Roy Cleeves is a great resource for KW, and there are many other investors in this Canadian forum that can help with insight on other markets.

Account Closed · Answer

@Eagle Yeh

Be careful with sub $200k properties. Example: Saskatoon has a few hundred that will be coming available this season once they’re remediated. .. and they’re almost all in a very rough area. Cheap doesn’t mean better (or worse). I appreciate you’ve got a budget, just, a detached $200k house in one of the major centres in sask is going to be junk and in a C class area at best. C class properties get C (or D) class tenants, and that’s a tough go for an out of towner making their first stab at revenue properties. And do NOT buy a condo in sask or Alberta before 2030.

Melanie Dupuis · Answer

@Eagle Yeh invest where returns are best! Whether it's a different city, province, or country! Make sure you build an investor-focused power team, that you can trust! Also consider your exit strategy, and if you want to make those returns in your currency or in another currency, ie: maybe you want to make USD money, invest where they use USD.

Mike D'Arrigo · Answer

@Eagle Yeh why would you want to drive by and see your $500-$600K property that isn't even breaking even? That's not investing. Even if you could get positive cash flow with 30% down, your cash on cash return is going to be extremely low. For people in high cost markets like you have no choice but to invest outside of your local area if cash flow is your objective. A lot of people are doing it successfully so don't be intimated by it. The key to success is knowing the neighborhoods and buying in the right area. The biggest mistake new OOS investors make is inadvertently buying in bad neighborhoods.

First Property, Local or Remote?

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