Where should I buy in Canada

19 Replies

Hi all

I'm getting ready to purchase a 2-4 unit property in Canada for rental income. I hope to buy 2 of them in the next year before moving up to 5-8plexes in the years after that. I'm in GTA so I know I need to go farther afield. And I'm ok with any location within Canada.... but where do I go?

I've looked at some CMHC reports and heard buzz about Saskatchewan and Maritimes, but I can't figure out where I should go for a stable rental market. My price range is $200k or less per property and I'm looking for a good, steady cash flow more than I want appreciation.

Maybe you know about a city or area? Or can you point me towards reports that I should be reading that will help identify the right area to look.

thanks

Tabatha

Hi Tabatha,

Good question. I can't point you to any reports at this time and can't tell you if its a good area or not. However, with your price range I would recommend in the Niagara region and Sarnia/Windsor. Make sure you always understand the market before jumping in.

Cheers, Aj

I would certainly recommend the Niagara Region because I live and invest in Niagara and it has been very good to me. With what you want to invest there are several areas that show slow and steady appreciation and good cash flow. I own a few long term rentals and plan on buying more.

It's a great way to build a good income portfolio

Just my two cents...

Dave

Tabatha,

If you are seriously considering the Niagara area I would be happy to show you around and share with you what I know about the area. I have lived and worked here all my life and invested here for the last years....the offer is always out there.

Looks like I am meeting Ajay today in St. Catharines...

Tabatha,

The pleasure would be all mine...

Just met with Ajay and his dad at his student rental in St. Catharines to give him a quick hand and see his latest purchase. Ajay has himself a great little investment there and we got to talk shop. Always a pleasure to meet and have conversation with awesome like minded people.

Dave

I'm a big fan of Alberta and Saskatchewan as a whole. Did some things in Yorkton, Sask and Edmonton. Might be doing some things in the summer in Saskatchewan, I can update the thread once I firm up an specific area of interest.

@Account Closed - Is this your first income property or are you an experienced investor? If you're starting out, I'd recommend somewhere you can get to within a car ride. Property management of a multiplex isn't as simple as a SFR. You'll have tenants moving in and out more frequently and you'll be dealing with multifamily issues (noise, garbage, common area clean up, etc.). I also live in the GTA, but I'm selling my multifamily family in Waterloo partially because it's difficult to landlord from a distance. At least for me it's been a challenge!

If you are starting with 2-4, I would suggest jumping to 8-15 after that. Once you hit 5 it becomes a commercial mortgage situation, larger downpaymnet and a shorter loan period. Typically the 5-8 range is higher risk than going for a slightly larger unit where the impact will effect your EGI less than the smaller places.

Just some food for thought.

@Michael Moikeha & @Chris Martin

While the differences between residential and commercial mortgage financing in Canada are similar to those in the U.S.A, mortgage terms are essentially the same - with 5-yrs being the most common. We do not have 15 or 30 year residential mortgage terms here. Similar to the U.S.A., 1-4 units are considered residential and 5+ would be considered commercial ... though there are a couple of Canadian lenders who are treating 5-6 unit properties as residential w/r to underwriting.

Canadian Mortgage and Housing Corporation (CMHC) is a crown corporation which fulfills the role of government insurer on multifamily and residential properties {In the residential mortgage space there are a couple of private insurers as well}.

@Ming Lim

This will be my first property ever. I live within driving distance of Niagara, so managing a 2-4 plex would be ok. Once I get the hang of one or two, I don't mind buying anywhere in the country and hiring a property management company to deal with the day-to-day running. I think I'd be okay starting out with having someone else manage even on the first property if it's farther away, as long as the numbers make sense. So I'm back to the question of where to invest.

Does anyone have some great reports or sources of general information they rely on to make decisions, or do most people stick within their province?

@Michael Moikeha

Why are 9+ units less risky? Once I hit 5+ units, the loan is based on the property's income, not mine. From what I understand, the deposit is still 20-35%, even if it's a commercial loan.

@Account Closed


I too am looking for investment areas. I feel that I need to look outside my own city as the local market here in Saint John seems confused. There is a lot of inventory for sale. High vacancy rates and high prices yet properties stay listed for long periods of time. There does not seem to be a lot of buyers investing right now but the sellers are not adjusting and are holding out for higher values. To me it seems that it should be a buyer market yet the sellers are treating it as a sellers markets. It does not seem to follow the normal supply and demand metrics I understand from economics.

If someone who knows the Saint John or the wider New Brunswick market wants to comment on the above I would love to hear their impressions.


I am totally new to this and I am at the preliminary stages so I will just tell you a little of what I am doing.


Step 1 Create list of cities/towns you may be interested in

I am using statistics such as entrepreneur friendly cities, cities with increasing average wages and a list of areas I think may hold promise or which I have personal connection.

This document from the Canadian Federation of Independent Business lists top cities for entrepreneurs.

https://www.cfib-fcei.ca/cfib-documents/rr3307.pdf


Step 2 Narrow your results by finding cities that have favorable economic indicators

This Wikipedia page has resource links to various websites (many banks and government) that discuss the housing affordability index. Basically how easy is it for people earning average wages to afford an average home.

http://en.wikipedia.org/wiki/Affordability_of_housing_in_Canada

Use Statistics Canada to find areas with increasing average incomes. I will not list here as there are charts for several different parameters such as by province and industry.

Use demographics and other stats here http://www.statcan.gc.ca/tables-tableaux/sum-som/z01/cs0007-eng.htm to find tons of data to narrow your search.

Step 3 Look at other criteria such as migration trends, transportation infrastructure improvements, look at outlying areas of boom towns, areas that attack business startups and jobs, and areas that are transitioning from one economic class to a higher class (gentrification).


Of course this is just a start to create a qualified list of potential areas to invest. The next step would be to start evaluating properties in those areas.


Good luck


US Data

http://www.realtor.org/infographics/infographic-metro-area-prices-affordability-q4-2013

http://www.demographia.com/db-nahb0001r.htm


Originally posted by @Dale Plant :
@Tabatha Lomov


I too am looking for investment areas. I feel that I need to look outside my own city as the local market here in Saint John seems confused. There is a lot of inventory for sale. High vacancy rates and high prices yet properties stay listed for long periods of time. There does not seem to be a lot of buyers investing right now but the sellers are not adjusting and are holding out for higher values. To me it seems that it should be a buyer market yet the sellers are treating it as a sellers markets. It does not seem to follow the normal supply and demand metrics I understand from economics.

If someone who knows the Saint John or the wider New Brunswick market wants to comment on the above I would love to hear their impressions.


Dale:

We have been looking at uptown Saint John since last summer. Part of phenomenon you describe can be attributable to owners expecting prices to rise due to the speculation over the bitumen pipeline coming to the City and the corresponding refinery and port expansion.

We have also observed that many of the "owners from away" of the 5-10 unit properties we have examined, bought them during the period when it looked as though the second refinery was to be built. These folks overpaid for the properties they have and are trying to get out with most of their skin in-tact. Many of them are not real motivated (yet).

That said, there are possibilities in the north (west of Pitt) and south west (west of Carmarthen and no further south than Queens Square) of Uptown. The key is patience and not being troubled by making an offer 20 - 30% below asking price.

@Roy N.

As always you provide the best advice. Before reading your post I came to the conclusion that my confusion over the Saint John market was a result of how I was looking at the market now and not within historical (recent) context. Your explanation is right on and explains a lot.

I am going to Fort McMurray next month but plan to keep looking at Saint John for opportunities so patience I have and bidding down is no problem. I will also keep eye on Fredericton and Woodstock, NB as I have personal connections to these areas. So if I can make something work there that would be my preference although I will not be investing emotionally (I hope).

I will check that building out.

Thank you

@Nathan Boulet

No, nothing yet. There haven't been any new properties lately. The ones on market (in decent areas) are priced too high for the rents. I'm considering a duplex. Although the cash flow will be lower, it'll be a good place to start. I would like to go bigger (8+ plex) sooner, but need to get my feet wet with something not too scary!

I also haven't had much time, because I take care of my kids full time. My plan is to look more aggressively in St. Catharine's and elsewhere once they start school this September.

Thanks for following up :)

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