Where should I buy in Canada

Question

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

Roy N. · Answer

@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}.

Account Closed · Answer

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

Account Closed · Answer

@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 :)

Account Closed · Answer

@Dale Plant

I have tons of information on evaluating a property, it's finding the area that's been stumping me. This is a good place to start.

Thanks!

Account Closed · Answer

@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 · Answer

Thanks Dave, I just saw your other posts in GTA areas. I may take you up on the offer! Niagara looks promising.

Account Closed · Answer

Thanks. I never considered Niagara.

@Ajay Kahlon

How do I understand the market before I jump in? Is there a section on BP about learning areas where you want to buy?

Dale Plant · Answer

Tabatha L.

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

Ming Lim · Answer

Tabatha L. - 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!

Nathan Boulet · Answer

Just Curious Tabatha, did you end up finding a nice property somewhere yet?

Where should I buy in Canada

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