Interesting. Having never purchased anything over 250k (I bought a six plex for 150k, my highest price ever) I didn't know that things scaled up like that. Thanks!
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
8y
@Sheldon Whalen
there are novice investors out there like my neighbor who would be ok with a deal like that. rent carrying the mortgage, maintenance fees and taxes including praying to the heavens that the condo appreciates. you build equity that is useless until you sell.. for me cash flow is key and nobody can take it away from me no matter how the market turns.. another thing is to trade a 200k debt for that kinda return..
again a lot of novice investors are doing this and are comfortable. pros don't weigh the cons for me
Fort Mcmurray Alberta, Canada · Member since 2017 · 26 posts · 3 votes
8y
Awesome thanks that's what I was thinking to the ROI is very small I'm looking for good deals not necessarily trigger happy just to say I invested in a bad deal
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
8y
Not sure what the laws are in your local but here in Ontario, the land transfer tax is not trivial; 2% for most of Ontario and 4% in Toronto of purchase price. If it applies, make sure you account for it as in your example it would be $2,700 or even $5,400 extra.
Fort Mcmurray Alberta, Canada · Member since 2017 · 26 posts · 3 votes
8y
Awesome thanks the gentleman I spoke to with their company said it would be a 7-16% Net ROI & in this example its 1.3% Gross and 0.7 Net ROI ? Correct?
Fort Mcmurray Alberta, Canada · Member since 2017 · 26 posts · 3 votes
8y
Hey quick question the guy I'm doing a analysis on his deal for the turnkey company he's saying I should put the mortgage pay down ($399) each month into the ROI to me that doesnt seem right ? The Net ROI goes from .74 % to 5.5 %. But I don't like banking on appreciation for my return seems alot like speculation I'm looking for cash flow
Investor · Toronto, Ontario · Member since 2014 · 148 posts · 34 votes
8y
hes a salesperson id stay clear - this is not sound investment at all IMHO
inbox me .. I close on a house May 14 in Ontario 1 hr from GTA , I spent 20K more than your price and my rent will be $1900/month. Property management fee 4%? That's lowest ive ever seen
Vacancy of 5% calculation .. put it at 10%. 5% means once every 2 years your empty for a month ... hmmm, suddenly your empty for 2 months or non pay 2 months and you need 3 years cash flow to make it up ?!?!
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
8y
@Oren K. land transfer tax in Ontario is only 1% minus $250. Toronto has a premium that I have no experience with, though I've heard it is simply double.
@Hai Loc You said that there is no cashflow in major Canadian cities, but I think that depends on your definition of major. London is nearly 400k people and there's plenty of cashflow to be had here.
@Account Closed I know we spoke via PM, but now that I see the details... yep, that deal stinks. Cash on Cash does not include paydown, but ROI does. However, if you're talking ROI with mortgage paydown, then you need to actually put an end-date on it and include the cost of sale as an expense... though we might then be talking about IRR rather than ROI.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
8y
Originally posted by @Account Closed:
Hey quick question the guy I'm doing a analysis on his deal for the turnkey company he's saying I should put the mortgage pay down ($399) each month into the ROI to me that doesnt seem right ? The Net ROI goes from .74 % to 5.5 %. But I don't like banking on appreciation for my return seems alot like speculation I'm looking for cash flow
Sounds like an effort to puff their numbers for marketing purposes. Servicing your debt should not be misconstrued as increased return from operations.
Fort Mcmurray Alberta, Canada · Member since 2017 · 26 posts · 3 votes
8y
@Hai Loc Like you said "for me cash flow is key and nobody can take it away from me no matter how the market turns" i am novice but I'm not willing to lose money like warren buffet said
"Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1."
I'm looking to grow my cash not lose it because i just want to say i have a rental property. I'm much the same mindset with the cashflow, Appreciation is the cherry on top.
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
8y
The key, in my opinion, to not losing money is to buy right.
You should be able to call a realtor to list your property the day you buy it and come out break-even or better despite legal fees, utility hookups, holding costs and realtor commissions.
This is a hard requirement of any purchase I make now.
I don't consider London as a major city nor Hamilton nor Barrie nor Windsor.. There are solid cash flow in those as mentioned cities vs cities over 1m+ population.. somehow CBRE combined London and Windsor as a combined market which to me doesn't make sense based on proximity of the 2 cities..
But the cap rate at 6% is excellent for London. I have always considered London as a college town. I know a number of people from there that moved to Toronto. Is it still a college town?
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
8y
@Hai Loc I agree that it is silly to combine two cities that are 190km apart. I would not pigeonhole London as being a "college town", though obviously UWO and Fanshawe are a major presence. There's plenty of other industry going on here, especially in medical and technology, and still to a solid degree manufacturing. These are vague statements, I understand.
6-cap is fair for on-market, performing commercial buildings in London. Some locations may be sub-5, occasionally 7 but that usually indicates distress, I think. Real active investors can do a lot better than that, and the surrounding areas are ripe with better opportunity.
Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
8y
...My most recent residential acquisition in an area of London that will be seeing gentrification in the next ten years is currently sitting at an 11-cap.
The ROI and CoC are infinite because it was a BRRR with more money in my pocket after refinance than before I started.
Effective January 1, 2017, the tax rates for land transfer tax will depend on the date of the agreement of purchase and sale.
If an agreement of purchase and sale is entered into after November 14, 2016, and registration or the disposition occurs on or after January 1, 2017, the tax rates on the value of the consideration are as follows:
amounts up to and including $55,000: 0.5%
amounts exceeding $55,000, up to and including $250,000: 1.0%
amounts exceeding $250,000, up to and including $400,000: 1.5%
amounts exceeding $400,000: 2.0%
amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.
and yes Toronto is double.
Not sure about prices in London, Windsor, Hamilton or other locations but in Toronto, just the land value of a lot in most cases will be much higher then $400,000.
Interesting. Having never purchased anything over 250k (I bought a six plex for 150k, my highest price ever) I didn't know that things scaled up like that. Thanks!
Specialist · Montreal, Québec · Member since 2017 · 19 posts · 6 votes
8y
You echo a lot of my feelings but I beg to ask, where are you seeing properties that properly cashflow in Canada. I assume you're looking outside of major cities?
there are novice investors out there like my neighbor who would be ok with a deal like that. rent carrying the mortgage, maintenance fees and taxes including praying to the heavens that the condo appreciates. you build equity that is useless until you sell.. for me cash flow is key and nobody can take it away from me no matter how the market turns.. another thing is to trade a 200k debt for that kinda return..
again a lot of novice investors are doing this and are comfortable. pros don't weigh the cons for me
...My most recent residential acquisition in an area of London that will be seeing gentrification in the next ten years is currently sitting at an 11-cap.
The ROI and CoC are infinite because it was a BRRR with more money in my pocket after refinance than before I started.
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
8y
Originally posted by @Account Closed:
You echo a lot of my feelings but I beg to ask, where are you seeing properties that properly cashflow in Canada. I assume you're looking outside of major cities?
there are novice investors out there like my neighbor who would be ok with a deal like that. rent carrying the mortgage, maintenance fees and taxes including praying to the heavens that the condo appreciates. you build equity that is useless until you sell.. for me cash flow is key and nobody can take it away from me no matter how the market turns.. another thing is to trade a 200k debt for that kinda return..
again a lot of novice investors are doing this and are comfortable. pros don't weigh the cons for me
Seems like Matt shed some light of how London is. Roy N. mentioned there are duplexes for 25-30k a door in the east coast so I expect the returns to be decent. Barrie Hamilton Windsor are places that returns appear to be stronger..
Lender · Toronto, Ontario · Member since 2018 · 22 posts · 11 votes
8y
These are pretty typical numbers in Toronto even with the interest rates we have now. It unusual to have a condo purchase cash flow unless the down payment is ridiculously large. There was an article in April about almost half of all condo investors not being able to cover their mortgage with the rent they are getting.
Having been an auditor in a previous career, I've never been a fan of them especially later in their life cycle.
I agree with Matt in that the cash flow properties are outside of the GTA. Most seem to prefer Southwest Ontario but there are good opportunities east of the GTA as well.
I don't see the situation in the GTA getting any better either. Housing shortage, stress test and higher interest rates are a toxic combo. Will be many years befor the housing shortage mess is cleared up if at all.
These are pretty typical numbers in Toronto even with the interest rates we have now. It unusual to have a condo purchase cash flow unless the down payment is ridiculously large. There was an article in April about almost half of all condo investors not being able to cover their mortgage with the rent they are getting.
Having been an auditor in a previous career, I've never been a fan of them especially later in their life cycle.
I agree with Matt in that the cash flow properties are outside of the GTA. Most seem to prefer Southwest Ontario but there are good opportunities east of the GTA as well.
I don't see the situation in the GTA getting any better either. Housing shortage, stress test and higher interest rates are a toxic combo. Will be many years befor the housing shortage mess is cleared up if at all.
A local investor I know has 1 unit in prestigious towers in Montreal. He pre-bought the 2nd and 2rd phases already. His rental income does not cover the expenses of running the property. His sole saving grace is the hope the appreciation kicks in to high gear and the principal payback. He has been forced to resort to Short term rentals in order to cover his mortgage. It's nuts why would anyone invest in these is beyond me.
Lender · Toronto, Ontario · Member since 2018 · 22 posts · 11 votes
8y
Originally posted by @Account Closed:
These are pretty typical numbers in Toronto even with the interest rates we have now. It unusual to have a condo purchase cash flow unless the down payment is ridiculously large. There was an article in April about almost half of all condo investors not being able to cover their mortgage with the rent they are getting.
Having been an auditor in a previous career, I've never been a fan of them especially later in their life cycle.
I agree with Matt in that the cash flow properties are outside of the GTA. Most seem to prefer Southwest Ontario but there are good opportunities east of the GTA as well.
I don't see the situation in the GTA getting any better either. Housing shortage, stress test and higher interest rates are a toxic combo. Will be many years befor the housing shortage mess is cleared up if at all.
A local investor I know has 1 unit in prestigious towers in Montreal. He pre-bought the 2nd and 2rd phases already. His rental income does not cover the expenses of running the property. His sole saving grace is the hope the appreciation kicks in to high gear and the principal payback. He has been forced to resort to Short term rentals in order to cover his mortgage. It's nuts why would anyone invest in these is beyond me.
The saving grace for Toronto condo owners *that bought a few years ago* is the fact that they still usually cash flowed a bit but are now benefiting the sky high prices of SFD and semi homes. Town homes owners are also benefiting from it as well.