Ask Me Anything - Investing in Toronto AMA!

[Ming Lim]

Hi Folks!

Biggerpockets has always been a great resource for me, so I wanted to give back a bit to the community.

I understand that investing in Toronto makes me a bit unique amongst investors, so I wanted to open up the floor and answer any questions about investing in Toronto. A bit about myself. I started investing in student rental properties in 2001 in Waterloo and reached 21 doors at one point there. I also started investing in Toronto at the same time and in the last 7-8 years have almost entirely migrated my portfolio to Toronto. I did this because of a number of reasons: better tenant profiles, better returns, scalability, ability to execute more complicated renovations, local expertise, etc. Between and my business partners, we've invested in lots of areas, Hamilton, Waterloo, Sudbury and Edmonton - we've all ended back in Toronto. Of course, you can make money anywhere if you know what you're doing. This is just my personal journey.

I'll answer the number one question I get about investing in Toronto - Is it possible to get cash flowing properties in Toronto? - Yes! You can't expect to buy a single family property here in Toronto and rent it out and cash flow - it takes a bit more. We use a various strategies, but the most popular one we use is densification where we take single family homes and turn them into legal triplexes to get cash flow. It's not cheap or easy. Closing costs are around $300k and renovations can be upwards of $500k with holding costs. From closing to tenants moving in takes about 1 year. But we take a property from $1.2M and exit around $1.9-2.0M by the end of this process. If we hold after refi, we're getting about $500-600 in cash flow. 

Okay - let me know what other questions you have! I'm happy to answer!

Cheers,

Ming

[Amber C.]

Originally posted by @Ming Lim:

@Renee McGrady - Goodness - I forgot to reply to you! We've always approached investing by fundamentals. What does this mean to me?

1. 1) Major centers of employment and population - esp in a post COVID world. We won't be working from home forever and offices, malls, places of entertainment will all return one day. With that in mind, I would want to invest in an area where the local economy is as diverse as possible as there's a greater chance of buffered impacts to employment. 
2. 2) Transportation - the trend is away from people not owning their own cars. So public transit is key. Even for those that choose not to use public transit, you'll need a place well support by uber and the other drive sharing programs. 
3. 3) Tenant profiles - This is super key. Wherever you're buying you want to ensure you're getting GREAT tenant profiles. Responsible, young professionals are who we go after. I can write pages on why, but in general, we want tenants who'd rather eat Kraft Dinner and still make rent if they're short on money. We stay far, far away from what my business partner loves to call, the "beer and weed" tenant profile - people who will spend their money on beer and weed, and pay rent with whatever is left over.

Hope that helps!!

Cheers,

Ming

 Hi Ming! How can you decide if an area has good tenant profile or not?