Would you invest at these numbers? (Halifax NS)

Question

Freehold property $340k - rents at around $2000pm. Property taxes $300pm.

What's going on with Halifax? Crazy bidding wars everywhere and rents are through the roof! For average incomes here, rents are way too high!

I'm not sure if I should wait until fall or just jump in if the numbers make sense!

Joel Armstrong · Answer

There is development on every end of the city in Saint John, NB and the surrounding communities. It may be worth a call to a seasoned realtor who is familiar with the city and has experience with multi family properties.

I just purchased a 4 unit and had people show up at the property asking to rent before it is even ready. There is tons of growth here right now.

Yuan He · Answer

@Jasmine May Hey there, I am in Halifax and things are hot here. But have you considered investing in surrounding areas like windsor, truro, kentville ? I recently just bought a duplex in Kentville and so far it cashflows 1000+ a month. And a lot of properties there perfectly meets 1% mark. Of course, if you are also thinking about buying with potential to appreciate, then Halifax is surely a great market for that.

Theresa Harris · Answer

@Jasmine May  If you are afraid of missing out and want to get in on the action-then sit back and think about what you want to do.  Channel that vulcan logic as it will serve you well.  I have two condos and two SFH and honestly the SFH are the better option.  Condo fees eat up a lot of your cash flow and while both of my condos are well run, I've had one before that wasn't.

Some people like university rentals.  Where I am courses are online in the fall, but 60% of the students say they are returning to town anyhow.  I like the stability of non-student rentals, plus students are often living on their own for the first time and that can create more problems (eg dish soap in dishwasher).

Take your time to look at places.  Are there any towns outside of Halifax with good rental potential that are less expensive?  You might find things slow down in the winter, but it will also be harder to find tenants  in the winter.  Ideally you could find something in Jan-Feb and have closing March or April when things start to warm up.

Account Closed · Answer

If it helps, we are also sitting on a pile of cash waiting for the right opportunity.  With $500k, you can get into mid-sized MF deals and get a much better return than buying a SF home.  There will be opportunities when the financial realities settle in.

"LOGICALLY speaking, I shouldn't be investing now."... now you've answered your own question. REI is about logic and numbers NOT emotion (which is how homeowners buy).

Account Closed · Answer

@Jasmine May  have you accounted for utilities (water/sewer), repairs, property management?  Estimating all of these (I don't invest in Halifax and therefore don't have these dialed in) the property doesn't make sense for me (note that I also don't buy SF residential). If you are happy and confident with your numbers, that's really all that matters.  As noted by @Theresa Harris, don't overpay for FOMO (fear of missing out).   Good luck!

Account Closed · Answer

@Jasmine May  This property isn't going to cash flow, even if the tenant pays utilities so, no, I would not personally invest in this property.

Spencer Riche · Answer

I would also pass on this property unless you increase the income. I've found the 1% rule on income and 50% rule for expenses to be quite accurate for a quick analysis. I agree with the previous comments that this property would not cash flow.

Few expenses missing assuming SFH:

Vacancy

Utility cost - Heat, Electricity, Water/Waste? (even if tenants pay, you should factor some cost during turnovers or for when you get stuck with the bill).

Insurance

Taxes - Depending on location, taxes will reset to purchase price. For example, in Saint John, NB, the taxes will reset at 1% of the transaction value.

Property management  - 10% of gross rents (even if self-managed, your time has to be valued)

CAPEX - 5% gross rents

OPEX - 5% gross rents

Snow/Lawn (who's responsible)

Bookkeeping/Legal/Accounting

I would not buy on the fear of missing out, investors should be disciplined, you do not have to swing at every ball thrown. If you can't find any opportunities in your market, try searching in a different market!

Jasmine May · Answer

To be totally honest, it is FOMO. I am sitting on about $500k cash and bidding wars everywhere.  LOGICALLY speaking, I shouldn't be investing now. We are in the middle of a huge pandemic, low immigration, university students not coming back this year, CERB/mortgage deferrals ending soon. I think I should just see how this winter turns out.

BUT nothing is following logic these days.

Bidding wars in RE in the backdrop of huge unemployment and epic recession !! I am losing my mind!

Account Closed · Answer

@Jasmine May

In comparison the last one I bought out west here (April 2020) for $328k I put $37k in and it rents for $3200 monthly... so no, I certainly wouldn’t buy that unit.

James G. · Answer

@Joel Armstrong I’ll soon be looking to invest in the SJ area. I’d love to pick your brain about it.

Would you invest at these numbers? (Halifax NS)

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