All Forum Posts by: Stevo Sun

 Thank you Stevo! Truly appreciate your input as an investor in Calgary. Question; how have the rate hikes affected the local market/perspective in Calgary both for newcomers and those seeing their mortgage payments increase? Are sellers less willing to let go due to costs of a new mortgage? Is there a significant fear of defaults forcing sales? 

Great idea: let's review a student rental next to University of Toronto as an example. Those go for $1.5-$3 million. Let's see what $1.5M smaller place would look like. I am actually curious.

Canada does not allow 5% down on anything >$1M, it must be 10% down then (only $500k purchase qualifies for 5% down). Any mortgage has to have 20% down, otherwise the mortgage must be insured with our government agency at a cost of 4% of the mortgage amount (think of it as Freddie or Fannie). For the example sake lets imagine that 5% is allowed.

On a $1.5M purchase we are looking at $75k down (5%) and a loan of $1.425M which means 4% * $1,425,000 = $57,000 will be added to the mortgage balance as a mortgage insurance. Round it off to $1.5M total loan after all said and done. 

Mortgage payment alone on $1.5M is $9500/month. Taxes will be around $1000, insurance another $300. Say we are talking $11,000/month cost to carry without vacancies, maintenance, issues with tenants that may not pay rent (eviction takes 8 month easy around here). Of course the place is rented from day 1 with no empty time to find tenants. 

On revenue side I see a 3-bed basement in that area renting for $3600. That would leave us another $6k for upstairs which I also see up for rent in the area. Say we net out $9-10k. That's again, no maintenance, no vacancy, no bad tenants, not living in it yourself, all runs smoothly. 

In that case we are down $1-2k per month which we can recoup through mortgage paydown. Sounds like a zero-sum game bet on appreciation. Which is ok for some people and may not be ok for a student without savings who also needs to live somewhere else (we rented the whole house). Also keep in mind that we looked at $1.5M home while rentals that I found were likely in $2.2M range. Those houses are 100 years old. Likelihood of something going wring from capital expenditure perspective is huge. And that's a student rental with all its usual maintenance issues that we can think of. And he is self-managing this property spending his time. And tenants pays all utilities. I am almost writing it in a sarcastic tone since most of the assumptions above will go out the window in a real world in my experience.

Again, nothing necessarily wrong with the overall approach. However I wouldn't count this as an opportunity, and certainly not for a new student who has no experience, no cash and no credit.

Thoughts on the above?

I don't think there's a single source to get good deals. But the most accessible is obviously the MLS. You can look at Zillow, Realtor.ca, etc to filter through the listings. I'm in Calgary and the best deal I got was from the MLS. I have also bought from a neighbor and such but unless you have some boots on the ground, your best bet would be finding a realtor you like and/or search the MLS.

Does anybody have an idea on the best places in Canada for a new real estate investor to start out? I have heard Calgary is a good place because of prices but does anybody have any insight on where you can get the best deals?

Thanks Stevo. Yes, that all makes sense and is how our mortgage broker has explained it to us as well. 

we may have to go the route of finding a co signer possibly. Or  just continue to save $$$, for a bigger dp.  

Or maybe do something in a partnership with someone! We work in construction, so we can do all the work and we can also bring funds. I also excel in design/ decor... so we have a ton of skills to offer a partner. That may be the next step! 

Hi here, 

I'm new to BiggerPockets and joined this community after reading the book about rental investments. 

I'm keen to try and want to invest in Edmonton. I wanted to connect with locals (I'm Canadian living overseas now) and to learn about the housing market there!

Cheers,

Fiona