All Forum Posts by: Tom Stromar

Property manager is definitely the way to go for hands off REI. Outside the Vancouver market using the property manager is reasonable due to the lower prices. Two further thoughts:

1) Even though there is a cost you'll be amazed at the return on your time *not* spent. Just make sure the numbers support it

2) Interview, get referrals, and choose the *best* PM you can find. They all seem to charge very similar rates, you might as well get the folks doing the best job. It makes a difference.

Hi Arthur - we are currently working with some folks that are exploring the development of a medium MFR, once we have some idea of the construction costs, we can pass along the scope as an example

Hi Peter - I originally moved over to the island 20 years ago (pre-R.E.) and I'm glad I've found myself here as the prices have not skyrocketed like back on the mainland and while difficult compared to south of the border, one's still able to buy a simple rental and get a positive cash flow which, when combined with patience yields the ultimate dividend.

Nanaimo's definitely an interesting place with a number of parallel markets in play. From the original locals who can't understand why a house would cost more than 100K to the Vancouver commuters and more recently, the increased Asian interest.

For myself, I enjoy it as a Vancouver Suburb - downtown vancouver is only 15 minutes away on a float plane but there's no traffic and the R.E prices are 2/3's lower.

Aurther - I'm not sure if you've got a plan of any kind set out but I agree with the other folks you'll probably need to build or grow into that sort of generation off of the 100K. 

Even if you were to follow in our footsteps, you would be about 1400 a month (which I think is pretty good for the west coast)

Thought I would chime in about Nanaimo as it is my stomping grounds - after a peak in 2011 the prices were slowly deflating until the summer of 2013 (SFR down 8%, Condos down %20) at which point the trend reversed. Back then 5-6% cap was the norm. The flow of the market changed in 2015 - fewer listings, for more buyers, price appreciation accelerated markedly in the later half the year creating a new high. This has put quite a bit of pressure on the cap rates. The influx of people also drove down the vacancy rates and rents are creeping up a bit but there is a constraint there due to the nature of employment in the city.

Regarding 515 Campbell, it has some fairly significant challenges. The lower floor is entirely under height and the fellow that ran his GP practice hadn't done any improvements in decades. It's in 'total' need and is a *very* old building. It does have a lot of parking however. Commercial vacancy is quite high downtown Nanaimo as most of the businesses have clustered in the North end (although the city has a mandate to reverse this trend and has enacted no DCCs downtown, etc...)

A recent zoning change makes it possible to 'develop' a suitable SFR property to generating a 10-20% cash on cash return. This is what my partner and I are focusing on at the moment.

Hey Erich - good to hear things are going well : )

Hi Taylor,

Presently, there doesn't seem to be as positive an opportunity with basement suites. There is typically a negative return on the improvement at current market prices although you do end up increasing the return (rents increase about 33%). One note: turnover in the suites tend to be higher than average due to the sound / proximity issue. This can affect the upper unit a bit as well. Also, how to deal with yard space / privacy can sometimes be challenging.

Conversely,  a suitable property for carriage home installation can be found for 20 to 30% less than a suitable one and the rent differs only minorly for the 'main' unit.

Also - as mentioned earlier in the thread, the city is currently looking to formalize all suites to code. Gone are the days that you could 'slam' in an extra apartment for 10K given all permits, etc...

Yes - exactly, sewer, water garbage. Their bill is titled 'User Rates' at the top I think. If you're paying 4, the finance department has you marked as a 4 dwelling property.

There's a fellow named Mike' whom you will be indubitably working with at the City.

Here's an overview - in Nanaimo, prior to Feb 7, 2005, secondary suites were illegal. That day, they allowed for any existing suites to become 'authorized' which is different than 'legal'. Any suites constructed after that date can only be 'legal'. Further, both 'authorized' and 'unauthorized'/'illegal' suites will have a notice placed on title. Interestingly, if you have an authorized suite, the city won't shut it down but the notice is still kept on title to make everyone aware that it was not put in legally. Got that? LOL  

Anyway, while some people did opt for simply 'authorizing' their suites, with the contravention on title, it can be tougher to secure financing, etc... Banks tend not to like to lend on things that say 'BYLAW CONTRAVENTION'. So I *highly* recommend going the legal route, in many cases there isn't much difference but your mileage may vary.

As mentioned, city council has decided to initiate a crackdown. The process appears to work as follows. The finance department, who isn't directly involved, but is always ensuring that they get paid, look through ads, the MLS, etc... to see where suites may exist. Upon discovery, they begin assessing 'double user rates' (in your case it would be quad instead of double).

The inspection department crosschecks all the properties that have multiple user rates with any permits. If they don't find any, they send you a letter indicating that you've got a suite contrary to bylaw.

The other, and former, method of discovery was through public complaint.

Once you're 'in the system' (if you have that notice on title or quad user rates you're about to be 'in the system' it's inevitable at that point but may not happen for some time as they are understaffed incredibly) you'll be given the choice of removal, authorization in cases where it was constructed prior to 2005 or legalization.

Note, you may be in area where the zoning does not allow for your current density - if so, there's nothing you can do, you'll need to remove them. (I can look this up for you or if you've got a real estate agent you're using, they can. Full disclosure, I'm licensed myself)

To create a legal / authorized suite is simply addressing a laundry basket of safety items such as:

- fire separation between living units (typically amounts to thicker drywall, fire doors, etc..)

- interconnected smoke detectors

- bedroom windows

- proper plumbing ventilation

- separate controllable heat sources

- access to electrical panel controlling suite for tenant

etc..

One thing that I do NOT like about the new bylaws is that work must be outsourced to a licensed contractor. The issue being that in the past, a home owner, providing he met code would be able to work on his own place. With suites (any multi family really) this is no longer an option.

As far as removal goes, they usually get the stove wiring pulled, upper cabinets removed or remove 'functional' separation of the living units. So, a house could have two kitchens as long as there is not easy separation between them (door no good, open wall ok)

Are you paying 4x rates now?

Yes, my wife and I are currently working on building a portfolio of small ranchers and developing carriage homes in back. The returns are *quite* good relative to normal rental investments. So instead of say a 5% cap rate, one can achieve over 10 fairly easily. Our current project is estimated to be 15%.

Just a note, there is a directive from city council to crack down on unauthorized suites where as in the past there were dealt with on a complaint basis, now, they have a department (albeit immensely short staffed) dedicated to the task

Heh, actually the surrounding area is *quite* good. It's simply Rosehill and Bradley that have been a bit run down the last while so I think that's a good thing.

Also, there a number of active permits for redevelopment on those two blocks - let the gentrification begin!

Just a note - believe it or not some of the smaller houses on those two streets don't have foundations :p