12-Unit in Edmonton

kevinanthonyw

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Mar 13, 2019
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#1
Hi everyone,

I am a relatively new real estate investor from Richmond, BC. Since my first deal in the winter of 2017, I've focused on single family homes, taking on both fix and flip and buy and hold projects.

Looking to get into the multifamily space. Edmonton seems like a much better market to do so than the GVRD where rent control exists & cap rates are low.

I am looking for some input on a 12-unit in the McCauley area in Edmonton but am unfamiliar with the neighbourhood. Any feedback is much appreciated!

The suite mix is 10 bachelor units, one 1-BR, one 2-BR, with one commercial space. Bchlr suites range from 320-500 sqft. 1955 bldg w/ 3 garages.

Listed at $1m. Avg rent for the residential suites is $700 per proforma.

Thoughts?
 

ThomasBeyer

Senior Forum Member
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#2
Tread carefully in that area .. loads of junk .. both tenants and assets. Don’t overpay. Don’t overlever. Many a rookie MF investor has lost his shirt in Edmonton. 80/door might be an ok price depending on state of upgrades, age of roof, age of boiler etc .. it might just be waiting for a bulldozer to build a new building so separate land value from physical building. McCauley is ripe for redevelopment so close to downtown but it has a very rough edge to it and may take a decade or three to fully redevelop !


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ThomasBeyer

Senior Forum Member
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#4

Michel Lafleur

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Apr 30, 2015
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#8
Cherwan Manor?
Tough area to manage, and with mostly bachelor/1 bed suites, you'll have high tenant turn-over and lower rents.
Good if you're a local guy, and/or have a live-in property manager. Would be a tough one to just drop into a professional PM contact and make it work profitably.
 

Martin1968

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Jan 22, 2017
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#10
I have talked to so many out of province investors who bought based on god knows what info from whom, their first multi in Edmonton in these such areas and are now stuck and bleeding hard.

Don't walk from this deal, RUN!!
Tina, is there a ‘RUN’ score for this neighborhood as well........?
 
Likes: ThomasBeyer

alaas

Frequent Forum Member
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Apr 24, 2011
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Edmonton
#12
My two cents:

Mccauley is not for the faint of heart or newbie investors, I've owned a house in Mccauley for over 12 years, I see this area changing for the good, however the tenant profile is very rough, it was my first house and I have kept it only because I see the potential and the changes that have come in the last 10 years and have very little of a mortgage left. This area in my opinion will eventually be a good area, key word eventually, however in the meantime you will have lots of tenant turn over as well as higher turn over costs due to tenant damage and this tenant profile hasn't any money to cover damages etc, higher repair costs due to the tenant profile. A lot of houses are being torn down and expensive houses are going up so I think somebody knows something that I don't so that is one of the reasons I have kept the house, in the last two years some VERY nice houses have been built which has made me shake my head, houses built just a block or two from the soup kitchens even. If mortgage rules stay as tight as they are, homeowners will buy in the areas they can afford and fix them up and therefore change the area, many people still want the dream and those who aren't from here will not realize the areas history until after they've bought.

If you are okay with dealing with druggies, hookers, bums sleeping in the hallways, late rent or non payment of rent etc for a few years while the area eventually improves, then maybe consider it but only if it cashflows like crazy and you've accounted for a higher vacancy and repair etc costs, you are making good money on the buy or the terms are extremely favourable, also assume that you will manage it as was earlier pointed out, finding a manager will be very difficult.

If you are a newer investor it would be better to buy a more expensive building in a better area, even though cashflow may not be as high, your appreciation is better and time expended/wasted will be significantly less, Mccauley is a hands on area.

My tenants have stayed a long time, simply because I allow dogs and the location is decent, however prior to this tenant I used to take my German shepherd with me when I had to do repairs or deal with issues, I actually got locked in the house and had a drug dealer banging on the door to get to the old tenant as they thought she still lived there and she owed him a debt, thank god I had my German Shepherd (she's not so friendly)with me, the drug dealer didn't leave til the cops came. Very scary.

Eventually when this tenant moves out and the market improves I will sell the house and move the money to a better investment.

I have owned properties for over 12 years and the rougher areas can be very lucrative on the buy if you know your property prices, but to hold them they take a lot of your time whereas better areas require a lot less effort.

Lisa
 

Caleb West

Multi Family Commercial|Collaborative Office|
REIN Member
Feb 7, 2017
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#13
If you need a hand with things let me know , we have several commerical apartment units in Edmotnon and work as a rep for out of province investors.

My email is caleb@seedgroupcanada.com


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kevinanthonyw

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Mar 13, 2019
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#14
Really appreciate all the feedback and warnings! The property looked like it had a lot of value add potential but will likely steer clear now of the McCauley neighbourhood... at least on my first MF deal due to the tenant profile and high turnover that seem to prevail here
 
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CashProperty

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Aug 30, 2018
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#15
Hi Kevin, Sorry for the late reply. Although it sounds like you are walking (although many of the others advised you to run) from this deal, I would suggest you get the rent roll and expenses and learn to do your analysis on this property, as it will allow you to gauge a bad deal with a good deal. Does it have a reserve for the garage repair? Did you include a reasonable prop mgr fee?

Another thing to consider if you haven't already done so, is talk to a commercial mortgage broker and find out the considerations around unit sizes under 500. Also, at $1M, each unit is about $83K. Unless these units are high-end, $83K is high for bachelor. To put it into perspective, 3bd unit are ~$120K.

Lastly, you mentioned you are from out of town. Why Edmonton? The economy here could turn around in 1 year or it could be 5 yrs.