advice for novice member: get going

jeanna

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Sep 15, 2018
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#1
Hi everyone - I am hoping to get your advice on how to best approach my current real estate goal.
Background info: I am 32 and do not own any property (investment nor primary residence). I met with a mortgage broker and have been assessed as qualifying for 400k mortgage. I have a stable income, 81k gross salary. I also have a decent savings/down payment of 200k (in great part from an injury settlement I recently received) and my parents are receptive to assisting me with up to an additional 100k (either towards my primary residence or towards a joint investment property with me or a portion towards both). I currently pay room/board in Richmond and work in downtown Vancouver. My immediate real estate goal is to acquire three properties within the next five years - with a buy and hold strategy.

As a novice in the arena, I am soaking up the REIN threads and reading up on all things real estate. I am learning a lot, but in all honesty, it is a lot to take in without the benefit of an experienced sounding board to provide advice or answer my questions.

This is where I'm hoping you can come in! I would appreciate your advice/insight on getting going on my investment goals - in terms of how to best utilize my funds and where to put down my funds (i.e.: in province/out of province) to achieve my real estate goals over the next five years.

Would really appreciate your experience and thoughts/strategy to get me going!

J.
 

ThomasBeyer

Senior Forum Member
REIN Member
#2
How much time, on avg, could you spend on finding, vetting and managing RE.

Are you open to other locations besides Lower Mainland, and if so where ?

Would you be ok in a house where the basement is rented to someone else ?

How far out would you consider for this given your work location ? Surrey ? Langley ? White Rock? Tsawwassen ? Burnaby ? NVan ?


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Matt Crowley

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Dec 14, 2013
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#3
I'd start by clarifying the 'goal'... most people want to make a x% return. So put the focus on that and not on a real estate goal. Who cares if it is 3 homes or 100 or 1?

PATH 1:
If you want ~10%. Buy and hold long term will probably get you there. Significant downside risk in Vancouver because current pricing has built in 5 years of 7% compounded growth.

PATH 2:
If you want to think about doubling or more your money, you need to become a developer. Best way to start is to become a greenfield builder and build a generic value product.

PATH 3:
If you want somewhere like 20% returns, you need to be doing deep value-add improvements. So renovations then lease up to market rates. Lots of churn.

So, think of where you want to be in the spectrum. Most REIN folks go for path #1 thinking they will get path #2 returns. It will not happen unless the market goes bananas. Path #2 and #3, start at 10,000 hours to get anywhere near acceptable level of good. Path #1 can be achieved with a weekend.
 

jeanna

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Sep 15, 2018
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#4
How much time, on avg, could you spend on finding, vetting and managing RE.

Are you open to other locations besides Lower Mainland, and if so where ?

Would you be ok in a house where the basement is rented to someone else ?

How far out would you consider for this given your work location ? Surrey ? Langley ? White Rock? Tsawwassen ? Burnaby ? NVan ?


Sent from my iPhone using myREINspace
Thanks for following up Thomas.
Yes, I am more than okay with a suite situation and also okay with other locations outside the Lower Mainland (Vancouver Island, Ontario, Prince George for example).
I am willing to do the work and on average have currently been spending approx. an hour/day reviewing properties, educating myself on how to understand/approach RE so understand that time would be applied to finding, vetting and managing RE.
I think you are asking about how far I would be willing to commute to work with your last question - I would consider North Vancouver. Burnaby and New Westminster per skytrain/sea bus accessibility. Tsawwassen, Ladner and White Rock - I would consider these locations if I am able to change my work schedule to an earlier shift to miss the worst of rush hour.

What are you thinking based on such?
 

jeanna

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Sep 15, 2018
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#5
I'd start by clarifying the 'goal'... most people want to make a x% return. So put the focus on that and not on a real estate goal. Who cares if it is 3 homes or 100 or 1?

PATH 1:
If you want ~10%. Buy and hold long term will probably get you there. Significant downside risk in Vancouver because current pricing has built in 5 years of 7% compounded growth.

PATH 2:
If you want to think about doubling or more your money, you need to become a developer. Best way to start is to become a greenfield builder and build a generic value product.

PATH 3:
If you want somewhere like 20% returns, you need to be doing deep value-add improvements. So renovations then lease up to market rates. Lots of churn.

So, think of where you want to be in the spectrum. Most REIN folks go for path #1 thinking they will get path #2 returns. It will not happen unless the market goes bananas. Path #2 and #3, start at 10,000 hours to get anywhere near acceptable level of good. Path #1 can be achieved with a weekend.

Thank you Matt. These are the type of questions I was hoping for. I am not on the developer path nor the flipping/renovating path. I want to be pursuing path #1 with the aim of ~10% return.

One of the stumbling blocks I seem to keep coming up against and that I am trying to get past when I review real estate listings (in and out of BC) is related to how much down payment will need to be put down. I have been going through listings and "working the numbers" (even if only for practice sake) so that I can be ready to act when something promising comes up, however, my 20% down payment doesn't seem to cover mortgage and associated expenses. I reviewed listings in Prince George, Duncan, Sarnia, Abbotsford most recently.
Could you give me your thoughts/advice on whether the reality is that I may have to put a greater down payment down or is it the case that I am not looking in the right areas to find/vet rental opportunities? I hope that makes sense. I know people act on opportunities every day and I am trying to understand where I'm going wrong, so that I can redirect myself in the right direction.
 

Matt Crowley

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#6
Vancouver is one of the most expensive cities on the globe with disproportionately low rents (CBRE). So pretty much nothing is going to cash flow there. There is a bit of a bubble mentality that it can only go up. It is a market priced for perfection, there is no upside left from what I have seen.

There is almost no hope at all of cash flow positive property in Vancouver right now, buying at today's prices...so you are doing your math correctly. There are essentially two pieces in return: income and appreciation. The income is measured by the yield = NOI / property price. Across Canada, the average is ~5.25%. In Vancouver, it will be below 2% using actual rents today... (and remember you are capped on your future rent increases now).

Multi-family properties should barely cover costs at 80% LTV (so 20% downpayment). At 70% LTV, you might get an annual cash yield of 3-5%. Better opportunities right now in Edmonton, Calgary, and Winnipeg. I would also consider select investments in Saskatchewan.

If you are interested in some hands-off options, send me a PM. We have a diversified strategy with a strong investment thesis, capturing the opportunity that is left in Canada and other select markets in US and Mexico.
 

Michel Lafleur

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REIN Member
Apr 30, 2015
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#7
Some great questions and advice on here already.

Its well known that cashflow with the standard 20% down is very difficult to find around Vancouver, especially from public sources such as MLS. You may find something like a pre-sale condo still under construction or a For Sale By Owner (FSBO) property that could work, but those are quite difficult to find.

If you are aiming to buy a primary residence in this process, Id suggest keeping your cost of living low, either by buying something modest, or by considering living in a property where you can offset your living costs by renting out the other portion.
For example, could you live in a garage or basement suite for a few years while renting out the main house? Your equivalent living cost would be lower "renting" your secondary suite. And down the road when it makes sense, you could move into the main house and rent out the secondary suite.

For your investment properties, I agree with the idea of exploring other markets such as Alberta. You will have more buying power (lower prices & more inventory to choose from), plus less restrictions on rent increases and better cashflow.
 

Joan12319

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Aug 21, 2017
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#8
There are other options to get into real estate investing more passively. Look into Epic Alliance Inc. in Saskatoon, Sask. They have a program called Hassle Free Landlord Program (HFLP). They have properties available to own that are already rented. They take care of absolutely everything. I hardly consider the 2 properties we own as rentals because it is so passive. We are seeing double digit returns. They offer 15% returns and cater to how you would like to receive the income, monthly cash flow or at the end of your term. They have a 2 year exit strategy so if you would like to do something different then you are not tied in long term. It is a great program and especially for new real estate investors. If you would like to chat more about HFLP or other options we have found then please contact me. Good luck.
Joan Latchuk
www.epicalliance.ca
 

jeanna

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Sep 15, 2018
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#9
Thank you Matt, Michel and Joan - this is great info and introduces me to some hands-off options I wasn't aware of, have noted your contact info. At this point in time - I would like to try to do something more hands-on and have taken up your suggestions to look at the Prairie cities. Much appreciate your advice and time in responding.
 

jeanna

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Sep 15, 2018
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#10
Also, going to look into options that might be available locally (i.e.: in Fraser Valley) for living in a room/suite and renting out the remainder of the home as you mentioned Michel... this would be an ideal way for me to take advantage of obtaining my first primary residence alongside the investment piece. Thx!
 
Likes: CorySperle

CorySperle

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Sep 1, 2010
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#11
This would be a good idea if this is your first property, a mortgage helper with a suite, and get your feet wet to decide if land-lording is for you. This is how many investors, including myself got started 18 years ago.
 

ThomasBeyer

Senior Forum Member
REIN Member
#12
There is no rush. I’d start with my own personal residence in a location that suits your lifestyle. If a TH, duplex or house even then you can sublet. However a $500,000 asset in the Lower Mainland is likely a condo and as such, tough to sublet without inconveniencing your own life style. Plenty options here to buy, old, new, pre-sale, wood frame or concrete.

So the next best option then is to continue renting locally and buy in other markets, say Victoria, Edmonton or S-Okanagan.

Some ideas here, 3 our of many options, to buy and rent sub $400,000

REIN members Robert McLeod and Andrew Schulhof are offering this in Edmonton http://www.solaraliving.com/solara-at-skyview/ or http://andrewschulhof.com/properties/

REIN member David Steele of Western Wealth, via his affiliated firm Investment Realty led by Cynthia Aspen, sells this right now in Langford, near Victoria https://www.vancouverrealestatepodc...n-canadian-properties-group-with-dave-steele/

We had a cancellation in our small TH project in Oliver. Those sold in the low 300’s a year ago. Now listed for $389,000 .. www.oliverlanding.ca