Hamilton vs KWC purchases

[andrewi]

Hi all,

I`ve just started to read this forum regularly and the stuff here is great. I am now starting to invest and was originally looking at 3-plexs in KWC but then I came across 5-12plex in Hamilton that are 30% higher in cost. I remember reading some threads here that rightly mention that the returns should be better when you buy in bulk.

However, my broker is saying that Hamilton properties are not appreciating and I was wondering how I can find out if this is true? I read Campbell`s book `top 10 places to invest in Ontarion and hamilton was around #5`. I also read somewhere that you shoudl buy for `Income` not `Appreciation` but would both not be better?!

Also, should I have any specific concerns about the age of the property? is there anything like too old?

Any advice is appreciated...as you can see I have a lot of questions...trying to make a decision.

Thanks a bunch,

Andrew

 

[housingrental]

If I were in your position I`d not purchase either

Triplex`s in KWC and smaller multi-plex`s in Hamilton are extremely costly and offer a low return. With standard financing you`ll have a hard time remaining cash flow positive after taking care of repairs etc.

Although taking action is important, doing it from a position of knowledge so you have an increased likelihood of being setup for success is important.

I`d recommended you spend more time developing an expertise in these markets and getting setup with a good investment Realtor in the area you decide to focus on and viewing many properties.

As for age of the property you want to factor in the amount of deferred maintenance to ensure that you:
a) Have enough cash available to cover repairs needed after close
b) You have a good understanding of what $$ in will be needed on an ongoing basis and in the future.

 

[andrewi]

Thanks housingrental....I looked at properties in Toronto, Oshawa, hamilton, chatham and now KWC but the most I seem to be able to get as net cash flow is about $200. IS that good and I just wait for appreciation? A triplex or lager multi-family seem to be the only ones to cash flow with a 10% down? I guess soon I`ll have to do 20% anyhow.

When you mention expertise in these markets what kind of knowledge are you referring to?


spoke to a realtor in Hamilton today and he said the $300k 9-lexes were al in `bad` areas...lots of addicts as tenants... except for 1 which had an offer on it...guess its back to waiting..

does anyone know of a good investment realtor in KWC?

Thanks for all the advice..

Andrew


QUOTE (housingrental @ Feb 19 2010, 03:38 PM) If I were in your position I`d not purchase either

Triplex`s in KWC and smaller multi-plex`s in Hamilton are extremely costly and offer a low return. With standard financing you`ll have a hard time remaining cash flow positive after taking care of repairs etc.

Although taking action is important, doing it from a position of knowledge so you have an increased likelihood of being setup for success is important.

I`d recommended you spend more time developing an expertise in these markets and getting setup with a good investment Realtor in the area you decide to focus on and viewing many properties.

As for age of the property you want to factor in the amount of deferred maintenance to ensure that you:
a) Have enough cash available to cover repairs needed after close
b) You have a good understanding of what $ in will be needed on an ongoing basis and in the future.

 

[Gen1GT]

When you`re renting, who cares what a "bad" area is? If you look at the vacancy rate for the area, cap rate for the area and appreciation for the area, who cares if there are crack addicts there? That`s why you have property managers...

 

[mflynn]

QUOTE (andrewi @ Feb 19 2010, 08:36 AM) Hi all,

I`ve just started to read this forum regularly and the stuff here is great. I am now starting to invest and was originally looking at 3-plexs in KWC but then I came across 5-12plex in Hamilton that are 30% higher in cost. I remember reading some threads here that rightly mention that the returns should be better when you buy in bulk.

However, my broker is saying that Hamilton properties are not appreciating and I was wondering how I can find out if this is true? I read Campbell`s book `top 10 places to invest in Ontarion and hamilton was around #5`. I also read somewhere that you shoudl buy for `Income` not `Appreciation` but would both not be better?!

Also, should I have any specific concerns about the age of the property? is there anything like too old?




Hi Andrew, I am a long term investor in Hamilton. In the past 5 years, we have purchased 10 properties all of them cash flowing profitably.

Hamilton is a great place to invest, but can be tricky.

I have conducted a number of "mentor" days in Hamilton with other REIN members. All of them have felt that it was beneficial and a few have gone on to purchase their own positive cash flow properties in Hamilton.

If you`re interested in hearing more, email me at [email protected]

In fact, I`m conducting a mentor day today and another one next Sunday... it`s definitely a good time to be purchasing in Hamilton.

Cheers
Mary


Any advice is appreciated...as you can see I have a lot of questions...trying to make a decision.

Thanks a bunch,

Andrew

 

[andrewi]

Hi Gen1GT,

That`s exactly what I told the realtor...if I got a property manager would they not handle the collections..he said even they cannot get some tenants to pay...I am just wondering now if he was trying to keep me away from some of the other properties...not listed by himself...

Andrew

 

[manojsingh]

Hi There,
In hamilton bad area means non payment of rent, less appreciation, more management required, more maintenance issue. Where ever you are considering drive there in night and then decide.There is a reason that those properties are cheap. If you fix those problems thats great. Its all depends on your choice. Thanks

 

[housingrental]

Gen1GT`s post gets my vote for the worst and most dangerous of the year

1) You`ll never hit expected cap rates for those area`s. Actual maintenance costs, occupancy, and collection don`t ever come close to expectations. Repairs and expenses relating to evictions and LTB running at $3000++ / unit / year. Often huge deferred maintenance to deal with as often older buildings that have been beaten up without enough $$ being put into them on an ongoing basis. Occupancy and collection are sub 80% for many of these buildings. I`ve seen listed cap rates of 8% turn into actual cap rates of less than 0% - Ie owners actually losing money even after adding back finance costs.

2) You`ll have a very difficult time find quality management for these types of properties. In certain towns I`ll go so far as to say YOU CAN NOT FIND A SINGLE ADEQUATE PROPERTY MANAGER TO SERVICE YOUR NEEDS.

This is the business for:
Land banking
Experienced and gritty self managing landlords that are experts in their particular location and property type who were able to purchase it for dirt cheap... ie 1994 prices not 2010 prices...for top quality buildings.

ie NOT a desireanle investment for 99.9% of people


QUOTE (Gen1GT @ Feb 20 2010, 12:22 AM) When you`re renting, who cares what a "bad" area is? If you look at the vacancy rate for the area, cap rate for the area and appreciation for the area, who cares if there are crack addicts there? That`s why you have property managers...

 

[housingrental]

If you only have 10% down I`d suggest a multi-plex in Hamilton or KWC is a TERRIBLE property choice for you for your first investment. You will be putting yourself into a position for potentiall lots of pain and stress.

Why not townhouse to start? Then buy second one and third one soon after once everything moving well? Or wait until you have more funds together?

Expertise in these markets - Ie do you know what the difference in tenant profile, occupancy, rent, rent collection, etc. is from one part of a street to another? Do you know what changes in the operating environment are expected 1 month or 4 years out for that particular area?

Your realtor in Hamilton - Seems to have given you some good advice. Except that one property that is good that is conditionally sold 9/10 will not actually be good.

Realtor in KWC - Yes. Please email me through my website to discuss further.

QUOTE (andrewi @ Feb 19 2010, 11:58 PM) Thanks housingrental....I looked at properties in Toronto, Oshawa, hamilton, chatham and now KWC but the most I seem to be able to get as net cash flow is about $200. IS that good and I just wait for appreciation? A triplex or lager multi-family seem to be the only ones to cash flow with a 10% down? I guess soon I`ll have to do 20% anyhow.

When you mention expertise in these markets what kind of knowledge are you referring to?


spoke to a realtor in Hamilton today and he said the $300k 9-lexes were al in `bad` areas...lots of addicts as tenants... except for 1 which had an offer on it...guess its back to waiting..

does anyone know of a good investment realtor in KWC?

Thanks for all the advice..

Andrew

 

[housingrental]

Hi Andrew

It sounds more likely the opposite of your suspicion - He`s trying to setup you up for success.
An (admittedly awkward) analogy I can give you is this:

Your a first time home buyer looking for your first home and will have only a few thousand cash left after purchase and don`t have any handyman skills. Your willing to take on something that isn`t perfect and you can repair yourself over time. A property comes up for sale that seems to be how much you can afford, and $50 000 less than similar properties normally sell for so you think its a good deal and want to buy it. Your realtor cautions you not to as it needs structural, electrical, plumbing, and other repairs that you don`t have the skill set to do your self. These repairs will cost $80,000 to get done if your hiring workers to do them ie more than the discount your buying it for and way more than you can afford. In other words what seems like a great purchase is a terrible purchase.

Your situation is potentially even worse as it`d be equivalent to you might not be able to find a single worker who can adequately do the job you need done - imagine being out in north western Ontario 3 hours from the closest trade with sufficient skills and having to do it yourself.


QUOTE (andrewi @ Feb 20 2010, 09:30 AM) Hi Gen1GT,

That`s exactly what I told the realtor...if I got a property manager would they not handle the collections..he said even they cannot get some tenants to pay...I am just wondering now if he was trying to keep me away from some of the other properties...not listed by himself...

Andrew

 

[housingrental]

Manoj is a smart man
Don`t confuse his post though with Gen1GT`s post though - You aren`t going to be able to fix the bad area - Just the poorly managed property in the good area

QUOTE (manojsingh @ Feb 20 2010, 10:06 AM) Hi There,
In hamilton bad area means non payment of rent, less appreciation, more management required, more maintenance issue. Where ever you are considering drive there in night and then decide.There is a reason that those properties are cheap. If you fix those problems thats great. Its all depends on your choice. Thanks

 

[JoeRagona]

QUOTE (Gen1GT @ Feb 20 2010, 12:22 AM) When you`re renting, who cares what a "bad" area is? If you look at the vacancy rate for the area, cap rate for the area and appreciation for the area, who cares if there are crack addicts there? That`s why you have property managers...

To me, investing my hard earned money into these areas you suggest is not a great idea. Property Managers can only do so much and if you know going in that you are in an area with drugs or the tenant profile you suggest, you will not only have large maintenance issues (which will ultimately cut into your cash flow), eviction challenges, rent collection problems and low appreciation. Let alone trying to find a manager who wants to deal with all of that.

I think for sophisticated investors, it comes down to purchasing properties that they themselves would live so they can benefit from all of the fundamentals in our systems.

 

[BenSanderson]

Hi Andrew,

If you`re interested in investing in KW-Cambridge, you should check out our monthly Investor Meetings that we hold at Williams Coffee pub at 4500 King St. East, near Costco. The next one is set for Sunday Feb 28th at 3:00 pm.

It`s a great way to meet others who are actively investing in KWC and to get contacts for building a solid investing team. Many attendees are REIN members. It`s very informal - we just trade stories, strategies and debate the future of investing over coffee and munchies.

PM me if you`d like more info or want to be added to our mailing list, thanks!

 

[andrewi]

Wow...you guys have really enlightened me to a lot of things here...after all the advice I do believe I will stay away from those `cheap` properties. I may just go to townhouses...but when I did the calc originally I was not getting any real cash flow...I`l re-look or maybe a bungalow with a basement suite...

Ben, I think I`ll check out your meeting as Don` top 10 list has KWC at the top..if I can get something there within my budget. If not I`ll look elsewhere...I am not particular if its not too far...easy driving distance.

What about Oshawa ..I know its #10 on Don`s list but reasonable prices...

Thanks a bunch guys...great advice...

Andrew


QUOTE (BenSanderson @ Feb 20 2010, 04:08 PM) Hi Andrew,

If you`re interested in investing in KW-Cambridge, you should check out our monthly Investor Meetings that we hold at Williams Coffee pub at 4500 King St. East, near Costco. The next one is set for Sunday Feb 28th at 3:00 pm.

It`s a great way to meet others who are actively investing in KWC and to get contacts for building a solid investing team. Many attendees are REIN members. It`s very informal - we just trade stories, strategies and debate the future of investing over coffee and munchies.

PM me if you`d like more info or want to be added to our mailing list, thanks!

 

[andrewi]

QUOTE (housingrental @ Feb 20 2010, 12:29 PM) If you only have 10% down I`d suggest a multi-plex in Hamilton or KWC is a TERRIBLE property choice for you for your first investment. You will be putting yourself into a position for potentiall lots of pain and stress.

Why not townhouse to start? Then buy second one and third one soon after once everything moving well? Or wait until you have more funds together?

Expertise in these markets - Ie do you know what the difference in tenant profile, occupancy, rent, rent collection, etc. is from one part of a street to another? Do you know what changes in the operating environment are expected 1 month or 4 years out for that particular area?

Your realtor in Hamilton - Seems to have given you some good advice. Except that one property that is good that is conditionally sold 9/10 will not actually be good.

Realtor in KWC - Yes. Please email me through my website to discuss further.

Hi Housingrental,

After reading the posts, yes, it seems as though townhouses, condos or bungalows might be the answer for a start. Iw as going to try for 10% but my broker now says 20% is needed...I cna do that by taking some equity out of my personal residence.

On the expertise side: how do I go about finding out those kind of specifics on tenant profile, rent collection, etc? Is that public info ( hardly think so) or do I get a realtor who can advise? for the operating info I tend to read the news and the city website...with the original base being Don`s info in the top 10 towns.

Just point me in the right direction if uou don`t mind and I`ll get to it...

Thanks,

Andrew

 

[housingrental]

Expertise - Choose an exact location. Start looking at - Current places for rent. CMHC stats. MLS sold data. MLS expired data. View places currently for rent. Track over time which get rented. Or as time saver find good invesmtent realtor with expertise on the particular area of interest and good property manager to draw from.

Joining REIN and working through it`s a material is a good first step.

QUOTE (andrewi @ Feb 20 2010, 10:50 PM) Hi Housingrental,

After reading the posts, yes, it seems as though townhouses, condos or bungalows might be the answer for a start. Iw as going to try for 10% but my broker now says 20% is needed...I cna do that by taking some equity out of my personal residence.

On the expertise side: how do I go about finding out those kind of specifics on tenant profile, rent collection, etc? Is that public info ( hardly think so) or do I get a realtor who can advise? for the operating info I tend to read the news and the city website...with the original base being Don`s info in the top 10 towns.

Just point me in the right direction if uou don`t mind and I`ll get to it...

Thanks,

Andrew

 

[Gen1GT]

Sorry guys, I guess I have a bit of an advantage for the bad areas of Hamilton. Not only did I grow up in the North Central area of the city, my brother is a cop, and knows where all the crack houses are, and where the sketchy people hang out (so I can avoid them). But you can get duplexes for $100 G, and rent them for $1300/month. It comes down to risk vs reward, and what your personal tolorance for risk is.

 

[larysa002]

Just my opinion, but it seems like some hope is on the way to North Central with the introduction of tighter mortgage rules and the shift toward lower priced homes. There are quality character homes and duplexes
in that area. Pride of ownership, when the area improves. There should be a turning point when good home owners take the lead. Not just sure how long it will take.


QUOTE (Gen1GT @ Feb 22 2010, 04:21 AM) Sorry guys, I guess I have a bit of an advantage for the bad areas of Hamilton. Not only did I grow up in the North Central area of the city, my brother is a cop, and knows where all the crack houses are, and where the sketchy people hang out (so I can avoid them). But you can get duplexes for $100 G, and rent them for $1300/month. It comes down to risk vs reward, and what your personal tolorance for risk is.

 

[housingrental]

That is a huge advantage and this might work if you if you have the local expertise for it.
The original poster doesn`t

QUOTE (Gen1GT @ Feb 22 2010, 06:21 AM) Sorry guys, I guess I have a bit of an advantage for the bad areas of Hamilton. Not only did I grow up in the North Central area of the city, my brother is a cop, and knows where all the crack houses are, and where the sketchy people hang out (so I can avoid them). But you can get duplexes for $100 G, and rent them for $1300/month. It comes down to risk vs reward, and what your personal tolorance for risk is.

 

[jseib]

I`m not sure I would call that an advantage at all... Gen1Gt

Real estate is far to fluid in a few years the house across the street that used to be owned by a lovely old lady who looked after everything can easily be a boarded up grow op or rented by one of those folks your brother would normally keep you clear of..

If it works for you great but don`t advise people who are new to this to step into those areas... Especially if you believe you have some unique advantage they definitely don`t have..

I`ve seen a lot of those duplexes and even triplexes with amazing cash flow.. Talk to the landlords enough and you`ll see they are desperate to get out because the amazing cash flow only exists a few months out of the year and the rest of the time they are dealing with dead beats who abuse the property and most of these homes need extensive repairs and upkeep unless your running the property into the ground like most out of town investors in Hamilton..

Last Triplex I looked at had $1974/month rental income and I could get it for $115,000 on Chestnut Ave ... When we looked at it the tenants had the heat turned up and the windows open and the landlord was just so happy to have them because the last 3 tenants they had never paid, damaged the house and taken forever to evict.. I no longer look in central Hamilton...