Housing Affordability Index

Villamaria

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#1
From my understand the Housing Affordability Index applies if i'm an investor in houses right? If i'm an investor in mutli family buildings, does this stat really apply?
 

ThomasBeyer

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#2

Villamaria

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#3
Hey Thomas,

i'm looking to buy in montreal and surroundings in quebec. Looking for 6 units up to 12 units buildings.
 

Willyboy

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#4
Hey Thomas,

i'm looking to buy in montreal and surroundings in quebec. Looking for 6 units up to 12 units buildings.
Multifamily in Montreal is way overvalued relative to rents. If you do the math most apartment buildings are at best breaking even and many are in the negative cash flow zone. I was going to buy a building over there a few months ago but when I did the math I changed my mind and ran away.

The party is over in all of Canada. Whoever buys today will have to have a long term time frame of way more than 10 years I'd say 15-20 years at least.
 

Villamaria

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#5
Thanks for your feedback Willyboy. Did you use the ACRE system in evaluating the building ? does acre apply to those types of properties?
example: cash fow zone, the goldmine card...
 

David Wilson

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Oct 26, 2017
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#6
The party is over in all of Canada. Whoever buys today will have to have a long term time frame of way more than 10 years I'd say 15-20 years at least.
I’d have to respectfully disagree with you. There is money to be made in any kind of market it just involves different strategies.

As well you can not generalize the entire Canadian market. There are local market factors involved, for example when a large employer leaves town (like Oshawa and the GM plants)

The real estate market life cycle is not a national figure even if people use the national averages. There are always markets over / under performing or in different stages of the life cycle.

The mortgage rule changes resulted in less homeowners this in turn results in more renters. Regulators are looking at extending the new bank qualification rules to other lenders which would in turn result in less homeowners and more renters. It will also likely add additional downward pressure on housing prices.

Nothing is never as simple as black and white. If you feel the party is over then it’s perhaps time to look in different markets or strategies.



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ThomasBeyer

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#7
The party is over in all of Canada. Whoever buys today will have to have a long term time frame of way more than 10 years I'd say 15-20 years at least.
I’d have to respectfully disagree with you. There is money to be made in any kind of market it just involves different strategies.

As well you can not generalize the entire Canadian market. There are local market factors involved, for example when a large employer leaves town (like Oshawa and the GM plants)

The real estate market life cycle is not a national figure even if people use the national averages. There are always markets over / under performing or in different stages of the life cycle.

The mortgage rule changes resulted in less homeowners this in turn results in more renters. Regulators are looking at extending the new bank qualification rules to other lenders which would in turn result in less homeowners and more renters. It will also likely add additional downward pressure on housing prices.

Nothing is never as simple as black and white. If you feel the party is over then it’s perhaps time to look in different markets or strategies.



Sent from my iPhone using myREINspace
Well said. There is ALWAYS opportunity somewhere it might just not where you were looking in the past, where you live, where you currently own or had planned to buy or in an asset class you are familiar with.

Being open to options is critical. One business model doesn’t fit every market all the time.

Learn from mistakes too. Going from home run to home run exists not even in the movies.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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Matt Crowley

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#8
I think @Willyboy was referring to the 'everything works' party being over ie. never-ending cap rate compression. We have probably touched our lows or are very close to them. If you were a buyer in Vancouver in the last 12 months, I'd have some sleepless nights thinking about the prospect of rent controls. The deals I looked at were underwriting 5% CAGR rental growth to hit a 7-8% IRR.
 

Willyboy

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#9
I think @Willyboy was referring to the 'everything works' party being over ie. never-ending cap rate compression. We have probably touched our lows or are very close to them. If you were a buyer in Vancouver in the last 12 months, I'd have some sleepless nights thinking about the prospect of rent controls. The deals I looked at were underwriting 5% CAGR rental growth to hit a 7-8% IRR.
Thank you Matt. That was 100% my point.
 

aileen

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Willyboy

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#11
Thanks for your feedback Willyboy. Did you use the ACRE system in evaluating the building ? does acre apply to those types of properties?
example: cash fow zone, the goldmine card...
No problem Villamaria. I normally use a rental property cash flow analyzer. It shows me the cash flow whether positive or negative and the return on investment ROI with mortgage pay down and ROI with appreciation but you have to play with the numbers i.e. you can use an average appreciation rate of 1%, 2% or whatever you want and accordingly you get the ROI numbers however at first when analyzing a property I don't factor in any appreciation because it will mask out any actual low ROI but of course if the ROI turns out to be good enough on a certain property without appreciation then I add only about 2% for annual appreciation on today's market in Montreal because the multifamily sector but not condos or houses has seen huge appreciation in the last 10-20 years so much that rents didn't keep pace with price appreciation and that's why the cash flow is not positive enough and CAP rates are as low as 3-4.5% specially when you use real percentages for vacancy, maintenance and property management and you have to watch for those numbers as some realtors use enhanced proformas with percentages that don't make sense like as an example they sometimes input 3-5% for maintenance where you should input at least 8% because the buildings are old and many of them not well maintained. For both property management and caretaker they sometimes input 4-5% where in reality it is at least 8-10%. Same thing for vacancy sometimes they use 2 or 3% which is low, 5-8% at least would be more realistic.

I am not discouraging you but I'm encouraging you to do your homework and I'm not saying there's no deals at all but I think it's not as easy as it used to be when you could find deals with CAP rates of 7-10%.

Also it depends on where you live and if you are able to do the management yourself. If you live close to the property, are a handyman and can handle the repairs then go for it as this will help you bring the ROI up.

It also depends on your age as the younger the better because due to the debt bubble I don't expect the next real estate cycle peak to hit the market any time soon but if you're a younger guy you will be able to wait it out.

It didn't work for me because I don't live in Montreal but if you live there go ahead and buy provided you crunch the numbers and do your due diligence and who knows you might get lucky and find a good deal.

Good luck!