10% rule - Is it viable in Vancouver?

[Singh]

Hi Everyone,

I am from the lowermainland, and have been trying to find if the 10% rule works here, I am noticing a lot of homes are either .03% or .02%, but not exactly 10%.

For instance, my father`s house, assessed value is $600k. Estimated rent if we rented out all 3 units, and we made 2 bedrooms in our garages. I would say it would be 24,000 a year, so rougly a 4%  cap. I have found some homes around a 5-6% cap rate, but nothing close to 10% in the Surrey Area, Langley/Whiterock area.

Any lowermainland investors here find anything with a 10% cap?

 

[DonCampbell]

Hi,

The 10% rule is just a rule of thumb to filter out most properties. Many investors as they become more adept at their business lower their filter to 8%. The DO NOT buy based on this, however you can find some properties that cash flow in that %. The lower the number the less chance you will finding cash flow... However as we discussed at the Quickstart, we showed examples where some properties cash flowed at 8%, while others did NOT cash flow at 9.7%. It all boils down to the Property Analyzer Form.

We did a complete update to the 10% Rule - Now called the Cash Flow Zone at the Vancouver Quickstart.

 

[Nir]

Hi,

The idea behind Don`s 10% rule is brilliant and I`m using it a lot as it saves time in the search for the right property and helps us focus on cash flow in addition to appreciation.

Each area is different, in Ontario`s top cities for example it is not difficult to find properties meeting the 10% rule. The properties I focus on in Ontario exceed 13% annual rent to purchase price ratio. One (triplex) had 16.3%!

Regards,
Neil

 

[Dan_Eisenhauer]

The 10% rule is applicable anywhere. But, as was pinted out above, it is only one filter to sue when analyzing properties.

Being from the Lower Mainland, you discovered one reason why finding good investment properties here is problematic. There are very few properties that cash flow... at least not without putting in huge down payments, and then the ROI drops substantially, no where near the 10% guideline.

There are cash flow properties around Abbotsford, Surrey, and Chilliwack. You just have to dig for them.