QUOTE (investmart @ Jul 22 2008, 02:54 PM)
Hi All,
Was wondering what you think about investing in Brantford today considering recent changes in economy (specifically automotive industry in the area).
Was ranked 5th in Ontario in previous top 10 cities to invest in research. However, things changed since. just not sure how significantly(?)
Thanks,
Neil
Hello Neil, Do you live in Ontario? If yes, have you been to Brantford recently? One short drive over there will tell you a lot about what's happening.
If I can help in any way, you can email directly at [email protected]
Brantford has the food industry and although influenced by the automotive industry the prime employers are Toyata affiliated which are still doing well. My realtor is involved with the Chamber of Commerce in attracting new business and she tells me they are looking to amalgomate new farm lands for industrial use and can attract more business.
You can also get the Hamilton crowd looking for something more affordable.
Real Estate has softened so now is a good time to get in. There is a market for decent places as there are still alot of terrible rental accomadations so professionals or people with standards are glad when they find you.
I just picked up a townhouse and have it rented out. The locals, my realtor and handyman, wondered what the hell I was doing looking in that complex as they have known it from their youth as a trouble area. Now they see the potential once things are fixed up.
These types of deals can still be picked up in Brantford but are being found out.
We are based in Brantford, If you want to discuss feel free to drop me an e-mail. [email protected]
There are good deals out there, and as Ramon stated there is alot of run-down rentals, so when the professional or very qualified renter are looking to rent they will pay a premium to get a good place. From a tenants perspective it is hard to find a good, well-maintained unit.
We are seeing more people move-in from out of town aswell.
Does this include some more than a hundred years old(!) properties for really good prices in East Ward or do you actually recommend newer properties or/and other parts of the city?
The problem with Brantford is that there are pockets of areas that you don`t want to invest in. One street is good, one over is not. 100+ year old buildings can be a good deal if the price and location are good, however your maintenance costs will be higher. One area to watch is Eagle Place, we took-over a small 3 bedroom Brantford cottage, did some minor repairs (under 1500) put a lawn sign up and recived 17 applications in two days. (no internet or newspaper ads) Along with the re-development of the brownfield areas it should prove interesting in the near future. Stay close to schools and avoid 1 bedrooms.
John brings up some good points. It was interesting to read his comments on Eagle Place. I had an advantage of being an outsider coming into Brantford and finding interesting pockets the locals overlooked but I must be getting too influenced by my local advisors as they told me to avoid Eagle Place.
As John said the key is to find the right pockets. Even townhouse complexes with similar layouts in the same area can be trouble. I had an accepted offer on a unit in one complex only to have my inspector find the footings were sinking and the buildings were splitting apart, the bricks were deteorating and would need to be replaced soon, windows did not close properly indicating more structural shifting. The prices in this complex tended to be higher then in my favorite complex.
There are REIN members doing well fixing up century old delapitated multifamily units. Just make sure the bones of the building are alright. I gave up on this segment as allot of them have been neglected and have serious problems. Speculators have come in bought them up with no inspection, do the cosmetic painting and try to flip at a decent profit a couple of years later. I also had an appraisor tell me price appreciation can be realized on apartment buildings due to the lower CAP rates investors will pay for this type of building but multifamily houses will always hold the same CAP rate and price appreciation can only come from driving up rents.
Regarding "price appreciation can be realized on apartment buildings due to the lower CAP rates investors will pay for this type of building but multifamily houses will always hold the same CAP rate":
What do you mean by "lower CAP rates investors will pay"? you mean they will pay a higher price (generating lower CAP) on apartment buildings? well, if they pay a higher price/lower CAP today how will they see any appreciation when they sell? will the next investor buy for a price that generates an even lower CAP? I find this a little confusing as I am not sure I understand the logic(?) It would be great if you can clarify/elaborate on this interesting point.
Also, excellent point regarding the importance of a detailed home inspection and the risk associated with purchasing very old properties. Obviously the temptation is the high CAP they generate.
Sorry for the late reply.
When Brantford was in the doledrumbs CAP rate on apartment builds were 8%-9% or higher. Now that the City is picking up and investors are moving in apartment buildings are selling at CAP rates of 7.5%. In my case the appraisor was also willing to consider a rate of 7% if I needed it to get financing. When we discussed it he felt investors would bid apartments to 7% or lower eventually but now that the market is a bit soft 7.5% was reality for now.
If you look at the CAP rates on the old houses turned into multifamily dwellings they still sell at the 8%-9% CAP rates.
The lower the CAP rate the higher the price of the building. As the CAP rate is bid down by investors the greater the appreciation on buildings even if you keep operating expenses and income the same.
When Brantford was in the doledrumbs CAP rate on apartment builds were 8%-9% or higher. Now that the City is picking up and investors are moving in apartment buildings are selling at CAP rates of 7.5%. In my case the appraisor was also willing to consider a rate of 7% if I needed it to get financing. When we discussed it he felt investors would bid apartments to 7% or lower eventually but now that the market is a bit soft 7.5% was reality for now.
If you look at the CAP rates on the old houses turned into multifamily dwellings they still sell at the 8%-9% CAP rates.
The lower the CAP rate the higher the price of the building. As the CAP rate is bid down by investors the greater the appreciation on buildings even if you keep operating expenses and income the same.
Regards,
Ramon Forgiel
Fearing I'm going to sound naive or worse; I'm not fully understanding your meaning on the "multi-family/lower cap rate" topic. Can you advise further on what this means? I'm a new investor and I am interested in the multi-family end of things.
I see the difference between apartment buildings and multiplexes in a new angle now.
However, I think it is the CHANGE in desired CAP by investors that contributes to the appreciation of apartment buildings compared to multiplexes. If for example you are saying that new investors in Brantford are now purchasing/OK with 7% CAP apartment buildings then it helps whoever purchased in the past for say 9% CAP. BUT... for those purchasing now, ONLY FURTHER REDUCTION in the future in the desired CAP by investors, will help achieve appreciation higher than multiplexes.
(this comparison excludes other factors like condition of apartment building VS. multiplexes, potential rent increases etc.)
For those of you at the August REIN Workshop in Toronto, you will have enjoyed the focus on Brantford`s real returns and opportunities... a 68% R.O.I. EVEN if you bought poorly.
Not many areas will have provided that over the last 12 months. And the trend line is still very strong.
