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Buying Opportunities???

J

JROC

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Hi Everyone,

I had a discussion with a few real estate investors yesterday. Where are real estate investors buying right now in Canada. They are managing their portfolios and sitting and waiting for an opportunity.

1 You have BC RE prices soaring, near impossible to find cash flow properties.
2 CAL/EDM/SASK - prices are starting to come down.

I am curious to know what are RE Investors buying SFH, Condos, TownHomes? And in what areas?
 
Your question " where are people buying" is a bit broad as the generic answer is " almost everywhere "!

Development works almost anywhere where there is demand and in-migration.

Mobile home parks, multi-family and commercial properties also work almost anywhere, as do houses and town-houses, and condos too in many instances.

Wait for a bottom to form in AB and SK, likely 2017 but even in AB or SK you can make money today if you know what value looks like.

The trick is to become an expert in a very small niche ( assuming limited capital ).


Specifically we recently bought a MHP in SE BC, took over a multi-family building in Dallas, TX and am doing a development in the S-Okanagon. Holding all assets with reduced cash-flow in AB, for now.
 
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An additional consideration is your specialty or niche market.

For example, for regular rentals, my specialty is legally suited houses. A quality up/down should cashflow in any part of the cycle, and they hold their value because of the limited inventory, so I am always watching for an opportunity to buy a good property. It doesn't matter to me if the price drops a little before it eventually increases because my business is set up to weather any storm so I should never need to sell at a bad time, and I only buy properties that should be self-sufficient through a downturn.

Other investors specialize in properties located near infrastructure such as LRT stations. Again, limited inventory, good cashflow, and good possibility for value increases may make it attractive to buy such a property even in a falling market.

Yes, it would be better to buy these properties at the bottom of the cycle, but when inventory is limited it is not always possible to find such properties exactly when you'd like to.
 
Currently a noticeable glut of condos (townhouse & apt style) in Saskatoon. Prices have softened slightly overall and should stay that way for the remainder of this year. Condo prices have softened more than others and will stay that way for minimum 2 years, probably 3. Saskatoon is currently way overbuilt in the condo space. Lots of the generic projects aren't moving quickly at all. Only one that I know of that is currently maintaining demand is the Banks development and that's both area driven and style driven. No other project similar.

I stick to permitted suited houses on large lots & will be shopping this year (but will remain picky for two reasons: market & capital).
 
Our current focus is in the NE Calgary, targeting single homes with secondary suite potentials. We are starting to see properties that works despite the current rental going rates. We are positioning our self to buy in the late 2016 and into 2017.
 
ThomasBeyer said:
but even in AB or SK you can make money today if you know what value looks like.

The trick is to become an expert in a very small niche ( assuming limited capital ).
Click to expand...

I will be presenting along these very same lines in Calgary at the next meeting on the 28th. What's working, what isn't and how to get the most out of our market right now.
 
There is definitely opportunity in Calgary right now. I recommend my clients stick to the REIN principles
- buy based on cash flow with today's rent (build in a buffer)
- buy close to transit
- buy in walk able neighbourhoods
- target the millennial generation (2+ bedrooms, updated and nice)
- area in transition or opportunity for re development

There is cash flow if you know what to look for and we are seeing motivated sellers who are in financial trouble.
 
No better place to look right now then New Brunswick. I can show you all kinds of good properties with positive cash flow. To top off we are in a down market which makes things very cheap.

Jeff
 
Ensure that the elevator leaving from "groundfloor opportunities" doesn't end up in the basement .. look at JOB GROWTH and POPULATION GROWTH ( birth rate + in-migration) .. the rest is all rouge and lip stick !
 
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It seems to me that all opportunities are in Europe or America real estate markets.
 
AnnaDanishek said:
It seems to me that all opportunities are in Europe or America real estate markets.
Click to expand...
America and Canada is dead ? Forever ? Why is that ? No one is coming here anymore ? The world is shrinking ? People vacate Canada for Cuba, Greece, Albania and N-Korea ?
 
Somewhere in southern Ontario will be my next rental property... not sure exactly where yet.
 
Multifamily in Edmonton and Saskatoon, rents are down and generally prices are not but good deals here and there to be found if your patient. Likely 2017 is better but I have not been succesful (or ever will be) trying to time buying at the bottom.
 
Depends on the type of property, but even then it's difficult to calculate and average.

Tenants in single family homes or side by side duplexes tend to stay longer.
Tenants in suited houses tend to stay for shorter periods. I'd say 2 years is the average for up/downs. Some stay for only one, others stay for much longer.
We have had a basement suite tenant for 8 years who only left this month because his company is shutting its doors. We have had a couple of main suite tenants stay for 3 years each. If you take great care of both your properties and your tenants, they will tend to stay longer.
 
Hi,
Thank you. I think bigger buildings with many units have lower averages. This indirectly explains other things like different bedbug treatments recommended (Heat, chemical) for different property types.
Thanks
 
Not a lot of good advice above. Very general and philosophical. The problem is the question is silly too, far too general. Looks like an unsophisticated money lender with an unsophisticated real estate "expert". My best advice is to guide them towards RRSPs. A question that broad is like bringing money to the casino.

This forum is so obsessed with the word "cash flow". Cash flow is pretty much meaningless. Nearly every property cash flows, just take away the mortgage.

The real question is yield and NOI. Cash flow is a function of debt. You choose how much cash flow you want after you choose the best property based on the level of risk ie. debt that you are comfortable with. Some lazy theory being taught at REIN.

It is funny how investors blow in wind suddenly becoming "legal suite experts" when they have long been "rent to own" experts. Hmmm...

Real estate is a place you put money once you have a whole lot of it and you want to preserve it and make about a 4.5% - 6% yield. Pretty much across Canada unless you run into a town with weird economics due the local job cycle. That is it, 4.5% - 6% return including PPD. Yippee. Note that I have never seen any REIN material telling the truth about what properties actually make. It doesn't sell memberships very well. Instead they focus on the glamour of "cash flow".

Now, no matter how much REIN talks about being conservative, make no mistake that they are speculators. Everyone involved in control-based real estate investment where you pick where to invest is a speculator. Nobody is in this for just 4.5%. So in order to get 10%, you need to be very good at picking locations where the property value is going to increase 2% per year over ~5 years. If you don't know how to pick that location, don't invest in real estate. I don't think that the REIN top towns report is very useful either, and has been drastically wrong in Alberta. You need a much more fine-grained approach down at the neighbourhood level.

Ultimately, you need real data and you need to do some math. Two areas that I see almost never talked about on this forum.
 
Hi,
Sorry you are confusing different formulas.
Lets go back to RE 101:
Total return is most important = value appreciation + cash flow + principal reduction.
Total ROI is not 4.5%-6% usually, but much closer to 10%. Often higher due to leverage - putting around 25% down payment.
Cash flow is not meaningless. It is usually based on 25% down which allows you to compare different buildings apples to apples. Cash flow is usually low or close to zero.
To summarize, for a pretty good analysis you want the expected CAP Rate (%), Mortgage interest rate (%) and Down payment (%).
Using these, you can estimate your Total ROI.

You mentioned "you need to be very good at picking locations where the property value is going to increase 2% per year over ~5 years". Wrong, the average property did better than 2% increase per year in the past 5-10 years.
Why do you think you need to be very good to achieve below average result?
Thanks
 
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Using some conservative math:

30% down

No cash flow or cash flow used for staying power , modest upgrades, vacancies, annual accounting costs etc

Over ten years: Mortgage gets paid down 25% of the 70% or 17% of house price

ROI in flat market: 17/30 = almost 60% or 6% a year

Assume a modest 20% value upside in ten years get another 20/30 = 66% a year

Total conservative ROI: 120% or 12% a year

Better in many markets or with 20-25% down !!
 
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