Canadian Multi-Family Investment Property Inventory Discussion

[invst4profit]

Student housing starts, being a specialty market, is still visible in most university towns.

Multi or apartments starts have not been very popular since rent controls were introduced in the 90s. The Ontario government, and particularly the Residential Tenancy Act is driving investors out of Ontario.



It is tough to make decent money without the benefit of free enterprise. If the RTA is ever changed to allow landlords control over their properties investment in new builds might return.

 

[Thomas Beyer]

[quote user=invst4profit]The Ontario government, and particularly the Residential Tenancy Act is driving investors out of Ontario.
Not quite.



What it has done is LOWERED apartment values, thus taken money from private operators into the hand of government. Wealth transfer .. theft if you want .. or socialism ..



It also lowers, or certainly severely delays (until a tenant moves out) the incentive to upgrade existing buildings, thus lowering job creation for plumbers, painters, carpet layers, bathroom renovators & suppliers like Rona, HomeDepot etc.... unintended consequences of government meddling in the economy.

 

[markl]

Hamilton has a steady supply of properties. Many of which are poorly managed with below market rents and o course delayed maintenance.



We have started seeing turn around in those units and currently see most prices in the 60 - 80k per unit range with some regions hitting 100 -140k per unit.



As with anything if you are looking and are searching aggressively you will find product. Hamilton does have a greater density of smaller multi res 12 - 20 units than most markets so it is ideal for people getting into small multi's as the investment is small up front. It just takes a little more management and patience on the operating side.



Hope this helps



As for Toronto again I have seen portfolios of 50 - 250 units for sale recently in decent areas. If you really want to find it and are willing to pay the price for the asset there are things available and you still get some people who do not realize what their asset is worth and undersell it but again you have to dig and sometimes that hole is very deep.



Regards,

 

[Thomas Beyer]

[quote user=TangoWhiskey]If you're getting on a plane to go see your property it doesn't matter if its Edmonton or Albuquerque!


Well it matters in 5 or 10 years when you exit, as the Can$ to US $ exchange rate is a big gamble; likely far less US $s per Can $ if they continue to pump out debt. Is either of their presidential candidates credible on debt reduction ? Hardly.



Maybe Chris Christy or Rubio in 2016 will tackle it in earnest when their debt is over $20T.



We own a large asset north of Dallas, TX where CAP rates for stable, well maintained class B assets are now 6% again. A assets even lower ... but of course more selection in the C and D category with high risk of non-collection or class warfare, but certainly upside too if you buy in the 20's and 30's a door with 35-50% vacancy.



Money in the US is also about 1 percent more expensive for multi-family, say 4% for 5 year money as opposed to 3% in Canada. Also, the days of 80-90% LTV are long gone, more like 70-75% for stable assets, less for high vacancy turn around assets.



But OK play if getting US $s is the goal.



Also: much higher capital gains taxes in the US on exit than in Canada, so adjusting for taxes and exchange rate risk not a slam dunk if getting Can $s is the goal !

 

[TangoWhiskey]

I agree with the risks identified, especially currency and political risk (hello taxes on out of country owners). However, the ability to use 1031 exchanges to move money around in the 330 million person market of the US without triggering taxes and hopefully capturing some of the apparently more volatile movements of the US market is an attractive one.



There will certainly be ways to hedge against currency risk for varying cost.



Also, the severe destruction in the value of the US dollar that inflation would bring is inherently hedged if you have selected very long term mortgages. You can get 30 year 75 % mortgage money at 4 or even sub 4 % on good assets with solid histories. Can't get that in Canada, 10 years tops. If times turn suddenly inflationary for a long period, then the equation reverses and makes the debt the asset not the liability. I have no personal experience of inflationary times, but the text books show us that those who have long term debt being eroded at 5 and 6 and 7 % per year emerge as massive winners. The value is in the debt destruction; the nominal rise in rents and value is only illusory.



Between the downturn, the greater opportunity to find an emerging market, the 1031 exchanges and the 30 yr long term debt unavailable in Canada, I think there are great reasons to think about the US.

 

[Thomas Beyer]

[quote user=TangoWhiskey]The value is in the debt destruction;
Of course, that saves the US with their huge debt .. and politicians on both sides of the spectrum know it ..



[quote user=TangoWhiskey]30 yr long term debt
The key disadvantage here is the inability to get out and sell an asset, say 5 years later if the value is up 20% and debt is down 10% it is hard to cash-in trapped equity !



[quote user=TangoWhiskey]1031 exchanges
That is indeed a key vehicle for true wealth creation made in the US !



[quote user=TangoWhiskey]emerging market
true, but careful city and sub-location selection is critical as A and C- locations are often only 2-3 blocks apart in some US cities where racial issues and gang violence are far more pronounced than we are used to !

 

[TangoWhiskey]

[quote user=TangoWhiskey]1031 exchanges
That is indeed a key vehicle for true wealth creation made in the US !



I'm very interested in 1031 exchanges. As a pure investor, anything that allows me to compound money without incurring tax drag significantly biting into returns is something I want to learn about, find out how it works and basically everything about it if I can use is.



Do you know anything about non-citizens using a 1031? There are specialised real estate law firms that only specialise in 1031 exchanges and they would know, but do you have any personal experience?

 

[Darr]

Could you guys please stick to the topic on "Canadian Inventory" and start a new post on 1031 if you must.



We need additional comments for
other Canadian cities not already discussed in details including:



Toronto, Kingston, Ottawa-Gatineau and others

 

[Thomas Beyer]

[quote user=TangoWhiskey]

Do you know anything about non-citizens using a 1031?
You have to use a US C corporation, a tax filing "resident".