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Investing in Canada Real Estate

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LongWayFromHome

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I am an Australian who travelled around the world earlier this year. I had bought many properties in Australia over the last few years. Prices had risen and yields dropped dramatically in Australia, even in small country towns, so I figured it was time to explore other countries. My intention was to ski 9 weeks in Canada and then go property-hunting in Eastern Europe. I had not expected to buy anything in Canada. However, I was so astounded at the Canadian Real Estate market that I bought 14 houses in Saskatchewan and Manitoba. What triggered that? So many people I met at the ski resorts, when I told them I was a property investor, said things like "You should invest in Vancouver or Calgary or Edmonton". When I asked why, they would say "Prices have been rising so fast there". When I asked them about places where prices had not risen much, they would say things like "Don`t buy in Saskatchewan, prices are so cheap there". That didn`t make sense to me, so I went exploring.

I am very glad I did. I could not believe the deals I found. Apart from one challenging tenant, I am very happy with the performance of the properties so far. Most of these are returning (gross) over 20%. Some are even 40% or more! I could not believe the value and the low prices. I did not buy anything in Europe, prices were much higher than I expected. What do other people think? What is going with Canadian Real Estate? Why are decent towns with strong fundamentals in Saskatchewan and Manitoba so ridiculously cheap compared to the more high-profile markets? Have I missed something? There is one particular property (and yes, this was an especially good deal after lots of negotiation) that only cost $7,500 (that is not a typo). It has three bedrooms, an excellent kitchen, good bathroom and a great long-term tenant at $250 per month. The tenant is happy because I am a good landlord and I`m repairing things that really should have been done years ago. Not all the properties were this cheap, I did buy one at $58,000 in a town which I think is my favourite place in Canada.

If I went to a very small town in the middle of the desert in Australia and bought a renovators delight, I think I would be hard pushed to find anything less than $60,000! I also found it hard to find properties in Eastern Europe under $100,000.

Interested to hear other people`s thoughts ... I am confused (and excited) about the Canadian market.

Keen also to build some genuine contacts in Canada to share ideas, thoughts etc.
 
Hello LongWay...
My name is Ed, I am in Southern Ontario close to St. Catharines. I have 2 properties, one here and another in SE British Columbia. I look at and for properties every day. I have 2 great challenges, the first is finding properties that actually cash flow and aren`t slums, the second is finding other investors, realtors, mtg brokers, etc that think `out of the box`. It would be interesting to share ideas and concepts as I would like to be investing on the same scale as you. I am considering 3 FSBO properties in Northern Ontario that are cash flowing well and are in an area showing good economic fundamentals at first glance. I am looking for Joint Venture partners for this and other deals I have in the works. Please contact me at [email protected] or by phone at 905-329-1460.

regards,
Ed R
 
QUOTE (roadortrail @ Sep 19 2007, 10:05 AM) Sorry,
Please note if you are searching for St. Catharines, I misspelt the city in my last post.

Hello,
I am searching good cash flow properties and i have been looking at Brampton, K-W area.
You can contact me at [email protected] if you are interested to talk about JV.

Thanks
 
LongWayFromHome - looks like you`ve invested a la Warren Buffet style and my thoughts on the Canadian real estate market is that you have picked up on an interesting trend that has already happened in the U.S. real estate market.

In the U.S. - as real estate in the larger cities got to a price some folks find impossible to afford and the fact that baby boomers don`t need to be in the bigger cities - small cities in `small town` U.S.A. became (and still is) a good place to move to/invest. You just have to look at some trends going on in smaller cities/less `talked about` places to see that places such as Rome, Georgia, Bristol or Clarksville, TN, small towns in the Blue Ridge Mountains, N.C. or perhaps small towns in Idaho are actually doing quite well right now despite other U.S. real estate hot markets having problems (these small town u.s.a`s are just examples of many)

Finding a property for less than 10 grand that brings you in 250 a month is fantastic and as long as you don`t mind the long distance landlordship - hats off to you for adapting a `blue ocean` strategy to your real estate investing.

I too have similar thoughts and also was going to check out Eastern Europe and Latin America for RE investing to diversify...but when you look at the strength of the Loonie and my thoughts are that the Cdn dollar will hold strong over the future - then please contribute more to this message board and let us know your successes! I`m new to this message board and want to get into networking with other real estate investors in Canada - Don Campbell`s book is so refreshing in the `bubble filled` real estate books out there!

style_emoticons
 
I just completed an 8 day property road trip in Australia. I went to a bunch of "outback" and rural towns with very small populations (some below 500 people) looking for investment properties for myself and for others. I came back empty-handed. I was surprised to find no liveable properties under $120,000 (about CDN 110,000) and no gross rental returns above 6%. So, I`m coming back to Canada to search for more properties. In SK, I like:
Melville close to Yorkton and close enough to get a ripple effect from Regina, good cashflows (seems easy to get positive cashflow);
Lanigan area seems to have strong employment and industry from what I have seen, also strong rental demand, and there are some attractive small towns and villages around Lanigan, also close enough to Saskatoon to benefit from a ripple effect, once again seems easy to get positive cashflow;
Moose Jaw, Swift Current and Assiniboia more conservative choices, attractive places, larger populations, probably lower rental returns - maybe around 10%.

We couldn`t get a decent coffee (no expresso`s) in Melville. Lots of great coffee in Moose Jaw and Swift Current. I think there is an inverse relationship between decent coffee and real estate prices
style_emoticons


I took another Australian investor to Canada with me in June. He couldn`t quite bring himself to invest in Melville. He felt it was too gloomy and depressed (and no decent coffee). I`ll be interested to hear others views of this town (especially if they go there).
 
G`day mate,I am from SK and thought I would provide some insight. I don`t mind the cities you have presented, but I more of a fan in investing in the 2 larger centers of Regina and Saskatoon due to the paling and simple fact of population growth. These larger centers will have more of a future than some of the smaller (one-horse) industry towns you have mentioned.
If you are interested in some more info, please feel free to drop me a note or give me a call anytime.

Regards,

Monte Dobson
Regina, SK
Ph. 306-535-2787

QUOTE (LongWayFromHome @ Oct 23 2007, 08:46 PM) I just completed an 8 day property road trip in Australia. I went to a bunch of "outback" and rural towns with very small populations (some below 500 people) looking for investment properties for myself and for others. I came back empty-handed. I was surprised to find no liveable properties under $120,000 (about CDN 110,000) and no gross rental returns above 6%.

So, I`m coming back to Canada to search for more properties. In SK, I like:

Melville close to Yorkton and close enough to get a ripple effect from Regina, good cashflows (seems easy to get positive cashflow);
Lanigan area seems to have strong employment and industry from what I have seen, also strong rental demand, and there are some attractive small towns and villages around Lanigan, also close enough to Saskatoon to benefit from a ripple effect, once again seems easy to get positive cashflow;
Moose Jaw, Swift Current and Assiniboia more conservative choices, attractive places, larger populations, probably lower rental returns - maybe around 10%.

We couldn`t get a decent coffee (no expresso`s) in Melville. Lots of great coffee in Moose Jaw and Swift Current. I think there is an inverse relationship between decent coffee and real estate prices
style_emoticons


I took another Australian investor to Canada with me in June. He couldn`t quite bring himself to invest in Melville. He felt it was too gloomy and depressed (and no decent coffee). I`ll be interested to hear others views of this town (especially if they go there).
 
QUOTE (LongWayFromHome @ Sep 19 2007, 01:55 AM) I am an Australian who travelled around the world earlier this year. I had bought many properties in Australia over the last few years. Prices had risen and yields dropped dramatically in Australia, even in small country towns, so I figured it was time to explore other countries. My intention was to ski 9 weeks in Canada and then go property-hunting in Eastern Europe. I had not expected to buy anything in Canada. However, I was so astounded at the Canadian Real Estate market that I bought 14 houses in Saskatchewan and Manitoba. What triggered that? So many people I met at the ski resorts, when I told them I was a property investor, said things like "You should invest in Vancouver or Calgary or Edmonton". When I asked why, they would say "Prices have been rising so fast there". When I asked them about places where prices had not risen much, they would say things like "Don`t buy in Saskatchewan, prices are so cheap there". That didn`t make sense to me, so I went exploring.

I am very glad I did. I could not believe the deals I found. Apart from one challenging tenant, I am very happy with the performance of the properties so far. Most of these are returning (gross) over 20%. Some are even 40% or more! I could not believe the value and the low prices. I did not buy anything in Europe, prices were much higher than I expected. What do other people think? What is going with Canadian Real Estate? Why are decent towns with strong fundamentals in Saskatchewan and Manitoba so ridiculously cheap compared to the more high-profile markets? Have I missed something? There is one particular property (and yes, this was an especially good deal after lots of negotiation) that only cost $7,500 (that is not a typo). It has three bedrooms, an excellent kitchen, good bathroom and a great long-term tenant at $250 per month. The tenant is happy because I am a good landlord and I`m repairing things that really should have been done years ago. Not all the properties were this cheap, I did buy one at $58,000 in a town which I think is my favourite place in Canada.

If I went to a very small town in the middle of the desert in Australia and bought a renovators delight, I think I would be hard pushed to find anything less than $60,000! I also found it hard to find properties in Eastern Europe under $100,000.

Interested to hear other people`s thoughts ... I am confused (and excited) about the Canadian market.

Keen also to build some genuine contacts in Canada to share ideas, thoughts etc.

Hi Longwayfromhome,

We know how you feel. We came to Canada from New Zealand, where the market has done the same as in Aussie.
The cashflow properties we have there have appreciated a lot and new cash flowing properties are hard to find. So we decided to go to Canada since my wife is Canadian and we have been following the market from a distance (no pun intended).
We have done one JV so far in Calgary and are looking for cash flow properties in Ontario. As we see it, the market in Canada can be split into two chunks, Alberta for Capital gains and Ontario for Cash flow. This is ofcourse a very rough division. The JV in Calgary cashflows as well, so that was a good reason for us to act.
The challenges we are facing are credit rating and finding good property managers. How have you tackled those issues. I am assuming you don`t manage your Canadian properties yourself.
Another question for you, what have you done with your properties in Aussie that have appreciated past good "return on equity". Have you sold or re-financed a few to invest overseas.
We ourselves, are debating what to do. We decided to sell one of our properties that was way past a good ROE and use this for our investments here.

Appreciate your thoughts, Cheers

Rob
 
Hi Rob, sorry for the delay, I haven`t been on this site for a while. I have kept most of the Australian ones (well 40 out of 66). Main reason I sold some was I did a number of quick buy and sells. Not really quick flips, more like 6 to 18 months. When I discovered Canada RE last March, I sold several Australian properties to fund Canadian purchases. Decided to hold most of the remaining Australian properties long term. Property Mgmt has indeed been a big challenge. I`m getting on top of it! Up until recently I had 10 under mgmt and 4 I was managing myself. It wasn`t that bad actually, I had a minimum of two local contacts to start with (RE Agent & Building Inspector) then networked from there to find plumbers etc. Now I have property managers for all 14, although I might take 3 properties off a substandard mgr soon. I`ve been learning a lot along the way. I found RBC good for finance (even though in the end I decided not to borrow in Canada yet). I`m convinced on the opportunities in smaller towns in SK and MN, so I will be continuing to invest there.
BTW, do you use a Canadian Accountant? What system do you use (Quickbooks, spreadsheets etc)?

Anthony

QUOTE (CleverDough @ Nov 22 2007, 04:38 AM) Hi Longwayfromhome,

We know how you feel. We came to Canada from New Zealand, where the market has done the same as in Aussie.
The cashflow properties we have there have appreciated a lot and new cash flowing properties are hard to find. So we decided to go to Canada since my wife is Canadian and we have been following the market from a distance (no pun intended).
We have done one JV so far in Calgary and are looking for cash flow properties in Ontario. As we see it, the market in Canada can be split into two chunks, Alberta for Capital gains and Ontario for Cash flow. This is ofcourse a very rough division. The JV in Calgary cashflows as well, so that was a good reason for us to act.
The challenges we are facing are credit rating and finding good property managers. How have you tackled those issues. I am assuming you don`t manage your Canadian properties yourself.
Another question for you, what have you done with your properties in Aussie that have appreciated past good "return on equity". Have you sold or re-financed a few to invest overseas.
We ourselves, are debating what to do. We decided to sell one of our properties that was way past a good ROE and use this for our investments here.

Appreciate your thoughts, Cheers

Rob
 
QUOTE (LongWayFromHome @ Feb 9 2008, 06:27 PM) Hi Rob, sorry for the delay, I haven`t been on this site for a while. I have kept most of the Australian ones (well 40 out of 66). Main reason I sold some was I did a number of quick buy and sells. Not really quick flips, more like 6 to 18 months. When I discovered Canada RE last March, I sold several Australian properties to fund Canadian purchases. Decided to hold most of the remaining Australian properties long term. Property Mgmt has indeed been a big challenge. I`m getting on top of it! Up until recently I had 10 under mgmt and 4 I was managing myself. It wasn`t that bad actually, I had a minimum of two local contacts to start with (RE Agent & Building Inspector) then networked from there to find plumbers etc. Now I have property managers for all 14, although I might take 3 properties off a substandard mgr soon. I`ve been learning a lot along the way. I found RBC good for finance (even though in the end I decided not to borrow in Canada yet). I`m convinced on the opportunities in smaller towns in SK and MN, so I will be continuing to invest there.
BTW, do you use a Canadian Accountant? What system do you use (Quickbooks, spreadsheets etc)?

Anthony

Hi, we`ve been investing in Saskatoon for the past 5 years, and currently live in Estevan. We travel regularly to Saskatoon for a variety of reasons -- kids in University, work meetings, visiting family. You`re right, the small towns do have great investment opportunities. A few short years ago Saskatoon and Regina were not appreciating at a very fast pace, but that has changed in the past 1-2 years. Cash flow is still available, you do need to do your homework though.
If you need help, information or are looking for something in particular, let me know and I can see what I can find. I have a few contacts and a list of buyers who are looking for rent-to-own in a variety of price ranges.

Tracey
 
QUOTE (LongWayFromHome @ Sep 18 2007, 11:55 PM) I am an Australian who travelled around the world earlier this year. I had bought many properties in Australia over the last few years. Prices had risen and yields dropped dramatically in Australia, even in small country towns, so I figured it was time to explore other countries. My intention was to ski 9 weeks in Canada and then go property-hunting in Eastern Europe. I had not expected to buy anything in Canada. However, I was so astounded at the Canadian Real Estate market that I bought 14 houses in Saskatchewan and Manitoba. What triggered that? So many people I met at the ski resorts, when I told them I was a property investor, said things like "You should invest in Vancouver or Calgary or Edmonton". When I asked why, they would say "Prices have been rising so fast there". When I asked them about places where prices had not risen much, they would say things like "Don`t buy in Saskatchewan, prices are so cheap there". That didn`t make sense to me, so I went exploring.

I am very glad I did. I could not believe the deals I found. Apart from one challenging tenant, I am very happy with the performance of the properties so far. Most of these are returning (gross) over 20%. Some are even 40% or more! I could not believe the value and the low prices. I did not buy anything in Europe, prices were much higher than I expected. What do other people think? What is going with Canadian Real Estate? Why are decent towns with strong fundamentals in Saskatchewan and Manitoba so ridiculously cheap compared to the more high-profile markets? Have I missed something? There is one particular property (and yes, this was an especially good deal after lots of negotiation) that only cost $7,500 (that is not a typo). It has three bedrooms, an excellent kitchen, good bathroom and a great long-term tenant at $250 per month. The tenant is happy because I am a good landlord and I`m repairing things that really should have been done years ago. Not all the properties were this cheap, I did buy one at $58,000 in a town which I think is my favourite place in Canada.

If I went to a very small town in the middle of the desert in Australia and bought a renovators delight, I think I would be hard pushed to find anything less than $60,000! I also found it hard to find properties in Eastern Europe under $100,000.

Interested to hear other people`s thoughts ... I am confused (and excited) about the Canadian market.

Keen also to build some genuine contacts in Canada to share ideas, thoughts etc.

I am curious, where did you find the property for $7500.00? What fundamentals does this town have? What is your exit strategy/who are you going to sell to when you decide to exit? Maybe I`m out of the loop, as it has been 7 years since I`ve lived in Saskatchewan. I grew up on a farm there and continued farming until that time. I know a lot about Saskatchewan including it`s volatile politics and sparse population. If you are going to invest in Saskatoon or Regina that has one risk level, but if you are investing in Small town Saskatchewan where you can buy properties for next to nothing, there is probably a reason.

My brother and his sons farm in a small community in Southern Saskatchewan about 60 miles NW of Moose Jaw. Less than 10 years ago both my Brother and one of his sons bought a house in that small town. My Brother paid $5000.00 and my Nephew paid $2500. Fridges, Stoves, Washers, Dryers included. This may have been a very good deal for them as they didn`t plan on moving any time soon, but if they were to plan on renting out the properties, there just isn`t a market. When I grew up in this town it was growing and it grew to about 500 in population, now there are only about 300 people in town. Many of the farms are larger and there are less people.

In the early 80`s I taught figure skating in the local club. I had over 100 students. Now there are less than 20.

My Mom tells me that most of the houses are now sold in town. I`m wondering who is buying them? Speculators? Locals? If they are speculators, have they thought about their exit strategy? Let me tell you, for the long term hold, all I can see is properties in the middle of no-where, with difficult to find tenants and property managers and a lot of upkeep as well as sinking money into renovations when the property has little return, and then being stuck with it because there is no one to buy it.

Think about it. If you make 100% on a $7500 property, you`ve made $7500. On a property in Edmonton that I paid $300,000, I would make $30,000 if it only went up 10%, and $15,000 if it only went up 5% and $7500 if it only went up 2.5%. In that year what are the chances of it going up 5%? Pretty high when you look at the statistics.

Have you looked at the average real estate growth rate for the area you are buying in? I suggest you do.
 
All good points Rebecca.

I don`t think there is a general "right" answer.

Some investors focus on real estate in bigger cities. Typically, rent return percentages are lower, the vacancy risk is lower and the capital growth is expected to be higher. Other investors focus on smaller towns or regional areas where the rent returns are typically higher, the vacancy risk is higher and the capital growth is expected to be lower.

Either way, I believe if you hold reasonable real estate long term you will probably achieve wealth. I believe it`s possible to get there via the "cashflow" or "growth" strategies.

I do both. My portfolio (mostly in trusts) has a mixture of big city, midsize city and smaller town properties; mostly residential but also some commercial, industrial and some land.

One of the reasons I buy "cashflow" properties is so I can buy and hold more "growth" properties. Analogy - a bit like getting a 2nd and 3rd job and using the extra income to help you buy more 300K properties in Edmonton.

I now have all 14 Canadian properties rented out and property managers in place. Gross return 60K on 300K of purchases. Your example on numbers is valid if I was buying only ONE $7500 property and then comparing it to your ONE $300K property. A more meaningful comparison will be to compare the performance of my 14 cashflow properties (total spend 300K) to your one 300K Edmonton property. At this stage of the economic cycle, it won`t be a contest because the price growth in Edmonton will ripple through regional areas. Your $300K property would have to significantly outperform my 14 properties in price growth to catch up on the difference in income each year. Having said all that, there will be different stages of the economic cycle where I will also be buying 300K Edmonton properties (or similiar) :-) about 2013 I think.

Coming to Saskatchewan early 2007 with fresh eyes and little knowledge of the province, it was quickly obvious to me that the major centres in Alberta had experienced major growth and were due to flatten out; major centres in SK were growing strongly (probably had more growth left) and smaller regional towns and cities in SK were poised to really take off after years of price stagnation.

Good fundamental research quickly eliminated many small towns that were too risky (dreaded ghost town scenario you alluded to).

Where do I like? Swift Current and Moose Jaw are my favourites. Smaller places with good funamentals like Lanigan, Melfort, Melville and Assiniboia are also interesting.

Exit strategy? I don`t really have an exit strategy because my plan is to hold for 20+ years. I do have exit options though. If I need some cash, I can sell one or two or three.

I sincerely hope this `debate` helps some people out there to take good actions :-)

LWFH


QUOTE (RebeccaBryan @ Feb 13 2008, 11:22 PM) I am curious, where did you find the property for $7500.00? What fundamentals does this town have? What is your exit strategy/who are you going to sell to when you decide to exit? Maybe I`m out of the loop, as it has been 7 years since I`ve lived in Saskatchewan. I grew up on a farm there and continued farming until that time. I know a lot about Saskatchewan including it`s volatile politics and sparse population. If you are going to invest in Saskatoon or Regina that has one risk level, but if you are investing in Small town Saskatchewan where you can buy properties for next to nothing, there is probably a reason.

My brother and his sons farm in a small community in Southern Saskatchewan about 60 miles NW of Moose Jaw. Less than 10 years ago both my Brother and one of his sons bought a house in that small town. My Brother paid $5000.00 and my Nephew paid $2500. Fridges, Stoves, Washers, Dryers included. This may have been a very good deal for them as they didn`t plan on moving any time soon, but if they were to plan on renting out the properties, there just isn`t a market. When I grew up in this town it was growing and it grew to about 500 in population, now there are only about 300 people in town. Many of the farms are larger and there are less people.

In the early 80`s I taught figure skating in the local club. I had over 100 students. Now there are less than 20.

My Mom tells me that most of the houses are now sold in town. I`m wondering who is buying them? Speculators? Locals? If they are speculators, have they thought about their exit strategy? Let me tell you, for the long term hold, all I can see is properties in the middle of no-where, with difficult to find tenants and property managers and a lot of upkeep as well as sinking money into renovations when the property has little return, and then being stuck with it because there is no one to buy it.

Think about it. If you make 100% on a $7500 property, you`ve made $7500. On a property in Edmonton that I paid $300,000, I would make $30,000 if it only went up 10%, and $15,000 if it only went up 5% and $7500 if it only went up 2.5%. In that year what are the chances of it going up 5%? Pretty high when you look at the statistics.

Have you looked at the average real estate growth rate for the area you are buying in? I suggest you do.
 
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