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Investing in small towns. Good or bad idea?

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Nirvana65 | 07 Nov 2014, 09:53 AM Agree 0
What’s the pros and cons in investing in a home in a small town like Sudbury? Is it worth it? The big cities are now SO expensive!!!
  • InvestorDave | 07 Nov 2014, 01:37 PM Agree 0
    You have to look at the stats in these places to determine if the rental market is strong enough to sustain your investment. As with any investment, due dilligence is crucial.
  • InvestJ | 11 Nov 2014, 02:10 PM Agree 0
    Where can I find these stats and information as a first-time investor. Where should I get looking?
  • alexiscooper5 | 21 Nov 2014, 05:47 AM Agree 1
    Investing into small cities is very good idea. Day by day population increases and Small City's grow very fast. In Small city's there is no risk of property but in big city investment is more and earning is good but risky.
  • Nirvana65 | 24 Nov 2014, 11:14 AM Agree 0
    I’m hearing the similar things about smaller markets. Do you have experience doing this? If so where? Just looking for a good market with high return value.
  • GPanko | 24 Dec 2014, 09:42 AM Agree 0
    Be very careful in a small market. There is a good reason the big 5 banks won't lend for commercial property in cities with populations under 20,000. If a major employer leaves the market and population starts to leave, you can experience extreme vacancies, not to mention a very limited pool of buyers when you wish to sell.
    Large cities and city centres are much less risky, however your cap rates will be lower. Some small cities can experience ridiculous growth and very high cap rates, but just keep in mind, they will be more volatile and you may not be able to sell when you want to. It's not unlike penny stocks vs large cap dividend paying companies. Anyone with a little experience will tell you to stay away from the small stuff because it's not investing, it's speculating.
    If a financial institution won't lend to you in a market, realize they probably won't lend to the next guy trying to buy this property in the future either.
  • Alvin | 29 Dec 2014, 06:21 AM Agree 0
    Let me list some of the good points first.
    Benefits of Investing in Small Towns
    * Properties can be significantly cheaper than in larger, metro areas.
    * There is often less regulation.
    * There is often less competition.
    * That small town atmosphere can be pretty tempting.

    Drawbacks of Investing in Small Towns
    * These can be much tougher markets.
    * Lack of economic opportunity can restrict your pool of qualified renters or buyers.
    * You will be doing a lot of driving to show, check on and maintain your properties.
  • Jill | 29 Dec 2014, 10:05 PM Agree 0
    All good comments. I think small towns are a good investment if you can see economic growth. Ontario's main economic engine is the Automotive Manufactures, so if you can invest in areas with growth in this sector I would say it's a good idea. For example Woodstock Ontario went thru huge real estate growth as soon as Toyota news release back in 2005. Similar to Alliston Ontario when Honda expansions were released. Another smaller sector would be our aging demographics. Ontario is seeing a large swing into the baby boomers retiring. A good example of this it the <A HREF="http://liveonthebay.ca/collingwood-real-estate/">Collingwood Real Estate Market</A>. Collingwood is becoming a huge location for retirees. Retirees are spending their money on quality of life.

    So to sum this up economic growth means real estate growth.
    • Hill | 07 Feb 2017, 05:12 PM Agree 0
      Hi Jill,
      you are absolutely right ....this is how Investment mechanism works....Wish you a very best...
  • alexiscooper5 | 17 Jan 2015, 04:24 AM Agree 0
    The return value of small market is higher, if the grow of the city is fast.
    • Hill | 07 Feb 2017, 05:14 PM Agree 0
      Hi Alex..
      Low investment and high rental Income is always a best preposition in investing in properties.
  • NorfolkNick | 30 Jan 2015, 11:55 AM Agree 0
    I own investment properties in small towns like Port Dover and Simcoe in Norfolk County (Southwest Ontario - Lake Erie area). These can be challenging investments. What attracts me is the low entry price. I was able to acquire multi-family/multi-unit properties in the area which guarantees a consistent cash flow. The actual properties don't grow in value the way they would in a major urban market but you'll always find healthy positive cash flow on a day-to-day basis in these areas.

    If you're looking to buy, I would suggest staying in the "downtown" core of small towns. These would be the most desireable properties. - preferably prominent corners or streets. Be careful who you rent to as there is generally more unemployed, on-the-dole tenant pool. Pick a town that may be on the way to a larger town. I like Port Dover because while it's a booming tourist town in the summer, its main street is a quick drive to outer Hamilton where US steel and other work can be found. Many of my tenants want to live in a small beach town and commute from there.

    Also, know what rents you can get. Always make the tenant pay for utilities. Look for VTB, unorthodox lenders, local credit unions etc., as it can be challenging to obtain financing in these areas... especially mixed use (residential on top, commercial below). Good Luck!
    • Claudia | 01 Nov 2015, 12:38 AM Agree 0
      Hello, I'm looking to buy right downtown Simcoe, it is a duplex, my intention is to buy to rent both properties and live in one after 6 years - when I retire, would appreciate if you could please give me your impressions regarding the rents ( realtor told me I can ask for 1200 on 3 bdrm), thank you.
    • Hill | 07 Feb 2017, 05:16 PM Agree 0
      Hi Nick...
      Rightly said.....you are investing the right way...
  • alexiscooper5 | 02 Feb 2015, 01:49 AM Agree 0
    Yes, May be it will be challenging for you.
  • Hill | 07 Feb 2017, 05:05 PM Agree 0
    Investing in properties in Canada is an art....so how you learn the art is purely depends on your vision how you analyse a market.
    Canada has an edge over real estate market....specially Ontario is a good market to Invest but depends on where you need to invest.
    Canada has three market segments....one is lower segment....second middle segment and Higher segment all you need is where you need to invest and what is your investment appetite.Firstly when you invest you need to look into the geographical horizon and the infrastructure.....amenities like schools,Universities,Job markets and the population strength and foremost the demand and supply graph.
    Always buy a property on Investment perspective whether it is for you to live or Invest.....You idea is always to sell a property in the future....nothing is fixed...so look out for equity growth in your property and rental demand in your area of choice.Ontario properties are always influenced by Toronto real estate market and any place close by to Toronto will definitely fetch a good price in the long run.Always before investing in a property look into your finances and take a prior approval of your mortgage and then you have crossed the first comfort zone.Look into the property tax structure in the particular area of your choice and the Auto Insurance which are added expenses which will recur every year. Work out a plan for all your expenses and mortgage installments incurred and compare the rental income you will get in that area if you are a serious investor.If you can save a 500/-cad from your rentals in your house after all your expenses....its a good bet and as well a good Investment.Looking into the demand and supply graph if you find any property satisfies all the above criteria....I would say go ahead.......you are sure to make your revenue and you have invested in a right property......Always invest in a property which is cad 299k to 400k properties whereby you can sell these properties at ease and the buyer too has a edge to get his mortgage approved.....So wish you a very best......
  • Larkin | 21 Feb 2017, 10:43 PM Agree 0
    I've been thinking a lot about this myself before finding this board. The property I want to buy is in a 3000 pop. Town which has grown by a dozen people in the last 5 years lol either way I'm getting a great cap rate and low entry costs.. if I reinvest the profits it will be paid off in 7 years so the way I look at it I only need it to be occupied for 7 years worst case scenario and I'll have a property which is hopefully still worth something. Great board! FYI listen to Clayton Morris podcasts it's quite influential
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