New hotspots owe success to neighbours

Escalating prices in many of Canada’s hot markets have now ruled out any opportunity for new investors to cash flow, but one expert is weighing in on nearby opportunities with significant cash flow.

Ottawa properties don’t cash flow,” says investor Brent Mondoux. “I could spend $900,000 on a six-plex in Gatineau, luxury and brand new construction, with $70,000 of revenue, and on the Ottawa side that $900,000 will be $1.8 million and there will only be around $5,000 more in revenue."

The Ottawa Real Estate Board released new figures last week, showing that the average sales price for homes in the city rose by 0.9 per cent in April to $403,239 and condos were up 2.7 per cent to $265,371.

Meanwhile, just a 15-minute drive across the bridge in Gatineau, Quebec, the average price for a single-detached house in March 2015 was $337,491.

Mondoux suggests that investors who are considering the Ottawa market should instead focus their attention across the provincial border to Gatineau.

“It’s a fraction of the cost and offers better cash flow, plus the vacancy rates are actually better,” he adds.

The trend towards a city’s hotspot status seeping into its neighbouring cities has been seen many times over across the country: with Hamilton next to Toronto and Surrey next to Vancouver, for instance.

To illustrate the Ottawa-Gatineau disparity, Mondoux says that a 2,800 square foot home in Ottawa would cost around $800,000, while the same property would cost $300,000 over the bridge in Gatineau.

“If a geographical area doesn’t work, it’s not going to work across the board universally,” said investor Brent Mondoux. “And that’s the problem with Toronto, Vancouver and Ottawa right now.

“The inevitable adjustments won’t be felt as heavily in an outlying area like it will be in those cores.”

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