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Toronto's investors disappear, remerge down 401

by Neil Sharma on 18 Apr 2018

According to professional real estate investor Rachel Oliver, avoid Toronto.

“A lot of people from the GTA are gravitating to Ottawa because it’s cheaper there and they can pick up rental properties,” said Oliver, co-host Mothers of Real Estate TV show, co-author of MORE Confident Real Estate Investor Course, and Rent to Own Expert. “The government is a pretty stable source of employment, so as an investor you have people with stable demand who are employable and have employment options. You have demand from people who are migrating and driving up appreciation. They’re driving up the need for more rental properties.”

REMAX Core sales agent Sabrina Mtanos agrees that the stability provided by government employees and students makes Ottawa attractive to investors, but she says other factors have conspired in their favour as well.

“Ottawa is currently in a sellers’ market, which essentially means there's a low inventory of homes for sale and a large demand from buyers, which leads to many buyers competing for the same property and paying full asking or above asking for the property,” said Mtanos. “The market has shifted since last year and we're seeing a lot of rental properties going into bidding wars as well. A lot of buyers are missing out on a property, which leads them to renting instead. It's becoming very common for tenants to compete with other applicants for a rental unit thus making the Ottawa Real Estate market hot for investors and landlords.”

But according to Oliver, smaller towns and cities are ideal places for investors because, typically, purchase prices tend not to exceed $500,000—and even for that price you can get a lot of house. Oliver says that helps investors recoup 1% of their investment through rents—a virtual impossibility in large cities like Toronto and Vancouver.

“One percent of the purchase price is an indicator of how much the investor can collect from rent in order to cash flow,” said Oliver. “If a property is listed for $400,000, the 1% Rule suggests that property needs to have a monthly income of $4,000 in order to cash flow. So after the investor factors in carrying costs, property maintenance, vacancy, etc., there is a positive cash flow they can bank on every month.

“Invest in specific markets primed for growth. Understand the fundamentals about whether future appreciation will kick in. You buy for future appreciation, not total demand because you don’t want full saturation, otherwise you’ll be overpaying.”

 

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