Trying to decide on a market

[Account Closed]

Hello Investors,

I am a carpenter working full time in Toronto I have set my goals high to become a successful real estate investor and am willing to put in all the work it takes to get there.

I have spent the last few years learning and planning it out and I would like to take action this year and buy my first property. My plan is to buy a duplex or triplex that I can cashflow through rentals and add value then ultimately refinance and buy more (brrrr method).

As of right now I am working through the process of deciding on which market I want to invest in. I've gone to a few meetups and it has swayed my decision around a bit. My price range is 300k so my hometown Toronto is out of the question. What I am looking at is. 

1) Small town Ontario. Hamilton, Brantford, Sudbury, Welland or similar towns. I like the idea of investing in these parts best because while it is a commute I will still be able to visit the property when necessary. My biggest concern is how many people have told me the struggles investing in Ontario because of tenant-friendly laws. I've been warned that tenants can go months without paying rent and a situation like that would make it hard for me to keep up with payments.

2) New Brunswick. After going to afew REI meetups with a group I am in I have noticed a common trend that many investors love New Brunswick. Mostly because landlords have more power and freedom to raise rents and get rid of bad tenants much unlike Ontario. Some of these investors have bought these properties without even visiting them and claim it is going very well for them. I have been strongly encouraged to invest in here. The idea sounds great and I am considering it. I have never been and I don't know much else about NB but I am currently doing my research. Any investors in that market please reach out!

3) Alberta. Once again I have only heard good things about this market yet I don't know much about it myself. I will be doing my research but any advice will be greatly appreciated!

I am still new and learning and there is more research to be done on my part but any insight will be greatly impactful!

[Paul Sverdlin]

Hey Matt. Your question is so targetted that only an expert in ON, NB and AB markets can answer it, and even then it would only be their own experience. Hence it seems rather quiet in this thread.

As an ON investor for over a decade I can tell you that tenant nightmares could be real, and yet a lot depends on how you screen and treat those tenants. If you condense the question it seems to be a decision around total return vs. total risk. 

The biggest returns so far in Canada had been from appreciation, not so much from rents. Appreciation is great in Ontario and has been great lately in AB. While cashflow may be good in NB, I doubt it will match the value growth in our biggest growth markets.

The risk is in tenants not paying rent, and the pain in evicting them. That's where ON would be tougher than AB. However, this risk needs to be weighted against other risks of managing properties remotely since doing it from ON has its own issues (can't do even smallest of repairs on your own, can't check on the condition of the units, can't even show them to tenants in person to evaluate those tenants when you are first renting to them, etc). All of those remote management issues do add up and cost $$$ in long run.

Imagine a bad scenario: ON tenants stop paying, refuse to leave, it takes 10 months to evict them and they trash the place. Say rent was $3000/month. So you are out of pocket $30k + another $30k for renovations. While $60k is a lot, can you live with it if your property goes up in value by hundreds of thousands over the course of many years? Mind you, that's a very bad scenario. And it can also happen in AB or anywhere else in the world, although the likelihood may be a bit higher in ON. In 12 years that I managed my own rentals in ON there had been a few instances where I had to deal with problematic tenants and each time we resolved our issues without involving LTB. None cost me more than $5k. Meanwhile a coat of paint in-between tenants that I could have put on myself in my home market would easily cost me $5k in a remote market since I simply can't go there to paint the unit and have to hire a contractor instead. And that's every 3-4 years when tenants move out.

Hope this gives you some food for thought. Happy to connect if you need to discuss.