Montreal, Canada; Multifamily Investing?

Question

Hi everyone,This is my first time investing in real estate. I am pretty young and I have a day job but recently I have been given an opportunity to have enough capital to purchase a multifamily home in Montreal. I have been listening to the podcasts on youtube as much as possible, especially the ones involving Ben. I have often heard of this 1% or 2% rule but I don't think it exists up here in Canada.Through the Bank of Dad I can get a loan of up to 500k for 2% interest rate but when looking through MLS the prices for anything decent are at least 150k to 300k more expensive. Also according to my research the absolute best rents I would probably get are $800.00 to $1,500.00 per unit. Which seems low considering I would be lodging in one of the 2 or 3 units myself and use the cashflow to pay for any the mortgage, taxes and any other expenses.In the podcasts it is mentioned several times to purchase something for 500k and renovate it to bring it to 650k but I have no background in construction nor any time to learn my way through it with my day job so... I don't think I have any such option.Though thankfully nothing having been signed yet I can use some advice or maybe some feedback on what I am doing here.Cheers!

Abel Curiel · Answer

Hello Sam Jahsin , With limited time to learn about construction, I would read J Scotts books on flipping houses & estimating rehab costs. Another, less time consuming approach, could be to speak to investors in your area and get recommendations for contractors. A great contractor can be invaluable in this industry especially if you're looking for great deals on property. Purchasing homes with little rehab needed might be less of a headache but if you're concerned with ROI, you might not like the numbers. You can also use BP and REIA meetings to find local wholesalers for off/below market deals. You have an abundance of options. Keep using the education tools here on BP to learn as much as you can so that you make the best decision for your business. Best of luck to you! -Abel

Kristina Schmitt · Answer

Have you looked outside the city at all? If you can't afford something in town, there may be something more in your price range outside the city a bit. I know you're nervous about construction, but have you just looked for an ugly house? Maybe something where you don't need to do major renovations, but where some paint and flooring upgrades / updates will do some good. There's the book on estimating rehab costs that Brandon wrote too that could come in handy for you when going through the numbers. No matter what, make sure the numbers work!

Sam Jahsin · Answer

Thanks for the quick reply.I am going to the location tomorrow with calculator in hand if I have to. Anything you can recommend I read or keep in consideration when it comes to the numbers.As you said. All of them. I have some background in accounting but I know little when it comes to finance.Thanks Kristina!

Kristina Schmitt · Answer

You definitely want to make it better than break even. The 1% rule is just a guideline for a quick analysis and, I've heard it said before, doesn't really work in Canada. We have a duplex that cash flows, but doesn't pass the 1% rule, so run the full numbers. I'd recommend using the calculators on here at least a couple of times to get an idea of what to include in your analysis. (There's a lot you can miss that can bite you in the rear end). I've been using them to create my own excel calculator, but it's probably faster and easier to just use them on here.

Olivier LePage · Answer

@William JohnsonNo worries. Let's keep in touch, I'm still actively buying.Take care!

William Johnson · Answer

@Olivier LePage sorry to get back to you so late but, like the boy who cried wolf this deal turned out to be a dud. Hard to imagine when I had the offer accepted at less than 100 and the tax evaluation was above 230 but I was still happy to have flushed this out with due diligence before rather than after...

Olivier LePage · Answer

@William Johnson Hey William, haven't heard from you in a while, wanna to touch base. I would like to have a peak at you're opportunity. Send me the details.Olivier

William Johnson · Answer

I have a pretty decent investment that I would be willing to sell for 150, I will be closing on it in the next week or so. It is worth between 265 and 300 renovated.

Sam Jahsin · Answer

The problem is not that I cant afford it is that whether I buy a 400k location or a 750k location getting even 1% return IE 4k rent from the 400k investment does not seem feasible. I did look outside of the city too, nothing that seemed proper popped up to me. The best I could find is a 300k location for 2.4k average return with tenants already inside. Location? pretty good, area is clean and safe and access to pretty much anything. However seeing the other crap on the market I am afraid this is too good to be true... which it usually is.I am going to check the place this weekend and see how that goes.PS. Besides I might need some real info on the finance part of things besides everything else. I need to at least make this venture break even right?