First Investment Property advice-Canada

[Peter Davies]

hi forum members!

I would like a chance at gaining something extra for retirement which is in the next 10-15 years and had my eyes on the rental investment market. There are a few properties which have ok- not bad cashflow (up to $300 per month -8-12% CAP Rate) and I have been pre-approved for up to 220k. A few places like in windsor Ontario fall into that range. I don't have a HELOC option (as when I renegotiated my new 5 year mortgage term 18 months ago they instead gave me a basic renewal but with a really low variable 2.11 on my existing home. I was thinking of using a line of credit for the down payment of approx 35-40k as I don't have much available in savings towards a down payment and didn't want to break open my rrps's. My plan was looking at paying back up to 5k per year on the down payment (LOC). Of course I would need some contingency, and want to know if this still could be a good approach and anything else I need to factor in and to not over extended myself?

Appreciate Opinions and Thoughts

thanks

Peter from Vancouver, B.C.

[Peter Crisp]

I'm in Surrey, BC (also Peter) and I'd be happy to meet you to swap notes. I just sold a property in Windsor (a fourplex). I could have held it but I wanted to balance debt and cash out. Windsor is and always has been cyclical and while I wouldn't say it's over-priced, it's fully valued, the pickings are slim for good properties, and I see some downside risk as the auto sector cools off. I won't say that I'm a Windsor specialist but I know that market pretty well so if you want in I can make some suggestions. There are other markets in Ontario worth looking at also - I scan them regularly.

I think good property owners can do well in any market, but the tight rent controls which probably don't even cover inflation are a problem in Ontario and professional tenants in Ontario can make life miserable for Landlords. I'm looking at properties in Ontario, but I have more invested in New Brunswick for a few reasons and the lack of rent control is one of them (NB has other problems, but not this). As for BC, it's very hard to find much that makes sense except very far out. It is do-able but it's mainly in areas such as investing in new projects or pre-sales. In fact, the pickings across Canada are pretty slim at prices that make much sense to me. You can find them, but there are a lot of shoppers out there. A lot of investors are going to the States, but I don't know the markets well enough, I can't add value, and currency risk exists so I've stayed clear.

As for financing, I can talk off-line and share my experiences if that's helpful. You can do a lot with HELOCs but it's way easier to spend the money than pay down the loans, so you have to be careful.