Duplex In Gatineau QC. Canada

[Kevin Khalaf]

I am looking to purchasing my second property (first one being a house hack in Ottawa ON.). I found a nice cheap duplex that requires fair bit of renos, which will increase the value by quite a bit and the property will generate a good cash flow. The problem that I am encountering right now is that after looking further into the neighbourhood (which I am not too familiar with), I found out that it is one of the worst neighbourhoods in the city, and everyone that I have contacted regarding the neighbourhood advised me to think of the quality of the tenants that I will have to deal with.

My question is: is there anyone here that can give me an advise on how to logically think about this without having the emotions of "fear" of having to deal with a hard to manage tenant or the "excitement" of having to found a really good deal after searching for over 2 months?

[Souleymane Alioune Haydara]

Hi Kevin,

I am a real estate investor in the Gatineau area, currently getting my realtor license. Your question is about how to manage the excitement of a new deal vs the fear of possibly having bad tenants and how to deal with those aspects with logic and emotional neutrality.

You mentioned learning that it was the worst neighbourhood in the city and many people were telling you that the tenant quality would be bad. It is true that every city has bad neighbourhoods and good ones. The first questions I would ask are: Are the people that gave you advice investing in that area, or know personally someone that did? If yes than do they have tangible evidence of what they are saying? People that are not investors tend to be scared and give bad/emotional advices. If they are investors, have invested in that particular neighbourhood before, then maybe taking their advice would be wise because they have more experience than you. You could also go in that neighbourhood on your free time, drive around and get a feel for it, you could even knock on doors Grant Cardone style to speak to landlords about their experience.

Also, a good thorough screening process is a good step to take towards eliminating bad tenants (Credit score, job, references etc.). If you are investing in RE, you will at some point have to deal with difficult tenants even in the best neighbourhoods! If that is not for you then a property management company that would take care of it for you might be a good investment for peace of mind.

Now for the "Getting excited" part of your question, A good way to handle it would be running conservative numbers and stress testing your deals, by that I mean what if the interest rates go up on your mortgage from 3.97% to say 6% are you going to cashflow, break even or potentially lose money? What if the property is vacant or you have a sudden CAPEX to take care of? Those tests depend on your level of comfort and your goals. It could also be wise to show your numbers to another experienced investor who could judge your deal from an outsider's perspective. Also, not letting the hunger from a two-month search guide your decision could be a wise thing to keep in mind, good deals will always be there, I find some in Gatineau every week or so.

I hope that helped you, do not hesitate to contact me if you have any more questions, or if you want to have a coffee! I love talking RE!

Cheers!

Souleymane H.