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Worry about brrr strategy in Ontario
Love th idea of real estate investing but isn't brrr strategy very dangerous of tenants stop paying rent. Especially in Ontario since it's protect the tenants more than landlords?
Any rental brings a level of risk that an investor needs to assess and then determine whether they are comfortable with it. BRRR or not, a tenant can always stop paying rent, trash the place, bring in legal aid to their side and leave you with a bill to pay. If your comfort zone does not allow for it - either ensure that you have a wide margin of safety (hard to find, but I'm sure possible) or just do something else (flips perhaps without renting at all).
Imagine a BRRR where the house was purchased for $1 million, renovated for $200k and now its worth $1.5 million. Say your tenants stops paying rent, it takes 8 month to get them out + renovation. That could be $100k out of pocket. Are you still ahead? Yes. Can you stomach it? That's a different story.
I had water bills of $3000 left unpaid. I had a house burned down by tenants. I had tenants stop paying rent and courts taking 9 months to get them out. Still glad I am in the real estate game. Its all in the numbers. By the way 9 months to evict can happen ANYWHERE, not just in Ontario. My biggest delay was in US where laws are landlord friendly. All it takes is for the tenant to get legal aid on their side and a friendly judge. Go figure.
Quote from @Paul Sverdlin:
Any rental brings a level of risk that an investor needs to assess and then determine whether they are comfortable with it. BRRR or not, a tenant can always stop paying rent, trash the place, bring in legal aid to their side and leave you with a bill to pay. If your comfort zone does not allow for it - either ensure that you have a wide margin of safety (hard to find, but I'm sure possible) or just do something else (flips perhaps without renting at all).
Imagine a BRRR where the house was purchased for $1 million, renovated for $200k and now its worth $1.5 million. Say your tenants stops paying rent, it takes 8 month to get them out + renovation. That could be $100k out of pocket. Are you still ahead? Yes. Can you stomach it? That's a different story.
I had water bills of $3000 left unpaid. I had a house burned down by tenants. I had tenants stop paying rent and courts taking 9 months to get them out. Still glad I am in the real estate game. Its all in the numbers. By the way 9 months to evict can happen ANYWHERE, not just in Ontario. My biggest delay was in US where laws are landlord friendly. All it takes is for the tenant to get legal aid on their side and a friendly judge. Go figure.
Thank you the perspective, completely agree there is risk regardless of the method.
any insight on how to buy right and get good purchase price so I can start my BRRRR ?
cause all mls listings are not fixer uppers so hard to buy right and rebab in order to refinance.
The BRRR strategy can be tough in Ontario for multiple reasons. Obviously, you have the prices being what they are, banks having rigorous regulations for investors (this isn't mutually exclusive to Ontario) and the LTB really favors tenants so your concern is very valid. That being said there are many ways you can make this strategy work. It seems like your biggest concern is the tenant not paying rent. You can use the BRRR strategy combined with a student rental approach so that the tenants don't fall under the RTA, meaning easier eviction if they don't pay rent.
Also, I would recommend looking at off-market properties, that's where I am finding the best deals for any reno projects.
Quote from @Ruben Solano:
That being said there are many ways you can make this strategy work. It seems like your biggest concern is the tenant not paying rent. You can use the BRRR strategy combined with a student rental approach so that the tenants don't fall under the RTA, meaning easier eviction if they don't pay rent.
Also, I would recommend looking at off-market properties, that's where I am finding the best deals for any reno projects.
Hi Ruben, RTA does apply to students. It only excludes students living in the school-provided accomodation like a dormitory.
Could you please elaborate on how you are finding off-market deals in Ontario. There are lots of strategies out there, I am curious to see which ones work in today's market for you.
Thanks!