Rule of thumb for buying multi-units in Canada

[Pascal Lapointe]

Hi everyone,

My job allows me to work with clients that have real estate investment portfolios and work with real estate agents and after talking to many of them I concluded that it seems that the rule of thumb for buying multi-unit properties is to try to pay less than 10x yearly revenue. I imagine there will be different rules depending on the market. In my case, i'm in the Montreal, Quebec area or the province of Quebec in Canada.

In my market, it's practically impossible to find something that is less than 14-16x annual revenue, which seems ridiculous to me. I have my parents and older clients telling me they use to pay 5-7x revenue... So in theory, excluding, taxes, renovations, and other costs, it would take on average 15 years to pay it and probably more than 20 years if you include all the costs. This seems kind of high to me.

Let me know what you guys think.

Thanks!

[Mazen Al Ashkar]

Hi Pascal and welcome to BP, 

There are lots of rules of thumb out there that are very helpful, from my experience, i think ultimately, you need to define your own rule of thumb, i.e. how much are you looking at your property to cash flow and what return expectations do you have. The GIM (Gross income multiplier) you're referring to 14 to 16 is normal in Montreal. i recently closed on a 4plex at 13 GIM. at the end of the day, 13 is not really what i based my purchase on, it was full financial breakdown that helped me make the decision including full expenses, vacancy rates, mgt fees, etc... 

You'll also run into 1% rule, 2% rule or 50% rule mainly here on BP and again i'm speaking only from my experience, i highly doubt you can find any 1 and 2% properties on the island. 

Hope this helps...

Mazin

Hope this helps,