Investing Around Vancouver, BC. Looking to Make Connections.
Member since 2020 · 10 posts · 4 votes
I’m hoping that people can share their experiences with me about their recent successes in BC real estate, markets to be looking at, and the best ways to get started (apartment, townhome, detached, etc). If people want to connect, I have an eagerness to learn from those who can take me to the next level.
I'm interested in flipping, BRRR, cash flow, and possibly remote investing as the lower mainland opportunities are quickly drying up. I've been looking at Chilliwack, Nanaimo, and Prince George. Also many places in Ontario that provide much more opportunity.
After over 5 years of learning and educating myself about the world of real estate and wealth building, I’m finally in a position to get into real estate. I’m now 24 year old and have been working harder than ever to break in the the ridiculous market that is the Vancouver Lower Mainland. I’ve been working, at minimum, 60 hours a week to save up for a down payment. I’ve sacrificed in many ways to be where I am today.
Never ever make your first RE investment negative cash flow unless it is your primary residence.
" No one has ever gotten rich off of $300/mo cashflow." I disagree with this statement. There is an estimate that says 90% of millionaires got to become millionaires investing in Real Estate. What they Don't say is that the vast majority got that way by accident. In addition to that $300 cash flow, they made a monthly mortgage payment and of that say $1600 payment, a large portion goes into equity.
example 500k property with 125k down payment 375,000 mortgage at 2% .. rough estimated mortgage payment is $1600 with 800 going to interest and $800 going to principal pay down. That is $300+$800 per month, not just $300.
Wait until you have a problem tenant that does not pay.. or the roof leaks, or some tree roots break through your drain tiles. If your in a Strata, I have seen Special Levies for major projects that go +50k per owner! As a Manager, I have passed Special levies, approved by owners of over $10k EACH for major repairs. Wait till your company closes AND the tenant doesn't pay. What do you do if there is a market correction and the value of the property drops to 400k? If you were positive cash flow, you would just bank the cash, build up your capex/contingency fund and ignore the market fluctuations.
After a few years, when you have too much equity or cash in your contingency fund, re-finance and look for your next investment.
I have lots of real life stories to tell, but I suggest you keep reading and studying. I am sure you will get lots of different opinions. Get lots of input and keep asking questions. Try listening to Ken McElroy's predictions, right at the end of the talk around Minute 18. He is American, but the principle still applies.
@Brendan Conners Hey Brendan. I have a very similar story to yours in regards to working 60 hours a week and all that.
I’ll share my experience with you. At 23 I was able to buy an apartment in Abbotsford. I’ve grown up and lived in Surrey all my life but I bought in Abbotsford as I wanted to be able to pay my mortgage as well as still have money to invest.
At 24, I bought my first rental in Windsor, Ontario and that has gone great for me. Its nearly doubled in price (paid 150k) and gives me about $700/mo cashflow as I’ve just upped the rent $250/mo to $1650 now.
I’m currently in the middle of flipping a property in Edmonton as the money in the deal. I have a connection out there managing the deal for me.
Although Windsor Ontario is going great I probably wouldn’t recommend buying out there right now as prices have gone up substantially. I plan on buying another rental this year and I’ll be looking at either condos on chilliwack or possibly a quality condo unit like something close to the water or high up in a quality high rise. Maybe Surrey central.
I know biggerpockets stresses to buy for cashflow however, I feel having a couple hundred bucks of cashflow is a defensive move, rather than an offensive move. No one has ever gotten rich off of $300/mo cashflow. Ultimately it’s either forced or passive appreciation which is going to build your net-worth and that’s why I’ll be buying the rest of my properties here in our back yard. Appreciation isn’t guaranteed but we live in the most beautiful city in canada, probably a top 30 city in the world. Other Canadian retirees and wealthy immigrants love to come here. We have the cleanest water and air quality. Fishing, hiking, camping, snowboarding, beaches, and probably the best, most mild weather you can get in North America.
Anyways, this is just my opinion, it’s totally subjective.
@Conor Kelly Thanks for sharing you experience Connor. I’ve been looking at a few areas in Ontario such as Niagra, St. Cathrines, and Windsor. Even though you say that Windsor has gone up substantially, everywhere else has too. However, a detached property in these areas are still the cost of a small apartment here in the lower mainland. They also still provide a lot of potential for cash flow.
In terms of appreciation, the recent spike in real estate prices makes me apprehensive to get in now. People have been calling for things to fall off a cliff for years now but it never seems to come. Still, having that small amount of cash flow is a must to hedge a bit in case things go south.
Another consideration is the strata fees that have recently skyrocketed, making things even harder around here. That being said, places with cheaper strata fees can still be found but it makes me more inclined to try and flip properties, more than buy and hold for appreciation. At the same time, I do agree that the unique geography of the lower mainland has made it a prime spot of appreciation. With limited viable land to build on, low housing supply, and continue immigration, appreciation will always be the biggest factor around here.
@Brendan Conners Windsor is great. I’ve got a great realtor and property manager out there if you’d like their information.
I totally get where you’re coming from and I agree. After owning one property in Ontario, even though it’s gone great, I can tell you I definitely don’t want to own a portfolio of properties I’ve never seen, on the other side of the country which is a 4 hour long, $900 plane ride away. There’s not much piece of mind in it.
That’s why I’m ideology on investing has changed to - if you can afford to take the $100-200/month hit to own a quality property in your backyard then why not. You could even dedicated a 10k reserve to that property as a safety net. In a couple years rents will have probably gone up and you’ll be getting a cashflow anyways. My condo in Abbotsford rented for $1150 in 2018 when I first bought it, 3.5 years later it’ll rent for nearly $1500.
Vancouver is like Apple stock and cashflow markets are Pepsi or Johnson and Johnson.
When you’re young is usually the time to invest in the growth stocks.
I definitely don’t want to talk you out of anything if that’s what you want to do. I just wanted to share my thoughts with someone who’s in the same shoes I was in 2-3 years ago and whose walking the same path as me.
Shoot me a message if you want to chat more or you want my team is Windsor’s information.
Never ever make your first RE investment negative cash flow unless it is your primary residence.
" No one has ever gotten rich off of $300/mo cashflow." I disagree with this statement. There is an estimate that says 90% of millionaires got to become millionaires investing in Real Estate. What they Don't say is that the vast majority got that way by accident. In addition to that $300 cash flow, they made a monthly mortgage payment and of that say $1600 payment, a large portion goes into equity.
example 500k property with 125k down payment 375,000 mortgage at 2% .. rough estimated mortgage payment is $1600 with 800 going to interest and $800 going to principal pay down. That is $300+$800 per month, not just $300.
Wait until you have a problem tenant that does not pay.. or the roof leaks, or some tree roots break through your drain tiles. If your in a Strata, I have seen Special Levies for major projects that go +50k per owner! As a Manager, I have passed Special levies, approved by owners of over $10k EACH for major repairs. Wait till your company closes AND the tenant doesn't pay. What do you do if there is a market correction and the value of the property drops to 400k? If you were positive cash flow, you would just bank the cash, build up your capex/contingency fund and ignore the market fluctuations.
After a few years, when you have too much equity or cash in your contingency fund, re-finance and look for your next investment.
I have lots of real life stories to tell, but I suggest you keep reading and studying. I am sure you will get lots of different opinions. Get lots of input and keep asking questions. Try listening to Ken McElroy's predictions, right at the end of the talk around Minute 18. He is American, but the principle still applies.
Ken McElroy's 5 predictions for housing in 2022, on youtube June 11, 2021.
One more time.
Ken McElroy's 5 predictions for housing in 2022, on youtube June 11, 2021.
https://www.youtube.com/watch?v=qospzZ0ttVs
@Wendell Fong Thanks for the response Wendell. I totally agree, there’s plenty of unforeseen things that can go wrong and that’s why having cashflow is a great defensive tactic to preserve your wealth. Typically a property that cashflow $300/month won’t end up netting you much return. At some point there’s usually a big ticket expense that eats up that cashflow and that’s why I said “no one has ever gotten rich off cashflow”. Plenty of people have built a portfolio of cashflowing properties and the mortgage pay down and appreciation has made them rich. But typically, it’s never the cashflow itself. My stance is that, if you can afford to safely own a quality unit that’s cashflow negative or break even (upon the nightmare scenario) then I would say it’s not a bad idea to buy it. Like I said before, this is subjective. I’m just offering Brendan a different perspective/option as buying a property site-unseen on the other side of the country comes with all of its own, new and different risks.
@Wendell Fong thanks for the the response and alternate perspective. I watched McElroy’s video and yes he does come up with some very valid points. However, there will always be people calling for the downfall of the market. By the way he makes it sound, any implications are still a little ways out, and the rental market will remain strong.
In terms of timing the market, I don’t believe it will be advantageous for me to just continue waiting on the sidelines, waiting for the perfect opportunity. Otherwise, it may be years of being stuck in the analysis paralysis stage. I feel like I really just need to just get a foot in the door and go from there. That may be FOMO talking but I’m not willing to overpay and get in bidding wars with people. If the number don’t work for a positive cash flow of at minimum a few hundred bucks a month, I won’t buy.
@Conor Kelly My concern with being break even, or even negative, is that it will prevent be from accumulating more properties in the future. Ideally prices and rent do go up in future years but that can be a slow process sometimes. Building my portfolio May stagnate as a result if break even or negative cash flow properties keep eating into monthly expenses.
I’m thinking that a middle ground between enough cash flow to cover unforeseen circumstances ($300-$500?), and appreciation may be the best way to go. This is why I’m looking at places like Chilliwack, where cash flow opportunities can still be found. I also frequent the area and have seen massive growth and development on the south side and see a lot of appreciation potential for the coming years.
There are people here who have places in Nanaimo and Prince George. Jason Ridout is just north of Nanaimo and knows that market pretty well. Prices in Nanaimo haven't gone up as much as areas around there (Ladysmith or Parksville), but they have gone up. You are right in thinking about buying now. I have places north of Nanaimo and bought them 6 years ago just before prices started to go up. Not sure I could afford to buy those same places now as they'd be well over $400K each.
As for BC vs ON-look into taxes for ON vs BC. BC has a property transfer tax. I think ON does and in ON you might have an extra foreign buyers tax depending where you buy.
@Brendan Conners. Out of your original choices (Chilliwack, Nanaimo and Prince George), I personally would prefer Chilliwack given ease of access from Vancouver and the lifestyle opportunities it presents. When you say some cash flow opportunities can still be found, can you give an indication of what you are seeing from a year one cash on cash investment perspective?
@Brendan Conners Yeah totally. There are some cashflow properties in chilliwack however I think it might be hard to find one for $300-500 a month (I could be wrong though). Most I’ve seen is about $150. Btw, Calgary is another decent market right now. Good value for what you’re buying.
Two other things to consider:
1) BC is very heavily tenant favored. Rental increases are limited to cost of living and set by the province. (used to be COL+2%.. now is only cost of living.) While you are limited to one increase per year also in Alberta, there is no limit to the %. You can increase the rent by 5% in Alberta if you want to. BC Rent Increases
2) Strata often limit the number of units in a complex that can be rented out. Check your bylaws before buying a Strata unit. I have had units, purchase by overseas buyers, get caught between the empty homes tax and a Strata Bylaw limiting the units that could be rented. They were essentially forced to sell, since the units were empty and they could not legally rent them out. I have run AGM's where the owners voted to lower the number of rental units permitted.
Hey Brendan, I would be happy to connect and discuss your goals and focuses. I am from the lower mainlaind (Sechelt/Victoria) and I work up north and invest in commercial properties in developing towns with high growth potential and security of long-term development. I would be happy to chat should you be interested. Currently, with the CGL LNG project, the north coast has a lot of potential and should not be overlooked. One thing I like to do is look at large projects, approved and funded, in all sorts of areas, and then do research into property development in that same area. Look for things like new subdivision developments, new storefronts and municipal investment into development in the same towns the projects are in. Using a ideas similar to this can help stack the odds in your favor to be in the right place at the right time.
as some examples, I have created a number of rental packages such as fully included (cable, hydro, furnished etc) where I total all the bills based on the high-cost season and add $100 to each bill and total it all into the base rent. Companies wanting short term rentals for their workers generally like this idea because it's completely hands-off for them, you as the landlord get premium rates on your rents, and you can hold the company who is renting off of you accountable, which can be a lot more simple than chasing casual tenants. However, to keep yourself marketable, you can have 6-mo, and 1-yr leases available as well which can be strong security when renting remotely. There are always ways to be creative with rents, property value, tenancies, purchases etc. Keep an open mind, and stay focused and you may surprise yourself with the opportunities you can create
@Wendell Fong covered some very important points. $300 cashflow will make you rich when you've paid off a $500,000 mortgage. Real estate investing isn't about the cashflow, it's about debt pay down. Appreciation is the icing on the cake. Many investors don't bank on appreciation. Cashflow can be calculated, debt pay down can be calculated, appreciation can't. Appreciation is just speculation. If you want to speculate, go buy stocks.
Thanks for the shout out @Theresa Harris! Let me know next time you're on the island and we can meet in person!
Also, as you mentioned @Brendan Conners, a negative cashflow property will hurt you when you try to buy additional properties. It's not a scaleable model. How many properties can you afford to subsidize each month? Cashflow is the safety net that allows you to hold the property regardless of what the market does.
Don't get me wrong, @Conor Kelly has a point that $300 cashflow vs paying a couple hundred bucks to float a property isn't a huge difference. If I had the choice of having one property I subsidized a bit to get the debt pay down and eventual increase in rents or have no property at all, I'd take the negative cashflow property. That being said I have 6 properties cash flowing between $300-$600 per month each. I wouldn't be able to do that if I had to pay to float each one.
I own in Prince George, Parksville, Lake Cowichan and Port Alberni. I'm focusing on Vancouver Island moving forward because I can still find cashflow and the appreciation is very good.
If you'd like to connect, send me a PM. I host monthly meetups in Nanaimo for investors and it's available through zoom as well.
@Jason Ridout Totally see where you’re coming from Jason. However, I could argue that it is scalable, it just depends on your time horizon. If you plan on buying 6 properties right now, then no, it’s not scalable. If you plan on buying 6 properties over the next 5-10 years then yeah, it’s scalable. I personally know several investors that own over 10 doors here in the lower mainland/Fraser valley. I could also argue that investing for the long term is not speculating as there are several macro economic factors that will cause real estate to go up over the long term (especially in Vancouver). But for the sake of the length of this message (LOL)… I totally understand and agree with your point of view. I’m just suggesting that there are many ways to go about real estate investing and you shouldn’t completely remove where you live from the equation just because of cashflow. I know many of my friends and family want to buy investment property but do not want to buy something in their own market. There are ways to make it work. I would never tell someone who’s barely paying their monthly bills to buy a property cashflow negative or break even.
@Conor Kelly do not want to buy something outside of their own market** sorry.
I am not certain how you scale with a negative cash flow. After your primary residence and maybe one more property, how to you get a bank loan? Your debt coverage ratio (DCR) is under 1 and the banks want to see a DCR of say 1.25 before giving you a loan on a non primary residence.
@Wendell Fong Rent increases and refinance’s. It’s a longer time horizon for-sure Wendell.
I would like to play devil's advocate here because rental focused approach can be quite profitable, it depends on the deals you make and the creativity you approach your investments with. In my post a few days ago regarding my 4-plex in Kitimat is a good example that I will lay out here:
I live in Fort St John, BC, for work, but I invest in developing communities. This method requires a lot more homework into projects coming to a community, potential setbacks, community support, and municipal investment that coincides with projects coming to an area. a few things I did, in particular; I used a private mortgage broker, I used a long standing top quality home inspector, offered additional financial incentives to be very picky with the properties I sent them to so I could use their findings to bargain down deals or get sellers to eat the cost to fix certain things, saving my lots of time and money in the long run. set my mortgage payments to be bi-weekly, which gives you almost 1 month of extra payments per year as opposed to monthly, and it pays down your interest quicker. I also make my units option to be fully furnished or not, utilities included or not (with big charges to make it worth my while), month-month at the higher rent options, 6-month at slightly discounted from month-month, and then slightly more discounted for yearly leases. This allows me to have cheap mortgage payments, pay down interest faster, have a fluid ability to adapt to market conditions on the fly (very important and financially life-saving during covid or other setback events). The 4-plex in question here has 2 3-bedroom units on the ends, and 2 2-bedroom units in the middle.
Here are the financials:
4-plex : $590,000.
Mortgage at 1.8%, ($1,044 bi-weekly)
property management at 10% of rents.
month-month rent 2-bedroom: $1,700
Month-Month rent 3-bedroom: $1,900
fully furnished: +$400/mo per unit
cable included: +$200/mo per unit
Heat included: +$150/mo per unit
Hydro included: +$200/mo per unit
6-month lease: -$100/month rent ($600 savings overall, a good selling line)
1-year lease: -$200/month rent (remember, if tenants break tenancy on signed off leases without justifiable cause, you can be owed the remainder. However, if you have difficult tenants, you are also stuck with them for a year. you can weigh your own pro's/cons)
At the cheapest rates, fully rented: +$6,400/mo
mortgage: -$2,088/mo
property managment: -$640/mo
misc and rest: -$2,000/mo
average net proceeds on discounted 1 year leases with no add-ons: ~ $1,600/mo.
While I agree no one is getting rich off $1,600/mo, I can also share that with good communication and good management teams, you can upsell your tenants and provide a better living experience at the same time. With my current packages rented out, my monthly net proceeds are in the +$3,000/ month range. The other thing to mention is when there are 4 units or more, the rent prices and situation you set your buildings to can also affect the value of the property, which means your equity can raise higher than neighbors of exactly similar properties based on your creativity with your set up. Increased equity with creative solutions is an easy way to use your BRRRRRRR method and slow and steadily repeat. an extra tidbit that I like to use, is to have a mixture of renting to businesses that send workers to areas because they tend to like month-month and shorter leases, also for them it is a business expense and they can write costs off so as long as you can provide all the services to make their efforts as easy as possible, they are more likely to pay the higher rates. This just diversifies my spread of adaptability for my properties.
I understand this is a long reply, I apologize, however; I wanted to give an insight into one of my properties and different ways an investor can be creative with rents and rental packages to not only increase their monthly cash flow but also to increase their properties value and ultimately your equity and ability to keep investing.
There are many strategies and methods, and everyone has their favorites and each method has its pros and cons. Do not rule one or the other out, it can lead to limiting strategies and may lead to missed opportunities, even if it's a method you don't normally love sometimes they are still worth the time of consideration, thought and some research. Keep an open mind, and always be willing to learn more
@Theresa Harris thanks for the reply and I’ve actually done a lot of research on the Nanaimo area. There is a strong demand for rentals in that market and has seen appreciation start to ramp up in the past couple of years.
I myself have been through Nanaimo a few times and can see the appeal to why people would want to live there and escape the mainland. Detached houses can still be purchased there for $400-500k.
It’s definitely an appealing market but I’m just not sure about it for my first purchase. Especially if I’m wanting to build some sweat equity before I rent it.
@David S. Hi David, I can’t give you exact examples as I’ve been busy at work while waiting for my pre-approval. Although, as others have stated here, you can expect a $150-$300 in cash flow a month on some properties. When I said $500 earlier I was just being optimistic, you’d be hard pressed to find anything that high.
I’ve seen a lot of growth South of Hwy 1 in Chilliwack. The north side may follow soon. However, the South side has the Vedder river and a lot more recreation, which is more appealing.
@Brendan Conners Sorry, I am not good with tagging and such, but check the post I made above that discusses rental's as more dynamic options where you can do more with them to make situations better for yourself and ways in which you can be creative with them to make rentals highly profitable and combo to add increased value to your properties equity all the while earning higher cash flow then you would otherwise think you could
@Theresa Harris thanks for the reply and I’ve actually done a lot of research on the Nanaimo area. There is a strong demand for rentals in that market and has seen appreciation start to ramp up in the past couple of years.
I myself have been through Nanaimo a few times and can see the appeal to why people would want to live there and escape the mainland. Detached houses can still be purchased there for $400-500k.
It’s definitely an appealing market but I’m just not sure about it for my first purchase. Especially if I’m wanting to build some sweat equity before I rent it.
I bought 5-6 years ago in Parkville and Qualicum, so it was different as the prices were a lot lower (under $250K for a detached house that needed a bit of work/updating). I did work on two of them, the other was turn key. All have increased significantly in price and the rents have gone up as well. Talk to Jason and others as there are still places on the island where you can get them for a bit less and do the sweat equity.
@Michael Voulgaris Wow Michael, that’s actually amazing cashflow. You got a ridiculous interest rate as well. I’m curious why you chose Kitimat? I was looking into kitimat earlier this year but the vacancy rates were absolutely ridiculous. Is this a concern for you?