Out of province or across border?

Question

Hi my fellow Canadians! I was wondering whether any of you have experience investing out of province within Canada or across the border in the US. Looking to buy a multi-plex with a maximum 200k down (including down payment, closing cost, renos, etc.). I'm located in lower mainland and clearly priced out. Been looking at Kamloops/ Kelowna BC and can't even find anything that fits the bill - never mind the crazy bidding wars going on all over the place. It seems like the only options are either out of province or across the border.

Here are some of my thoughts: Washington/ Oregon states are still accessible by car once the border opens back up, prices look workable, but definitely raises challenges in financing and taxation, as well as poses exchange rate risks; out of province - the closest would be AB and that's further than a weekend quick trip, while any other provinces would definitely require flying which I would much rather avoid (husband is extremely afraid of flying lol).

Care to provide some insight if you have experience investing out of province or across the border? Thank you!

Roy Cleeves · Answer

@Yulin Wang I invest in Orlando Florida and Halifax, Nova Scotia and many in Kitchener, Ontario, where I live.  I find the ones that are out of Country and out of Province easier as the tenants never call me or know that I own them.  They deal with property management.

My business partner and I purchased a 4 Alex in Bedford, NS right on the Ocean.  We paid $834,000 in October 2020 and are now refinancing it for $1,275,000.  We bought this one from a digital walk through.  Never saw the place in person until after we closed on it.

My 3 properties in Florida that I bought, I did not see either.  I relied on the Realtor, the Home Inspector and the Property Management company.  And I still have never been inside them.  I have now over the years, had the opportunity to drive past the outside of them.. I bought them in 2009, 2010 and 2011.

To wrap up, I am saying that you don't need to be there or fly or drive to these rental boxes as long as you find good people local to the property to advise you.

Good luck with your search.

Chris Baxter · Answer

@Jason Ridout cap rates are on the decline in most major markets in Canada as cheap money is looking for a home.  The west coast is great (I live here) but the rent to price ratio make it untenable as a place to buy and hold, especially with a potential move towards rent control tied to the unit (not the tenant).  The people on this thread aren't advocating for investing where cap rates are highest, but rather where the numbers make sense.  The million dollar house 2 doors away from my home that rents for $2500 a month makes no sense unless you are 'banking on' appreciation.

Chris Baxter · Answer

@Yulin Wang   I invest only out of province. My recommendation would be to remove the geographical restriction so that you are open to all markets and can invest where it makes sense for your strategy.  If flying is going to truly be a barrier, set yourself up for a long exploratory road trip to build connections and learn about potential markets. While lots of leg-work can be done virtually, there is no substitute for visiting a market to get a true feel of what makes it work.

Theresa Harris · Answer

I'd stick within Canada.  You have the exchange rate to deal with plus all of the income taxes.  Alberta is a good option.  Property taxes are a bit higher than BC, but you don't have property transfer taxes.  You can also look in BC, but look at less expensive places.  Kamloops might be doable, but in Kelowna prices are too high.  Try Nanaimo or Prince George.  Both of those are affordable.  Prince Rupert is smaller.  Cranbrook might also work.

I have places on Vancouver Island and in AB.  Jason is right about the island.  The prices sky rocketed and it is unlikely I'd be able to buy another house there as they start at $500K.  Vacancy is pretty much zero there and rents are high.

Ryan Kenneth · Answer

I understand your plight as I went through the same exercise trying to invest again in BC. I ended up going out of province and it has been liberating. More cash flow opportunities as well as provinces that are more landlord friendly. It takes some time to build out contacts, yes,  but a good PM allows the investment to be a bit more passive for yourself.  Good luck.

Matt Andrews · Answer

Great advice mentioned above. I live on Vancouver Island and travel a good chunk of the year (thanks to real estate). Most of our portfolio is in Ontario (Windsor, Sudbury, Sault Ste Marie, Guelph, etc) and we're expanding to some other provinces. When you have a great team and knowledge of the markets, other cities and Provinces can be quite a great investment. We like to target 7-8Cap Deals, and when other investors end up discovering those cashflow cities, we have been luckily rewarded, however not dependant on that since the cashflow there is solid. Just a nice bonus when caps get driven down to 6% or lower like we're starting to see. We always target 8% Caps though in good neighbourhoods, building a strong defense against any downturns or interest rate rises. If you know where to look, they are out there.

Jason Ridout · Answer

I know a lot of investors are finding good cashflow and cap rates in other parts of Canada, but with the flexibility of many people now being able to work from home, people can choose to live anywhere they want. There will always be people that want to live on the East coast, or Alberta etc, but given the chance, a lot of people will move to places where the climate is better, ie West coast.

Strong cashflow and high cap rates are great, but what if a small percentage of the population start relocating to the West coast? Drops in housing prices and higher vacancies are legitimate concerns that should be considered when investing in any location right now. The market is doing fairly well across Canada, but the West coast is on fire. I'm dealing with clients going into multiple offer scenarios with 15 competing offers and selling prices often six figures over asking price. That's a clear indicator of supply and demand. That demand is driven by the West coast being the most desirable place in Canada to live. That demand is created by people leaving "somewhere else" and buying here. I'm not comfortable buying in the "somewhere else" that people are leaving because it's on sale with decent cap rates.

Old me would buy anywhere the cap rate was highest. New me sees a shift in the population and I realize cap rates don't help if your units are vacant and the market drops. I'm not saying to not invest in high cap rates. Cashflow is king. Just look at all the variables.

Cheryl Webb · Answer

New Brunswick is a viable market. I know several investors who are looking there.

Roy Cleeves · Answer

Yes. I recommend Benjamin May from Keller Williams Realty.  1m I can send you his details in a DM

He is pretty busy yet he will make you a priority if you tell him that I referred you.

Yulin Wang · Answer

@Roy Cleeves Thanks. NS looks interesting. Can you recommend some local realtors so I can find out more?

Out of province or across border?

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