All Forum Posts by: Adrian Ransome

 Hi Steve, I am not familiar with Reddit, but I see it occasionally. I'd like to network into a few more communities. Is your community open to outsiders (I am from Ontario)

I am an easterner, sourcing multi-family in Ontario with a keen eye on the prairies. I like the new wave of freedom that is happening there. I'd like to connect in with some investors in that region. 

This not an area of investing I consider, but some of the thoughts that come to mind are the big ticket items:

1) cost to install septic system;

2) cost to install well;

3) cost to distribute hydro to the new building; 

4) how challenging will it be to get trades to work in the area. 

#3 & #4 are the two biggies in my mind. Trades in the city are tough and have become very irresponsible. Quality is challenging as is professionalism. I hear from friends that have cottages, that finding a contractor is next to impossible and getting something built in a reasonable timeframe is a pipe dream. Unless you have some abilities to complete small tasks, you may find this to be a tough slog. However, if this is for personal consumption and you hope to offset costs with STR, then it sounds amazing. A place to get away from all the nonsense.

ps install your hydro generator ready and off grid if $$ allow.  

Ralph,

Finding prepared spreadsheets is challenging. With a basement renovation project, the real costs start to accumulate with the finishes you use. Your architect and more so the drawings will help you establish the amount of times required for what you are doing. Some simple google searches will provide some calculators to establish pricing on bigger ticket items like framing. Using some guidelines like 1/3 v 2/3 Supplies to labour help to project labour costs. Items like windows are often based on square feet, doors are doors sizes and rated versus unrated. Your electrical contractor can give you rough estimates of running new wiring with ceilings exposed, especially if you have the blueprints he can see for take offs. Larger ticket items such as furnaces, HWT and AC can also be calculated relatively quickly and easily, again using labour/supplies ratio. Plumbing can be a quick call to your plumber and review of drawings to price that out. I think the biggest influence on costs is the fixtures and finishes. Those you can source out  by itemizing your basement plan room by room. Not sure if this helps, but let me know if you find an online source for your budgeting. 

Kevin, 

great commentary and questions. I think you have some of the information already at your finger tips to answer some of your questions. RE is under siege right now in Canada. As you posted our inflation is the biggest head wind that investors will face, although real estate does act as a hedge against inflationary events. I always think it best to separate the residential market into two factions - homeowners and investors. Although there can be significant overlap, the economic impact on each is very different. As you pointed out, the high activity in 2021 could very well be a "pull forward" of sales that should have normally taken place in 2022. However I think the frosting on the market is more relative to cost to carry tripling because of interest rate increases. The headwind is how our central bank is viewing the pace of inflation. For a while they tried to hide under cover of inflation being transitory. After months flowing into years, that BS was soon abandoned. Now the central bank is under fire to hold inflation back which is done through higher interest rates. However, this also has the effect of freezing out buyers as they loose affordability. I hear the call of 500k of immigrants coming to canada. This is where my bifurcation of the real estate market into two factions comes in to play. Immigrants, typically rent until they can create credit and raise equity to acquire. The bulk of those new immigrants will put significant upward pressure on rental rates thereby improving values for the landlord class. With affordability locked in the rear view mirror, there is a huge wave of permanent renters that need places to live. I think that residential markets will continue to see downward pressure, while investment real estate will enjoy climbing valuations. 

There is a lot more to the market than this, but these are my thoughts.

Kevin, 

great commentary and questions. I think you have some of the information already at your finger tips to answer some of your questions. RE is under siege right now in Canada. As you posted out inflation is the biggest head wind that investors will face, although real estate does act as a hedge against inflationary events. I always think it best to separate the residential market into two factions - homeowners and investors. Although there can be significant overlap, the economic impact on each is very different. As you pointed out, the high activity in 2021 could very well be a "pull forward" of sales that should have normally taken place in 2022. However I think the frosting on the market is more relative to cost to carry tripling because of interest rate increases. The headwind is how our central bank is viewing the pace of inflation. for a while they tried to hide under cover of inflation being transitory. After months flowing into years, that BS was soon abandoned. Now the central bank is under fire to hold inflation back which is done through higher interest rates. However, this also has the effect of freezing out buyers as they loose affordability. I hear the call of 500k of immigrants coming to canada. This is where by bifurcation of the real estate market into tow factions comes in to play. Immigrants, typically rent until they can create credit and raise equity to acquire. The bulk of those new immigrants will put significant upward pressure on rental rates thereby improving values for the landlord class. With affordability locked in the rear view mirror, there is a huge wave of permanent renters that need places to live. I think that residential markets will continue to see downward pressure, while investment real estate will enjoy climbing valuations. 

There is a lot more to the market than this, but these are my thoughts.

Great questions and answers from locals that understand the market and have a keen level of experience. I do recommend that you learn the ropes yourself. I think interacting with tenants is a very useful experiential learning opportunity. Lean on your network for help with reviewing any tenants that you feel are worthy of renting your place to, for security. 

I use credit quality and affordability metrics to ensure that prospects can afford the rent. You should begin to establish a process for evaluating your rental market, your advertising, process for interviewing tenants including a formal series of questions. In addition, you should understand how to extract critical information from prospects that will allow you to make good decisions on leasing. 

Standard Ontario Lease is required, but you should start to think about all the terms and conditions that are not included in the standard lease and prepare to include them in your agreement. I have several specific terms that i include, which are highlighted and require initialling so that I have some form of proof that they were aware of those conditions. You will build up a very good list of terms to add as an operator of rental properties. 

Red Flags - tenants that can answer everyone of your questions. Pro's know exactly what you want to hear. If it is too good to be true, then usually it is. "I make $10k per month but have a 480 credit score but I pay my bills on time."

Repairs and maintenance or very tricky to enforce. Discuss with tenants what represents normal wear and tear and what does not. I always maintain a fund to fix damages, both accidental or negligence. The downtime, legal costs and that "kicked in the privates" feeling from trying to extract damage money from a tenant is not worth it. Inspect your properties often. Use fire safety inspection as way to get in every three months. This way  you can have hard conversations with them sooner rather than later. 

Good luck with land lording. It is the only way to economic self sufficiency that I know.  

Good to see some locals connecting on multi-family. Happy to connect and discuss the business, investment and operations of multi-family.

Cheers

Leo,

starting out is tough to do, especially now with the massive increase in pricing. There seems to be less profit in small properties as they require a lot of capital and time commitments. I am in the multi-family space, so I am able to amplify my returns by economies of scale. My investors look for opportunities to invest in profitable assets while minimizing their involvement because they work full time or are retired and just want to be retired. BP is a great place to start listening to the ways to build your portfolio. Teaming up is also a great way to leverage someone else's expertise, see a return and gain some insight. Three imperatives for being profitable in real estate: time, money and experience. You need two at a bare minimum. The other will have to acquired through partnership. If you only have one, become a silent partner and get exposed to the business. I know there are many other ways to get there, but this seems the most prudent to me if I were starting out.  

Hey Leo, glad to see more people with interest in investing. I am in Mississauga as well. I currently invest in multi-family, doing the BRRR strategy. Not exactly a beginner strategy, but that is because I am old. Happy to share some of my experiences with you. Let me know what you hope to learn and what you know so far.