All Forum Posts by: Chris Baxter

@Randy McKillop  
What's the chances this only lasts one year?

Probably slim... next NB election is in 2024 and there are more tenants that landlords out there to keep happy for votes.

Quote from @Huong Luu:

side question to this: Do you think rent control encourages renters to stay renters, thus making more houses on the market for investors? 

The longer a tenant stays in a rent controlled unit, the harder it is for them to leave, especially in appreciating markets. With each year that goes by, they are getting a better 'deal' on the cost of housing.  I don't think this helps investors at all; for a property to change hands, there has to be something for the landlord to gain.

Here's a real world-example of the net impact of today's decision on one of my properties, a 6-plex in Moncton (all 1BDRM). Market rent (which has escalated considerably in the last 2 years) is now $850 including utilities.  I've been applying $20-$50 increases over the past few years, but kept rents flat during COVID to help tenants out. My average rent is $659. I had a $100 rent increase scheduled to go into effect on April 1st; all units would still be way below market, and all tenants were staying on. Now, my average permitted increase will be $25.  From an NOI perspective, the delta is $5,400 in year 1 which, at a 6CAP, translates to a decrease in value of $90,000.  I have one tenant that has been in the building for 34 years.  She will never leave and will never pay market rent. My costs go up and the allowed rent increase doesn't cover inflation.  So, as time goes on, I am subsidizing housing costs.

Quote from @Mike Singh:

Thanks for this @Chris Baxter , I just closed on another property there and was planning for rent increases . Looks like I will have to reconsider my strategy . 

At least that property tax decrease is pretty nice !!

Considering how property taxes saw a large increase this year, a 50% reduction in taxes over 3 years is less helpful. If you have below market rents, you'll never be able to catch up at a 3.8% annual increases unless units turn over.  

The conservative majority government of NB just instituted rent control in their budget.  3.8% retroactive to January 1, 2022.... So any landlords that have already served notice of increase (I had respectable increases set to take effect on Apr 1) are hooped.  This will likely impact any transactions out there that haven't closed.  On the plus side, property taxes are set to decrease by 50% (but over 3 years).  

Quote from @Logan Jag:

@Chris Baxter, Thanks for sharing the book. Will read through it. 

I understand that the incorporation is about business structure. Since I have purchased 5 rental properties in my personal name, the liabilities & risks are very high. I will consult an accountant to guide me with a correct business structure. When you incorporate, do you have these properties in a holding company? 

I have a pretty complicated structure... My holding company owns my operating company (my active business) as well as my real estate companies.  This structure is detailed in the link I provided, but isn't a fit for everyone.

Quote from @Logan Jag:

Thanks Chris.. I started buying rentals in 2021 and have successfully bought 5 rental properties so far apart from my primary residence. I am planning to Scale up and buy at least another 2 properties by end of this year. The main challenge is transfer these existing properties that are my name to a corporation as the lenders are not approving them. Even if they approve, its going to cost me a lot as lawyer fees and land transfer taxes So I have decided to buy a property under a corporation (with Cash) and obtain a mortgage after I place tenants showing the rental income. Not sure if its the right thing to do

Ahhh... it sounds like you've hit the personal debt wall (lenders typically consider 100% of expenses against 50% of income for residential properties). Transferring residential properties into a corp won't solve your problems and may create more cost (property transfer taxes, legal fees). Have you looked at buying MF with a commercial loan instead? If you want an assessment from a mortgage broker that is active here on BP, reach out to @Jordan Perry

@Logan Jag  welcome to BP.  Have a read through this book: https://www.amazon.ca/Accounti...

Incorporation isn't about the number of properties, it is about finding a business structure that matches your needs. I've held smaller properties personally and larger MF properties inside a corporation, but that's what worked for me. Your accountant can guide you on what's best for you.

@Nazmus Sakib Welcome to BP (and soon to Canada). As a young non-resident with no credit history in Canada, you'll be hard pressed to find a conventional mortgage. If you are looking at mid-size MF (10 units) in the Toronto area, you'll need deep pockets... this doesn't mesh with your need to "save for a downpayment" unfortunately. 

Have a look at the clause for 'satisfactory inspection'; it likely contains language similar to 'at the buyer's sole discretion'. Buyers can (and will) walk quite easily with these standard escape clauses. If your property is worth selling, why waste time trying to take legal action? Focus on getting the sale. Going forward, ensure that a sizable deposit (earnest money) is paid immediately once terms are agreed to so that you eliminate buyers that want to tie up your property for extended due diligence without consequence.

When building relationships, be clear and honest about your intentions. Your first reach-out to a Realtor should not be to ask for them to send you listings. Instead, take the opportunity to learn more about the market, their experience, and what opportunities they see for investors with your specific strategies. This information is far more valuable than simply analyzing random listings in a large market (both Calgary and Edmonton are huge... ).