All Forum Posts by: Jason Ridout

It's never too late to start investing @Raul Velazquez!

As others have mentioned, Vancouver is very expensive and difficult to find cashflow. 

You have a couple of choices.
Invest elsewhere in the world. Alberta, USA or anywhere else that makes sense.
Or invest a close to Vancouver as you can that still cashflows. 

I used to live in the lower mainland but invested where the numbers work like Vancouver Island or Northern BC. At least that way you can still drive to the properties if you need to check in on something in person. 

If you want to know anything about investing outside of Vancouver, but still in BC, send me a message. 

Happy investing!

Hi @Joss Biggins, I don't have anything in the Comox area but I've done a number of BRRRRs in Port Alberni and Lake Cowichan area. There's definitely some potential up in the Comox area. 

I run the Nanaimo real estate investors group. I know it's a bit of a drive, but we meet in person the 4th Monday of each month in Nanaimo or the 1st Wednesday on zoom. Events are free and open to people of all skill levels!

Just search for nanaimo real estate investors on Facebook or meetup.com

@Teesh L.

You're right. You will not generate a profit house hacking in a very expensive city, but I think it's still worth doing.

If you're paying $2,500 per month for a 1 bedroom condo, but you could rent a 2 bedroom condo for $3,000 per month in the same area and rent one room out for $1,500 per month, you've reduced your cost of housing from $2,500 to $1,500. That's an extra $1,000 per month in you pocket. It's not profit, but has the same net effect at $1,000 profit.

Hi @Andrew Kim 

My only real complaint with Maxsave is how quickly they place tenants when there's a turnover.
After the tenant gives notice they are moving out, Maxsave usually doesn't post an ad for the unit until the tenant has moved out. They also don't seem willing to show the unit while the existing tenants are still in the unit. This means the unit is vacant before advertising and showing the unit. You are going to lose at least one months rent at that point. Often it's empty for 2 or even 3 months between tenants.  
I don't know how much of the problem is Maxsave and how much is a higher vacancy rate in PG.
Other than that, I'm happy with their service.

There hasn't been a lot of appreciation in PG compared to the lower mainland or Vancouver Island. That doesn't mean that won't change in the future. I'm not sure the appreciation of really desirable markets is sustainable. If national inflation averages 3% and a city is averaging 5-7% appreciation, I don't think it's sustainable for that city to see higher than average inflation indefinitely. 

PG is a long cashflow, debt pay down game, which I don't mind. I don't like speculating on appreciation. 

There does seem to be decent rental demand. 

 Hi Teesh. 

I'm not sure what you mean when you say that house hacking will bring headaches to your employment situation. Who lives on the same property as me has no effect on my job.

The reason I think house hacking is ideal is because it reduces your cost of living. Housing is most peoples largest monthly expense. If you can find a way to reduce that, that frees up capital and income to invest.

For example. I have 2 houses on my property. The second house is rented to a family paying $2,700/m in rent. My mortgage is $2,300/m. I am now earning money to live in my house. If there was only one house on the property, I would be paying the mortgage myself. I can use the income from my job to buy more houses instead of paying a mortgage.

Having a roommate, a basement suite, a STR or any other way you can have your home generate income, frees up money to invest elsewhere.

 Unfortunately just because a lease is a fixed term (ie one year) doesn't mean you can terminate them at the end of the lease. You can say the lease ends on a specific date, but you need to give a legitimate reason to end the lease on that date such as you or a direct family member are moving into the unit. 

So even if a lease has an expiry date, you can not evict for any reason other than the typical reasons (Personal use of the property or extensive renovations) 

 @Lubica J.  "I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right"

This is a very important realization, but you need to take it a step further. Inaction is still a choice and what has not taking action cost you? You will never find the answers to the millions of questions you have, especially if you don't start taking action.

I'm not suggesting you take unnecessary risks, but if you wait until you know everything before you buy, you'll never buy. 

I'm a huge fan of Josh Dorkin's saying "If knowledge was the key, we would all be rockstars with 6 pack abs." We all know exactly how to get six pack abs. Lots and lots of situps. So why don't we all have 6 pack abs? We don't do the action. 

Knowledge isn't your problem. 

I bought my first investment property in Prince George. I had never set foot in Prince George and I bought it sight unseen. I had a good idea what it would rent for and calculated the basic expenses. My calculations we pretty close to reality and it's generated a steady profit for 6 years now. I could have spent months or years researching migration trends, the economy of PG, historic vacancy rates, blah, blah, blah. I could have found a million reasons to talk myself out of buying. What I learned from the first one, I used to buy 3 more in PG and then 4 on Vancouver Island. 

When you're calculating whether or not to take action, if you're going to calculate the cost of a bad investment, be sure to calculate the cost of not taking action as well. There's risk to inaction.

There a lot more people that have failed to take action, and lost out on great investments, than there are people that were too bold and took action when they shouldn't.

Hi @Lubica J., unfortunately it's very difficult to find a property where you can house hack and cashflow, especially in larger/more expensive cities. 

Typically house hacking is a way to subsidize your cost of housing, not cover it completely. A house with a suite that might rent for $2,500 upstairs and $1,500 downstairs, might generate a bit of cashflow, but if you live in one of the units and lose the $1,500 or $2,500 income from that unit, it almost certainly will not cashflow. The rental income will simply help cover costs.

One suggestion would be to buy a house with a suite and rent the upstairs as a STR or MTR. It would be easy to manage because it's so close, and you can get about double the rent as a STR or LTR. Renting a 3 bedroom upper unit to students or healthcare workers might work well.

I'm an investment focused realtor in the mid Vancouver Island area. If you have any questions or want to know any local strategies, let me know!

Talking to a mortgage broker that specializes in investment portfolios is a good first start.
Try Keaton Kirkwood. 

There are cash flowing properties on Vancouver Island right now. I know of a few in Port Alberni and few in Nanaimo that cashflow well, even with the high interest rates. 

There are creative ways to put properties in hold cos that will enable more mortgages.

I'm happy to hop on a phone call with you and hopefully help solve the problem. I closed on my 6th and 7th in April and know some tricks.

We saw a substantial swing in the real estate market in 2022.

What happened?

2022 started off the way 2021 ended, with a very hot market, quickly rising prices and fierce competition between buyers bidding on very limited inventory.

That quickly changed as the Bank Of Canada started increasing interest rates in an attempt to curb excessive inflation. Because the BoC was in denial about the state of inflation for so long inflation got out of control. The only tool at their disposal to curb inflation is raising interest rates. The BoC raised interest rates starting in March and continued to increase them faster than ever before in history.

With average mortgage rates getting pushed from about 2% at the beginning of the year to about 6% by the end of the year, the amount of money that people could afford to borrow was drastically reduced. That had a drastic effect on what people could afford to pay for a home and as a result we saw housing prices drop about 15-20% from the peak of 2022.

Eager buyers with high borrowing power turned into cautious skeptics that couldn’t afford their dream home anymore and decided to sit on the sidelines to watch what happens. A market that drastically favoured sellers was now a motivated sellers worst nightmare. The buyers were burnt out and no longer caught up in the “fear of missing out” of the hot market.

So where are now? 

Warren Buffet once said “Be fearful when others are greedy and greedy when others are fearful.” It seems to me like most people are fearful right now and that’s when opportunity will present itself.

With property prices down 15-20% and motivated sellers willing to negotiate even further discounts, there’s the potential of scooping up some great deals. The competition from other buyers is a fraction of what it was which means that sellers will either have to make a deal with you, or risk not selling their house at all. It is worth noting however that many sellers aren’t motivated to sell and will simply choose to not sell their home. The most motivated sellers will present the greatest opportunities.

We are heading into a recession, if we aren’t already in one. Unfortunately the majority of our economic indicators are “lag” indicators. So just like the BoC being about a year behind spotting excessive inflation, they are also way behind the curve recognizing the recession. Real estate is typically viewed as a “lead” indicator. The real estate market corrects more quickly than other economic indicators. We’ve seen real estate prices drop 15-20%. We’ve seen buyers back out of the market. Real estate is clearly in a recession, the rest of the economy will likely follow.

So what comes next? 

Look back over the history of any recession. In order to stimulate the economy the central banks lower interest rates. In my opinion, the BoC as well as other countries financial regulators, have raised interest rates far too high far too fast. It can take many months or even years for interest rate adjustments to take full effect and yet financial regulators are expecting immediate results from rate hikes. We’ve experienced the fastest increase in history and yet we haven’t felt the full effects yet. By the time we do feel the full effects, it’ll be too late and we will be in full recession, forcing quick and harsh rate slashes.

We’ve entered a time of opportunity. We already have properties discounted up to 20%. We have sellers willing to offer further discounts. We have the bulk of buyer competition sitting on the side lines. The icing on the cake will be the drop in interest rates. When will that happen? Some predict by the middle of 2023, some say not until early 2024. I personally think it’s coming sooner rather than later, but it depends how slow the BoC is to react.

The opportunity to act might be narrow. Once the general public shifts from fearful to greedy, you’ll be just one more buyer scrambling to get your hands on whatever’s left. One tactic might be to start hunting for deals now, buy using a variable rate mortgage and as interest rates drop you’ll get to have your cake and eat it too. Just remember to lock in the variable rate mortgage when rates become reasonable again!