All Forum Posts by: Jeffery Zhang

I think lack of appreciation in someways is a good thing. None of these are geographically constrained places, any price appreciation above the rate of inflation is just going to encourage new construction.

@Philippe, it's good to hear that the favorable ratios are due to lack of appreciation rather than collapsing local economy. If they are similarly interest rate insensitive when interest rates go back up, that would be really great.

@Marc, I'm curious why you think the rents would not decrease if the plants closed. My biggest concern about investing in these cities is the possibility of a detroit scenario. Given how close Montreal is, wouldn't people just flock to Montreal if local job markets collapsed? My other concern is that despite the awesome looking gross yields, how rentable are these properties? A high gross yield is only an illusion if the market have so much vacancy that you have to expect a long period of vacancy in between tenants.

I've been looking at prices and rents on realtor.ca and kijiji. The price/rent ratio near Montreal (where I live) is absolutely terrible. Revenue/price are <7% and once you subtract expenses you end up with cap rates in the 3-4% range.

So I look around the surrounding regions. Trois-rivieres/Shawinigian in the Mauricie region have around 150k population and their price/rent ratios are a world of difference. Revenue/price ratios of 10-12% are not uncommon. I'm wondering if the region is economically depressed or something. I understand that rents are significantly lower, 3 bedrooms seem to rent for around 500-600. But even so, with 4-plex 3 Br selling for 150-200k, there is a lot of room for vacancy and expenses. Are houses in these regions hard to finance? I'm trying to understand, what is the problem here?