All Forum Posts by: Tyler Cruz

Hi Everyone!

Nearly 3 years ago I finished reading nearly every article and blog posts here before finally feeling confident enough to buy my first income property.

About a year later I finally purchased my first income property in British Columbia, Canada. It's a house with a unit upstairs and a unit downstairs that I rent out on a buy and hold strategy, as cashflow here isn't anything like it is in the US, and appreciation seems to be the main method of real estate investment here.

Note that all prices below are in Canadian (CAD).

I got a bit lucky in that the market here exploded and I did really well with my investment. In my city, appreciation over 1 year ago on average was a staggering 19%! I purchased my income property almost exactly 2 years ago for $274,000. My realtor believes that I could now sell it for $360,000.

I put $140,000 down, which leaves me with a 61% ROI, and I currently owe about $128,000 on the mortgage. Rents each month are $1,900 with almost no vacancy (HUGE rental demand here), and basically breaks even on net cash flow after taxes and all expenses.

For a living I am self-employed but haven't been making any money for a couple of years, and am just barely making enough to stay afloat with my living costs, with no extra money saved up for more real estate investment, and no such investment money to be seen anywhere in the near future either.

So my question to you is, do I have any options with what I have to do any more kind of investing, such as maybe somehow refinancing and taking equity out of my income property? Taking equity out of my personal home is out of the question. How would that work, anyway? And what kind of numbers would we be talking about here?

I know I could ask a mortgage broker about this, but I want to hear from you expert investors on if I have any options here.

Thanks!

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For what I was looking for, yes, I just looked at MLS and PCS (I had access to PCS because I used a local realtor I found here on BiggerPockets). In fact, I still check the PCS and sometimes MLS almost daily, even though I'm in no position to buy another property anytime soon, simply because I absolutely adore this industry.

I guess it depends on what your definition of 'worthwhile' is, as well as your goals. I was looking for a buy-and-hold property, not a huge cashflowing one. You won't be able to find cashflowing properties here like you read about on most of BiggerPockets in the US. And most of the good cashflowing ones I found were in derelict housing, which I didn't want to take on.

Back when I was looking, I spent like a solid year reading every single article on BP, searching the market, and creating a somewhat sophisticated Excel analysis spreadsheet (I got it to the point where all you had to do was enter in the MLS number and it would extract all the data, analyze it, and spit out all the details.

It's analyzing everything from appreciation rates, cumulative appreciation gain, IRR, NPV, etc.

Here's a screenshot from the summary numbers of some of the properties I was looking at over a year ago. Keep in mind that I pad my expenses quite a bit to be safe (typically 5.5% vacancy, 6% maintenance, 5% contingency, and 12.81% property management fees. Those numbers include ALL other expenses too including 100% accurate property taxes, insurance, city utilites, inspection costs, lawyer, appraisal fees, etc.:

http://imagizer.imageshack.com/img922/6639/pe8CnM....

I haven't attended any Nanaimo real estate investors meetups - I was thinking of it when I was looking, but they are really pretty inactive, often only holding meetings once every 3 weeks. And I've had major health issues lately so I haven't had any income to buy another property anytime soon.

I can't wait until I do though - honestly, looking for an income property to buy was one of the most thrilling and interesting things I've ever done in my life.

May I ask why you're looking at those big pricetags? I don't know your budget, but why not focus on looking at the smaller properties here? They're a bit simpler to analyze and then you might even find one to buy!

I bought my first income property in July of 2015 and it has already appreciated 24% in value, so there are definitely opportunities in Nanaimo. Granted, I was fortunate to luck out with the massive boom we had recently, but even so... 

Plus, all I hear is with the new foreign buyer's tax in Vancouver that many of those Chinese buyers are looking at Victoria, so Nanaimo is definitely on their radar too.

Just an example - imagine the construction company you hired managed to mess up some piping in the all the units, and fixing it will cost $10,000 per unit. That's another 1.5 million right there... so you can see how quickly profit can go out the window. 

I think multi-unit properties are not all that different from single units, they're mostly just on a larger scale is all.

Ah, the one on Casper's Way?

I'm not a big-time multi-unit investor either, nor I have even built a place from the ground up before, but I'd imagine (assuming your building costs are correct) you're missing the following points:

- You're assuming that you'd sell 143 units at once. There'd be a lot of holding costs until they all sell

- You're also assuming that all goes according to plan. Surely there will be added costs during construction! In fact, I'd guarantee it.

- Realtor and legal fees! Here you're looking at about $14K for realtor commissions per unit. So that's 2 million right there.

- Capital gains tax? No idea, just throwing it out there

- Unless you have 26 million lying around, you'll be leveraging other people's money. You need to factor in the penalties for paying this off early as well as the interest you'd be paying until you pay it off.

Basically though, you're saying that you'd build each townhome for as low as $132,000 then sell it a few months later for $300,000, except you're multiplying it by 143 units. There are so many costs you're omitting here, otherwise everyone would be doing this left and right - easy 127.3% ROI!

Nanaimo does have a real estate investors group, although it's pretty small and doesn't meet all that regularly.

Wow, young guy entering real estate! I'm a fellow Nanaimoite and bought my first rental last year. I just wish I had more money to go buy another one as I absolutely love this industry!

Nanaimo has a small one (http://www.meetup.com/Nanaimo-Real-Estate-Investors-Club/)

Dan, it was a single-family home with a legal suite.

Tom would actually be a bit better of a contact to ask regarding housing questinons since I'm a noob still, and he's a local realtor here. In fact, I actually "met" him on BiggerPockets and ended up using him as my realtor here.

I think you have an advantage though as it appears from your profile that you've been involved with flips before. There are a lot of cheaper single-family homes here that are ripe for flipping ($150K-$200K range) or improving then renting out. I have a friend here who utilizes sweat equity and I think he has around 20 properties now.