Rather than be in diverse markets spreading out our portfolio, we live by Warren Buffet’s philosophy be in only a few markets, be the expert in those markets and watch them like a hawk. Having said that we are primarily only in 2 markets Barrie, Ontario and Calgary, Alberta. In all cases we look to purchase properties at a maximum price of 10% above the median price for that product category. This ensures we are in the price range of most prevelant buyers, in the event that we need to sell.
Truth be told, Barrie is our hometown and where we got started so to us it made perfect sense to get our feet wet here. Fortunately for us, this market has experience great growth over the last 10 years. It continues to be poised to excel as noted by Real Estate Investment Network who for the year of 2014 has ranked Barrie as the 3rd best city to invest in, in Ontario. In the time we have been investing in Barrie we have definitely tweaked our approached. We have left the student market (where we started) primarily due to the lower appreciation, high annual turnover, and continuous maintenance requirements but still believe to this day it is an excellent place for a beginner to get started. The greatest plus being low risk of acquiring a professional tenant.
We on the other hand have chosen to focus on legal duplexes, and triplexes further away from the college. In most cases our cash flow has been about the same, once you factor in all the extra costs incurred by the students. When we buy in the right areas we are seeing the natural appreciation the city is experiencing without having to do much to them. We buy good quality properties that we would be comfortable allowing our children to live in one day. Nice steady growth, great long term plan.
Calgary came about simply due to the potential of the city. All economic signs point(ed) to full steam ahead with regards to this market. In addition to the fantastic economic environment it has the added bonus of no land transfer tax, lower taxes, higher tenant incomes, no rent control, and fair landlord tenant practices, other than the 4 hour our plane ride it was easy decision. The niche we have found in Calgary is taking single family homes and building them into legalized suited properties. Legal suites have only been permitted since 2007 so there are not a tonne of them. The high demand for rentals (less than 1 % vacancy rate), has made these properties hot commodity’s for investors in the area and often command a pretty penny. Virtually impossible to find so we renovate to create them. Currently we are putting about $55-$75k into these properties but can often refinance to pull that out and still cashflow.
From time to time we come across individuals that for whatever reason need to sell their property quickly. In most cases when you need to liquidate a property quickly it tends to come a bit of a financial hit. To the seller elevating the property is the greater concern than the cash value they are receiving. Often times our purchase allows them to avoid bankruptcy, foreclosure and/or the hassle of putting the house on the market. This is a bonus to our investors as they may not be taking on the property of their choosing but they have acquired instant equity. In these cases we are still considering our exit plan so good areas, and median price range are still key. We buy this product only when they are located where most buyers and renters want to be.
Fix and Refinance
Occasionally we come across properties that need a little lipstick and rouge, i.e. paint, flooring, and fixtures. When these can be purchased in good markets, at a reasonable discount they are a nice buy to fix, rent, refinance and hold onto for appreciation or maybe sell.
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