Landlord friendly provinces/1% rule/7-10% Cap Rate

[DesiOnFIRE]

Hello All,

I'm a nube real estate investor. Well, technically, we just own our house (in the GTA) and no rental units yet. But I have been educating myself on real estate, reading a lot of material, most notably Chad Carson's real estate books. I'm trying to understand the following -

1. As a first time landlord, the traditional advice is to invest near where you live. Given where the GTA market is, all the deal analysis fundamentals like the 1% rule, lower GRM (Gross Rent Multiplier), unleveraged yield/cap rate of 7-10% & even cash flow get thrown out of the window (coz of the current interest rates too).

2. I'm a passive index investor at the moment (love the approach) but I'm considering real estate for 3 primary reasons - to potentially utilize the equity we have built into our house, see if I can match or exceed the rate of return from long term passive index investing (I would consider that to be in the 8-10% annual growth if we look at periods >10 years) and to become a small but mighty entrepreneur (with our 1 to less than 4 real estate rentals, I currently work in a full time gig).

3. Questions is - GTA seems unlikely to have those numbers within my target range ($200-300 cash flow at least & use that cash flow to pay down the principal on the primary residence). I understand you can always look for that diamond in the rough. But Ontario is not landlord friendly either, so is it okay if I look to other provinces as long as the numbers hold up (look at it strictly from a business perspective)? And if yes, Alberta is one of those provinces which seem promising to me (based on my limited research). Any insight into that will be very well appreciated.

Thank you in advance!

[scottish]

2. I'm a passive index investor at the moment (love the approach) but I'm considering real estate for 3 primary reasons - to potentially utilize the equity we have built into our house, see if I can match or exceed the rate of return from long term passive index investing (I would consider that to be in the 8-10% annual growth if we look at periods >10 years) and to become a small but mighty entrepreneur (with our 1 to less than 4 real estate rentals, I currently work in a full time gig).

Real estate has in Toronto has been going through a period of historically high growth due in large part to historically low interest rates.    I'd be hesitant to make a big leveraged bet like that unless/until prices show some substantial declines.   What are your thoughts on this?

[Freedomin5]

I’ve never been able to follow the 1% rule in the GTA. We did buy a condo in the GTA 10+ years ago when the appreciation was 20+% a year and the interest rates were super low, so the rent covered expenses. When we sell we will make money from appreciation. It definitely is not landlord friendly. Our tenant is currently paying about 15% below market rate because she’s been there so long and we can only raise the rent by 1-2% a year. We don’t mind though, because she is a great tenant.

In terms of other provinces, I think @Metalcat bought a place in New Brunswick that she’s renting out. I’m not sure what the landlord rules are in that province. 

[Metalcat]

I’ve never been able to follow the 1% rule in the GTA. We did buy a condo in the GTA 10+ years ago when the appreciation was 20+% a year and the interest rates were super low, so the rent covered expenses. When we sell we will make money from appreciation. It definitely is not landlord friendly. Our tenant is currently paying about 15% below market rate because she’s been there so long and we can only raise the rent by 1-2% a year. We don’t mind though, because she is a great tenant.

In terms of other provinces, I think @Metalcat bought a place in New Brunswick that she’s renting out. I’m not sure what the landlord rules are in that province.

NB had no tenant protections when I bought and then brought in massive tenant protections a few months later. They've scaled back some of the more extreme ones, but with the current political climate, I wouldn't expect any jurisdiction to not have strong tenant protections moving forward in Canada.