Author Topic: Canadian landlords that have positive cash flow?  (Read 2497 times)

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Canadian landlords that have positive cash flow?
« on: November 28, 2019, 11:45:43 PM »
I'm not interested in being a landlord anytime soon but I am curious: are there any Canadian landlords making positive cash flows monthly that have bought in the last ten years?  Which regions?  I live in Alberta and it doesn't seem very likely right now.

Places like Vancouver and Toronto seem to have even crazier price to rent ratios.

I get the impression that the only people making money bought before the run up in prices in recent years.  Am I mistaken?  Or are they pulling equity out as it gets paid in to create cash flow?

Freedomin5

  • Handlebar Stache
  • *****
  • Posts: 2305
  • Location: China
Re: Canadian landlords that have positive cash flow?
« Reply #1 on: November 29, 2019, 02:00:09 AM »
We bought in Toronto in 2012 and have positive cash flow.

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #2 on: November 29, 2019, 04:18:59 AM »
We bought in Toronto in 2012 and have positive cash flow.

Perhaps I should have been more specific.  Do you hit the 1% rule?  Would it be viable with current house prices?  Have your rental rates climbed substantially since you bought or are property prices steaming ahead of rental prices?

I'm trying to figure out if small time landlords are starting to bring risk into the housing market by wagering on capital appreciation.  Capital appreciation has stalled in Alberta, and there are tons of vacancies, and I'm wondering what the implication is for the trend of house prices. I believe there has been substantial demand created in the housing market fueled by this type of thinking, and It seems it offers a risk of panic selling or some type of systemic contagion.  I work with several people who are underwater on their rental condos and are not making monthly cash flow.

Freedomin5

  • Handlebar Stache
  • *****
  • Posts: 2305
  • Location: China
Re: Canadian landlords that have positive cash flow?
« Reply #3 on: November 29, 2019, 08:16:45 AM »
No, it does not meet the 1% rule. Yes, it may be viable with current prices, depending on location.  In fact, we are hoping to buy another one soon and will only buy if it makes financial sense. Yes, rental rates have climbed substantially. Our problem is that our tenant loves our place and doesnít want to leave, so we can only raise rent by the rate of inflation each year, which means she currently pays below market rate for our unit. And no, itís not the most lucrative way to invest our money. We have other reasons for holding real estate in Toronto.

Alberta is a different story. My general understanding is that there were too many new developments (esp in Calgary) and after the oil crash, not enough demand. Though if we are talking Alberta, Iíd love to buy something in Canmore or Banff. Those are places I would expect to see more stable demand, and who wouldnít want to retire to a place where you see the Canadian Rockies outside your window every single day?

Seadog

  • Stubble
  • **
  • Posts: 227
  • Age: 36
  • Location: Halifax, NS
Re: Canadian landlords that have positive cash flow?
« Reply #4 on: November 29, 2019, 08:20:32 AM »
Even where I am in Halifax which is considered to be one of the most affordable markets in the country, there are very very few places that would hit the 1% rule. But, like bitcoin, as long as the price keeps going up, the more people take note, and the more people pile in, which drives prices further, then it doesn't matter if you lose money each month, since the appreciation will more than make up for it. I'm currently renting here for around 0.4%, and the LL is constantly griping about how little money he makes. The market wont really support much higher rents, but does prices for some reason. It doesn't help that the last several gov'ts of all stripes have done everything in their power to keep this gas bag going. From 0 down 40 yr mortgages, to expanding CHMC limits, to the current and expanding co ownership schemes.

Looked at rationally, every conceivable metric like home ownership rates, price to income, price to rents, price appreciation vs wage appreciation are at the highest levels ever, and beyond where the US was when it fell off the rails. In Vancouver it takes over 100% of average after tax income, to service an average mortgage. Saving rates are near zero, half of people are $200 away from insolvency each month. It seems that Canadian housing runs the gamut from "overpriced" in the more affordable markets, to the literal "limit of financial capability" in Vancouver. If you're eating ramen, have no car, already taken on a boarder, make an above average income and have a below average home which consumes all your money, who is going to buy it from you in 5 years at double the price? 

That said, lots of people delude themselves into thinking they're cash flow positive. I subscribe to the mindset of Paula Pant who says that to evaluate an investment home, look at it as if bought with cash, and everything from management, to maintenance, to cleaning is outsourced, and have realistic numbers for things like vacancy.

Many amateur landlords will put 50% down, lease it themselves, do all the handwork themselves, account for zero vacancy, amortize zero for long term big issues like a new roof, and then rave about how easy it is to be cash flow positive. I guess that's true and repeatable - so long as you have a bank willing to lend you 50% down at zero interest, and a pool of labour willing to manage and repair your place for free.

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #5 on: November 29, 2019, 09:21:57 AM »
No, it does not meet the 1% rule. Yes, it may be viable with current prices, depending on location.  In fact, we are hoping to buy another one soon and will only buy if it makes financial sense. Yes, rental rates have climbed substantially. Our problem is that our tenant loves our place and doesnít want to leave, so we can only raise rent by the rate of inflation each year, which means she currently pays below market rate for our unit. And no, itís not the most lucrative way to invest our money. We have other reasons for holding real estate in Toronto.

Alberta is a different story. My general understanding is that there were too many new developments (esp in Calgary) and after the oil crash, not enough demand. Though if we are talking Alberta, Iíd love to buy something in Canmore or Banff. Those are places I would expect to see more stable demand, and who wouldnít want to retire to a place where you see the Canadian Rockies outside your window every single day?
Thanks for the info.  Yeah the mountains would be a safer bet and I think your analysis is right about new developments and the oil crash.

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #6 on: November 29, 2019, 09:29:47 AM »
Even where I am in Halifax which is considered to be one of the most affordable markets in the country, there are very very few places that would hit the 1% rule. But, like bitcoin, as long as the price keeps going up, the more people take note, and the more people pile in, which drives prices further, then it doesn't matter if you lose money each month, since the appreciation will more than make up for it. I'm currently renting here for around 0.4%, and the LL is constantly griping about how little money he makes. The market wont really support much higher rents, but does prices for some reason. It doesn't help that the last several gov'ts of all stripes have done everything in their power to keep this gas bag going. From 0 down 40 yr mortgages, to expanding CHMC limits, to the current and expanding co ownership schemes.

Looked at rationally, every conceivable metric like home ownership rates, price to income, price to rents, price appreciation vs wage appreciation are at the highest levels ever, and beyond where the US was when it fell off the rails. In Vancouver it takes over 100% of average after tax income, to service an average mortgage. Saving rates are near zero, half of people are $200 away from insolvency each month. It seems that Canadian housing runs the gamut from "overpriced" in the more affordable markets, to the literal "limit of financial capability" in Vancouver. If you're eating ramen, have no car, already taken on a boarder, make an above average income and have a below average home which consumes all your money, who is going to buy it from you in 5 years at double the price? 

That said, lots of people delude themselves into thinking they're cash flow positive. I subscribe to the mindset of Paula Pant who says that to evaluate an investment home, look at it as if bought with cash, and everything from management, to maintenance, to cleaning is outsourced, and have realistic numbers for things like vacancy.

Many amateur landlords will put 50% down, lease it themselves, do all the handwork themselves, account for zero vacancy, amortize zero for long term big issues like a new roof, and then rave about how easy it is to be cash flow positive. I guess that's true and repeatable - so long as you have a bank willing to lend you 50% down at zero interest, and a pool of labour willing to manage and repair your place for free.

Your analysis makes sense to me.  I agree with all of it.  Hard to say where the market will go, but I feel like demand could fade at any moment.

Personally I'm not as much of a housing bear as I used to be, and I'll buy for myself when the time is right.  I worry about the consequences of the short term political attempts to keep the market overpriced.

Seems to me that a drop in retail spending and the ensuing job losses could be the actual straw that breaks the camel's back.  Many people seem to be throwing all they have at the housing market.

rocketpj

  • Pencil Stache
  • ****
  • Posts: 750
Re: Canadian landlords that have positive cash flow?
« Reply #7 on: December 03, 2019, 07:08:22 PM »
I bought a place two years ago that hits about 2% monthly, but it is mixed commercial and residential.  West Coast BC, near Vancouver.

Have a look outside residential property.  There are much fewer buyers in the commercial space, and the math is different - a property is worth what it can pay and nothing more.  And there are some very good deals in certain circumstances.

Of course there is risk as well.

nancyfrank232

  • Stubble
  • **
  • Posts: 227
Canadian landlords that have positive cash flow?
« Reply #8 on: December 03, 2019, 07:52:38 PM »
I'm not interested in being a landlord anytime soon but I am curious: are there any Canadian landlords making positive cash flows monthly that have bought in the last ten years?  Which regions?

Yes. We bought rental properties 10 years ago in the US

The C$ and US$ was at parity and property was selling for less than replacement value

Back then, any B class rental property in a B class neighbourhood would produce over 20% of its purchase price in annual gross rent. A property that rented for $US1000/mo or $US12000/yr would be priced at $US60000. And they were everywhere. Former homeowners all dumped their homes (or had them taken by the banks) and became renters

Easy money for Canadians. We were the biggest foreign buyers of US real estate for a number of years in a row back then

Cash flows like crazy. Completely replaced our entire household income 2x over. And the US$ is a lot stronger now

I shopped with a fellow from Minnesota who purchased a 50 unit building that had 10 vacancies. Each of the other 40 doors produced $US750/mo in rent or $US30000/mo or $US360000/yr. He bought it for $US1.75m cash. Today he has 0 vacancies are rent is $US1500/door/mo or $US75000/mo or $US900000/yr. Remember $US=$C back then

Today he tells me that he regularly gets investors offering him $US6000000 for the building. Thatís $C8000000
« Last Edit: December 03, 2019, 08:09:42 PM by nancyfrank232 »

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #9 on: December 03, 2019, 09:58:49 PM »
I'm not interested in being a landlord anytime soon but I am curious: are there any Canadian landlords making positive cash flows monthly that have bought in the last ten years?  Which regions?

Yes. We bought rental properties 10 years ago in the US

The C$ and US$ was at parity and property was selling for less than replacement value

Back then, any B class rental property in a B class neighbourhood would produce over 20% of its purchase price in annual gross rent. A property that rented for $US1000/mo or $US12000/yr would be priced at $US60000. And they were everywhere. Former homeowners all dumped their homes (or had them taken by the banks) and became renters

Easy money for Canadians. We were the biggest foreign buyers of US real estate for a number of years in a row back then

Cash flows like crazy. Completely replaced our entire household income 2x over. And the US$ is a lot stronger now

I shopped with a fellow from Minnesota who purchased a 50 unit building that had 10 vacancies. Each of the other 40 doors produced $US750/mo in rent or $US30000/mo or $US360000/yr. He bought it for $US1.75m cash. Today he has 0 vacancies are rent is $US1500/door/mo or $US75000/mo or $US900000/yr. Remember $US=$C back then

Today he tells me that he regularly gets investors offering him $US6000000 for the building. Thatís $C8000000

Those are some tasty numbers.  I guess I didn't specify within Canada.  Doesn't really surprise me that some Canadians did well on the financial crisis spread and the strong loonie.  Good on that guy!

P.S. can you stick some commas between those zeros next time?

Jon Bon

  • Pencil Stache
  • ****
  • Posts: 962
  • Location: Midwest
Re: Canadian landlords that have positive cash flow?
« Reply #10 on: December 04, 2019, 03:14:17 PM »

Looked at rationally, every conceivable metric like home ownership rates, price to income, price to rents, price appreciation vs wage appreciation are at the highest levels ever, and beyond where the US was when it fell off the rails.


Go home Canada, you're drunk (on real estate speculation)


Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #11 on: December 04, 2019, 03:17:13 PM »

Looked at rationally, every conceivable metric like home ownership rates, price to income, price to rents, price appreciation vs wage appreciation are at the highest levels ever, and beyond where the US was when it fell off the rails.


Go home Canada, you're drunk (on real estate speculation)

Seems that way, although to argue in favor of price appreciation I would say that Canadians have a bit more cash flow on average to throw at housing since they don't have to buy health insurance.  Could be wrong though, and It does feel irrationally exuberant.

nancyfrank232

  • Stubble
  • **
  • Posts: 227
Re: Canadian landlords that have positive cash flow?
« Reply #12 on: December 04, 2019, 05:16:14 PM »
MF product in Calgary is listed for $200k/door which is stupid

Sellers are hoping for a windfall while they collect fat rents

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #13 on: December 04, 2019, 05:51:00 PM »
MF product in Calgary is listed for $200k/door which is stupid

Sellers are hoping for a windfall while they collect fat rents

Are they collecting fat rents though?

nancyfrank232

  • Stubble
  • **
  • Posts: 227
Re: Canadian landlords that have positive cash flow?
« Reply #14 on: December 04, 2019, 08:49:36 PM »
Are they collecting fat rents though?

Fat enough that owners of MF product arenít serious about selling

snacky

  • Walrus Stache
  • *******
  • Posts: 9844
  • Location: Hoth
  • Forum Dignitary
Re: Canadian landlords that have positive cash flow?
« Reply #15 on: December 04, 2019, 08:51:40 PM »
My prairie city rental does very well. This year some tenants went bad and I had to pour money into the place to get it usable again, so I'm just breaking even. Other years it has paid very well with very little input. I would say that in the long run it works out to better than the 1% rule.

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #16 on: December 05, 2019, 05:01:18 AM »
My prairie city rental does very well. This year some tenants went bad and I had to pour money into the place to get it usable again, so I'm just breaking even. Other years it has paid very well with very little input. I would say that in the long run it works out to better than the 1% rule.
Good to know, would you say this is typical of the area?

snacky

  • Walrus Stache
  • *******
  • Posts: 9844
  • Location: Hoth
  • Forum Dignitary
Re: Canadian landlords that have positive cash flow?
« Reply #17 on: December 05, 2019, 07:00:32 AM »
I come across opportunities to expand my empire in lucrative ways semi regularly. In general I think this region is a good place to be a landlord.

Wrenchturner

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 32
  • Location: Canada
Re: Canadian landlords that have positive cash flow?
« Reply #18 on: December 05, 2019, 08:58:09 AM »
I come across opportunities to expand my empire in lucrative ways semi regularly. In general I think this region is a good place to be a landlord.

Interesting, good to know, thanks.  I thought it was all doom and gloom out there.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3436
Re: Canadian landlords that have positive cash flow?
« Reply #19 on: December 05, 2019, 10:43:10 PM »
FWIW, you can't say it "works out better than the 1% rule" as the 1% rule doesn't say much about your actual returns (you can find 1% rule properties that are awful, and others that are awesome).

It's just a rule of thumb, not a way to calculate your investment returns. *In general* properties that meet the 1% rule will beat stock market returns (ie, ~10% a year) but that's not always the case.

I'd be curious to see your actual numbers.

-W

My prairie city rental does very well. This year some tenants went bad and I had to pour money into the place to get it usable again, so I'm just breaking even. Other years it has paid very well with very little input. I would say that in the long run it works out to better than the 1% rule.