The ONLY real estate investment for 2024 ..
Why you should strongly consider a small, value add apartment building as your next investment.
Canadian residential real estate has been on a tear, a nearly 30 year boom cycle with the last major correction occurring from 1989 to 1996. With cash flow projects becoming increasingly difficult due to high price points (and interest rates), what real estate investment makes sense today?
Many investors in condos or single-family homes are quitting are selling off their properties, notably in Ontario and British Columbia due to the complete incompetence of the LTB. Investors are fed up with bad tenants using the system to live rent free, while causing damage to owners properties. CBC ran a story last week about a tenant setting fire to the owners property and still maintained possession!! I have several friends in BC who gave up on self managed rental properties for the exact same reason, and the consequences are catastrophic to the rental supply.
Case in point, Ontario currently has 927,465 Multiple property owners where 695,465 are homeowners with ONE investment property, which accounts for 30% of rental housing in Ontario. With owners selling off their properties in droves saying ‘never again’, rental demand will remain tight, and rents will rise for several years to come.
Not to mention the massive surge in immigration in the past couple of years, and the growth in the working population. Home prices are not coming down, and rate cuts will be minimal over the next year or 2, so what does this all mean?? Quite simply Canada is quickly becoming a nation of renters (including me), so owning a multiple dwelling unit should be the ONLY investment you should be considering right now, but what type, and where?
New builds are the flavor of the year right now, however building costs have reached the tipping point where construction has slowed due to skyrocketing costs, and builders have scaled back, as has CMHC. I have many peers who have built using the MLI select program, and are having trouble finding projects that make sense, whilst at the same time CMHC is scaling back their loan sizes. Government red tape and bureaucracy adds enormous costs to these projects, while the housing situation in Canada becomes ever more dire. Also, most projects are not even close to viable without government programs like CMHC, so ask yourself, do I really want to partner with the Federal Government?
So, what is the safe, and sensible play here?
Well, value add apartment buildings in well located areas can still be purchased for less than half the replacement cost. In my niche, rents are rising at the fastest pace in Canada with no rent controls. Prices are still very reasonable (but rising fast) justifying much higher price points. I have done very well over the past 20 years with a methodical approach to investing that incorporates value add, with careful research and modest leverage. I invest in markets with the best chance of current and future upside – or the greatest opportunity for growth which is why now is the perfect time to invest in the prairies.
Here are just a few reasons to invest now in the prairies:
- Rental upside – there is still at least $300-$500 rental upside over the next few years to even come close to other parts of the country.
- No rent controls, especially in Saskatchewan with twice a year, unlimited increases.
- Replacement cost less than half what a new build costs with instant cash flow.
- Pandemic inflation is easing, and expenses are getting under control.
Alberta experienced a flat to declining rental market for nearly 10 years and it has come roaring back with a vengeance.
Do you want to buy your own apartment block today but not sure where to start? Let me show you how in 4 simple steps with my Multifamily Essentials Program!
Click HERE to learn more about the Multifamily Investing Essentials Program
Happy investing!
Cory Sperle
