real estate investing Part II

by Mark Broady on Thursday, June 11, 2020
Episode 24

We realize that investing in real estate might not be for everyone... but we've also noticed that more and more people are beginning to take an interest in it these days. When compared to all the uncertainty and volatility of the stock market, real estate always has been, and always will be a relatively stable alternative for investors.
 
 I decided to take a quick look at one of our local real estate markets and track the value progression over the past 10 years - from 2009 to 2019.
 
 The figures below are the median sales prices for single-family homes in Beaconsfield over the past decade: 

2009-$393,750

2010-$415,000

2011-$440,000

2012-$464,000

2013-$460,000

2014-$479,000

2015-$475,000

2016-$514,000

2017-$522,000

2018-$600,000

2019-$672,000

 

It's had some ups and downs of course, but the total appreciation from 2009 to 2019 is + 70.67%  or an average growth rate of return of +7% per year. 

According to a recent article published by MoneySense.ca - the average Canadian diversified equity fund returned 4.37% per year over the past 10-year period. When I looked at my own investment portfolio - it appeared to do slightly better than that at about 5.5%... but still fell short of the returns that the real estate market might have yielded.
 

 Last week I shared a discussion I had with my sister Catherine about her experience in real estate investing. We received a lot of positive feedback from the post and we even had a few people reach out to Catherine for advice. Therefore, we decided to continue our focus on this topic and gain even further perspective from some other investors.
 
 This week, I'm going to be sharing an interview I did with one of our team members - Desiree Ofter. Desiree joined Team Broady back in 2017, and works with many of our buyer clients including investors. Desiree also became a real estate investor together with her husband 2 years ago, and she was willing to sit down and tell us about her unique experience.
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 M: So Des, tell us how you got started as an investor, or describe your first steps on the property ladder.

D: My husband and I bought our first property together in 2014 and at the time we knew how important it was to become owners rather than renters. We were both living and working closer to the city back then, and I knew from my experience in real estate that the condo market was starting to experience new growth in Montreal. So we did our research and decided on a small condo in Griffintown, which we purchased on plan from the builder as new construction. We were extremely confident that the market was about to take off, so we had no doubts about buying in that area. 

 

M: How long did you live in the condo for?

D: We lived there for 4 years and we loved every minute of it. It was the ideal home for us at that stage of our lives and it met our needs perfectly. We were close to the action downtown, but just far enough away that it wasn't too hectic or noisy. We also liked being close to Old Montreal and the Lachine Canal and Atwater Market area. 


 M: What made you finally decide to move?
 
 D: We just arrived at a point where we needed more space. We knew from the beginning that we would eventually out-grow our 1-bedroom condo. Both my husband and I grew up in the suburbs so part of us wanted to get back to that environment as well. We looked forward to having a backyard again - especially for our dog!

 

M: Did you make any changes to the condo or do any renovations?

D: No - which was precisely the reason why we chose to buy a new condo! We didn't want to have to worry about repairs and renovations. 

 

M: Smart. Now, when you decided it was time to move, had you already been planning to get into the investment side of things, or did it sort of happen by accident the way it did for Catherine and her husband?


 D: No, we definitely had a plan. Again, one of the reasons why we purchased new construction in Griffintown was because of the long-term potential for growth. We also knew that there is a strong rental market for condos in that area, so that when we decided to move, it would be easy to find a tenant.

 

M: Did you need to leverage the equity you'd built up in your condo to help finance the purchase of your new home in the West Island?

D: No, we didn't change our existing mortgage at all. We simply had a plan since the day we bought the condo to save enough money to put as the down-payment on our new home. It took four years, but we stuck to the plan, and that allowed us to make the move without needing to refinance or sell the condo. 

 

M: Did you have a hard time renting the place?

D: Not at all. We literally found a high-quality tenant within the first few days of putting it up for rent. 
 
 


 M: Was the rental income enough to cover all of your carrying costs as an owner? (mortgage, taxes, condo fees, etc.)

D; Not quite. It's very close to break even but the negative cash flow is so insignificant compared to the gains we're seeing in appreciation on the condo itself. We're willing to sacrifice some small short-term losses in exchange for bigger, long-term gains.
 
 
 

M: Spoken like a true investor! I'm also curious to know how you find being a landlord. Does your tenant cause you a lot of problems?

 

D: With all honesty... I NEVER hear from her! In fact, the only times I even have to think about the fact that I have a renter is when I see the rental income deposited in my bank account. Once again, I think we owe this privilege to the fact that it's a new condo building with very little maintenance required by the co-owners. 

 

M: That's amazing. Because you often hear horror stories from other investors and landlords about the nightmare tenants they have to deal with and how time consuming it can be when you're doing "property management". It sounds like you guys have a very "hands-off" situation and have gotten away without having to invest a great deal of time or money into your income property.

D: Yeah, we've been pretty lucky, but we've made very careful decisions as well. Unfortunately, our current tenant who's been renting from us for the past two years just gave us notice that she's not renewing her lease. I only hope we can find another renter like her.
 
 
 

M: Thanks for sharing your story with us Desiree. Best of luck finding your next tenant!


Capt'n Mark