All this and more on this week’s Truth About Real Estate Investing Show for Canadians since 2016!  Yes that’s right, this show while not impressive in flash is one of the two longest running podcasts on real estate investing in Canada.  Many have gone away, many just started, almost no one has over 300 hours of podcast content but even still, the Ontario Rental market is forever changing, my investment strategy has changed based on what the market is telling me hence we all need to be up to date hence we have the founder/owner of Rent Panda, my good friend Hart Togman back on the show.

Rent Panda now manages properties all across Ontario in times of vacancies across Ontario rising, credit ratings among tenant applicants are declining, inflation high, Landlord Tenant Board as its worst, etc… what better time to expand one’s property management business 🙂.

Hart is a good guy and details for us his preferred investment strategy student rentals as well which is a great segway into me reading for you a chapter I just wrote for my upcoming book.

The chapter is titled: The best deal our client ever invested in. 

It’s not what you expect. It’s not one I would have anticipated either.

The year was 2013, non conforming multi-family properties were being cracked down upon by cities everywhere for good reason, tenants were getting hurt, many even dying in fires due to lack of our poorly maintained fire safety systems.  If you’ve ever owned a property needing new windows in a basement room where there previously were no windows or had to replace a fire escape, you know the cost could be $30,000-70,000 for a triplex.  

Universities and colleges were growing in student population and needing more off campus housing from private landlords. Student rentals are a best practice investment for small landlords as the building and fire code requirements are significantly lower than even a duplex.

Now about the investment: my property manager and friend Roger gave me a tip about a large house builder near Brock University in St. Catharines had new construction houses suitable for student rentals.

A high quality builder who built houses as they were sold and only needed a $5,000 deposit.

These were four bedroom, 1,900 and 1,700 square foot semi detached and town houses respectively but because we were buying off a plan, I could design the house to be an ideal, safe, city, building and fire code compliant property.

A met with the builder’s designer and made the following changes to their plan:

• Shrunk the principle bedroom to allocate more space to the smaller bedrooms
• Converted the dining room into a bedroom that I can rent for $6,000 per year
• Removed closet doors saving thousands of dollars.  These often get removed or damaged by student tenants so why provide them.
• Finished the basement to include a three piece bathroom, two bedrooms each with an egress window, an oversized window to allow in sunlight over 4.1 square feet in size and can be opened without tools for a person to climb out of in case of fire
• All walls and ceilings were insulated with fire rated sound insulation, the drywall was fire rated.  We followed the Ontario Building Code as if this property was a multifamily property.
• Rough ins for a basement kitchen installed.  At the time, basement kitchens weren’t allowed so we only did rough ins should the by laws change in the future and make suiting a basement apartment easy to do.
• No carpet, replaced with vinyl plank as it is water proof and incredibly durable.

My requested changes added around $40,000 to the price of the house.  A fraction of what it would have cost us to hire contractors to renovate an existing house that would have taken longer and permit costs and delays.

Best part was my clients could include the upgrades into the mortgage and invest a minimum of 20% down payment plus closing costs.  By minimizing the investment dollars, the return on investment ballooned on an investment property that cost $315,000 to buy and rented for $3,150 per month inclusive of utilities.  The gross rent yield of annual rent to price is 12%.  Needless to say many of our clients bought and are ecstatic about the returns.  

The management not so much as that was rocky for many aside from the few who got lucky with who turned out to be the best property management company in town.  Shout out to Adrian Kulakowsky and Student Rentals 101

Fast forward to 2023 we sold one of these townhouses while the market was pretty hot for $804,000 in multiple offers to a mom desperate for a home for her kid going to Brock University.  On price appreciation alone the return on investment was over 400% over ten years not factoring in 10 years of mortgage payment and cash flow.

Winterberry Blvd is the name of the street.  In 2012 it was a road lined by empty lots of dirt on both sides of the road.  Fast forward to today, Winterberry is known as the top destination for student housing for Brock Students, the bus service drastically improved (which I helped lobby St Catharines Transit for) AND students appreciate the newer, more modern housing, bigger bedrooms, bigger house, stainless steel appliances vs the majority of the houses in St Catharines were built in the 1950s, smaller, not renovated, and only basic fire safety systems.  Big difference and we charged a premium rent.  Premium rents have equated to above market values for our clients rental properties since investors value cash flow.

My clients townhouses actually sell for more than bigger houses by the same builder because of the income.  These are the rewards of highest and best use investing and a little luck.  Sadly, my wife and I didn’t buy any as we were focussed on the basement apartment suiting strategy.

University student rentals in general is the preferred investment strategy for many small investors since student non-payment of rent is very rare hence one avoids the risk of ending up in the Landlord Tenant Board.  We’ve also been very lucky with all the price and rent appreciation, regular turnover of tenants as they graduate school and leave return home.

Rich parents signing as guarantors helps too!

But it’s never all sunshine and rainbows.  Declared student rental, A lender financing is non existent.  Student rentals with A lender mortgages at A lender rates where either not student rentals at the time the bank appraised the property or the appraiser did not notice a house with six-seven bedrooms near a university or college would be used as a student rental.

My last mortgage on a student rental was 10% from a B lender, max 65% loan to value and they would NOT recognize the recent, new appraised value to allow me to take back some equity. 

Point is, from a Financing perspective, student rentals are not scalable in my experience.  Investors have to be prepared to have their capital tied up until they sell.  Why? Because student rental is not a recognized use by most zoning by-laws.

Then there is rental licensing, another couple of hundred dollars per year in costs after a couple thousand dollars in licensing fees and to renovate into compliance.

And that is the Truth About Real Estate Investing for Canadians in student rentals in my experience.

We have many educational events coming up.

Saturday, January 18th at 9 AM EST we’re hosting a FREE virtual tour of investment properties my clients and I own in landlord friendly USA.  We’ll share real numbers, video walkthroughs, before and after pictures as we do a lot off market, buying for under market value, BRRRRs.

👉 Sign up here

Saturday, January 25th at 10 AM EST we’re hosting a both in-person and Zoom webinar on How to Maximize the Sale Price of Your Investment Property, even if it’s tenanted.  This is something we specialize in—having been landlords in Ontario for years. My co-presenter (a fellow investor-focused Realtor and property manager) and I will be sharing our best strategies and lessons learned for selling investment properties for top dollar.

👉 Sign up here

Ontario Rental Market Update w/ Rent Panda

On to this week’s guest!

Again, Hart is a friend, I refer him clients all the time for tenant location services.  This may sound like a paid endorsement and full disclosure, Hart Pays me nothing. We receive zero compensation for me having Hart on this show and sending him referrals.  It’s too bad we’re selling the rest of our Ontario portfolio in the near future so I could have asked him for favours but no. Nothing LOL. Which I don’t mind so my judgement is not clouded.

We get a long because we’re both on a mission to help Canadians get a head in life without taking away too much time from their lives and families by streamlining their investments. Let them sleep at night and we both volunteer for non-profits that support landlords.

Hart’s company Rent Panda is an expert on rentals providing both property management and tenant location services while also using the same tools we recommend like SingleKey and Front Lobby.  Any Ontario landlord not using them is exposing themselves to unnecessary risk. Risks that honestly don’t exist in landlord friendly USA but I digress.

You can find Rent Panda along with a bunch of free online resources every Ontario landlord needs at www.rentpanda.ca

To Listen:

HELP US OUT!

BEFORE YOU GO…

Before you go, if you’re interested in what kind of properties I am looking at in the landlord friendly states of the USA please go to iwin.sharesfr.com for what I consider the best investment for most Canadians, most of the time.

I’ve been investing in Ontario since 2005 and while it’s been a great, great run. I started out buying properties in the 100,000s and now it’s $800,000 to $1,000,000.  How much higher can it go? I don’t know

To me, the remaining potential for appreciation does not match the risk hence I’m advising my clients to look to where one can find rental properties that are affordable range of $150,000 to $350,000 US$, with rents that range from $1,400 to 2,600/month plus utilities.   As many Canadians recognize, these numbers will be positive cash flow and are night and day compared to anything locally. Plus the landlord has all of the rights, no rent control, and income is US dollars which are better than Canadian dollars.

If you don’t believe me, US dollars are better than Canadian dollars, go ask 100 non-Canadians which currency they prefer to be paid in.

So to regain control of your retirement planning.  Go to iwin.sharesfr.com and check out what great cash flow properties are available in the USA.  

The best part is, my US investments will be much more passive compared to by local investments as I’m hiring an asset manager called SHARE to hand hold me through the entire process.  As their client and shareholder, Share will source me quality income properties, help me with legal structure and taxes, they manage the property manager and insurance provider while passing down to me preferred rates so I save both time and money.  

Share will even tell me when to strategically refinance or sell.  SHARE can even support investors all over the country for proper diversification hence my plan is to own in Tennessee, Georgia, and Texas.  Share is like my joint venture partner but I only have to pay them fees while I keep 100% ownership and control.

If your goal in investing is to increase cash flow, I don’t know of a better strategy for most Canadians most of the time.  One last time that’s iwin.sharesfr.com to see what boring, cash flowing real estate investing can look like on your path towards financial peace.

This is how I’m going to make real estate investing great again for my family and hope you choose the same.  Till next time!

Sponsored by:

This episode is brought to you by me! We don’t have sponsors for this show. I only share with you services owned by my wife Cherry and me.  Real estate investing is a staple in my life and allowed me to build wealth and, more importantly, achieve financial peace about the future, knowing our retirement is taken care of and my kids will be able to afford a home when they grow up.  If you, too, are interested in my systematic strategy to implement the #1 investment strategy, the same one pretty much all my guests are doing themselves, then go visit www.infinitywealth.ca/events and register for our next event.

Till next time, just do it because I believe in you.

Erwin

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Disclaimer:

As a committed advocate for transparent and responsible real estate investment, I want to openly share my involvement with SHARE SFR (Single Family Rental) as an Advisor. I hold an equity position in this company and receive a referral commission for clients I introduce to their services. My endorsement of their business model – focusing on direct ownership of positive cash flow income properties – is consistent with my own personal investing since 2005, is based not only on a professional assessment but also on my personal experience and belief in their approach. Please note that while I stand behind my recommendations, it is crucial for each individual to conduct their own due diligence and consider their unique circumstances before making any investment decisions. As always, my priority is to provide you with honest, insightful, and practical real estate investment education.