Choosing an investment property

23 Mar Investment Properties-What’s the best investment for me?

investment property, investment properties, investing in real estate, types of investment properties, real estate investments, investing, duplex, triplex, fourplex, multi unit residential property, residential property, landlord, commercial property, office building, plaza, hamilton investment property, hamilton real estate investment, hamilton duplex, hamilton triplex, hamilton fourplex, hamilton multi unit residential, hamilton residential property, hamilton real estateInvestment properties – What’s the best investment for me?

Town House or Condo Apartment Investment

This is a no muss, no fuss investment, ideal for those who want their Hamilton investment to work for them, literally.

A three bedroom unit can be bought for $300K in the East End Vincent Greenhill/Quigley Area or upward of $400K for a 20-year-old unit on the Hamilton Mountain. Rents for these are in the $1,500-$1,800 range and the tenant pays the utilities. Condo fees hover around $300+-, property taxes are generally under $2,800.

Townhomes don’t have the appreciation of detached homes but you can’t have the sheep and the money. There is no maintenance, the condo corporation takes care of the expensive stuff, exterior maintenance, roof replacement, landscaping and fencing, exterior doors and windows. Your only job here is to scrutinize the tenant well, assure you are renting to someone who will take care of your investment.

Condo apartments work the same way. They have a condo fee, which is pretty hefty and dilutes the cash flow/income. On the flip side, there is even less to do as far as maintenance goes.

FIND ME A CONDO OR TOWNHOUSE

 

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A worry-free investment if you take the right steps to choose a good tenant. I can help with the process and on my site, you can find all the info a landlord would need. Taxes are $3,000+-, the tenant would pay all utilities and take care of the landscaping/grass/snow.

The trick is to find a tenant anchored by schools, jobs and such. Rents are $1,500-2,000+-. Cross-reference Hamilton rents on Kijiji or viewit.ca. Ideally, the mechanicals would be sound and last another ten years. A long-term investment.

Purchase price should be under $400,000 for the property to cash flow (rent pays the mortgage, house insurance and property tax).

FIND ME A SINGLE-FAMILY HOME

 

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Two or more tenants in a large house. Some hands-on maintenance required but cash flow is much better. Heat cost is usually paid by the owner. Separate hydro meters would be a bonus but are seldom found.

May be legal, legal non conforming (grandfathered in) or illegal. Check Hamilton Zoning By law here and check out zoning of potential investment on the Interactive Zoning Map! Fire code regulations must be observed.

To facilitate more than two units, the house has to be big. Typically found in Central Hamilton, around Gage Park and St. Clair or in Kirkendall, DurandNorth James Street or West Harbour. (backlink as many neighbourhoods as you can to our neighbourhood page)

These 2.5 storey brick homes were built in the 20’s, have parking or plenty of street parking. Rents are approximately-1 bedroom $850++, 2 bedroom $1,000++ utilities included. Hamilton vacancy rate is below 2%, so if you’ve got it and it’s decent, it will rent.

Here is a random proforma for review.

My abacus calculation is to allocate $3500 in expense per unit (utilities, property tax, insurance, maintenance). You can manage yourself or hire a property manager. Property Management rates in Hamilton are between 5 and 10% of gross rents. With a little effort, tenants can help you be mortgage free sooner. Prices, from $400K++ for a duplex and upwards.

The neighbourhood is key. Good area, good tenant. The condition of the house is also important, good tenants do not live in dumps. A good client of mine’s philosophy is that she only buys and rents homes she would live in herself. It’s a good approach.

Here is the link to the zoning bylaw. It’s a long read:

https://www.hamilton.ca/sites/default/files/media/browser/2015-03-30/hamilton-zoning-by-law-6593.pdf

Link to interactive zoning map: https://www.hamilton.ca/city-planning/official-plan-zoning-by-law/interactive-zoning-mapping

FIND ME A DUPLEX/TRIPLEX/FOURPLEX

 

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Can be built in 1920’s-30’s with wood floors or in 60’s and 70’s with terrazzo (cement) floors.

Location again is key. Central Hamilton, Durand and Kirkendall (backlink to neighbourhoods) are good bets. Barton Street is a long hold. Hamilton Mountain has some nice mid-century buildings in great condition and full of solid tenants.

Once again, like all investments, you are buying a business and it must be viable from day one. The calculation is pretty straightforward;

Value =Net Income /Rate of Return x 100
1,200,000 =60,000/0.05×100

I’ve used a five percent ROI and that is basically to be expected in Hamilton (maybe up to 7% tops). Price per door is anywhere from 130K- in an older building, to upwards of 160K per unit for a mid-century building.

You can hire a superintendent, a manager, DIY-it or have a tenant manage with compensation or free apartment. Financing gets tougher, you need a minimum 20% down payment to get in.

FIND ME A SMALL BUILDING

 

Large Multi-Unit Investment Properties

Prices range from around 150K+ for a

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 1920’s building/unit upward to over 180K per unit for a 1970’s building like the one in the photo.

Management is a whole different strategy. Once again, the neighbourhood is key. Pooling resources with other investors is pretty simple and clearly defined by a good contract.

FIND ME A MULTI-UNIT INVESTMENT PROPERTY

 

Commercial/Plaza/Retail Investments

Fewer tenants, less hassle. Businesses lease to stay not to flee. Location is key, more foot and car traffic the better the tenants do.

Financing is difficult. Minimum 40% down payment required! Ideal if your financial tolerance is high to vacancies.

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Mostly built mid-century. Maintenance staff and management need to be on site or nearby. Apart from basic maintenance, upkeep can be a breeze.

FIND ME A COMMERCIAL BUILDING


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