The Phones Are Ringing

by Darrin DeRoches March 21 - 27, 2013

Spring is here and the phones are ringing. It may still be cold outside and the flowers are not blooming but the spring market is starting strong. I received four different calls about income properties this week and I do not have any listed. I also had two calls on a commercial property that is for lease but two different buyers want to purchase a property that is not listed. The real estate investor is looking to Hamilton in a big way.     The inquiries are for duplexes, students, triplex and commercial spaces. The questions are all the same – positive cash flow and good tenants. Hamilton is one of the only cities left where you can put down 20 per cent investment and have a property pay itself off and still have a positive cash flow monthly. The first time investor is always a challenge since they believe they will make a ton of money with very little work. A good property will make you money but the right tenants will make your life easy. Every type of investment has its challenges and a little bit of wisdom can go a long way.     Most people think the more rooms in a student house the better the return. Eight rooms at $400 each is $3,600 a month income so buy a property in the mid $400,000 and it all makes sense. I would suggest you get a student house with six rooms in the mid $300,000 and make more money.  Why would I suggest to a buyer to purchase a cheaper home and make less commission? A proper set up home with two baths and 6 rooms is easier to rent or split between groups so you can charge a little more for more space and a better set up. That six bedroom property will bring in $2,400 to $2,600 per month and be fully rented, compared to an eight bedroom house you cannot charge the same price for the attic or basements and it is next to impossible to find a group of eight who want to live together. An eight bedroom house will likely bring in $2,800 to $3,200 per month on average and the difference may pay the mortgage difference but it is more likely to be a challenge. The larger homes tend to turn into “animal houses” and bring a lot of challenges.     Duplex and triplexes are great investments but when you are buying those you have to really consider the locations and what type of tenant and rent it will bring. A rule of thumb is if they do not have long term tenants in them, there is an issue. If the seller is selling this great investment but cannot bother to have put an ad on Kijiji and fill his house it is a big red flag. Pay more for a property in a good rental area with higher rents and you will tend to have better clientele. Investing is not just about the numbers it is also about the location, people and history of the property. V         Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.