Where should I look at investing?

[middeljohn]

Wondering if I can get some feedback from you guys about good neighbourhoods to invest in.

I'm a first-time buyer looking to purchase a property that I can rent out part of. Logic would suggest finding something in an "up-and-coming" neighbourhood, however I don't want to make it too difficult to find a quality tenant either.

One neighbourhood I have my eye on is McCauley. Prices there are low, but due to its location just NE of downtown I would be surprised if the area doesn't gentrify in the next few years. If I was buying it just for myself then I'd be ok with that, but in the mean time it's still one of the poorest and highest crime areas of the city, so in the short term it may be difficult finding a good tenant.

I would appreciate if anyone has feedback on some other good areas to look at. Another neighbourhood that was mentioned to me was Queen Mary Park, for example. I'm still relatively new to the city, so any advice would be much appreciated!

[thegx]

I would say the Windermere/Ambleside area is one of the most sought after neighbourhoods in Edmonton.

[Coldrsx]

Furthest from IMO.

Strathearn, King Ed, parts of inglewood.

Lrt is nice, if within 500m or so.

RF3 lot.

[EdmTrekker]

Originally Posted by Coldrsx

Furthest from IMO.

Strathearn, King Ed, parts of inglewood.

Lrt is nice, if within 500m or so.

RF3 lot.

I agree.

[240glt]

$$

Low: Parkdale, Alberta Ave, Montrose

Mid: Forrest Heights, Ritchie, Bellevue, Stathern

High: Mill Creek, Capilano

Don't worry about your renters. people are surprisingly more resilient than you think. Just be a good landlord and have a decent space to rent and you'll have no problems finding a good tenant regardless of the location. I don't think McCauley is going to gentrify any time soon although there are small pockets that are quite nice, you need to be on the right street. If you are ready and willing to live that inner city lifestyle, go for it. I looked in there back in the day, didn't find anything in the pockets at the time

I started like you, in the house in Parkdale with a suite in the basement. It served me very well when I lived in it and rented the basement, it has been a great investment and generates positive cash flow currently. Just be prepared to spend money on maintenance and repairs if you are looking for an older place.

I did buy it primarily because it's RF3 and <300m to the LRT. It's also walking distance to lots of amenities so I think it has a better location than further east in AB Ave (82 walk score) It a decent house, but old, before we leave Edmonton I'll redevelop it with a stacked duplex and sell it. Lots of that going on in the area right now

[MattinEdmonton]

Hey John, I will offer you a few tidbits of opinions from my experience investing and owning and developing legally suited homes in Edmonton.

[QUOTE=middeljohn;7289123]
I'm a first-time buyer looking to purchase a property that I can rent out part of. Logic would suggest finding something in an "up-and-coming" neighbourhood, however I don't want to make it too difficult to find a quality tenant either.
[QUOTE=middeljohn;7289123]


- When compiling a pro forma, don't add in appreciation of rent or the property. Assume things are going to be status quo for the first 5 years. If you have appreciation in rent, you will have appreciation in expenses. (Property taxes and repairs and maintenance) are the big ones.
- If you are putting down 5% keep in mind of the very real equity trap you are entering into. CMHC will require 3.6% of the property purchase price as insurance cost. This will tag onto the mortgage but will be a required payout if you sell. If you just pay your mortgage every month, it will take you about 3 and a half years to break even and take just your initial equity out after paying CMHC fees, Realtor fees, and closing costs.
- CMHC rules are likely to become more stringent in future. 80% LTV is required for a HELOC and this is likely to increase to 75% as concerns grow for housing markets across the country (this is a bit us being victimized by the run wild prices in Vancouver and Toronto).
- The area massively matters! I said don't count on appreciation, but you need to buy as good as possible to have the best chance of appreciation. As a rule of thumb, you will want to stay below $385,000 for a legally suited home in Edmonton to make it cash flow. I invest in Mill Woods because there are lots of families, it is close to arterials, Valley Line, and nearby all the new shopping centres in South Edmonton.
- I would stay away from anywhere near Whyte. If you are thinking of a SFH, you will not even come close to a cash flow property buying in that area. Not even close.
- TOD advantage is totally outsized by small investors who think that it will solve every problem. It won't. Unless you are renting to students, your home is going to be occupied by driving commuters. Often, access to major arterials is a bigger advantage in selling your property than proximity to an LRT. TOD advantage makes a lot more sense if you are investing in a condo, not a house. People think of renting a house and recognize that houses exist in neighbourhoods. It is typically a different renter profile.
- The quality of your development is the quality of your customer. Shitty house, shitty neighbourhood, shitty appliances, expect a C or D level customer. Drug problems, mental problems, and constant evictions.
- Do not underestimate the cost of repairs and maintenance. My places are professional developed legal suites and I pay somewhere around $1400 - $2000 per year for the first 5 years on maintenance on the house.
- Cash flow does not exist for the first 5 years. You will get money accumulating in the bank account but it disappears as "reinvested capital" fixing fences, furnaces, hot water tanks, roofing, windows... ect

[240glt]

^ there's quite a difference between buying purely for investment vs. buying a house to live in, have a mortgage helper in the basement with the intent of one day either renting the whole house or redeveloping the property

If I were purchasing purely for investment I would never have bought the properties I own now. (Well, not the house in Gold Bar anyways) i do disagree about prox to transit... I think you are undervaluing that benefit, based on my experience

The biggest gain from the property in Parkdale is equity! That's in part thanks to buying at the right time, but also due to accelerating the mortgage over the past three years while it's been a full-on rental. I don't need the cash flow so most of the upside goes back on the mortgage, which is done in less than two years. I would never get a CMHC mortgage.. i'd rather rent and save than spend the first five years upside down on the property

I've never had a bad renter either. We sold our downtown condo three years ago, mainly because other investors in the building were renting to problem tenants and the building was getting trashed

[middeljohn]

Awesome advice guys, thank you!

My primary goal is to invest for the sake of investing, but since I don't currently own anything and need to live somewhere, it makes sense for the first property to rent out half of the house. Cashflow will be negative if I also live there, but as long my overall personal cost of living will go down that is in a way also cashflow.

The alternative is that I buy a place and rent it all out while I continue renting a place myself, but then I'd have to purchase something significantly lower grade (20% down payment), so equity wouldn't grow as fast plus likely a shitty neighbourhood with shitty occupants.

The advice about buying close to arterials makes sense. Although I prefer living in the core it might make financial sense to stick it out in the burbs for a year so I can get a better property while only putting 5% down.

I read in a few places that rule of thumb should be to purchase for at least 10% below market value while also aiming for a 15% cash-on-cash ROI. One site said that the best neighbourhoods to buy are ones with 65-35 renter vs owner occupied neighbourhood as these tend to have the highest rent vs property cost ratio.

[240glt]

Access to arterials is important for a lot of people. That's one reason I discounted west side neighbourhoods like Inglewood or Westmount when I was looking to buy in 2004

Really the best decision is different for everyone. The biggest factor is how much you want to spend/ invest

[feepa]

Originally Posted by thegx

I would say the Windermere/Ambleside area is one of the most sought after neighbourhoods in Edmonton.

Depends on what you are looking for I suppose. It has good transit access to downtown, but I wouldn't consider it if you were driving downtown.

I just bought a place in Ambleside in the last year, but I also work out here... love being able to have my own place, my own yard, and still be able to walk to work, walk to grocery and other retails, and also love the great access to the Henday to get around the city.

[middeljohn]

What do you guys think about buying in Delton? Lots of for sale signs there but the neighbourhood looks well-maintained.

[240glt]

Delton is okay.. Quite a mix of housing, values anywhere from low 200's to mid 400's, decent transit and arterial connections, not a ton of amenities as you get closer to the Yellowhead but still easy to get to, i'd stick to the centre or centre-west of the area

Be aware that there is a commuter corridor being planned for 122 ave, from Fort Road all the way to 106st, so that'll likely see a major increase in traffic

[240glt]

If you are looking at building sweat equity a fantastic property just came up around the corner from us in Gold Bar on an estate sale.. 2000 sf four level split on a nice lot, house is very solid but needs some serious lipstick and mascara as it is stuck in the 60's.. 2 minute walk to groceries, #1 bus stop at the end of the street, 10 minutes to downtown in rush hour, a block from the ravine, it's priced at $100k less than it would be if it was cleaned up and contemporized

Pm me if you want more info and I'll send you the listing

[middeljohn]

I've narrowed my search down to a few neighborhoods..mostly in Millwoods, but a few around the Yellowhead as well. Everywhere else is too shitty or too pricey.

For those of you who invest in houses with basement suites, how do you determine a good purchase price? It seems that most houses with basement suites are more expensive than the rest of the houses in their area, but the amount extra seems to vary quite a bit. I've seen one house that's listed for $100K more than the average sale price.

I've been requesting past 6 month sales for neighbourhoods I'm looking at, but there aren't too many houses with basement suites to compare to in most cases.

[240glt]

^ when I was looking for a house with a suite I noted about a $30k premium in the areas I was looking in.

If I were you I'd hold off for the moment. I think the market is going to give back a little more over the next while

[Daveography]

While browsing listings in my area, came across this (which is really close to my own house) for $290,000:
http://www.gordyoung.com/mls-E400353...monton_AB.html

It's a fixer-upper, maybe even an infill opportunity if anyone here is looking for either.

[middeljohn]

After a 2 month search I've finally purchased a property right around Meadowlark. Needs a bit of work but nothing super major. Existing tenants on the main floor who would like to stay, so perfect for me since my intention was to live in the basement of whatever I purchase.

Thanks everyone for the input/advice!

[240glt]

Congrats on being a new homeowner!