This channel is about Income Property and Real Estate Investing in the Ottawa area, with movies related to revenue generating residential buildings, including statistics at the start of each month to provide investors with the most timely market information.
We also select one sold building every month and "crunch the numbers", to highlight current and key data points including capitalization rates, operating expense ratios, gross and net multipliers, ROI, and more.
I'm Patrick Walchuk and I've sold over 80 Multifamily Properties in my career, and it's what I like to do!
Want to chat about buying or selling any type of Multifamily Building in the Ottawa area?
Phone me 👉👉 613-788-2590 - email [email protected]
Our goal is to inform and educate current investors and those who want to become one. We share our market data and insights because we believe that a more informed investor benefits everyone.
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Buying multifamily is the best thing anyone can do. I was able to buy over 100 rental units in Southern California by adding value to properties and trading up. I do not come from money and all I want people to know, is that anything is possible in Real Estate.
Thank you for this video 🙏🏾
🔥🔥🔥
Thank you for the update 💎
Can you finance properties in Toronto
Where are you getting cap rate comps for a 4plex?
sounds like a renoeviction to me.
Happy Belated New Year. This is great material. I especially like the down-payment to breakeven line. This type of analysis merits a lot more views. I have to conclude that all speculators have exited stage left.
Thank you for sharing. Why an investor would put so much of his money down for a very slim ROI? Shouldn’t He be investing in stocks instead? I don’t get it.
I love this
What stands out for me is the unusually high Operating Expenses. Are they heating with an antiquated oil furnace or what? OE needs some analysis. Moreover, SRI is extremely low for 7 units IMO. Then there's the leverage issue. People have been conditioned to buy productive real estate with boatloads of leverage and hoping for a capital appreciation. They should be buying for the cash-flow with very little leverage. Problem for most people is that it's a big ticket item beyond their pay grade.
dude, your channel should be called "Speculate in Ottawa"; there hasn't been "investment" for quite a few years now.
We will look into making that name change. LOL. I do understand your perspective. Investment buyers and sellers have had a disconnect for some time now. Rising mortgage rates only compounded the problem.
@@PatrickWalchuk anyone who has purchased a property in Ottawa in the last 10 years (or perhaps longer)...no matter what they call themselves...is a speculator. houses are naturally depreciating liabilities.
I’d never buy a rental property like that .!! Not worth it whatsoever
I've had a fourplex for decades. Best investment in my portfolio. Yes, it has to be actively managed and can be a pain at times but it's revenues are indexed in the long run.
@@DarR1299 kzread.infoME8MkZPWAoU?si=QJZc3-82j6EvrPLR
support
oh thanks a lot
P r o m o S M 🌷
You're absolutely right about your comment regarding interest rate sensitivity. As a result, Sales are down. I would have to guess that inventory is way down as well. Strong hands have no reasons to divest with these low prices as many have cap rates north of 8%. Moreover, that's index's unlike a bond.
Hey Patrick, I am Suhayb a 17 years old entrepreneur. I do short video editing and was wondering if I could do it for you, for free, no strings attached, just to help me get experience?
I would make more sense to have a link in the description to the actual listing so the viewer can look through details and other circumstances of the property. thanks
We are not allowed to include an address or photo that would identify the listing of the sold property. Sorry, I'd love to give you that info.
The math is wrong. Cap rate is actually 4.153% and if you divide NOI by the cap rate, the value is the same as the sale price. The video shows that the value is of 911,707 when it should actually be of 900,000.
The cap rate in the video is shown as 4.15%. Using this the value is $900,722.
Straight to the point, great video Sir.
He said movie 😆
In los angeles county you can not evict no one not even if they don't pay rent .
That's so gay
Educate yourself. kzread.infoj-NZpDAag98
There is no reason for an investor to try to calculate a cap rate. Why waste time doing this if you have the market value?
Because Cap Rates allow an objective comparison between buildings of different sizes, revenues, and expenses, regardless of their Annual Debt Service, if any. It is also one of a number of data points used to compare one property to another. Some of the others are gross and net multipliers and operating expense ratios, etc. These are used in the comparative financial analysis of multi unit properties.
@@PatrickWalchuk NOPE! If you are comparing properties for sale but using the "asking price" to calculate a cap rate for "comparison" purposes then all you are comparing is the asking price. Seriously, why compare asking prices unless you always offer asking?! Not a good way to invest. Used correctly you get cap rate comps from sold similar properties and educate the seller why his asking price is a joke. You should know this.
@@Walina-gv9ph I'm sorry you fail to understand this. I've sold 85 apartment buildings, have 32 years experience and have taken bank appraisal method courses, so I do have some understanding of what I am doing.
@@PatrickWalchuk Instead of "saying" you know what you are talking about why not just "show" us. Everything you have stated so far is 100% incorrect. I say you can't.
@@Walina-gv9ph The numbers are based on SOLD Prices, not asking prices.
About the vacancy tax. That's got to be a violation of the charter of rights and freedom. If it's your principal residence, It's none of the governments business to dictate how many months per year you have to be there. If I want to travel around the world, I still want a place to come home to.
I could not agree more. It is a gross overreach with a misguided attempt at a solution to a social problem.
Where did you get the purchase price? Maybe you paid too much and that is why you are not cash flowing.
Hello. The purchase price is how much the property sold for. It's taken from the MLS system and is a matter of public record.
@@PatrickWalchuk What you are missing is that cap rate are used to get the value, You are explaining cap rates backwards.
@@Walina-gv9ph Yes the cap rate can be used to obtain value. (Value = NOI divided by Cap Rate) However I was not trying to obtain value as I already knew that. A Cap Rate is calculated by dividing the NOI by the sold price. If you want more detailed information on how to do the financial calculations and what they mean, please see the video in this link. kzread.info/dash/bejne/qK1qyamfoNPMl9Y.html&ab_channel=InvestInOttawa
@@PatrickWalchuk But ALL a cap rate tells you is what was paid for NOI, period. You have the VALUE so what are you trying to solve for?
@@Walina-gv9ph Cap Rates allow an objective comparison between buildings of different sizes, revenues, and expenses, regardless of their Annual Debt Service, if any. It is just one of a number of data points used to compare one property to another. Some of the others are gross and net multipliers and operating expense ratios, Debt Service Ratios, etc. These are used in the comparative financial analysis of multi unit properties.
I could be wrong here but there's more damage psychologically than financially. Sure, if you're counting on major leverage it hurts but rent prices are going through the roof with Ottawa's one bedroom and two bedroom prices up YoY 19% and 14% respectively. Best guess here, but I think the pendulum will change rather quickly in the next few months as the BOC has overshot their tightening and politicians will scream at the damage they've caused. Capital market debt levels can't survive on current interest rates. Inflation be dammed, just like the central bank has done in the 70's.
It is outrageous that a landlord has to do cash for keys with a tenant who is a problem or non rent payer. The Residential Tenancy Board is totally ineffective for landlords.
Yes the LTB seems heavily weighted toward the tenant. However it is unfortunate for both landlord and tenant that the Board is A) so slow in it's decision making process and B) so backlogged. Neither party gets prompt resolution and for the landlord it could mean foreclosure of their property.
what if the landlord doesn’t want to give my deposit after i signed the N11?
Down payment required to breakeven is a welcome addition to your analysis. Well done.
Thanks.
Awesome info as usual. I'm always curious to see a cap rate trend. Of course it's easy to state without knowing how labour intensive it would be to produce.
I agree. I'd like to see that as part of the monthly Real Estate Board stats, but I don't think that will ever happen. I occasionally have my assistant do a representative snapshot of cap rates, but even with Excel it can be labour intensive and I have to take admin off of other jobs to do that.
We don't know what the differed maintenance or CAPEX would be required but at face value, it seems like a great deal.
I have a feeling that both were significant.
@@PatrickWalchuk I suspect you're absolutely right
I always enjoy your videos and analysis which are very informative. I concur with you that the larger segment of the market may be skewed given the small sample size. However the 2~4 unit numbers seem about right. The significant reduction in sales and stable prices makes perfect sense in this environment. These building are predominantly held in strong financial hands. Moreover, these owners are typically more informed and rational than the average home owners. This is just my 2 cents worth but they're holding onto these properties because of their inflation outlook and rising rent potential which are up 10% in Ottawa over last year. They may also think that the Bank of Canada has painted itself in a corner and can't let interest rate normalize over the rate of expected inflation without causing a deflationary spiral. Like I said, this is just my best guess.
I always appreciate your input Dar.. I am sure Pat will respond also!😀 George.
Great analysis but how such investment makes any sense!?! Real estate in Canada appreciates 6.11% yearly on a 15 year average; inflation is 8%; ROI is -4%.
Yes it can be a real head scratcher at times. I think we have to conclude that investors are no longer expecting to be cash flow positive with a 35% down payment and are putting more equity into the property. Secondly these are "buy and hold" people not looking to flip in a year or two. We are experiencing a market in transition.
At first glance, the numbers don't look good but they are in reality. You shouldn't compare the returns of a leveraged investment against a non-leveraged investment just like you should not compare real returns with nominal returns. On a non-leveraged basis, this property yields a real return of 3.32% (after inflation) whereas a GIC with a nominal return of 5% yields a real return of negative -3%.
For example, let's say you only put down 35% to buy a 5 year GIC paying 5% and you borrow the rest at let's say 5% also. That means your nominal return is 0%. However, your real return is negative -8% (inflation).
@@DarR1299 Dar you are correct (as usual) about comparing a non-leveraged (cap rate) investment to leveraged (cash on cash) investment. I debated the accuracy / confusion of doing this, and still do. I discussed this will some experienced investors owning significant assets and others who were new real estate acquisitions. In the end I thought the current calculations may best inform the widest experience of people. Others wanted more data on a longer term buy and hold position, over five years, of principal paydown and an average asset value increase of about 4%. It’s difficult where to draw the line.
@@PatrickWalchuk I personally, think the data you're providing is excellent to paint a picture of a particular market segment. You cannot please everyone nor do I think you should try. It just may get messy. The only piece I would remove is that 35% down which currently does not work in this economic environment. Perhaps one day it will again. However, what I would replace it with is the break-even LTV. In other words, what the smallest down payment required without the cash-flow going negative using the current 5 year fixed term mortgage rate.
As I have posted in your May analysis, what I suspect here is a "Negative Gearing" purchase to lower the buyer's tax liability. I don't think the buyer intends to live in the building. I also suspect that buyer may have leveraged an even greater LTV using other assets as collateral.
You could be right. I'd love to have a survey done of everyone who purchased these properties. My anecdotal experience is that few investors purchase with a tax liability consideration. However anecdotal experiences can be worthless in the broader reality of markets. I think that your second point is most likely correct regarding LTV, use of other assets or just plain old all cash buyers.
@@PatrickWalchuk A purchase forensic analysis. Wouldn't that be something!
@@PatrickWalchuk just my 2 cents worth but seems the multifamily market is polarized between all cash and all high LTV. We know you can't cash-flow positive with 35% down where 50% down is about the breakeven mark for a clean building. Should you add-on deferred maintenance and CAPEX then we're entering an all cash purchase territory as you mentioned just to make it cash-flow positive.
Jeez. How many times have I mentioned that you cannot cash-flow positive with 35% down? Those days are long gone. You now need 50% down, minimum. What we have here is a "Negative Gearing" purchase to lower the buyer's tax liability. Post edit: On that note, the buyer may have leveraged an even greater LTV using other assets as collateral.
Hi Patrick, can you comment further on the -1.2% decline? Personally, I wouldn't have been surprised by that or for a 1.2% increase either. Seems there's a tug of war between rising interest rates and rising rent prices.
I agree with the tug of war comment but I would have leaned on the side of anticipating a 3 to 5% increase. This is because many people were locked into lower rates for 60 to 90 days. Vacancy rates remain relatively low. Rents can be shockingly high with some very average buildings getting $2,400 per month for a 1 bed, 1 bath unit, with no parking. Additionally is Ottawa's affluence, there are many people who can be all cash buyers (if they choose to be) for $1 to $2 million properties. As such I would have expected more buildings sold with higher prices, which is in contradiction to regular residential properties.
With variable rate mortgages on the rise will that not shrink the cap rate even more for real estate rental property investors? If you can stick you money in US treasuries at 3% why would you risk your money in real estate that seems to be trending down now with the Fed rate hikes?
There's no question that increased variable and fixed rates are slowing the market. I'd like to see another two to four months from now how this impacts pricing. Some people were locked into lower rates so once they expire we will have a clearer picture of the impact on pricing. But increased rates are certainly causing prices to be lowered if an investor wants to have a positive cash flow.
@@PatrickWalchuk Thanks for your sincereity and sharing your honest opinion!
good data, thanks
Thank you.
That's crazy.
Can't say that I disagree with you. This buyer must have had far more than a 35% down payment.
Do you have to give a 60 day notice after lease ends to evict them in an apartment complex with less than 5 units or can you give them 60 days notice before the lease ends? I know in Quebec you have to give 6 months notice before the tenants lease ends to evict them, and if the lease ends in two months, you will have to wait another 12 months, but just trying to figure out the difference between Quebec and Ontario as I thought it was much easier to evict a tenant to owner occupy in Ontario versus Quebec but it sounds similar. Thanks!
A question best left to a lawyer or property manage. One cannot simply evict a tenant unless it's for non-performance (not paying rent) or the owner is having an immediate family member move into a unit. In Ontario a building with four or more units does not permit an owner to remove the tenant so a family member can move in. If a tenant is on a lease, it is dominant over anything else and the tenant cannot (legally) be told to vacate the unit, even if it is a family member in a two unit building. When the lease expires a tenant can be told to vacate with 60 days notice provided.
I frankly cannot find any multi family homes in my own personal opinion that are worth purchasing in Ottawa otherwise, I may have hit you up for a showing by now Pat. Most of them are older buildings that probably need lots of upgrading and modernization. Does anyone build any multiplexes anymore or recently? Do you know where I can find a multiplex that was built in the last 30 years Pat? I was even looking at multiplexes on the Quebec side out of curiosity, and they are even more fewer and far between, and when you find them, they are almost considered vintage in age and are badly run down. If I am going to invest $900,000 in a multiplex, I do not want to look forward to putting another 100 to 200 K in upgrades otherwise, cashflow will be negative. But honestly, My wife and I and two sons are hoping to find a triplex so we can all just live in our own separate units. If you know of anything that fits this description that is not too old (built in last 30 years), please let us know cause that is what our families next move will be if we find the right property. Thanks!
Thanks for your comments and for subscribing to Pat's new channel, he will get back to you!
In the past five years there has been an increasing number of multi units being built. They are going up in the older sections of the city as "infill" properties...usually tearing down an old house or two and putting up a 3 or 4 unit unit building. When they sell, buyers pay a premium for them, sometimes with capitalization rates below 3%. This means one would need 40 to 50% down payment to buy one and be cash flow positive. There are a lot of people, with a lot of money in Ottawa willing to do this. The upside for them is that the building will not have any maintenance cost for at least another 15 years.
@@PatrickWalchuk Yeah, I just came across one yesterday that is around Preston Street area, and they want 1.6 Million for it, and its only a 3 unit with I believe 1 bedroom in each unit only. That is insanely expensive. You almost have to be an acredited investor to afford that kind of down payment. Where is this money coming from to buy such investments? Are rich asian tycoons buying up property in Ottawa by chance?
4-Plexes are not valued by cap rates. Where would you get comps? Direct capitalization is used for residential properties that have 5 or more units.
A cap rate is only one of the data points used to determine value of a multi unit building. They are certainly applicable to four unit buildings and three unit buildings. Cap rates can be taken from three to five, six or seven unit buildings, that is the whole point of a cap, they negate the number of units in a building and whether there is a mortgage on a building. I've seen many appraisers reports on three and four unit buildings, which include caps.