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I live in Saskatchewan, should I invest in my backyard?

Yvan

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We are a gay couple (late 30's) living in the small town of Biggar, Sk (2500 pop.) 45 minutes west of Saskatoon. We moved here from Calgary because of cheap rent/housing cost while making a good living wage 5 1/2 years ago. With a little luck and hard work we purchased our own home with an empty neighbouring lot (our lots give us 95x140 ft). The house was built in 1912 and cost below 125k. Now we are looking at buying a rental property in either our location (or perhaps Saskatoon) or maybe where would like to retire (Nanaimo area).

When we moved here the economy was hot (2011) it took us 5 months to find a rental property before moving (all I found was bachelor pad at 450$ a month till I could find a house). Eventually we rented an old shabby 1 1/2 storey house for 800$/mo. Surprisingly after the downturn in oil and potash the vacancy rates did not rise and neither did rental accommodations. The are many homes that come up for sale for cheap as elderly residents move to care homes or die. Family members live elsewhere or out of province and generally just sell the house for cheap to get rid of it. Some do need updating but most seem structurally sound and seem to have a potential. Some of these homes go for 40-100k for 800-1200 square ft. We would like to buy a rental home here by year end or our retirement home on Vancouver Island within 2 years time.

Our aim would be to build a portfolio of homes here or in the Saskatoon area. Are we wise to do so? Or should we just try to buy on Vancouver Island and let somebody else pay down the mortgage for us? My research indicates we are in a winter/spring season cycle for real estate in this area(yes I've read Don's books!) but a lot depends on Saskatoon growing and shutting out blue collar workers out of that market. The flip side would be to lay out more money and become landlords 2 provinces over.

Looking for some insight!
 

Thomas Beyer

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Small towns have far higher risk. If people leave or die, why would rents go up ? You will likely get a far better rent-to-price ratio than in Nanaimo though. The question though is where is the rental or value upside coming from ? If you leave, who would manage these houses impeccably ? Who would you sell to if you chose to leave ?

Can you discern good areas from mediocre ones in Nanaimo ? Have you looked at prices and comparable and rent levels ?

I have owned in SK, AB and BC, in both small and large centers, and the choices are many and there is no clear answer of X is better than Y. Everything has pros and cons, and what may make sense when you live there may not make sense when you move.

Consider rental upside, value upside, ability to get a mortgage, vacancy levels, cash flow, risk, management, liquidity and exit strategy. Then decide.
 

kfort

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Saskatoon is an excellent investment town. And this is very much a buying year.

I would choose Saskatoon over Biggar every day of the week IF the goal is long term hold & rent.

Edit: I would add, however, that you've listed two very different goals - buy a rental property (or several?), & buy your retirement home. Get clear on your steps and chat w a mortgage broker (as well as fellow investors here) so you don't end up painting yourself into a corner before you reach your goal
 

kfort

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I would also add, do NOT buy a condo in Saskatoon in the next 18 months. Maybe even up to 36. Massive glut, will easily be two more seasons before it's worked through. Likely more if the units at Avalon mall materialize
 

Yvan

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I would also add, do NOT buy a condo in Saskatoon in the next 18 months. Maybe even up to 36. Massive glut, will easily be two more seasons before it's worked through. Likely more if the units at Avalon mall materialize

Condos and town homes are out of the question for us.My mantra is if I pay tax and a mortgage why should I pay rent (sorry condo fees!) on top of that and be ruled on what I can or can't do.

I do appreciate both the comments and there is merit in both your arguments. We are not unopposed to Toon town it's just for a first rental home we figure we may may have more bang for our buck buying a house in Biggar or possibly in Rosetown. A decent house size 800-1200 square ft can go from 50-110k $ and fetch 700-1100$/mo (Iwas offered 1100$/mo for my home in the past 12 mo on a 2 year lease because of the lack of rental accommodations, as tempting as it was we just weren't in a position to buy another property then.) taxes range from 750-1100$/yr for those properties. For a comparible property in Toontown you would have to look in the rough west end of Alphabet town. Size range from 650-900 square feet, taxes from 1-1.8 k/ yr, insurance is through the roof because of the crime let alone damage from suspect tenants. Rent a month generally ranges from 950-1250$/mo.

Biggar and Rosetown have seen an influx of new blood in the past few years old tiny houses are replaced by new constructions and some old house have been renovated. If I count on the 9 blocks surrounding my home 7 older homes were torn down and 12 modern homes were built on those or other empty lots. 2 are currently under construction and another 5 have been been revamped for better curb appeal. Families that could not afford Saskatoon rents or homes found cheaper rents in three apart. blocks in town (no pets please!). Or from the few vacant homes that occasionally come up for rent. After 2 years most of these young families purchase their first home. Most of these bread winners commute out of town, generally Saskatoon. Though some have found good paying jobs here in town. Biggar's population stands around 2500 (estimate includes floating population). I may have a better pool of renters to choose from as oppose to Alphabet town (Saskatoon's west end). Though some areas of Alphabet town have become up and coming communities, and those prospects seem attractive that still seem like a huge risk to me.

Here in town I can afford a 30% down and still have a 10 K $ emergency reserve and some money left over for minor repairs. In Saskatoon my investment for something comparable may backfire or just get trashed. Surely there is some merit to my reasoning? Or am I just dreaming in technicolour? I've been a tenant all my life except until the last 3 years (thanks to Don's books in fact). I do see the opportunity here especially once the economy starts to pick up steam and so to for Saskatoon as well. it's just that I'm not in a position to purchase a decent home in a good neighbourhood and still make the property viable financially.

I open the floor to you......
 

Yvan

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We moved to Saskatchewan to make our fortune ( which we are doing way better than we would in Calgary). Since I dragged my spouse out here, our aim would be to be in a semi retired state in 10 but probably 15 years time. I don't think I could afford Vacouver Island by then. So it's either own a retirement home there or build a portfolio here to make semi retirement viable. We have seen some properties that would fit our bill in the Nanaimo or Cowichan Valley area. It's just I don't know if I can stomach making the leap into buying my first rental property so far away and not keep tabs on it. or can somebody give a good argument for this move? I can probably afford it within a 2 year window.
 

kfort

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I'm familiar with both rosetown & biggar. I taught high school near there for a few years.

Look deeper into Saskatoon neighbourhoods. Whoever has sold you the alphabet avenue stance is uninformed. There are several excellent areas on the west side. And at least 2 of the worst ones as well.

30% down? What's the goal there? Avoid possible appraisal problems in 5 years? If so... why not just buy in an appreciating area?

Edit:
Keep in mind also that you're not retiring on cash flow anytime soon. While it is important, wealth is built by mortgage paydown
 

Cory Sperle

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I invested heavily in Saskatoon in 2016, and will likely do the same this year as well. Coincidentally, one of the best deals I did was in Unity on a 12 plex, about an hour from Bigger on the Wainwright highway. I bought in 2008 and sold in 2011, however with single family I think it's a bit tougher. Bigger is one of the more stable towns in the area, like Kindersley and Unity, and Macklin where you can buy cheap and rent out for a decent amount, but the downside is you must self manage and could take you longer to sell when it's time to do so. I do think this year will be a buy year, with recovery coming 2018-2020 ish.
 

Marnie

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We moved to Saskatchewan to make our fortune ( which we are doing way better than we would in Calgary). Since I dragged my spouse out here, our aim would be to be in a semi retired state in 10 but probably 15 years time. I don't think I could afford Vacouver Island by then. So it's either own a retirement home there or build a portfolio here to make semi retirement viable. We have seen some properties that would fit our bill in the Nanaimo or Cowichan Valley area. It's just I don't know if I can stomach making the leap into buying my first rental property so far away and not keep tabs on it. or can somebody give a good argument for this move? I can probably afford it within a 2 year window.
With respect to your comment on buying your first rental property so far away, while it certainly CAN be done perhaps for a first property finding something closer will be a good way for you to get your feet wet. Try hands-on self-managing for your first property and better understand the systems (you've read about them in Don's books!) , your expectations and what it takes. When you move on to hiring a property manager, this will serve both of you. This also speaks to building a supportive and mutually beneficial team regardless of the city you buy in. If you intend to buy more than one rental property, you're not confined to buying in one city or the other. As someone has suggested, talk to a good mortgage broker who understands your long-term plan.
 
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