Winnipeg, Manitoba Renters

[andyr]

Someone suggested Winnipeg, Manitoba as a good place to invest. Out of curiosity, I decided to just take a look at the properties. I'm living in Surrey, BC, and I'm nowhere near having enough to invest here, so I was very interested in the more affordable housing markets in other provinces.



A quick mls.ca search in Winnipeg shows some promises properties. To the point where it seems too good to be true. One extreme example I saw was a 3 bedroom home for $98,500 currently rented for $1000/month and the tenants are willing to pay $4000 to stay as tenants.



I realize rental units are hard to come by there, but why are people paying those kind of rents for a property they could buy. The minimum down for a personal property is 5% isn't it. Why not put an extra $925 down and buy it? Even at 6% and a 25 year amortization the mortgage payment is only ~$600.



If this was the only property like that, I'd just assume there is something seriously wrong with the property. However, I found several properties that cash flowed very easily.



Not to look a gift horse in the mouth, but what am I missing here? Seems too good to be true and just doesn't make sense to me. Anyone have any insight? Anyone already investing in that area?

 

[bizaro86]

http://www.statcan.gc.ca/daily-quotidien/100720/t100720a3-eng.htm



Statscan reported a violent crime index for Winnipeg of 187, approximately twice the Canadian average of 93.7. That's approximately 20% more violent crime than the next highest Canadian city.



The only time I've ever been to Winnipeg was on a whistle stop on a Via Rail train for about an hour, so I don't have any direct experience, but if it's the capital of violent crime that's not a benefit. There are probably pockets that are good and bad, like any city, so I'd be careful to check out any neighbourhood you're considering investing in to make sure it's ok. I think it can be easier to get sucked into bad neighbourhoods when you're investing from out of town.



Regards,



Michael

 

[2ndstory]

Winnipeg has plenty to offer when it comes to rental properties. The vacancy rate is 0.8%. Finding properties that cash flow is easy in some areas of the city and difficult in others. Easy cash flow can be found in the North End and Point Douglas areas, but you have to be very careful there because large parts of these areas are high crime areas and dealing with these tenants would not be for the faint of heart. I would say that most of your tenants would be on social assistance; which does mean that cheques for rent will come straight from the government. Having said that, there are pockets and blocks in those areas that are quite decent and some investors are doing well there.



Probably your best bet are areas like the West End (near Uof W), Brooklands, St. Boniface, Elmwood, East Kildonan, and Fourt Rouge. These areas have some of the tougher pockets but are generally quite good. Most of the houses are older (pre 1960) and you can find some that are move in ready or do some work and build equity off the hop. It's not hard to have a net cash flow of $300 to $400 on these.



If you want to go up a level, and have a little less cash flow, but maybe a less tough tenant profile and possibly more long term appreciation of house, look at St. Vital, Fort Garry and Richmond (near the U of M), Crecentwood, North Kildonan, St. James, the Maples.



Areas where you will find it tough to cash flow are River Heights, Tuxedo, and Charleswood. Also any of the newer developments.



Here is the name and contact info of my agent. Feel free to contact him if you have any questions or would like him to send you some sample listings.


















Rod Peeler Sales Representative

RE/MAX Executive Realty

tel.:


204-947-9800

fax:

204-594-9030










email:


[email protected]









http://www.rodpeelerineversleep.com/4a_contact.php



Nik

 

[andyr]

Thanks for the responses guys. Surrey's Violent Crime Index isn't that much lower than Winnipeg and I'm not living here in fear. However, I've lived here my whole life and I do know what areas to avoid. Before I buy anything, I was planning a trip out to see the places as well as meet in person with some of the main contacts.



Thanks for the information Nik, very helpful! I appreciate the contact and will definitely give him a call when and if I decide to go this route.



My original question still stands though. Why pay $1000 in rent when you can own for $600? Maybe your comment about social assistance answers it though, I'm not sure. Having never needed it, how does it work? Is the government actually paying the rent, or are they giving money to the tenant and we have to rely on them actually making that payment? Or is it just that the banks won't approve them for the loan?



With the homes you mentioned Nik, what price range am I looking at? It is just so different than Surrey, I'm a little lost. I'm in a 2 bedroom condo that I bought for $140,000 5 years ago that I'm hoping to sell for about $215,000. The cheapest detached I can get is over $400,000 and needs work. So seeing a $98,500 detached is just insane. Is that too cheap though? What range would you recommend?



Looking forward to joining the game and I appreciate all your help and advice!

 

[fumbrunner]

Nik has it pretty much bang on. Some of those high cashflow areas will be eaten away with the repairs that you will need to do. Nik has highlighted some of the areas to look at, I would have to agree with him on the areas he selected. North End is ok if you are far enough north. Area to absolutely avoid? the corridor from Main to Arlington, between Dufferin and Mountain.

 

[fumbrunner]

[quote user=andyr]My original question still stands though. Why pay $1000 in rent when you can own for $600? Maybe your comment about social assistance answers it though, I'm not sure. Having never needed it, how does it work? Is the government actually paying the rent, or are they giving money to the tenant and we have to rely on them actually making that payment? Or is it just that the banks won't approve them for the loan?






Some prefer to rent, others (most) simply have poor credit and/or have the inability to save for the down payment. Someone on social assistance receives less than $300 for their housing allowance. Makes it really difficult to save up if you are not interested in being employed. Payments come straight from the EIA office.

 

[2ndstory]

I have a rule of thumb that I follow with houses in the middle range here in Winnipeg. If I pay $100000 for a house, I want to rent it out for a thousand. I can stay pretty close to that, but generally that means fixing a few things on a house to get it ready to rent.



People who are on social assitance will generally have it set up so that the landlord deals directly with the agency for rent. The amount that they are alloted from the gov't will be based on number of dependants, etc.



There are many people who rent for a $1000 and will not buy even with mortgage payments of $600 because of a number or reasons. Coming up with a downpayment, little credit, and newly immigrated to Canada are a few off the top of my head. Winnipeg has a huge number of new immigrants and they are largely from the Philippines. In general, the Filipinos that I know come from 2 parent families and are hardworking religious people. Great for tenants. The only problem is that they are such hardworking people that within a year or so, they want to buy their own. Great if you want to sell, or possibly rent to own, but you won't get many long term tenants that way.



I bought two houses this past year in the range you mention. One 1200 sq ft 2 bdr for $81500, renting now for $985 a month plus a utilities, and one 1500 sq ft 4 bdr for $103500 renting for about $1100 a month plus utilitlies. Both needed about $5000 to $7000 of renos to get them to where I wanted them. I'm picky. Some might rent out as is, but I'm into providing quality homes that attract quality tenants.



Hope that helps!



Nik

 

[andyr]

Great responses! Thank you all very much! I think that is everything I needed for now.



Now, just need to get the funds together