Tips for Investors

Tips for Investors

Written on 10/01/2019
Bo Kauffmann

Thinking of starting your real estate portfolio? Buying your first rental property? Here is a 14 minute interview with Property Manager Garret Wong of Upper Edge Property Management.

Full Transcript

Bo Kauffmann: So you’re thinking of buying rental property. Well, you’re gonna want to hear this.

Announcer: You’re listening to Winnipeg’s real estate podcast with Beau Kaufman of Remax performance Realty, answering questions of buyers and sellers of houses and condos in Winnipeg.

Bo Kauffmann: If you’re thinking of buying rental property and growing your real estate portfolio, then you’re going to love this call I’m about to make. I’m going to call a friend of mine. His name is Garrett Warren. Garrett is the president of the professional property managers association of Manitoba, and he runs a company called upper edge property management. Now they specialize in helping investors and property owners who have one, two, three, you know, a small amount of rental properties. Uh, all in all, upper edge has over 600 residences in their portfolio and they’re the perfect source of information if you’re looking for help in managing your properties. So let’s give him a call right now.

Garret Wong: Hello, Garrett speaking.

Bo Kauffmann: Hey Garrett. It’s Bo. How are you doing Good, how are you Good. Excellent. Listen, we’ll get right into it. I, I’m wanting to ask you a couple of things about people wanting to get into owning rental properties. And one of the most common questions I get is, is Winnipeg still a good market Now I recall an article a couple of years ago that said that Winnipeg out of 36 markets, Winnipeg was actually the one with the lowest vacancy rate and I was a couple of years ago. So I’m just wondering to hear your side of this is where it picks still a good market to own rental properties

Garret Wong: I believe so, yes. Um, those stats were a few years ago. Um, back in 2012 we actually had almost 0% vacancy rate with 0.9%. It has risen but you know, it’s a, it’s fairly balanced now, I believe the last stats from CMHC last fall said it was about a 2.99 or effectively a 3% vacancy rate. And all that means is a lot of the tenants that are trying to find properties just have a little bit more choice, right But it hasn’t really affected property values to the point that, you know, tenants can’t find a place or there’s bidding Wars. It just means that you have to provide a decent product if you’re going to be an investor.

Bo Kauffmann: Right. Do you now have a little bit of competition and renters have a little bit of choice

Garret Wong: Yeah. And there’s nothing wrong with that.

Bo Kauffmann: Right Exactly. I mean, I can go out and find a house for $100,000 in the core area or I can find a million dollar house in Linden woods. Where would you say is like the sweet spot for somebody who wants to buy their first rental property.  What price range in what neighborhoods?

Garret Wong: So I would probably not concentrate as much on price range of the building. That’s kind of obviously that’s important because you have to qualify and you have to make sure it cashflows properly. To me, I start with supply and demand. So I would look at what is the most desirable rent, um, for, you know, your demographic, a family of four or whatever you’re trying to attract. In my professional experience, I believe that’s probably around the $1,300 range, maybe 13 to 1500. Um, if you translate that back then into your cashflow projections, you’re going to end up with, you know, a set amount that you can afford for your mortgage and that will translate out to a building value. Typically, I find that most neighborhoods that will support, you know, at $250,000, um, property two or three bedroom. Um, we can talk about neighborhoods if you want in a minute. That normally will translate into a $1,300 rent, $1,400 rent, which means that the property will have a positive cash flow at the end of the day of between, you know, you’re probably wanting to target a hundred to $300, um, before or after management fees. You know, factor. Some Sunday can seem some maintenance allowances in there,

Bo Kauffmann: right So, uh, this is definitely not a get rich quick scheme. It’s not like flipping houses. It’s like generating a steady, slow and steady, fairly secure income.

Garret Wong: It’s, it’s a way of what they call generational wealth. Flipping is, it’s fine in some unstable markets and there are are people who are flipping successfully in Winnipeg. But I’m a proponent of buy and hold. Um, and to me you’re not really looking at, you’re not buying a rental property for cashflow. I mean whether you’re getting a hundred, 200 or 300 anybody can get that kind of money by you know, even getting a part time job for a few hours a month. What you’re really looking at is the long term gain, which is you calculate obviously your, your flow and nobody wants to be negative on a, on an investment, right But then there’s the appreciation of the property. But also with most people don’t realize or factor in is that property is being paid off significantly year after year. And that accelerates around halfway through the mortgage cycle, the amortization to the point that the tenant has now paying off the entire property after 20 or 25 years.

Bo Kauffmann: Correct. So when I understand your math is a cashflow of a hundred, $200, that’s after the whole mortgage payment is done. Not just the interest, but the whole mortgage payment.

Garret Wong: That’s more than that. That’s mortgage interest, taxes, insurance, right. Um, maintenance, property management, if you’re choosing to go with the firm, et cetera.

Bo Kauffmann: Okay, awesome. Um, next question is house or condo. What are you, what do you think would be better for somebody for their first property

Garret Wong: A lot of people will buy condos, uh, because, uh, they, they believe that there’s going to be less maintenance. And in a sec there might be, you know, you don’t have that roof. You don’t have to worry necessarily about the heating if it’s included in the condo. Um, lawn care, I mean, there are like, what does the condo market look like at that present time Because for the longterm picture, any investors should be looking at how do they dispose of that property and get their money out at the end of the day, right. In this current market, of course, as, as you’re aware, um, you know, it’s a little bit harder to sell the condo. Um, longterm. I mean, it might change. Um, so the advantages of a condo are, like I said, um, potentially less. Um, maintenance costs, although everything inside those walls you still have kitchen or you know, your appliances and your fridge and stove, washer and dryer that could break. There could be still other things that happen. Um, and then you also have to look at the impact that that association or condo fee has on your actual cashflow, which could be significant

Bo Kauffmann: and potential of a special assessments.

Garret Wong: Oh yeah. I mean if you’re not doing your homework or something else comes up, but you know, if they don’t have enough reserve fund or it’s an older building and something happens in the crawl space or they have to renew the parking lot and now that there’s a cash call, it doesn’t work so well for you as an investment.

Bo Kauffmann: Okay. So I’ll put you on the spot. What’s the one tip that you would give somebody looking to buy their first rental property Anything off the top of your head that you would think of

Garret Wong: homework Um, too many people try to get into it. Um, by looking on the internet, they get into a property, they don’t do enough homework either on the neighborhoods, on the rent. You know, the rent residential act for that province, it doesn’t have to mean that, you know, it’s Winnipeg or Manitoba and then not having the team behind them for support. Um, in this day and age. Yes it is. It is great that we have all this information at our fingertips, but, you know, speaking with actual, you know, mortgage brokers, realtors, insurance, maybe even getting advice from a property manager, even if you’re not going to be employing one, just finding out what the experts in the industry and accountants, what they, a lawyer, what they say. You know, they’ve already been through this. They’ve already had clients that have gone through it. Why reinvent the wheel

Bo Kauffmann: Right, exactly. I heard somebody say a couple of, uh, about a year ago I heard somebody say to an investor, Oh, you gotta look at 50 houses. You gotta look at a hundred houses. And it just kind of struck me as wrong. And I, I heard one of your presentations about two weeks ago and you put it so succinctly, so right to the point that, um, I’m wondering if you can repeat what you said during your presentation.

Garret Wong: Well, it goes along the lines of homework. Again with the intranet spreadsheets and knowledge. I don’t think you need to look at any homes. I mean you could technically just do all your homework ahead of time. Um, do your cashflow projections, you know, so let’s say that you’ve, you find a property through your realtor that you know, with the way things are now, things are automatically sent to you. You run your cashflow projections. Okay. You’re not sure exactly how much it should rent for. Well going to the property might not help you with that. So maybe you want to, you know, go and do your research on the local intranet or you know, you get a market evaluation performed by a property manager. So now you’ve got that income coming in. You can certainly go and you know, call the utilities and find out how much utilities are going to be.

Garret Wong: You can certainly, you already know what the property tax is going to be cause it’s in the listing. You already, you can speak to your insurance agents. So once you get all of those things into your spreadsheet, you have a number at the end of the day you can decide if that property makes sense for you because at the end of the day, this is a business. The rental property if you will, is a piece of inventory and it has to make money for you. There’s no point in looking at 50 houses, um, without knowing your numbers. So in that case then, if you look at it from the opposite end of the spectrum, there’s no point looking at a house unless it does make sense, right So therefore, why would you need to look at 50 houses You could certainly look at 50 houses online and run the spreadsheets or the cashflow projections for the comfort of your home. But actually physically getting out there. I’ve, I’ve done this where, you know, if it makes sense on paper, the only thing that you’re doing when you’re going out and doing the property is making sure that their, the pictures kind of match the,

Bo Kauffmann: it’s structural. Yup.

Garret Wong: You know, structural, the bones are good, different things like that.

Bo Kauffmann: Right. Uh, last question is, you touched on it a couple of times. Neighborhoods in Winnipeg, if we are talking about 13, $1,400 a month rent house that’s in the low two hundreds to two 50, what neighborhoods would be fairly easy to rent out

Garret Wong: Well, there’s some older houses in st James, you know, you’ve got your EK, Elmwood, a trans Kona is a great, great area. You can find tons of properties in that price range. Um, I, I personally like the West end sort of between the Arlington and polo park area is, is very good. Even if you have to go, um, East of Arlington, it’s not too, too bad because, you know, West Broadway and Wellesley’s kind of, um, flexing and expanding out so you can find lots of properties there. You look around the city and there’s always these little like older two or three bedroom properties in that area. Even some older saints Patel, you know, as long as you’re not going into the million dollar or the brand brand new areas where the properties are, you know, 10 years old or less, those are going to be obviously in the three to $500,000 range and they’re not going to cash flow unless you’re trying to get a, a rent of, you know, two to 2020 500 but again, how many people would want to pay that when they could be in home ownership So that’s why I like to target personally the 12 to 15, 13 to $1,500 rental range because it’s just a real, it just means that the attendants are probably choosing to be renters at that point.

Bo Kauffmann: Do I recall you telling me that I’m on your website. You have a tool where people can kind of find out what a potential rent would be in a neighborhood

Garret Wong: Well, I actually developed an algorithm a few months ago, um, that mimics the way I actually analyze the property. So there’s a lot of tools out there, but basically based on other cities and they’re probably just on a square footage model and square footage is definitely something I take into consideration in the algorithm. But there’s also other things like the number of bedrooms,

Bo Kauffmann: bathrooms,

Garret Wong: basements are not finished. Um, bathrooms, grads, um, age of the property when it was last upgraded for cosmetics. So I’ve written an algorithm. It’s, um, an automated process on there. You just sort of go through the fields and fill them out and then you just click, hit submit and um, uh, reports automatically sent to you. And you can do that as many times as you like. I’m going to be exactly, you know, um, as good as me performing something. But it, it’s, it’s pretty close.

Bo Kauffmann: It gives you a ballpark. Yeah. But that’s, that’s really cool. Where, where do people find this tool

Garret Wong: It’s on our website. So our company name is upper edge property management and the website is www.upperedgepm.com. PMs and property management, so www, upper edge pm.com and the calculators right on the front page.

Bo Kauffmann: Cool. That’s really nice. That’s very helpful. All right, well it’s been a very enlightening call Garrett. Um, how, how can people get ahold of you I guess through that website Is your email contact on there

Garret Wong: Yeah, we do have a contact us page on there. Um, and yet you can click on there. Obviously we’ll go through our staff and if you would like to speak to me, just mention that and they’ll eventually get to me or one of our other teammates.

Bo Kauffmann: Super. Hey, thanks a lot Garrett. I appreciate it. Okay, take care. Bye. Bye.

Speaker 5: Are you looking to buy a house or a condo in Winnipeg Work with the agent who takes the time to explain the process to you, guiding you through every step for service beyond the sale. Book your home buying consultation with Bo Kaufman of Remax performance today bone knows real estate

Announcer: Hope you’ve enjoyed this episode of Winnipeg’s real estate podcast. All episodes are available on iTunes, Stitcher, and Google play. When you are ready to buy or sell a house or a condo in Winnipeg called Bo Kaufman of Remax performance Realty at (204) 333-2202 or email BoKnowshomes at gmail.com

Bo Kauffmann: Bo knows real estate.

[spp-player url=”https://traffic.libsyn.com/bokauffmann/Seller_Tip_1.mp3″]

Listen to the latest Podcast Episode

Podcast available on most pod-listeners.