Duplex, Triplex for sale Montreal – McGill real estate agency broker Montreal Duplex, Triplex for sale Montreal – McGill real estate agency broker Montreal
Too late for the plex?
GOOGLE TRANSLATE
Published June 26, 2010 05:00 AM | Updated June 26, 2010 05:00 AM
Maxime Bergeron
Press
The price of rental properties has almost tripled over the past 10 years in Montreal. The multiple used to calculate the profitability of “plexes” have followed a similar pattern. With higher mortgage rates, is it still time to invest? Yes … provided very well make its calculations. And finding the rare pearl.
Nerestant Schiller, a computer consultant in his thirties, was launched in earnest in real estate five years ago. He bought a triplex, then another, and then a 14-unit building in Rosemont and the Plateau Mont-Royal. A “heavy” task, he admits.
“Sure there are bad payers and unexpected breaks, but I knew already throwing me in there that I have some surprises,” said the Montrealer. It is well to prepare for departure, having sufficient liquidity. ”
Mr. Nerestant could count on the experience of his family, already owns several apartment buildings in the region. And on an adequate working capital. But for many novice investors, the dream of buying an income property is now more elusive than ever.
The median price of “plex” of two to five homes has exploded in the Island since 2000. It went from $ 148,000 to $ 395,000, a jump of 167% in one short decade. In the central areas of Plateau and Rosemont-La Petite-Patrie, the increase is even greater and the median value is around half a million.
Rents, meanwhile, grew at a much slower pace: 34% in 10 years for a two bedroom apartment in Montreal. So that the reports used to calculate the return on investment in rental housing-especially the multiple of gross income-reach these days of record highs.
Traditionally, the “magic number” to calculate the multiple of gross income was around 10, said Denis Doucet, Director General of Multi-broker mortgage loans on the South Shore. Basically this means that it would take 10 years to pay off the property in calculating the annual income generated by the buildings, before expenses. The report is theoretical, but it gives a good idea of the profitability of the building coveted.
“Last spring, I saw passing records when people wanted to pay amounts equal to 19 times earnings,” says Doucet. These are files that you’ve never been able to fund. ”
Prices have soared so much that it is not uncommon to see properties for sale showing even higher multiples of 20, 25 or even 30 times the gross income. Reports that can be acceptable to a homeowner (which pays part of his mortgage through its rental income), but are extraordinarily high in the case of pure investment, highlight several experts consulted by The Business Press.
“In plexes, profitability is not there, slice Jean-Francois Bigras, investor and former chairman of the Corporation of property owners in Quebec. If we talk about investment, when you look at the prices that are paid today is very long term it will be profitable. ”
‘No logic’
Mr. Bigras, like many others, advocated the greatest caution when signing a purchase.
“Today, many people buy property without any mathematical logic” (…) He studied several settings before you plump for a property, especially a multiple of net income, the number of years to pay property based on annual income after expenses except the mortgage.
“At 12 times the standard operating revenue, you make an extraordinary bargain at 15 times is good, and above that, you start paying a bit expensive,” he said. Me, I never pay above 16.5. Never, never, never. ”
What to buy?
The plex market is overheated, as evidenced by outbidding several tens of thousands of dollars often observed for a year. But good deals do exist, says Jacques Lepine. As found? The expert recommends that owners look for in need, including monitoring exercise notice in the land register.
“We need to find motivated sellers: those who pay too much, those who are under-capitalized and that fund too high, ahead there. When you look at the price people pay today, there will be a percentage that can not hold up, unless they put a lot of cash. ”
(…) Advise him as to expand its geographical horizons. The site, designed for investors, lets you search for rental properties based on several criteria, such as the multiple of the lowest gross income. “It is between 5 and 30 times earnings, it gives an idea of the range!”
Not surprisingly, the properties offer the best profit potential are often located in the regions outside major centers. This should not discourage buyers on the lookout for a bargain, says (…)
“There is no geographical barrier to property investment,” he said. People in Toronto can see a duplex in Trois-Rivieres and say the report is good, I buy. There will always be a trusted local to service and collect revenue. ”
(…) Recommends also avoid too small to optimize building performance. “If you do not intend to occupy it, I recommend at least one building of four units, if not six.”
Finally, the investor Jean-François Bigras launching this warning to all prospective buyers, they intend to live in their building or not: “Be careful, and do not make your calculations based on the current interest rate! Must be realistic. ”
