You want to Real Estate But Prices Are Just Too High in 2019: Here’s What You Can Do…

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This week, we have a new and special guest blogger! Please welcome Terrie Schauer. She is a real estate investor and property manager with has a passion for residential rental properties. She’s been working to make small- and medium sized investment properties profitable for twenty years, in Canada’s major markets (Toronto, Vancouver and now Montreal) as well as in Marseille, France.

For her, investing in real estate is not just about the money, it’s about financial freedom as a way of life. This is what inspires Terrie to manage properties for others, and to – more recently – build real estate coaching programs for investors who want more time and more freedom.
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If you live in one of Canada’s urban centers – Toronto, Vancouver and now Montreal – and even if you don’t, you’re probably watching prices climb and climb and wondering if you’ll ever be able to afford to purchase a property.

With the increase in prices in urban centers – especially in desirable neighbourhoods – many investors and home-buyers now need to get creative. As lots of people are getting priced out of their local markets, new challenges and opportunities are appearing. Don’t despair!

Here are a few ways you can use real estate as a way to better your position, regardless of what your local market it doing.

1) Leverage your living situation to generate income.

Paying for housing tends to absorb most of our resources. According to guidelines for a “healthy” financial portrait, your living expenses should eat between 33%-50% of your income. Whatever you earn, that’s a lot of money! And it’s likely your biggest expense.

There are things you can do to reduce this percentage and, perhaps even generate additional income. When I was a student, I rented a whole 4 bedroom house with an independent basement unit. I then furnished the house and rented the property by the room. This allowed me to drastically reduce my own living expenses and share utilities.

Today, there are many solutions of this type: you can rent a bigger unit than you need and take in roommates. You can host Airbnb guests. This works whether you rent or own, and it’s not necessarily contingent on being credit-worthy or having a down-payment saved. It does require a little creativity, but over the time-span of a few years the impact on your financial situation can be literally huge. I know more than a few investors who were able to save down payment money for their first property this way.

2) Buy a investment property outside your local market.

So a condo in downtown Toronto costs 600k now, 1 million in Vancouver or 450k in Montreal? So what!? Who says that’s where you have to buy? If we’re talking Montreal, no one says your first property needs to be in the Plateau or Quartier des spectacles. You could perhaps consider a half basement unit in the Village or Hochelaga for about 200k. You might look a bit farther and consider a location near the Metro in Laval, in a new development in Lachine or just off-island on the South shore.

Of course, you’ll need to thoroughly do a cash-flow analysis to make sure rents in the area will cover your monthly costs. The basis of real estate investment is positive cash flow, not necessarily owning space in the cities most desirable postal codes. If you live in an area like the GTA or Greater Vancouver that is just too pricey, you could consider secondary markets a little further away. It might require hiring a property manager, but then as long as your cash flow supports the expense, it may make sense. Just because your local market is haywire, doesn’t mean you have to give up on using real estate as a way to better your financial position.

3) Reconsider owning your home.

As real estate investors, we aim to use capital in a way that will bring us the best ROI (return on investment). In today’s markets sound decision making may lead away from tying up loads and loads of capital in a private residence. Perhaps there’s more money to be made buying where it makes sense to buy (in the outskirts or in a lower-income neighborhood) and renting a cool place to live in your favorite overpriced borough. In short, the decision of what to do with your precious capital is perhaps best made with a calculator and without a postal code as your only emotional consideration.