The Paradigm Shift for K-W Real Estate Investors

Cliff Rego
Published on February 28, 2017

The Paradigm Shift for K-W Real Estate Investors

Last Thursday, we hosted another one of our free seminars for aspiring Kitchener-Waterloo-Cambridge real estate investors. While we normally have great crowds and lively discussion, this seminar’s crowd was especially energized.

And why wouldn’t they be? The market has shifted and there’s an unprecedented opportunity for investors (more on that below).

We fielded the typical questions – types of properties to buy, how to manage tenants, financing options, etc. – but there was a new, overarching concern among our guests:

How, in today’s market, do you find a property that yields positive cash flow?

Positive cash flow (the extra money you have every month after you subtract your expenses from your rents) has always been a key tenet of real estate investing and a goal we’ve worked to attain for our clients.

And yes, with home prices increasing much faster than rental rates, it’s a goal that’s becoming more difficult to attain by the day. We see this challenge, we empathize with you.

But the cause of this “problem” is also the big opportunity – at least for those willing to change their mindset.

The paradigm shift is simple: When evaluating investment opportunities, apply a “year-to-year” filter vs. simply looking “month-to-month”.

To illustrate:

You’re thinking of buying a $350,000 townhouse with a $70,000 (20%) down payment: $280,000 mortgage. For argument’s sake, let’s say your rents fall short of your expenses by $300 per month.

Viewed only through the “month-to-month” filter, this would appear to be a bad investment as your cash flow would be negative.

But how does this same investment look through the “year-to-year” filter?

In the first year, your renters (and you, through your $300 out-of-pocket expenses), will kill off around $7,500 in mortgage principle. That’s a little over $600/month GAINED.

(You’ve already made money.)

And then there’s appreciation. At 10% (which is more than possible this year), your $350,000 property would be worth $385,000 by next year…another GAIN.

Add it up: you’re spending $300/month to make around $3,500/month.

As I said earlier, unprecedented.

Now, this is just a high-level example: every investment opportunity requires an in-depth scrutiny of local rent and vacancy rates, neighbourhood factors, expenses related to the home – and the cash outlay that you as an investor could stomach each month. But, the point is clear:

By taking a holistic approach vs. getting stuck in the weeds of convention, prospective real estate investors in Kitchener Waterloo stand to make impressive gains. Mindset and education, as always, is key.

Want to take advantage of the big investment opportunity in K-W-C? Contact us below to request a one-on-one strategy session.

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