Real Estate

Investment Property in Barrie

  • Last Updated:
  • Mar 24th, 2022 9:41 am
Newbie
Apr 4, 2017
16 posts
6 upvotes

Investment Property in Barrie

Planning to buy an investment property (townhome-2000 sqft) near Barrie south GO. After 20% down payment, the estimated monthly mortgage will be $3500. Closing will be Jan. 2024. Based on previous lease data research, the monthly rent will be approx. $2500 for > 1500 sqft tomehomes. For 2000 sqft, can I expect $3000/month? But still, there is a negative cash flow. My friend has just signed up for the townhome (as an investment property). He says negative cash flow will not be an issue. There are more chances that rent will increase over time. He is investing purely based on expectations on property appreciation. Is it the right approach to buy an investment property?
14 replies
Sr. Member
May 3, 2010
773 posts
460 upvotes
maranep wrote: Planning to buy an investment property (townhome-2000 sqft) near Barrie south GO. After 20% down payment, the estimated monthly mortgage will be $3500. Closing will be Jan. 2024. Based on previous lease data research, the monthly rent will be approx. $2500 for > 1500 sqft tomehomes. For 2000 sqft, can I expect $3000/month? But still, there is a negative cash flow. My friend has just signed up for the townhome (as an investment property). He says negative cash flow will not be an issue. There are more chances that rent will increase over time. He is investing purely based on expectations on property appreciation. Is it the right approach to buy an investment property?
In this market, with 20% down, NOTHING will be positive cashflow. You will need to put money from the pocket. So it really comes down to, do you have any liquid capital to not only pay for the shortfall but also carrying costs in case you can't find a tenant in time and/or you run into tenant disputes and they stop paying.

Also, a 2000 sq ft townhouse will not get you 3000. It will get you the same 2500 as other townhouses. Barrie still has cheaper rents and a townhouse is a townhouse. 3000 is detached territory.
Deal Expert
Feb 29, 2008
21738 posts
21353 upvotes
Tarrana & The Ri…
Better think long and hard before buying that property. Look at what rents are going for now. I saw 1 at $3K and that's it. I don't see rents going up anywhere near $3500/month.

IMO this is a bad investment if you're expecting $3500. You may not even hit $3K.

Look at the detached houses in Barrie. They're going for around $3K. The numbers don't make sense IMO. 3-4 years I don't see prices jumping that much.
Member
Oct 29, 2015
445 posts
235 upvotes
Cash flow is your protection moat around potential expenses like interest rate hikes, unexpected repairs and maintenance, tenant issues.

I personally wouldn't be comfortable holding a negative cashflow asset unless its in a PRIME PRIME location and market (maybe with a good chunk of equity built up as well)
:D
Sr. Member
May 3, 2010
773 posts
460 upvotes
GameChannel wrote: In this market, with 20% down, NOTHING will be positive cashflow. You will need to put money from the pocket. So it really comes down to, do you have any liquid capital to not only pay for the shortfall but also carrying costs in case you can't find a tenant in time and/or you run into tenant disputes and they stop paying.

Also, a 2000 sq ft townhouse will not get you 3000. It will get you the same 2500 as other townhouses. Barrie still has cheaper rents and a townhouse is a townhouse. 3000 is detached territory.
To further add to my comment earlier, it comes down to this:

- Based on the fact that you will have about $3,500 monthly mortgage with 20%, I'm assuming your purchase price is around $1.1 million.

- Your monthly carrying cost will be $3500 plus owners insurance plus property tax. So that's a total of $4200 roughly.

- You will get a max of $2,500 in rent which leaves about $1,700 out of pocket. Which is about 20,500 per year out of pocket. Now, you can carry this cost thinking the crazy appreciation will continue and the townhouse will be worth much more in a couple of years. But is that realistic? For Barrie? I'd like to think not. You'd be paying $20,500 out of pocket every year plus $24,000 in mortgage interest on an annual basis which doesn't go towards your equity so in reality, you'd be paying almost $44,000 out of pocket. With the way the market is slowing down, I don't think the townhome will appreciate fast enough to compensate for your 44k shortfall AND add additional appreciation on top.

Not all investments are bad, but this seems to be one. You're far more likely to benefit by keeping the 44k in your pocket and investing in other assets.

Now, I'm not saying everything is a disaster scenario. I recently purchased a 1.7million 4000sq ft + detached home in a nice up and coming family neighborhood. I put down 20% and my mortgage is approx $1.35million which equates to about $6k per month including property tax and insurance. The maximum rent I will get on the main home is $4,000 a month. So I will be paying 2k per month or 24k per year out of pocket. But I plan on finishing up the basement, create two separate apartments and renting them out for $1500 per month each. At which point, I should be $700-$1000 per month positive cash flow after mortgage, property tax and insurance. The kinda home it is in the area it is, it should appreciate in the long term at a slow and steady pace. Is it risky, sure it is. But every investment carries a risk. You just don't want to be paying a substantial amount out of pocket AND carry the risk on top.
Newbie
Apr 4, 2017
16 posts
6 upvotes
I will have the liquid capital to manage only 4 to 6 months if I run into tenant disputes/stop paying rent or no occupancy.
Newbie
Apr 4, 2017
16 posts
6 upvotes
JayLove06 wrote: Better think long and hard before buying that property. Look at what rents are going for now. I saw 1 at $3K and that's it. I don't see rents going up anywhere near $3500/month.

IMO this is a bad investment if you're expecting $3500. You may not even hit $3K.

Look at the detached houses in Barrie. They're going for around $3K. The numbers don't make sense IMO. 3-4 years I don't see prices jumping that much.
Thanks
Newbie
Apr 4, 2017
16 posts
6 upvotes
DecayHeat wrote: Cash flow is your protection moat around potential expenses like interest rate hikes, unexpected repairs and maintenance, tenant issues.

I personally wouldn't be comfortable holding a negative cashflow asset unless its in a PRIME PRIME location and market (maybe with a good chunk of equity built up as well)
It seems Barrie's property appreciate very quickly. atleas in last 2 yrs. https://www.blogto.com/real-estate-toro ... s-toronto/
Newbie
Apr 4, 2017
16 posts
6 upvotes
GameChannel wrote: To further add to my comment earlier, it comes down to this:

- Based on the fact that you will have about $3,500 monthly mortgage with 20%, I'm assuming your purchase price is around $1.1 million.

- Your monthly carrying cost will be $3500 plus owners insurance plus property tax. So that's a total of $4200 roughly.

- You will get a max of $2,500 in rent which leaves about $1,700 out of pocket. Which is about 20,500 per year out of pocket. Now, you can carry this cost thinking the crazy appreciation will continue and the townhouse will be worth much more in a couple of years. But is that realistic? For Barrie? I'd like to think not. You'd be paying $20,500 out of pocket every year plus $24,000 in mortgage interest on an annual basis which doesn't go towards your equity so in reality, you'd be paying almost $44,000 out of pocket. With the way the market is slowing down, I don't think the townhome will appreciate fast enough to compensate for your 44k shortfall AND add additional appreciation on top.

Not all investments are bad, but this seems to be one. You're far more likely to benefit by keeping the 44k in your pocket and investing in other assets.

Now, I'm not saying everything is a disaster scenario. I recently purchased a 1.7million 4000sq ft + detached home in a nice up and coming family neighborhood. I put down 20% and my mortgage is approx $1.35million which equates to about $6k per month including property tax and insurance. The maximum rent I will get on the main home is $4,000 a month. So I will be paying 2k per month or 24k per year out of pocket. But I plan on finishing up the basement, create two separate apartments and renting them out for $1500 per month each. At which point, I should be $700-$1000 per month positive cash flow after mortgage, property tax and insurance. The kinda home it is in the area it is, it should appreciate in the long term at a slow and steady pace. Is it risky, sure it is. But every investment carries a risk. You just don't want to be paying a substantial amount out of pocket AND carry the risk on top.
Since it is a regular townhome, I will not have the opportunity to make additional units (basement unit) to maximize the rental income and to cover the negative cash flow. In the last 2 years,% of appreciation is good. I am not sure it is going to continue or not.
Sr. Member
May 3, 2010
773 posts
460 upvotes
maranep wrote: Since it is a regular townhome, I will not have the opportunity to make additional units (basement unit) to maximize the rental income and to cover the negative cash flow. In the last 2 years,% of appreciation is good. I am not sure it is going to continue or not.
That's what I'm saying. You don't have the opportunity of breaking even on this property let alone generate positive cashflow.
Deal Addict
Dec 3, 2013
1814 posts
3254 upvotes
Somewhere over the r…
If you are looking for a property that has positive cash flow and that is your primary concern, (which it should be) Then you are better off purchasing a duplex/triplex/ as an investment property. They will cash flow better or at least come closer to being positive than what you are looking at now.

They do come with their own unique challenges compared to a single family home. I wouldn't touch most triplex's with a 10 foot pole but I do have a few duplexes. They don't appreciate as quickly as a SFH and basement tenants are generally a lower quality tenant pool but with todays prices that isn't necessarily as true as it was 20 years ago.

Currently It would be a very bad time to buy a house banking on appreciation in most markets, Barrie being one of them IMO.
Deal Addict
Aug 20, 2019
1074 posts
818 upvotes
Use your money and put it in the stock market. RE are over extended right now and the risks outweigh the reward, plus its more liquid.

I would wait and see what happens in the next 6 months with what sort of rate hikes we would be looking at.
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Sr. Member
Apr 7, 2016
921 posts
731 upvotes
Canada
Johntheshopper wrote: Use your money and put it in the stock market. RE are over extended right now and the risks outweigh the reward, plus its more liquid.

I would wait and see what happens in the next 6 months with what sort of rate hikes we would be looking at.
come on!
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Member
Apr 20, 2016
310 posts
282 upvotes
maranep wrote: Planning to buy an investment property (townhome-2000 sqft) near Barrie south GO. After 20% down payment, the estimated monthly mortgage will be $3500. Closing will be Jan. 2024. Based on previous lease data research, the monthly rent will be approx. $2500 for > 1500 sqft tomehomes. For 2000 sqft, can I expect $3000/month? But still, there is a negative cash flow. My friend has just signed up for the townhome (as an investment property). He says negative cash flow will not be an issue. There are more chances that rent will increase over time. He is investing purely based on expectations on property appreciation. Is it the right approach to buy an investment property?
I think I know which project you are referring to. The question you have to ask is would you rather pay $1.3M-$1.4M for something similar in the GTA? If so, the rent is not going to be much higher. If you go a little lower in price, you might only be able to get a condo in the GTA (I'm talking precon). My point is mostly anything you buy right now will be cash flow negative. There was someone else you had put out numbers of $44k out of pocket but that's not accurate as some will be paid by the renter. You have to calculate what your IRR or cash on cash return is projected to be and then compare it to other investments. But I do agree with people here that you have to be able to cover negative cash flows or put more money down. I will also caution you that there are a lot of investors who bought in that project (but again so is the case in many precons) so there will be many units coming up for lease which might suppress rent for a bit of time. If you want any more info on this feel free to DM me.

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