Real Estate

Ottawa and Surrounding Area Real Estate market discussion

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  • Jan 22nd, 2021 10:50 pm
Member
Nov 10, 2014
398 posts
555 upvotes
Ottawa, ON
Any guesses as to how long the inventory drought and the seller's market will persist? I want to buy but its brutal out there lol.
Member
Jun 15, 2009
411 posts
121 upvotes
Nepean
If I have to guess, it won't stop before winter. Even if Conservative comes in power, I see strong sales in Ottawa, as long tech sector is booming.
Tadalafil wrote: Any guesses as to how long the inventory drought and the seller's market will persist? I want to buy but its brutal out there lol.
Deal Addict
May 23, 2017
1033 posts
819 upvotes
cactus88 wrote: Anyone to compare new towns in Kanata lake vs small single In riverside south. For investing which one has more potential
ghasita wrote: You can still be cash flow positive (ignoring long term maintenance and vacancy loss) with 400K town in Barrhaven/Kanata South. Going rent in Barrhaven is 1900 and with current rate of 3.30% for 5 years, you would easily cover mortgage/tax/insurance and come out with spare of over 100$. Just find a good long term tenant.
I think Tadalafil was responding to cactus88 who asked specifically about a new townhome in KL vs a small single in RSS, and without doing the math myself I think those calculations look reasonable--basically, the cashflow on a new townhouse in Kanata Lakes would be pretty terrible. If we're looking at resale townhouses in Barrhaven/Kanata South, the cashflow is definitely much better. To cactus88: is there a reason you are only looking at Kanata Lakes/RSS? I find that both of these areas command a premium over neighbouring suburbs (KL because of the "prestige factor" and RSS because of future LRT). If you think they will appreciate more than the other areas that's definitely fair (and it's certainly possible), but you are taking a bit of a gamble and should be aware that the trade-off is your investment will have much poorer cashflow.

Personally out of the 2 options you are looking at I'm undecided which is the better investment...if you really want to stick to only those 2 areas (KL/RSS) I'd actually go with a townhouse in RSS. That gives you exposure to the area you like while being better in terms of cashflow. In Ottawa it seems like the more expensive properties appreciate less and have worse cashflow than the lower "midrange" properties, so for an investment property it's probably not a great idea to max out your budget just because you can afford it.
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May 23, 2017
1033 posts
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danthemightyone wrote: It's one of my preferred area, but I see houses around 700k+ are on the market now. Any single home below that range seems to be going fast. One home was sold even before I managed to set up a showing.
The speed at which houses are selling right now and ultra-low inventory seems to be an issue all across Ottawa, so that isn't limited to Centrepointe. You have to act super fast if you want to buy a home.

What's your budget and target house size? Unfortunately if you have a limited budget you will have to make the trade-off somewhere...either in location (suburbs vs. within greenbelt), house size (townhouse instead of single), or quality (older >50-year-old house instead of newer one). If your criteria is too narrow, it's going to be impossible to find a house. In your case, if you find that single homes in Centrepointe are too expensive, you can either go for a townhouse instead, or buy an older house in a neighbouring community (but of course, the area might not be as nice and the house also won't look as nice). For example you can find cheaper houses north of Baseline, but they might be built in the 1950s/60s so require more work/maintenance.
Member
Jun 15, 2009
411 posts
121 upvotes
Nepean
If your choice is limited to RSS/KL, I would prefer Claridge town in RSS. They are fairly priced, could have a decent size new town for 415 all inclusive, but delivery is Dec 2020, which maybe good or bad.

Update: I just looked at Claridge website and they have increased the prices on the towns by 4K since I was there early March.
jk9088 wrote: I think Tadalafil was responding to cactus88 who asked specifically about a new townhome in KL vs a small single in RSS, and without doing the math myself I think those calculations look reasonable--basically, the cashflow on a new townhouse in Kanata Lakes would be pretty terrible. If we're looking at resale townhouses in Barrhaven/Kanata South, the cashflow is definitely much better. To cactus88: is there a reason you are only looking at Kanata Lakes/RSS? I find that both of these areas command a premium over neighbouring suburbs (KL because of the "prestige factor" and RSS because of future LRT). If you think they will appreciate more than the other areas that's definitely fair (and it's certainly possible), but you are taking a bit of a gamble and should be aware that the trade-off is your investment will have much poorer cashflow.

Personally out of the 2 options you are looking at I'm undecided which is the better investment...if you really want to stick to only those 2 areas (KL/RSS) I'd actually go with a townhouse in RSS. That gives you exposure to the area you like while being better in terms of cashflow. In Ottawa it seems like the more expensive properties appreciate less and have worse cashflow than the lower "midrange" properties, so for an investment property it's probably not a great idea to max out your budget just because you can afford it.
Last edited by ghasita on Apr 10th, 2019 8:00 pm, edited 1 time in total.
Deal Addict
Mar 28, 2007
3066 posts
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Tadalafil wrote: 400k in Kanata Lakes gets you a 3 bed 2.5 bath townhouse that is 25~30 years old in need of updates, for which you may have to win a bidding war to purchase... Uniform and Cardel are selling new build townhouses at ~550k after some upgrades in Richardson Ridge, and I am not aware of any other builders in Kanata Lakes area right now. Even with 110k down + closing costs, the unit has to fetch ~$2600/month+ utilities to cover mortgage costs, property tax, and insurance alone.

I am wary of deals that are not cash flow positive on day 1 of purchase for couple of reasons:
1- opportunity costs of down payment- I can throw 80k in index funds or blue chip dividend stocks and call it a day. Cashflow negative property requires more money monthly, and comes with tenants, extra furnace, roof, appliances, etc. to maintain.
2- potential for future leverage- holding a property with bad cash flow is a serious detriment to obtaining additional mortgages when good deals pop up.

That being said, taking a cash flow negative property still could be a great investment in the long run (ie. TO condos few years back). It depends on one's investment objectives, strategies, and beliefs about the market.
I haven't looked specifically in Kanata Lakes, but I know just a few mins further (Stittsville) you were able to grab a brand new Townhome just a couple months ago for 400k (or less). Prices have gone up to around 425k now I believe. That being said, you can still fetch rent for ~$1800 (possibly higher - was looking through Kijiji and Padmapper and going rate is anywhere from $1750-$2000+/month) in this area as well, for a brand new Townhome.

Regarding your points:
1 - although this is true, this is exactly what I was looking into myself. However, I do believe diversifying is important, and owning a piece of RE, if like I said the costs are only a couple thousand a year, is doable. Also assuming the average growth rate of the stock market (7%) vs real estate (3.5%), over the span of 30 years, the RE investment would yield you higher returns, even if you account for the extra capital you have to put into the RE property every month.

2 - This is true - but this is "timing the market". Although it may work out better next year, or the year after, or the year after that - timing the market IMO is a losers game over the long term. Now I would understand if you mean "bad cash flow" like something like expenses are $3000 but rent is $1500 - that's a big delta, but for $100-200/month, I don't personally see it as a big issue.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
audiorichard wrote: Real estate is interesting investment, since there are no property is exactly the same even two properties are next to each other, their price can be very different. There are extreme case in the market where two properties are next to others and built by the same builder with the same floorplan. However, one of the property is next to a commercial parking with garbage dumpster, it is selling much lower than the other.

Back to the topic, buying property inside greenbelt can weather better value when there are economy downturn. Also, I find that property is easier to rent out inside greenbelt. In today market, every property can be rent out and sell in a good place, but don't forget the experience back in Year 2012 to Year 2014. There were few thousands condo sit in the market and seeking for buyer. As I said, there are no property is the same, but some properties/locations are preform better than others, it is all about location/timing/comparable/market demand.
Although I don't own properties in suburbs to compare with, I think properties in the Greenbelt are easier to rent, especially if the rent is reasonable, in a strategic locations close to institutions and offices. If not close to them, then at least close LRT or rapid transit. In a hot market like this, I know any property can be rented out, butI think in the Greenbelt, rent can be higher. For me, I look at these things as an investor: cashflow, easy to rent location, property in decent shape. To achieve cashflow, I look for cheaper outdated property and do some reno to refresh it, as long as the bones are good and no major issues.
Last edited by cyberfreak123 on Apr 10th, 2019 9:21 pm, edited 1 time in total.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
Tadalafil wrote: 400k in Kanata Lakes gets you a 3 bed 2.5 bath townhouse that is 25~30 years old in need of updates, for which you may have to win a bidding war to purchase... Uniform and Cardel are selling new build townhouses at ~550k after some upgrades in Richardson Ridge, and I am not aware of any other builders in Kanata Lakes area right now. Even with 110k down + closing costs, the unit has to fetch ~$2600/month+ utilities to cover mortgage costs, property tax, and insurance alone.

I am wary of deals that are not cash flow positive on day 1 of purchase for couple of reasons:
1- opportunity costs of down payment- I can throw 80k in index funds or blue chip dividend stocks and call it a day. Cashflow negative property requires more money monthly, and comes with tenants, extra furnace, roof, appliances, etc. to maintain.
2- potential for future leverage- holding a property with bad cash flow is a serious detriment to obtaining additional mortgages when good deals pop up.

That being said, taking a cash flow negative property still could be a great investment in the long run (ie. TO condos few years back). It depends on one's investment objectives, strategies, and beliefs about the market.
I'd agree on 2). All investment properties I buy might not be cashflow positive first (therefore cheaper price at purchase), but always have potential to cashflow + after some doing some work on them.
Deal Fanatic
Jul 4, 2004
5868 posts
1924 upvotes
Ottawa
ghasita wrote: If I have to guess, it won't stop before winter. Even if Conservative comes in power, I see strong sales in Ottawa, as long tech sector is booming.
I don't have a crystal ball but from my observations, it might be cooling (although still very much a sellers market). Looking at sales during the past week from Kanata to Orleans (146 total), properties are still selling very fast (avg 23 days on the market) but they are selling close to asking price (almost everything is within +-5% of asking price and that includes properties which are clearly listed well below market in order to attract multiple offers). Although that might be because sellers are asking for more (avg asking price was $477k, avg sale price was $485k).

I would still hate being a buyer though. FWIW, there are currently about 1520 active listings and 360 conditionally sold (some of which could return to the market) on the market right now.
Sr. Member
Aug 6, 2011
590 posts
261 upvotes
michelb wrote: I don't have a crystal ball but from my observations, it might be cooling (although still very much a sellers market). Looking at sales during the past week from Kanata to Orleans (146 total), properties are still selling very fast (avg 23 days on the market) but they are selling close to asking price (almost everything is within +-5% of asking price and that includes properties which are clearly listed well below market in order to attract multiple offers). Although that might be because sellers are asking for more (avg asking price was $477k, avg sale price was $485k).

I would still hate being a buyer though. FWIW, there are currently about 1520 active listings and 360 conditionally sold (some of which could return to the market) on the market right now.
Interesting info. Market conditions can change quickly, after adjustments of price or a surge of supply. I'm not sure about Gatineau market right now, but last time I've checked it was lagging the Ottawa in terms of price. I'd not be surprised some buyers to seriously looking into into the cheaper market, and even it means a change of province. From what I can see in downtown hull, rental properties are moving faster than in 2017.
Last edited by cyberfreak123 on Apr 11th, 2019 9:16 am, edited 1 time in total.
Deal Addict
Jul 7, 2007
1145 posts
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ghasita wrote: You can still be cash flow positive (ignoring long term maintenance and vacancy loss) with 400K town in Barrhaven/Kanata South. Going rent in Barrhaven is 1900 and with current rate of 3.30% for 5 years, you would easily cover mortgage/tax/insurance and come out with spare of over 100$. Just find a good long term tenant.
I don't own an investment property yet, but the money that a landlord collects from rent, isn't it taxed at their highest marginal income bracket?

So if you a pocketing $1900, thats before tax. After tax isn't the property still cash flow negative? Lets theoretically say you make 100k/year from your job, now you collect $22800 yearly (1900x12) from your investment property, isn't that taxed at 37.16% (26% federal tax and 11.16% provincial tax)?
Deal Fanatic
Jul 4, 2004
5868 posts
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Ottawa
StefanW499 wrote: New CTV article on Ottawa's hot market:

Ottawas Hot Housing Market
The comment about Civic area is the kind of misleading prices that I was commenting on earlier. Looking at an example "125 Ruskin". Sold in Oct 2011 for $676k and then just sold in Feb 2019 for $1.34mil so it looks like it almost doubled but looking at the renos since it was purchased, they easily spent 200k and I wouldn't be surprised if they spent twice that or more. Assuming they spent $300k on renos, the actual increase was "only" about $350k over 8 years so about 4% per year (although you can argue that you never get all your reno costs back - you certainly expect to get some back).
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Jul 7, 2007
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blackdragon12 wrote: Regarding your points:
1 - although this is true, this is exactly what I was looking into myself. However, I do believe diversifying is important, and owning a piece of RE, if like I said the costs are only a couple thousand a year, is doable. Also assuming the average growth rate of the stock market (7%) vs real estate (3.5%), over the span of 30 years, the RE investment would yield you higher returns, even if you account for the extra capital you have to put into the RE property every month.
The S&P500 has returned 7% on average the past 20 years after factoring in inflation. Do you the stats showing Ottawa RE has appreciated 3.5% on average the past 20 years after inflation? I believe that 3.5% does not factor in inflation.
Last edited by Zero Hope on Apr 11th, 2019 9:36 am, edited 2 times in total.
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Jul 4, 2004
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Ottawa
Zero Hope wrote: I don't own an investment property yet, but the money that a landlord collects from rent, isn't it taxed at their highest marginal income bracket?

So if you a pocketing $1900, thats before tax. After tax isn't the property still cash flow negative? Lets theoretically say you make 100k/year from your job, now you collect $22800 yearly (1900x12) from your investment property, isn't that taxed at 37.16% (26% federal tax and 11.16% provincial tax)?
You do pay taxes on rental income and it's basically added to your annual salary so yes, it is taxed at your highest marginal tax bracket (and it can bump you into the next bracket) but it doesn't make a "cash-flow positive" property into a "cash-flow negative" property, you just make less profit.

E.g. if you profit $1000/yr on your rental and pay a marginal tax rate of 50%, you'll pay $500/yr in taxes but you are still making $500/yr profit.

Having said that it's important to keep in mind that you cannot expense mortgage principle payments so it's not quite black / white and you need to carefully look at your expenses and deductions.
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User avatar
Jan 17, 2005
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Ottawa
jk9088 wrote: The speed at which houses are selling right now and ultra-low inventory seems to be an issue all across Ottawa, so that isn't limited to Centrepointe. You have to act super fast if you want to buy a home.

What's your budget and target house size? Unfortunately if you have a limited budget you will have to make the trade-off somewhere...either in location (suburbs vs. within greenbelt), house size (townhouse instead of single), or quality (older >50-year-old house instead of newer one). If your criteria is too narrow, it's going to be impossible to find a house. In your case, if you find that single homes in Centrepointe are too expensive, you can either go for a townhouse instead, or buy an older house in a neighbouring community (but of course, the area might not be as nice and the house also won't look as nice). For example you can find cheaper houses north of Baseline, but they might be built in the 1950s/60s so require more work/maintenance.
I don't think I am too limited by budget. Looking for a decent sized detached 3,4 bdr house. Trying not to go over mid 800k range and something built after 1980s. I didn't think I wasn't unrealistic... except some homes are getting sold too fast.
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Jul 4, 2004
5868 posts
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Ottawa
danthemightyone wrote: I don't think I am too limited by budget. Looking for a decent sized detached 3,4 bdr house. Trying not to go over mid 800k range and something built after 1980s. I didn't think I wasn't unrealistic... except some homes are getting sold too fast.
Even in this market, it should not be hard for you to find something unless you have unrealistic price expectations (for $800k, you probably won't find anything in the highest demand / most expensive areas in the city especially if you are only looking for a newer home (e.g. not many homes in the Glebe or Westboro built since the 90s except for very large / very expensive home that were built after tearing down the original home)).

At the moment, there are 286 detached residential 3+ bedrooms built since the 90s under $800k available in the "Greater Ottawa" (basically between Kanata and Orleans) and above $600k, they tend to not move as fast. The "on-fire" segment of the market is really row, townhomes and singles below $550k. In your price range, you can easily get new builds as well.
Last edited by michelb on Apr 11th, 2019 10:33 am, edited 2 times in total.
Deal Addict
Jul 7, 2007
1145 posts
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michelb wrote: You do pay taxes on rental income and it's basically added to your annual salary so yes, it is taxed at your highest marginal tax bracket (and it can bump you into the next bracket) but it doesn't make a "cash-flow positive" property into a "cash-flow negative" property, you just make less profit.

E.g. if you profit $1000/yr on your rental and pay a marginal tax rate of 50%, you'll pay $500/yr in taxes but you are still making $500/yr profit.

Having said that it's important to keep in mind that you cannot expense mortgage principle payments so it's not quite black / white and you need to carefully look at your expenses and deductions.
Thank you. I'm just trying to workout the calculations. So basically the 1900 in rent is 1200 after tax. Mortgage on a 400k property with 20 percent down is 320k. At a 2.99 percent interest rate its 1550 per month with a 25 year mortgage. Add 330 per month for property tax and 70 per month for insurance and the rental property costs the landlord 1950 per month while collecting 1200 per month in rent after tax. Basically covering 750 per month out of pocket. This is not accounting for any vacancy or repairs and maintenance.
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Jul 4, 2004
5868 posts
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Zero Hope wrote: Thank you. I'm just trying to workout the calculations. So basically the 1900 in rent is 1200 after tax. Mortgage on a 400k property with 20 percent down is 320k. At a 2.99 percent interest rate its 1550 per month with a 25 year mortgage. Add 330 per month for property tax and 70 per month for insurance and the rental property costs the landlord 1950 per month while collecting 1200 per month in rent after tax. Basically covering 750 per month out of pocket. This is not accounting for any vacancy or repairs and maintenance.
You're doing it backwards.

It's more like

$1900/month rent
- 300/month mortgage interest payment (not mortgage principle)
- 200/month property taxes
- 100/month insurance
- 100/month maintenance
- whatever other eligible expenses
=
rental income (lets say $1000 / month)

From that $1000/month, you'll likely pay roughly $400/month in taxes so you are netting $600/month.

From that $600/month, you have to determine if you have enough to cover your mortgage principle and then you'll determine if it's cash positive or not. Keeping in mind that payments your make to the principle do pay down your mortgage and eventually, you won't have a mortgage anymore. That said, when you do eventually sell (or change usage back to primary residence) you will pay a capital gain on 1/2 the profit of the sale (i.e. buy today for $400k, rent for x years and eventually sell for $800k, the year of the sale, you will have a $400k capital gain and will be taxes on 1/2 of that so $200k).

Vacancies simply lower the amount of rent you collect so also lowering the amount of tax you'll be paying but obviously you have to factor that into your expenses (you still pay everything else even if it's vacant).

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