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Investing in Smaller Markets and Not Enough Parking Stalls : Yes or No?

Dec 16, 2020
 

A recent graduate student from my Canadian Multifamily Investing Blueprint workshop asked me whether it was a good idea to purchase an apartment building in a smaller market and whether the fact that the property had less parking stalls than the total number of units was a problem.

In this short vlog, I answer those two questions.

Regarding investing in secondary markets, the bottom line is that in my opinion, there's nothing wrong investing in smaller, perhaps remote or rural markets as long as you understand the investment risk may be greater and you mitigate that risk accordingly.

For one, you'll probably acquire the asset at a higher cap rate. In other words, you'll pay less for a multifamily property in a smaller market than in a large centre, which serves as mitigation to a significant extent.  Assets in the smaller markets are less desirable because there's less demand for them and rest assured your lender and/or CMHC would look at it this way too.

In my days as a former CMHC multifamily underwriter, I've seen many investors get excellent ROIs in secondary markets.

With regards to the fact that the property has a lesser number of parking stalls compared to the total number of units in the apartment building, this clearly presents an added risk which too can be mitigated.

For example, is there ample parking space on the street or can tenants rent a parking stall nearby? Or is it the kind of urban market, such a large city where tenants don't own a car because there's a good transportation network system and prospective tenants don't expect to have a parking stall when they rent an apartment?

You always have to look at the risks involved and for ways to mitigate them.

 

 

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"Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.” - Theodore Roosevelt, U.S. president