2011 would be a momentous year for Toronto-based mortgage specialist Andre Persaud. Working as a financial planner and mortgage broker, Andre saw time and again the life-changing potential of investing in real estate. When Core Assets’ Managing Partner, Jordan Rasberry, a long-time friend and colleague, suggested that Andre and his wife Cathy give up their rental apartment in downtown Toronto and purchase an investment property, they were ready to listen.
Jordan: Andre, thanks for sharing your first-hand experience. Let’s start at the beginning. When did you buy your first investment property?
Andre: The summer of 2011.
Jordan: How many properties do you now own?
Jordan: Where are they?
Andre: We have a triplex in the Junction Triangle, a former triplex that is now a duplex in New Toronto, and most recently we purchased a cottage in Tiny Beaches, Ontario.
Jordan: Why did you decide to buy your first investment property?
Andre: My wife Cathy and I had been renting an apartment in downtown Toronto for a number of years while I was a financial planner at Scotiabank. As we paid down our landlord’s mortgage each month, we finally decided it was time to start building our own equity. We were both young, paying off student debt, and didn’t like the idea of buying a small condo. We also didn’t want to take on the huge monthly expense of carrying a single-family home. You (Jordan) had just bought your first triplex and suggested we do the same. We figured this would allow us to purchase a house in a neighbourhood where we wanted to live, with income to help us offset our mortgage.
Jordan: A lot of people reading this probably look back to 2011 and wish they had gotten involved in real estate back then, before the market picked up the way it has in the last 5 years.
Andre: They wouldn’t be wrong, but it wasn’t exactly a cakewalk for us. Even back then, after we found the triplex we wanted – a really nice, older place in the Junction within walking distance of both Lansdowne and Dufferin stations – we were in a multiple offer situation. As first time buyers, Cathy and I were way out of our comfort zone.
Jordan: But you hung in there and eventually bought the triplex.
Andre: We did. You (Jordan) kept us focused on the fundamental soundness of the transaction. Because you had a nearby investment property of your own, you were able to show us the strength of the area’s rental market and the long-term potential of the property, both in terms of appreciation and cash flow.
I think most buyers, especially when they come out of a bidding war, think “Did I overpay”? I definitely felt that, but it didn’t last long. Sixteen months later, that property had appreciated by more than $150,000, which allowed us to go looking for another.
Jordan: What came next?
Andre: We were looking to grow our family so we wanted to find a larger triplex in a quieter neighbourhood. We wanted a neighbourhood with solid upside that was not on everyone’s radar.
Jordan: How did that sale pan out?
Andre: It was another multiple offer situation but it went really smoothly. Based on comparables and the interest the property was set to generate, we put in a relatively high, strategic bid that was $35,000 above asking, and ended up closing on it in January 2012.
Jordan: Has this property done as well as your first one?
Andre: Yes. That Etobicoke property is worth over a million dollars now. It has completely changed our lives.
Jordan: In what ways?
Andre: Well, for one thing, it became our primary residence. My wife, two year-old son and I live in the bottom two units and her parents live upstairs, which has been wonderful. But the appreciation allowed us to buy our dream home.
Cathy and I never grew up with a cottage to go to, so rather than buying a single family home here in the city, we decided to buy a 4-bedroom beachfront home in Tiny Beaches. We were excited when we found it, but I don’t think I realized just how satisfied and proud a purchase like that can make you feel. There’s nothing better than being able to provide your family with something like that.
Jordan: It will definitely be a place that you and your family will enjoy for many years. Now back to the Junction Triplex. Do you still own it?
Andre: Yes, we we’ll never let that property go. It has solid cash flow and, after years of improvements, it’s relatively low maintenance and located in a place that attracts amazing tenants with little effort.
Jordan: What has been your biggest headache as a landlord?
Andre: Renovations. We intentionally bought places that needed work, but were hoping for mostly cosmetic improvements. Our Junction property had a water issue in the basement. We tried many different fixes but never got to the root of the problem. Last summer, when our basement tenant moved out, we decided to gut the space and re-do all of the drains. This seems to have resolved the issue. Overall, it cost us thousands of dollars, but it also gave us the opportunity to renovate the basement, which has added value to the property and should allow us to attract better, long-term tenants.
Jordan: Speaking of that, do you have any tips for a landlord who is searching for tenants?
Andre: To be honest, we were taught well at the beginning and have never had any major issues. Our rule of thumb is to price at, or below, market value. You’ll likely get a tenant willing to pay more, but by reducing your asking price you will get a larger selection of tenants. Better tenants means fewer headaches!
“I think most owners, especially when they come out of a bidding war, end up thinking “Did I over pay for this thing”? I definitely felt that, but it didn’t last long.”
Jordan: What do you find most rewarding about building your investment portfolio?
Andre: Buying the cottage. By starting young and leveraging our portfolio, we have been able to buy this awesome property and start planning for our retirement.
Jordan: So I take it you are going to continue to buy investment properties? Andre: Exactly. We’ll be expanding our portfolio eventually, but for now we’re in a bit of a holding pattern. We are expecting our second child and just want to relax and enjoy the small things for the next little while.
Jordan: That’s great news! Congrats again! Last question: What would you say to potential buyers who are having a hard time reconciling your success in 2011 and 2012 with the market they’re faced with today?
Andre: You definitely want to focus on getting in sooner rather than later, but getting in was the best thing we ever did. You might have to be aggressive and less picky with your first property, but once you have it, you’ll be able to do so much. Our first purchase was great, and while we’ll always love that property, the real benefit is what it will allow all of us to do in the future.