Hamilton’s smaller multifamily dwellings are still commanding strong rents, but they’re flat in the city’s taller apartment buildings, says a local investor.
“Plexes are where the money’s at with rent,” Sandy MacKay, founder and CEO of the Sandy MacKay Realty Network, said. “You get parking and other things, too, that people put a high emphasis on these days. A lot of these properties create more space for the tenants, including yards. If you put some extra money into these types of dwellings, even though you might not have in the past, to create a nice outdoor space, you can collect a lot more in rent.
“It’s easier to do this in small multifamily apartment buildings and it’s harder to do in taller apartment buildings.”
Downtown Hamilton is where MacKay recommends investors should search for multifamily apartments. Although rough pockets of the district still exist, much of the city is unrecognizable from years past, especially around James St. N. where gentrification is in full effect. As more people become inoculated against COVID-19, street life is returning to normal and adding an extra layer of allure to the city’s burgeoning downtown.
“The downtown core has some awesome spots now, and with life coming back to the area, with restaurants opening and people generally doing stuff outside, there’s more inventory on the market than in the summer,” MacKay said. “The area is seeing a lot of growth happening—there’s been gentrification and higher quality tenants moving to the area. For multi-residential, we are seeing prices not go up substantially but they are up in the downtown core with a lot of opportunities to cash flow.”
Rents have grown by around 10% in the last 12 months, MacKay says, and by as much as 20% in the last several years. Cash flow opportunities are, however, becoming tighter because property valuations are rising, as tends to happen in economically diverse cities. MacKay says there are still opportunities for growth, although investors may have to look harder than they have in years past.
One reason rents are quickly rising is that there’s downward pressure on vacancy because a lot of Torontonians have decided to settle in the city, and not just because their jobs brought them there. As a result, Hamilton is beginning to experience a big city problem, MacKay says.
“We’ve seen a high uptick in fake applications in the city. There is decent demand for tenants but we’re seeing so much more fraud than we did in the past, so landlords really have to do their due diligence today,” he said. “As tempting as it can be for someone to come in and offer six months’ rent up front, you have to do your due diligence now more than ever. I’ve seen so much more fraud because of technology like e-signature tools, and this is especially the multifamily sector, so I work with a really good property management company.”