The Niagara region is brimming with opportunity for investors who have grown tired of buying properties that long ago stopped carrying.
Chris Knighton, team lead of Knighton Real Estate Advisors, which is part of the Keller Williams Hamilton Complete Realty brokerage, says that the entire Niagara region—in particular Grimsby, where he lives, Thorold, Pelham and Fonthill—have properties that are still trading at favourable prices and that carry so well that they’re an ideal buy and holds.
“Buy and hold gives you the greatest percentage growth, but in the GTA it’s unattainable for a lot of people. However, the percentage growth you can get in the GTA, thanks to inflation and growth in the region, I see happening in Niagara over the next 10-20 years,” said Knighton. “For example, we just sold a home that was somewhat dilapidated, in what I would say isn’t the best part of Niagara, that was listed for $299,000 and we sold it for $350,000. People in the area might ask, ‘Who the hell would buy that?’ But people see the potential here and it reached $350,000 because there were multiple offers, and the house will still need about $100,000 worth of work.”
The region is also replete with bungalows, which might offer the best investment opportunity. These homes can be easily converted into two units that each command enough rent to carry the mortgage and cash flow well into the black.
“You’d get $1,750-1,800 upstairs and $1,400-1,600 downstairs, and on a mortgage at 2.5% plus carrying costs, including insurance and utilities, you’re looking at about $2,000-2,200, but because you’re bringing in about $3,200, its cash flows at $1,000 a month,” said Knighton.
“It makes a lot more sense buying in Niagara than in Hamilton. If you find the right deals, it’s a win-win for someone who needs to sell that house and get out. I did one like that in Thorold not too long ago where we renovated the upstairs and almost tripled the rents because of that opportunity. We refinanced and pulled our money out. There’s a lot more upside in those areas because you can leverage that dollar value, and in these more mature subdivisions with bungalows, they usually come with side entrances, which makes it much easier to put that second unit in there.”
The inherent risk to buying properties that don’t have cash flow but that will appreciate, like a Toronto condo, is that market downturns are inevitable, and while the market almost always recovers, the losses mount.
“When you look at some people’s investment strategy, it’s all based on appreciation, and when the market shifts 30% down and people are already negatively cash flowing, buying a property that carries will at least insulates you. Niagara is experiencing huge growth and it still hasn’t seen massive increases, so you’d be better protected with properties out this way.”
That isn’t to suggest that the cost of housing hasn’t increased in Niagara as it has virtually everywhere else in the Greater Golden Horseshoe, but because a growing number of people are priced out of the market, there’s high rental demand. Buying a two-bedroom lakefront condo in Grimsby can earn $2,200-2,400 in monthly rental income, which is equivalent to what a downtown Toronto condo would command.
“Right now, there’s zero trouble renting those out.”