Montreal Market Update

Hear from Bindu Patel about the opportunities and hot areas in Montreal in 2021.

Francois: Bindu, welcome.

Bindu: Thank you, can you hear me?

Francois: Yes, we can hear you very nicely. First time on, this is exciting.

Bindu: First time, what's that expression? Long time listener, first time commenter. So, thank you for having me here. Obviously I'm going to be giving you the broad strokes of what's happening in Montreal. Born and raised in Montreal, I have my own here. Definitely have been seeing a strong, upward trend in Montreal for the past. I would say two to three years. So, basically what's happening here is the following: multiplex income properties have always been popular in Montreal because we're more of a rental city.

We're also a university city. So, a lot of people buy multiplexes for 5, 8, 10, 12, and they usually rent them out to students. We have a huge trend of having a lot of expat workers come to Montreal as well. So, definitely multiplexes have always been popular, but not as popular as condos because with Toronto, with Ottawa, with Vancouver, condos have become extremely much more attractive property to purchase.

However, what we've seen in the past two, three years is a higher demand for multiplexes and there's silver reasons why, and of course, objectives are the number one reason why we buy a property. And it's the first question we ask all our buyers and some are just saying, we want to buy, we want to rent. Some say we want to buy, in other words, buy, hold. Other people want to buy empty units and sell them. And what's really interesting about Montreal, especially in specific sectors, like the plateau with camo. And once you get to know Montreal you'll understand that you can convert them into condos.

Francois: Oh, it's allowed. Okay. Many cities it's hard.

Bindu: Exactly. And we have two types of condos here divided in one. So that is also something that a lot of buyers look into. So, they'll buy, take out the tenants and then we convert them. We'll take out, you have to kick out the tenants, which is really not offended by the way, during COVID you're not allowed to evict tenants during COVID whether you have a permit from the city or not.

All these elements are coming into play. The broad strokes are the following. The past three years, we've seen a strong, upward trend towards multiplexes and there are many ways of calculating multiplexes. As we know, we can calculate the return on investment and net operating income cap rate, whatever it may be. Montreal in general, doesn't bring high cap rates because of our low rents, but property prices are still rising.

I'm not going to talk about the history of Montreal, but what I've noticed during the COVID we're going to call it, the COVID era is that condos are not as attractive because they don't have balconies. Houses are way too expensive. Supply is extremely tight. So, when most multiplex owners are, most buyers want to buy multiplex or income properties and want to live in one unit and rent out the other two. And this decreases the whole note home ownership. Home ownership costs in 2020 is 43% to live in one unit. What ends up happening is that not only are you paying off your own living expenses, but you also all the renovations and improvements are tax deductible.

These are important calculations when you buy a multiplex in Montreal, we're a very different city, even more than Ontario to Toronto, or even Ottawa. Because we have a lot of rules. We can just do whatever we want to change. We just can't, putting new windows whenever we want to do it, there are many rules and we also have tighter rules on rental, as you may not pass well, you know where we are managed or we have a tribunal on. So, we just can't raise rents as Ontarians would do it or try and 20th would do it nor can we kick out tenants now.

One of the creative solutions in COVID. The thing about COVID is that you have to find out of box solutions. When you buy an income property. You can't just look at the cap rate nor can you expect a positive cash flow. You won't get it in Montreal right away because prices are rising. So, per door, something that was selling at 125 per door is now selling at a minimum of 175 to250, depending on the sector. That's a big jump. Your income has grown here. Actually believe it or not, the income growth here has been from 53 to 70,000 this year, again, question mark. What's happening?

We have AI, which has dominated the city. We don't have foreign investors as much. We have a lot of Canadian investors. So, finally, the rest of Canada is waking up to Montreal. All of a sudden, a stagnating economy, a stagnating real estate market has now become the most popular real estate market across Canada. I've noticed in the past two years, as an agent, as a real estate broker, and as an owner, the demographics are changing. So, the bank of mommy and daddy are kicking in for the 45-year-old big trend has been locals buying, which is rare because remember we're a rental city.

Francois: Yeah, It's a big cultural change

Bindu: Huge cultural change. So, all of a sudden that bought a house for 150,000 in point, Claire selling it for 1.5 now. Think Bindu, Jonathan and Sarah get 200,000 each, they're not going to Thailand to go home. They're going to buy a property. That is where the money's coming from. If you ask me, and then of course we're pulling in investors as well, but that's a different market. And we'll talk about it in a bit. Prices have increased, I would say 20% to 37% in specific areas for multi income properties. If you're not getting a positive cash flow because rents are still 959. So, still a thousand dollars. And of course, rent evictions are not really, they're frowned upon here.

We're a socialist size. We're not a blue province. Okay. We're socialist province. So, we have to take into consideration all the rental rules, another huge and then huge improvement. Another different tactic and different strategy is raising capital. Of course, you guys do it as well. And we know this is what the beach is all about, but we're noticing a lot of people raising capital because properties are not affordable. So, you have to look at optimizing.

When a buyer calls me and says, I want to buy something with a 6% cap rate, I always just want to hang up the phone. You're not going to get the 6% cap that I have to look at the future value. You must look at optimization and you will only cash in probably in about one to two years. So, objectives are extremely important. So, this is the biggest thing that we've noticed. Quebec during the lockdown has considered real estate, still an essential service, probably because it's the only thing that's really keeping our economy alive right now.

For every home purchased and B property purchased, there's a $60,000 to $75,000, a spillover, right? Plumber, the inspector, the mortgage, the bank, the evaluator, myself, the broker. So, all this is coming to affect making it's going to remain essential despite the lockdown, despite the curfew.

Francois: So, be there, wrap it up. You remember you said the five minutes long. Yes, we're already almost at 10 minutes, so it's really great content. What would you say is one big takeaway for investors from all this, everything that's going on?

Bindu: That's the biggest takeaway, there is no takeaway. Real estate is always great to invest in no matter what, it doesn't matter. Providing a roof over someone's head is the number one thing. It's the number one most important thing that people have to understand. So, I think in our case, what you really need to understand is that you need to be patient and to hold the property, you hold the property and look at the creative ways of how you can convert this into a positive cash flow. Montreal is the best city to invest in.

That's amazing. Thank you so much for the quick summary. So, I told you time flies when you're having fun and you're in good company. So, yeah, Bindu's contacts will be shared in the chat very shortly. There you go. So, groupeagentselite@gmail.com and your phone number is there (514) 994-7075.

And then you please stay on and feel free to answer some of the questions. And we'll have to have you on again for the follow up with maybe a few more minutes and a few key takeaways. And Daniel is back. Thank you, Bindu and pleasure to have you on.