Sault Ste. Marie Market Update

The February 2021 CREA figures show the average price for a home in Sault Ste Marie rose from $181,185 to $218,684.

Where are the prices now?

Join Lee-Anne and Mike Nicholson of Nicholson Mortgages as they provide a pricing update, market update and some insights into the best places to be looking for real estate investing opportunities in Sault Ste. Marie.

Daniel: I need the light bulb point off that there is a better way and began researching quickly learning the power of creative financing and OPM, Other People's Money, my favorite kind of money. They purchased two single families in over three months in their hometown of Sault Ste. Marie. In the last 15 months they purchased another four single family homes in Detroit, Michigan. Their nine to five, Lee-Anne was able to retire last November. To achieve their long term real estate goals, they both became licensed mortgages to eventually allow them freedom so they can customize their lines. Good evening folks.

Mike: Good Evening. Thanks for having us.

Daniel: A pleasure is all ours. In February, 2020, according to my statistics here the average price of a house in your own town or your town where you live. It was just a little over 181,000. In 2021, a year later, almost 219,000. What is it now in 2022 and where is the market going? Where's the source energy market going?

Lee-Anne: It's going up.

Mike: It's catching up to every other market in Ontario. There's still some good opportunities here. I think we'll take you through the slides. I think the average post price broke 300,000, which is a record for Sault Ste. Marie compared to what we've seen over the last couple of years, similar to the Sudbury where there's just that plateau. And then in the last three years, a real spike.

Lee-Anne: Our presentation on Sault Ste. Marie Daniel said we're both real estate agents. We're both born and raised in Sault Ste. Marie. We have rental properties in the Sault Ste. Marie and Michigan and soon to be Florida. We have fingers crossed. We have offers out today. We're active in several real estate groups and we coach clients in real estate and mortgages.

Mike: Where is the Sault Ste. Marie is commonly called The Sault. As you can see Sudbury about 300 kilometers or three and a half hours, Torontoyou're looking at 700 kilometers seven and a half hours. Your Ottawa directly to the East of eight kilometers nine hours. Detroit would be straight South of us, almost 600 kilometers or five hours. Of course, because everybody wants to know where 4,000 kilometers from Costa Rica is, it seems to be the hot spot right now.

Lee-Anne: Our population in the Sault is roughly 74,000. The industry here is manufacturing mostly. We have Algoma steel, Tenaris Algoma Tubes, Arauco North America, McDougall Industry and Eacom Timber Corporation. As we said, before the average home price hit over $300,000 this past month and 68% of the homes are owner occupied and 65% of those are single detached homes.

Mike: That 65% are single detached homes. All of our lots are big, they're wide open. There's not a huge demand for duplex conversions yet in Sault Ste. Marie, it doesn't seem like the city really supports that up until a year ago. If a duplex conversion would cost you $150,000, two years ago, you could buy a great semi for $150,000. I think slowly over time that people might start adopting duplex conversions. But right now single family homes are king in Sault Ste. Maire.

The national price maps. Everybody's talking about how crazy the Toronto market is and how things are, year over year from 2021 to 2022, 33% price change. Obviously, on a million dollars, that's a lot, but you can see Sault Ste. Marie is keeping pace with that. January of 2021, $222,000, January of 2022, $296,000, it's a 33% increase. I think Tristan talked a little bit about it. You'll see when we run through one of our slides, I don't want to say the bottom end houses, but those affordable homes and those rental properties, the ones that were 150,000.

A year and a half ago it has ballooned. We're seeing that those are up 250,000, something that was 130,000 a year and a half ago, two years ago is now all of a sudden 250,000 to 275,000. Almost on some of those, that's almost an 80% price increase. Days on market, 2020, you would see a house would sit for 48 days 2021, it dropped down to 21 days. The average sale price is $209,000 all the way up to 271,000. You can see the volume because of the price increase of 600. We'll call it 700 million.

Huge price increase like it's almost 70%. A unit sold again, 4,300 units sold in 2021. We just ran December, 43 days on market dropping down to 23. You can just see in December 283,000, it's jumping already. I got some stats for January and February, and it's already over $300,000, the average sale price. It's just really ballooning.

Lee-Anne: This is actually a January snapshot of this same remarket. Mike has actually, just today got February. It's actually even grown in some cases. But you can see in January, 2018 there were 20 total listings. 75 homes sold the average day on the market was 10 days. Months of inventory is 0.37.
 The average detached home was 321,000 the semi detached. That's where Mike said the lower end came in at 217,000 and condos came in at 349,000 and average place. The new numbers that we got today was that the detached home went from 321,000 to 335,000.

Mike: The home was a $15,000 increase in just a month.

Lee-Anne: This middle one took the biggest jump from $217,000 for the semi's to $355,000. I'm doing mortgages in the Sault. We saw a few that came in at 250,000 and they're just, like Mike said, two years ago, they were worth $135,000, $140,000. We got in on some of those markets but that's where they're at now. You can see everything is still climbing from month to month.

Mike: We pulled up. There's still opportunities in the Sault definitely. We targeted 2020 when we were purchasing two properties. When you take over an existing property, you take over somebody at a lower rent. Tristan had mentioned in Sudbury, the Sault Ste marie market because it was such a great market for so many years. You could buy a house for $120,000, $130,000. You could charge a thousand dollars a month rent and you could still cash flow.

What's happened now is some of these units as they flipped over if you're taking the existing. You're taking a minute of existing rent in the last two years. House prices have gone up 80%, an existing tenant. You can't put their rent up 80%. We targeted single family homes that were owner occupied. When those owners were leaving, we got vacant possession. For example, right now two years ago we had paid $139,000 for a very similar house, similar neighborhood.

We paid $139,000 for the other one. We just did a mortgage for one $250,000. But they're going to be able to get vacant possession because it was owner occupied. They're going to charge. We were modest actually, $1,754 rent. You may be able to go $1,850, $1,900 on a single family home. Three bedrooms, one or two bathrooms in a very good neighborhood.

It's actually a really desirable neighborhood. It's close to one of the best high schools in town. It's close to a huge community center. There's two indoor soccer fields. They're building a double ice arena library, a walking center and a really great area. We ran it through a little matrix that we have income generated $21,000 for the year to be safe. There's very low vacancy in the Sault but we always build at 3%, even if you did have a tenant turnover, you're going to have two or three weeks of overlap, where you are going to have to go and clean up maybe touch up and get that next tenant in there.

The mortgage on this, your payments would be about 8,800 for the year. Your insurance is a little over a thousand. We always built in 5% for maintenance property tax. Net income for the year $5,200. You can cash flow $438 a month. That's a great income for that property. Now, if you get an existing tenant, here's $1,050 a month, and you can see how if you take over property that has these lower rents, lower market rents. You're sitting at $261. The biggest issue here is where that tenant is going to go because they know that they're going to go to a host at $1,750 and the market's tight to buy a house. There's a lot of tenants that aren't leaving, there's not a lot of turnover.

Lee-Anne: I'm the same. A purpose-built four-plex so we put the scenario out there again. This is vacant possession. Are you really going to get vacant possession on a fourplex?

Mike: You might get one unit.

Lee-Anne: You might get one, but probably not. With the purchase price of $700,000. You can see how it breaks out in this case for the four units. It's $8,700 a year or $726 a month. Now, what we're seeing a lot of is like Mike said on the multi-units that there are rents that have been there for a long time and rents that haven't gotten.

We have one and we have a tenant that was there that we adopted when we purchased the property. He's an elderly gentleman now in his eighties and he said, he's quote unquote, going to die in our building. I'm really happy with that. But they said wait, his rent was never increased up to us, getting him as a tenant. He's actually paying and we've increased as much as we could along the way and he's only at $868 a month. He's not going anywhere. His equivalent unit could probably get at least $1,200. That's where he's not going anywhere because there's just nowhere for him to go on a fixed income and everything else.

That's the problem that you run into. If you come into play with four existing tenants paying lower rents which we see time and time again on these listings this is where it becomes problematic and you're going to have to take a loss for how long we don't know. Like I said, our unit we're going on four or five years now with going at a unit that could be higher.

We're fortunate that all our other units support. We're fortunate on that. That's something to really think about. A lot of people come to talk to us and say I can do cash for keys. I can do this. I can do that. It's not always that easy. Take that with a grain of salt, that there are low rents here and people are sticking to them.

Mike: Location. Sault Ste. Marie is a great town. We lived here all our life. Great areas, the pea patch, Sault College, University, all great areas. Our downtown is, it can be rough. It's like a traditional downtown, just like I think with any area right now. Again, you can't cash flow very well here. You just have to be very selective with your tenant profile and you have to decide if you want a higher tenant turnover. You might get some higher cash flow, but again at the end of the day, you have to decide how much you want to take on. One of the biggest things I tell people when they inquire with us about investing in the Sault is always reach out to a property manager.

There's quite a few available in the Sault. Ask, tell them where the location is. I know some property managers have told me. I've introduced you to some people and they'll say, I told that person I don't manage property in that area. I have a higher rate because I'll send two people at a time. If you are looking to invest from out of town. I always talk with the property manager and make sure that their rates are the same or that they'll be property managers in that area.

Lee-Anne: That's the end of our presentation.

Mike: Thank you. Any questions we'll monitor the chat.

Lee-Anne: If you have any questions about the Sault Ste. Marie, about mortgages, there's our information.

Sarah: Amazing. Thank you guys. That was awesome. I've learned a lot about a new area that I didn't know a whole lot about. I think it is quite interesting and there's opportunities everywhere. It is amazing. Here is Mike and Lee-Anne's contact information. Feel free to reach out to them. Mike and Lee-Anne, we will have you come back shortly for our networking.