Despite a slowing property market in some areas and further expected interest rate increases the demand for real estate investment properties outside of the GTA continues to be strong.
Is that the case in Sarnia? Where are the opportunities for reasonable house prices and cash-flowing rental markets?
Join us for the next stop on our virtual tour of Ontario markets with expert insights and market updates for Sarnia from Kory MacKinnon from Yellow House Rentals.
Alfonso: Kory MacKinnon with the Sarnia market. Born and raised in Sarnia, Ontario. Kory's a former corporate trainer who was able to escape the rat race after six short years of real estate investing., With investing experience in multiple markets, Kory has executed almost every real estate strategy.
In the past three years, Kory has developed one of the fastest growing one-on-one coaching programs in Ontario, if not in all of Canada, to help students shift their mindset, think bigger reason, more capital, find more deals on an off-market. Welcome. Welcome, Kory, how are you?
Kory: Doing excellent Alfonso. Thanks for having me.
Alfonso: It's a pleasure to have you, and as we were getting ready for the event and just going over a few housekeeping items I don't know, man, it's probably been about at least 10 years, 11, 12 years that we met back. You were in London. You must've been commuting from Sarnia. I was commuting from Hamilton. We were meeting at Brusher College doing some networking, talking about different strategies, rent to own, different types of market.
I know I gave that amazing introduction. If you don't know Kory, you probably don't have the internet and you haven't seen some of his amazing videos and all the people that he's helped, but can you give us a little bit of background? Why should our music community listen to you? And then we'll start getting into a little bit about the market of these specific Sarnia.
Kory: Thanks for the introduction. It's so great to be able to impact people without having to drive hours and hours. I would still try to attend you guys' events, maybe every second or third REITE club when we were in person. I just feel like I'm an active investor and a coach to many people here. I've coached hundreds and hundreds of people over the years, whether it's been in business, real estate, I think it's been at least nine years cause I think maybe my first son was born when there was that Bresha. It's supposed to be rent to own mastermind.
I think I was like I wanted to do a rent to own. Can I be a part of the mastermind? That's how we got to know each other. Super blessed to be able to talk to you guys about my hometown, which is Sarnia, Ontario. I was born and raised here, and then moved to London for a decade. I'll be able to resonate with the London market updates here too. And then move back again here. Once we started having kids.
Alfonso: That's great. Kory, a high level overview of the Sarnia markets. I know you're not a realtor per se, but maybe we can start off with some overviews of what strategies or what the price is. Let's start with pricing. I guess if you have that info kind of average purchase prices, what's how much has it increased? It's gone up everywhere, but give us a little bit of background on that.
Kory: Sure. And just like everybody, I'm sure I am aware of COVID. People were hitting the ground like marbles and really trying to roll anywhere they could to go get value. A really good example of this is if you have a data report for the past couple of years, you can see where migration trends are going on, where people book a U haul truck, one way, and they don't return it because they're gone. They've moved forever.
Sarnia has always been looked at as a value area. I still believe it is compared to the more expensive areas, but just like everywhere, the supply is low and the demand is high. I did tap a bunch of my realtor on the shoulder, the past couple of days. I got some hardcore stats here for people. There's 94 listings on the market, remaining in price from $199,000, all the way up to $1.8 million, four of them are on leased land. It's probably out by the pinery or the reserve or something like that 19 pre-construction, really essentially 65 houses, townhouses, or condos to go on, put offers in on. And right now the inventory is about 0.6 of a month, or two and a half, three weeks.
Very low inventory, just like a lot of other markets. Normal inventory back three years ago was typically more like 200 listings and a half as many buyers, because right now, 3000 active buyers are looking for something in the city. I've still got some single family homes out this way. We've got almost a hundred doors. After this call, I've got a call with one of my JV partners just saying, hey, should we sell one of our single family homes? It's a furnished rental. It's bringing in good money all the time, but should we actually buy into the demand right now?
Average home price in January was $550,000. I think we hit peak real estate in February. Just a lot of markets did at $606,000. We came back a little bit down to reality again at 567, which, if you look at the year over year just because it dropped in March, it's dropped by the same amount, same time last year. For some reason, we've just been hitting peak real estate in Sarnia the past couple of years in February. I'm also talking to my local home inspector cause I remember calling them during COVID and saying, hey, are you doing okay?
Things have picked up. People are making lots of offers. My phone's not ringing because so many people are doing these like offers with no conditions and just from cash offers. He's starting to get calls a little bit more now. There are more and more accepted offers with conditions on them. The past couple of years he said that 75% of his home inspections were coming from people from the GTA. That's leveled down to a little bit more like 50%.
There's still opportunities and stuff. I think you do need to be smart with what you buy. There has been Airbnb licensing that's tried to get brought about from the city here and there's a group of short-term rental owners. We fought back and we're pooling funds to go fight it legally. It's tied up in the legal system right now. They're trying to paint us with the exact same brush that Toronto tried to implement in the GTA. It just doesn't make sense. There's really no basis for what they wanted to do. I'm all about regulation. I'm not about not having regulation.
I think it's also gotta be fair and it's gotta make sense as well. I can also talk a little bit about what's going on in Grand Bend when it comes to that sort of stuff here too. But the big story in Sarnia is that there's been a lot of development. Coming to Sarnia in the past five years. A lot of the plants and refineries Sarnia is known as the refinery town. We refined a lot of the oils into different products here.
My dad used to work in the plants and I still don't want to, like chlorine and all sorts of raw materials for other things. I chose a different route to be more of a business person and not go blue collar and work in the plants, but due to COVID, a lot of that work got pushed forward. We're still seeing a super high demand for rentals, super high demand for people wanting to buy houses. And unfortunately, a lot of people are getting priced out at those average home prices.
When they're going over 500,000 or when I hear of a semi in a rough part, it's Sarnia that's selling $400,000- $500,000. I'm just like, are you kidding me? This is a semi in Cardiff acres that used to be called cardboard acres because it was built with minimum building code back in the seventies. It's unbelievable. That's just a little bit of the market update here of what's going on. It's been super hot, just like other markets as well.
Alfonso: You know what? That's true. I remember being back at Sarnia. I think that was one of your first multi vital or Vidal roads in Sarnia, that yeah, it was a rough part of town. I can't imagine what that'd be listed for now with semi's at 400K and 500K. When I think he could under a hundred thousand back when that might've been late part of the last decade, but in terms of, like you said, the different refineries and different industry, like what kind of mixing, for those that are unfamiliar with starting, and I just want to take advantage of that.
You're just so hyper-local there that the area I'm going to first start with types of industry that most people that are coming to live in Sarnia either by or looking to rent the types of industries and maybe some of the larger employers and they don't want get into some strategies that will work in Sarnia that you see working. Let's start with some of the major employment or types of industry that are in Sarnia.
Kory: If you look at the contracts that are coming to town, it is all in the plant. We have Imperial oil this way. We have shells, they're all refineries. The refinery there, we're finding some of the raw chemicals that are being pulled out of the ground in the area. And then you have all the spinoff business that comes from that. You have the blue collar side of it and you have the white collar side.
What we saw five years ago, leading up to some of these contracts and the billions of dollars, 2.2 billion. You had a lot of the white collar, the engineers and the people that were coming in to do the logistic type of work. The feasibility work, ahead of time. Now, we've got a lot more, those people left town. I used to have some contracts to rent, executive rentals to those people. They've come in from Texas or wherever. Some of the other locations were for these companies and they'd want to rent houses for $5,000.
We would literally go buy a house and say, look, I'll go buy a nice house. Like we'd actually buy houses near the lake or in really nice subdivisions for $500,000 back then and rent them out for 4,500, 5,000 a month. We're getting the 1% rule back then, which was awesome. Those were some opportunities that actually allowed me to leave my day job seven years ago. But that switched over to now blue collar. Now all the feasibility is done. It's all approved. And now you have these guys coming in at shutdown time, which really peaks in February, March, and they typically get these three to six month contracts.
We're getting tenants from the east coast, from Alberta. People may not have as much work right now and they're coming into town for that type of stuff. Sarnia is also a really good retirement city as well. Just for the affordability. You got water on two sides. You've got water on the North and on the west side of Sarnia. It's also a bit of a retirement Haven for people whether it's pretty mild down here, not quite as mild as in Windsor, but pretty darn close. It was 19 degrees here today.
Alfonso: You know what again, because you're working with know whether they're seasoned investors or new investors that are looking to start their portfolio and maybe starting is on the radar of their top four or five cities that they want to focus in, or maybe, invest in what are the strategies that are used that.
You don't seem to be working well, or if you were to start in Sarnia, I know you have a mix and in different types of strategies that I think you've done almost the full gamut, but if you were coming into Sarnia today, what types of strategies should investors be focusing on or looking at that might work the best?
Kory: Sure, I'll start off with a couple that don't typically work in Sarnia. A lot of people in, let's say like the Welland, St. Catharines area, they're doing a lot of these, like duplexes cause they do the math. It's hey, I can go buy a bungalow and go, put all the money into the renovations and still have that lift. Once we go for refinance, because A+B=C with some extra margin on the bone there that just doesn't work in Sarnia. Like you can just go buy a duplex or triplex for much cheaper than it would be to go and put all that money into new construction these days.
The cost of construction, as everybody knows, is pretty significant and has gone up a lot. What does work here in town is if you can get yourself a good multi the thing was Sarnia is if you look at the CMHC data. I'm not trying to say this to straight people from Sarnia any way, but we just have way less inventory of Maltese versus other cities. If you look in Windsor, you look in Sudbury. You look in even, I don't know, North bay or Pembroke out and your Ottawa, like you'll see way more Maltese than you will in Sarnia.
They really do trickle onto the market when everybody is coming to Sarnia, as in the fifties and sixties, when all the refinery plants were booming. It was really popular here to just go rent a room. For example, my father-in-law, when he came in from Italy, he simply rented a room for a couple of years until they could bring his family, his wife over from overseas. That was just super common, just rooming houses and things of that nature cause it was either a small rooming house or you had a big high rise.
There was really no in between and they just didn't fill in the gaps with much fourplex, sixplex, 12 plex type of properties. I still do think if you can get vacant possession on some, let's say triplexes and fourplexes, and you can get the current market rents because the market rents here are about 90% as strong as they are in London, Ontario, for example.
If you've got some legacy tenants in there and you can't get them to move on, then it's going to be challenging to cash. I guess anything cashflow is if you put a big enough down payment down, but that's not the purpose of being a real estate investor is to have all your money tied up. I like medium term rentals, so we've actually been converting a lot of our properties into a medium term rental because of the demand with the blue collar work.
They don't need fancy, like high-end Airbnb finishes. Like we're furnishing them from just putting a little bit of art up on the wall and they're super happy with it. We typically get 50% more rent. I think I just posted maybe even today on my YouTube channel, just about how we're converting and what some of the numbers look like.
People can go check that out, but so medium term rental works. If you can get a multi on with vacant possession that can work as rent to own works in Sarnia. I actually recently bought a storage facility just on the outskirts of Sarnia 20 minutes away in Petrolia. That's going to be a great project that we can BRRRR and lift the value. We bought it at six cap and we're going to push it up to a nine cap and then refinance.
Alfonso: Very good, that's awesome. The storage facility, that's cool. I saw one on social media, but I think your son said it seems pretty boring. And then you explained it a little bit and he's this is pretty cool. That's awesome that you're training them at a young age at that point to realize that, hey it might be boring, but that's, I guess I don't know what the results of the Polaroid yet, but. I think boring is sometimes a good thing when it comes through the state.
Kory: 95% of people replied that as real estate investors, they just like boring assets, save the excitement. We always have enough excitement about things happening in reaction mode. We don't need more than that. And you can use those boring businesses to go do exciting stuff in your spare time with what you want to do with the people you want to do it with.
Alfonso: Last question, and then we'll wrap up for any closing thoughts from Kory. You mentioned there the rents and just so that we can touch on it, average rents, like if we're looking in, like you said, there's a limited amount of those fourplexes and things like that, but say on a single family home or in an apartment, just give us an average of what rents are. Somebody is looking in certain areas. It does vary. This is general information guys, the kind of top, end bottom end of the market.
Kory: Definitely depending on, so there's a lot of park pockets in Sarnia that are a little bit rougher. I'll just speak to the averages. I guess if you have a bachelor apartment those used to only run for five or 600 bucks a month, but now we're getting into the eights. If you furnish them we've got one that's furnished. That's renting for $1,100. I got another one that's really nice and it's renting for $1,500 a month for a bachelor. One bedroom apartments, I know you can get a thousand dollars all day long if it's nice and it's large, and it's in a bigger part of a better part of town, you can probably get up upwards of $1,200, $1,300 for a one bedroom, two bedrooms, even in a rougher part of town, you're getting $1,300, $1,400 more like $1,600, a nice part of town, maybe $1,800, if they're really large and roomy homes are all over the map.
If you can get a three bedroom, two bath and the North end, people would pay 2,500 bucks a month for that as much as 3,500 or 4,000 really depends what they want and what they need. Strong rents are much stronger and man, there's zero vacancy. Like we have a waiting list for this stuff. Five years ago, I was lucky to rent an apartment with the 60 days notice, but now. We're renting them within days. We put it on Kijiji and it just pops like popcorn.
Alfonso: Kory, great insights is always a wealth of information. Any closing thoughts or comments that you wanted to share with the community? That's you can get a hold of Kory, Yellow House Rentals, Kory@KoryMacKinnon.com. Any last thoughts or comments before we we pass it off to
Kory: I'm super active on social media. People want to stay in touch. That's actually maybe even better than email. People, if they need a hand, if they want to know, like pointing in the right direction or whatever, I'm happy to help in the Sarnia area for sure.
Alfonso: Awesome. Kory, thank you so much.
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