[00:00:00] Bo Kauffmann - REALTOR: Thinking of owning and managing rental properties. Today I'm gonna talk to a property management company and get some advice for you on this episode of Winnipeg's Real Estate Podcast.
[00:00:13] You're listening to The Bo Knows Real Estate Podcast, Tips and Advice for home buyers, sellers, and owners with award-winning reax agent Bo Kauffmann.
[00:00:27] Hello everybody. Bo Kaufman Remax Performance Realty, your residential real estate agent. Are you thinking of buying one or more homes or condos to rent out and make some money? Real estate has always been considered a very stable and safe investment. But before we call my friend Jackson Ham of Pillar Property Management, I do want you to be aware of a few things.
[00:00:47] I get calls from buyers in Toronto, Vancouver, Montreal, thinking of buying homes to use as rental properties here in Winnipeg. They're always excited by the fact that you can still buy a house around the $250,000 mark, but when they learned that most of those homes would rent for only about 1600 a month, they're a lot less enthusiastic.
[00:01:06] Buying and owning rental properties is not a get rich quick scheme. That's a tongue twister. You can't buy one or two homes and expect to make a grand per month profit each. That's just not how it works these days with five and 6% interest rates, you may be lucky to break even. So I'll give you an example.
[00:01:23] There was a house in East Kildonan on the market for $260,000 and it advertised that it came with a tenant who would love to stay. That tenant was paying 1,450 a month. Now do the math, mortgage payments plus taxes, plus home insurance, that'll all add up to more than 1,450 a month. So how can an owner make money?
[00:01:41] The answer is that the current owner bought that house for around $130,000, and at that price is now making a few hundred dollars a month in profit. So when considering buying a rental property, investors need to take the long view. It's not $500 cash flow, you don't see those kind of numbers, not these days in Winnipeg.
[00:01:59] So let's call Jackson of Pillar Property Management and ask him a few question. All right. Hello Jackson. How are you doing today?
[00:02:06] Jackson Hamm - Pillar Property Manager: I'm not doing too bad, Bo. How are you doing?
[00:02:08] Bo Kauffmann - REALTOR: Excellent. Excellent. So let's get right into it. Pillar Property Management. How long have you guys been around?
[00:02:14] Jackson Hamm - Pillar Property Manager: Pillar Property Management. We were established in 2007 and we recently celebrated 15 years in the industry.
[00:02:19] Bo Kauffmann - REALTOR: Nice. Okay. And how many homes do you have under contract at the moment?
[00:02:24] Jackson Hamm - Pillar Property Manager: We're managing between 400 to 450 doors. And. I'd say that's a mixed bag between single family, multi-family apartment buildings, and condominiums included.
[00:02:34] Bo Kauffmann - REALTOR: Okay. All right. So what's your average client look like? Do they have six or eight properties or are they mostly startups with one or two?
[00:02:40] Jackson Hamm - Pillar Property Manager: On average we get a lot of startups people with about one or two homes who aren't really quite sure what to do with them and maybe have never done property management themselves.
[00:02:47] They come to us to of help them out and we do get a few outliers here and there that have about six or seven units. But by and large, I'd say most of them are about one or two just starting off small.
[00:02:55] Bo Kauffmann - REALTOR: Right on. Do you guys offer different levels of service or is it just all inclusive. Like finding the tenant and then managing everything? Or do you have different levels.
[00:03:03] Jackson Hamm - Pillar Property Manager: So we only have one level of service here at Pillar. And the reason being is we believe that all of our clients should be treated with the same level of quality as as all the rest of them. And at Pillar we do this because we feel that the work we do should reflect the high standards we hold ourselves to.
[00:03:17] Which is why we only really want to go for one. Cuz you know, we only want to provide one, which is would be the highest level of service.
[00:03:24] Bo Kauffmann - REALTOR: Okay, so let's just briefly walk through this. Let's say I have a property that I wanna let you manage. There's no tenant in it right now. I come and see you. We sign a kind of a contract. What do you guys do? You guys even go out and advertise and find a tenant. You guys take pictures of property, that kind of thing.
[00:03:41] Jackson Hamm - Pillar Property Manager: Yeah. So what we'll do is we'll go out and we'll photograph the property for advertisements, but while there's times of vacancy in the property, especially when we do take new tenants or new clients on, we wanna make it very clear that with our clients, we don't charge any sort of management fees during times of vacancy so that they can be they can feel comfortable knowing that we're only gonna be making money when they are, and we're always acting in their best interest to do okay,
[00:04:01] Bo Kauffmann - REALTOR: that's good. So then you find the tenant, you do the background checks and all that kind of. We sure do. And what do you charge for your service?
[00:04:07] Jackson Hamm - Pillar Property Manager: We charge a 10% management fee for the service.
[00:04:10] Bo Kauffmann - REALTOR: So it's 10% of whatever the rent is.
[00:04:14] Jackson Hamm - Pillar Property Manager: That's correct, yes.
[00:04:14] Bo Kauffmann - REALTOR: Okay., Now since interest rates have gone from two to 5%. Does it make sense to go out and buy a property to rent out right now? I would say,
[00:04:21] Jackson Hamm - Pillar Property Manager: I would say it does. And the reason being is because it's never a bad time to buy real estate. And when you wanna mention that the interest rates were, sitting pretty high right now at around seven.
[00:04:30] Historically those are still quite low. Compared to the double digit numbers we used to see in the seventies and the eighties. I would say that don't let these interest rates discourage you. With the rates being as high as they have been in the last decade or so I can understand why people would be hesitant to do but that said there's been a lot more the renter's market has been quite flush with the applicants. So you're gonna see pretty low levels of vacancy across the board, and it won't be too hard to find yourself a really nice applicant to fit yourself in your home
[00:04:55] Bo Kauffmann - REALTOR: What do your recent clients look like? Uh, You and I had a brief discussion about that and you said you're getting a lot of homeowners who are unable to sell their houses for one reason or another. Is that your main new client
[00:05:06] Jackson Hamm - Pillar Property Manager: right now at the moment with the interest rates the way they are, it is a lot of our clients are coming in because they aren't able to find buyers for their homes.
[00:05:13] And so they decided to turn it into a bit of a nest egg investment and put their real estate into their portfolio and make money off of it. A lot of the people that come in these days, a lot of our clients recently have been a lot of young people that are just starting out their careers and looking to diversify their investment portfolio.
[00:05:27] As well, we're seeing quite a lot of new Canadians who are, new to the country, but understand that Winnipeg has a really healthy real estate markets and can be uh, pretty profitable to jump into the rental property industry right from the GetGo.
[00:05:39] Bo Kauffmann - REALTOR: Okay. Now, if somebody wanted to get into buying rental property, what would you advise 'em how to?
[00:05:43] Jackson Hamm - Pillar Property Manager: In Winnipeg if you were to, wanted to get into the rental property industry, I would say start looking for a house that has three bedroom. I think that's a lot of a lot of the times it's the most attractive home renters can look for really attractive to families for one.
[00:05:55] And it's going to give you a bit of a higher ROI because you can charge a bit higher rent for something with three bedrooms as opposed to two. And generally it attracts a wide range of applicants as opposed to a two bedroom, which you might see more maybe small families, single renters, that kind of thing. So the three bedrooms would probably be the good place to start if I had to give my opinion on that.
[00:06:12] Bo Kauffmann - REALTOR: What about neighborhoods? Are there any neighborhoods that you would recommend that would fit the right price range?
[00:06:18] Jackson Hamm - Pillar Property Manager: Any neighborhoods off the top of my head I could think of, be maybe around the Logan and Keewatin areas.
[00:06:22] The North End has got a lot of really good investment properties there. And it's often pretty low cost of entry there, if you were starting small, I would recommend, checking with the north end of Winnipeg. There's great real estate around there. And it's usually a low cost entry to get into that market.
[00:06:36] Bo Kauffmann - REALTOR: Not the bidding wars. You don't wanna get involved in the bidding war if you're looking for a rental property. Exactly.
That was my interview with Jackson Ham of Pillar Property Management, and I have some final words when I come.
[00:07:18] After we stopped recording, I asked Jackson what he considered to be the sweet spot of buying rental properties at what price would a home give you the best or the most decent roi? He said that they have a few nice bungalows with double car garages that fetch around $3,500 a month in rent.
[00:07:35] And if you can find such a home around the $350,000 mark, there's definitely a demand by tenants for nicer homes. Now 3,500 is way above the average Winnipeg rent. What you get here is you get professionals that have been temporarily transferred to Winnipeg for one or two years and would like to live in a nicer home, and they don't mind paying that, that level of rent.
[00:07:56] Just some food for thought. I hope you've enjoyed listening to this episode as much as I've enjoyed creating it, cuz I really do. If you found the information helpful, why not download my free podcasting app? That way you never missed another episode, and I've made it super simple too. Just go to Bo Knows dot home slash apps.
[00:08:15] And finally, please give this podcast a five star rating. Again, we've made it super simple. Just go to love the podcast.com/boknows. Thank you so much for listening. Let's do this again next week.
[00:08:38] You've been listening to Bo Kauffmann of Remax Performance Realty. Are you thinking of buying or selling a house or a condo in Winnipeg? Call Bo at (204) 333-2202. Remember, Bo knows real estate.