Amit Kalia’s Interview with Canadian Real Estate Wealth Magazine
I was recently interviewed by the Canadian Real Estate Wealth magazine. They were trying to shortlist Top 75 markets in Canada which are good for real estate investing and I am glad that they have selected Mississauga based on the sheer positive things happening in Mississauga.
I am very happy to have been a part of the process where I could provide my own two cents on what makes Mississauga a top choice for investors. Here are the Q&A from the interview with Clayton Jarvis, Staff Writer, Key Media on July 2, 2019.
Why Mississauga Investment Market is on top of Investors mind?
Q: People are curious about the Real Estate Market which has cooled down in the GTA in the last year and a half. How has it been in the last 6 months or so in Mississauga?
A: In general, Mississauga real estate market has slowed down like rest of the GTA. What’s happening is like all other markets, we are having issues with the stress test which came into play almost 6-7 months ago. What this stress test has done is that it is impacting the mortgage approvals.
Let’s say someone was getting qualified for 5.5 times their income, now they are only qualifying for 4.5 times their income. This has priced out many home buyers from the real estate market and the ripple effect is coming upon smaller segments which are going up in price and the higher segments are going down in price.
It is taking longer for higher-priced properties to sell because less number of buyers are there. When the stress test came in, a lot of buyers were moved down. There was a downward pressure from properties which were expensive to the ones which are less expensive. In a nutshell, this is how Mississauga is behaving currently.
Q: Let’s talk about the fundamentals that makes Mississauga a good place to buy in. What are your thoughts?
A: Let me focus on investors here. I have been working with investors for over 16 years now and this is how their mind-set works. They care about two major things: cash flow and growth. Third and fourth important things an investor wants is rent-ability and quality of tenants. These four points are very important for an investor to grow and flourish.
Mississauga has always been a great market for investors since the beginning of real estate activity in the GTA. We have a price gap of $80,000-$150,000 for the similar units that are selling in Toronto.
Why investors are flocking to Mississauga is because in Mississauga we have a lot of IT companies. Most of the recent immigration is happening in the knowledge-based category. Projects are happening in Canadian government departments (Federal, Provincial & Regional), in the banking, healthcare and other industries. Many IT companies are based out of Mississauga. Now these folks could be working out of Downtown Toronto for different projects but when it comes to renting, they are saving like 30% on rent by staying in Mississauga vs Downtown Toronto.
There is something we call “rent-to-buy-ratio” which is very healthy in Mississauga. Investors who look to rent to AAA tenants and to corporate employees, find that is costs less to put down in Mississauga than in Downtown Toronto. If they were to buy a property in Downtown Toronto, they would pay $100,000-$150,000 more in cash. They are putting 20% down these days. So 20% of $150,000 would be about $30,000 cash which they are saving when they buy in Mississauga. They also save by not paying additional Municipal Land Transfer Tax that is applicable in Toronto.
So it becomes a great opportunity for them to keep coming to Mississauga for investment even at the peak of condo market. We have witnessed an increase in condo prices, but the rents have gone up even more. Mississauga condos have appreciated by approx. 10% since June 2018 to Jun 2019, so has the rent gone up by almost 11% in just one year
Q: Let’s target on one area in Mississauga that investors should be focusing.
A: Most of the investors or landlords care most about quality tenants like I said before and they also like to look at a large pool of tenants available in the market they are focusing on. This helps them cherry pick the best tenants. As soon as the unit becomes vacant, they have 5-10 tenants waiting to grab that unit.
Tenants on the other hand are looking for excellent transportation and connectivity in addition to great units.
This is what Downtown Mississauga or City Centre or Square One is offering. It is not only giving you quality buildings, it also gives you an overall package.
We have Celebration Square, where people come together to participate in events, entertainment, the Square One Mall which has a great lineup of popular stores, the new REC Centre and we have a lot of students coming to Sheridan College. There are also many programs geared for adults where people who come with different degrees from different parts of the world, let’s say teachers, engineers, healthcare professionals, graphic designers, journalist, artists etc. This institute gives them programs where they can match up with the Canadian standards and bridge the gap.
About Downtown Mississauga condo dwellers
We are seeing a lot of people coming in with money where let’s say someone’s wife is a dentist and she is studying to write exams and wants to study at Sheridan, while the husband works.
We also get a lot of young students, adult immigrants, professional job seekers etc.
On the other hand we also have baby boomers who are retiring – they want to live in condos, because they can cash out on their real estate put let’s say maybe $1 million in their bank account and either rent, live six months here and go outside the country or buy a small condo to live.
So we are experiencing growth from many segments which is feeding into the real estate market at downtown Mississauga. You have so many segments fuelling Square One condo market which is becoming a Mecca for real estate investors.
Q: What property type should we look at for maximizing that cash flow? What should someone buy, what expected price to pay and what fair rent it could get?
A: Most investors are looking to invest the least amount of money in properties which go up in value fastest. We have a segment of good buildings that we focus on and we target those buildings specifically. This information is available for clients that we work with. We cherry pick from the best Mississauga condo buildings for our investor clients.
The best property type for investment is a One Bedroom or One Bedroom plus Den condo at Square one Mississauga. Your target rent could be $2100 to $2300 per month as on July 1, 2019. Rents are moving up and this amount could change in next 3 months or so. That is how fast rents are moving!
In terms of buying condos at Downtown Mississauga, as of July 1, 2019 you can expect to pay around $410,000 for a One Bedroom and $430,000-$460,000 for a One Bedroom Plus Den. Even with the condo fee, taxes, landlords insurance, the rent helps carry the property. There is no negative cash flow.
Over the years, these units also appreciate around 10-15% in value. That is what investors are looking for: good price growth or appreciation, no negative cash flow, easy rent-ability, AAA tenants and a place that offers what tenants are looking for.