Western Investor begins a four-part series on real estate investing with a report on buying into the hot multi-family market with $1,500 or less
During pandemic-plagued 2020 the total value of residential real estate in B.C.’s Lower Mainland increased by $50 billion from a year earlier, according to the BC Assessment Authority. Geographically and historically, Metro Vancouver represents perhaps the best opportunity on the planet to make money in real estate. Mortgage rates are at 100-year lows and the Vancouver area has the second-most expensive and among the fastest-rising home prices in the world.
For novice investors, however, the daunting cost of real estate – the Vancouver region composite home price is around $1 milllion – appears such a barrier that many believe they are frozen out of the market forever.
In this first of a four-part Western Investor series on real estate investing, however, we outline how strategic investing can allow non-accredited buyers to get onto a real estate ladder that could carry them to their first home and beyond.
Let’s start with how to get a share of Greater Vancouver real estate by investing in a real estate investment limited partnership– in this case, a platform with the lowest entry price point.
Start-up addy Invest has launched a web-based platform that provides an opportunity to purchase a share of selected real estate properties for as little as $1, with maximum non-accredited investments capped at $1,500. (Non-accredited refers to those who have net assets of less than $5 million (not including a private home) and incomes of less than $200,000 per year. In other words, most of Canada’s population.)
Addy works with deep-pocket partners to secure a property and then takes a stake in the building, usually from $500,000 to $1 million, as a limited partner. It then breaks its share into $1 allotments, which it sells to investors.
On launch day, Addy releases the property on their online platform, and members have the opportunity to purchase as many units in the property as they desire, up to the $1,500 maximum for non-accredited members. The members can choose which of the current properties they want to invest in, explained Addy co-founder Stephen Jagger.
A recent Addy project was a new-built commercial property in Chilliwack, B.C., tenanted by Starbucks under a long-term, triple-net lease. The Addy offering sold out in 36 days during November and December 2020, and the 833 investors will be paid a quarterly dividend starting April 15, 2021.
Some Addy properties pay a quarterly or annual dividend, but others are buy-hold-and-sell opportunities where the investor takes a share of the appreciation when the property is sold, or the offering can be a mix of rental income and a share of the exit appreciation.
The platform is attracting some very small investors.
Jagger said one 25-year-old member is transferring small amounts of $1 to $20 per week into his Addy “wallet”, allowing it to build up. The average member invests about $500.
Addy’s current project is an existing 22-unit rental apartment building in North Vancouver, where the general partner is Stephen Evans, who founded Pure Multi-Family Real Estate Investment Trust in 2012, built it into a 22-building U.S. portfolio and sold it in 2019 for $1.6 billion. Addy has a $1 million share in the fully-rented North Vancouver property and, so far, 999 members have invested an average of $386 each in the project. Members get a share of the rental income and a split of the proceeds when the building is sold – in this case within five years. Addy said the North Vancouver property is close to being fully subscribed, but the firm has a second property, a Granville Street downtown mixed-use residential- commercial building that will come to the platform within weeks. A Kelowna multi-family property, a Toronto rental portfolio, and two more North Vancouver apartment buildings are also coming to the platform shortly.
Once members sign up for free to the Addy website, they open a wallet and put in as much as they can afford. All of the properties are listed online, along with due diligence information and regular tracking of how the investment is performing. Funds from the member’s wallet can be transferred into the limited partnership of any property that the member chooses, or the funds can be split among different properties.
“You can follow along with any property online. It is totally transparent. You can become a landlord without the land lording,” Jagger said.
Jagger said Addy itself has not yet turned a profit, but the company plans on eventually having paid membership, “like Costco”, as the platform expands.
“Most limited partnerships are meant for high-net worth individuals who can afford to invest $100,000 to $500,000 or more,” said Jagger, who started Addy with co-founder Michael Stephenson. “Our idea is to help the vast majority of regular Canadians get a share in the real estate market.”
Jagger concedes that there are no guarantees with addy invest, but notes that real estate, particularly in Metro Vancouver, has historically been a consistent money maker.
Next in the series: investing in new multi-family projects and condominium as limited partnerships in Victoria, Metro Vancouver and Kelowna.