Inventory in Saskatoon stood at 2.2 months (which is 57.9 per cent below the level last year, and 53.5 per cent below the five-year average, while the sales to listing ratio was 61.6 per cent, suggesting that market conditions favour sellers).

Homes in Saskatoon stayed on the market an average of 36 days in March, down from 55 days last year.

Saskatoon saw the price of the benchmark composite home rise 8.2 per cent year-over-year, going from $290,500 to $314,300.

The market in Saskatoon is very specific, as it is in any city in the country. Often there are reports in the news about the Canadian real estate market, but this can be misleading.

There are numerous factors that play into what is going on in any particular part of the country, and there is no Canadian real estate market.

Each market is its own entity. What happens in Toronto or Vancouver or any other city does not necessarily have an impact into what is going on here.

Even in the Saskatoon area, there are many different factors that will affect the prices and how fast real estate will sell.

If you are interested in purchasing a property in a particular city, or area of a city, then study that area, and don’t get caught up in what is happening on the other side of the country.

Last month, I introduced the idea of getting into “big deals,” like in the game Cashflow by Robert Kiyosaki.

As we discussed, you need to buy assets, like real estate, that pay you money to have them.

Once you have assets that pay you enough passive income to cover all of expenses, you no longer need your job, and you are out of the rat race.

I promised to go over some of the ways to evaluate a multi-family building.

Two of my favourite ways are using the GRM, or Gross Rent Multiplier, and the NOI (Net Operating Income) and cap rate.

The GRM is quite simple. Take the asking price and divide it by the gross rents. The number you are left with is the GRM. Keep in mind that the gross rent is all the money collected from the rents. You then apply the simple GRM tool:

GRM >10 NO, unless there is something really special or unique

GRM 8.0 – 9,5 MAYBE, need to conduct some due diligence before proceeding

GRM <7.5 PUT IN AN OFFER NOW, conduct your due diligence while it’s under contract

You may notice that there are gaps between the numbers. The reason is that this is not an exact science and is just a quick calculation that you can use. If you find a property that is in that gray zone, I would still run the numbers to find out what they tell you.

For example: 6 plex asking $629,900, with gross rents at $60,000. $629,900 / $60,000 = 10.49 per cent.

In this example, we would most likely pass because the income is probably not going to support the purchase of the property. I would still look at the financials, because there may be an opportunity to increase the rents and get the gross income higher. Maybe there is another way to generate income. Is there storage space that could be rented out? Could you install coin-operated laundry machines? Are rents below market value?

Let’s look at the same example, but we are able to purchase it for $50,000 less than asking.

$579,900 / $60,000 = 9.66 per cent We are getting close to our cut off of 9.5 per cent. At this price, it would make sense to request the financials and start looking more closely at the numbers. There may be a great opportunity here that someone else has missed.

Next month, I will touch on how to calculate the market value of a property using the income and cap rate. I love talking about real estate. If you have any questions about residential, or investment real estate, please give me a shout anytime.

(Brad Chisholm is a Realtor and real estate investor based in Saskatoon Sk. You can find him at bradleychisholm.exprealty.com or brad.chisholm@exprealty.com)

-Brad Chisholm