Inspecting Investment Properties in Newmarket — What the Numbers Actually Say

Inspecting Investment Properties in Newmarket — What the Numbers Actually Say

I pulled up to 847 Mulock Drive on a Tuesday morning in October. The investor on the phone had already made an offer on this 1987 semi, and she had one question: "Is this thing worth $1,142,000?" Fair question. What she was really asking was whether the rental income would justify what she'd owe the bank.

That's the difference between inspecting your own home and inspecting someone else's investment. When you're buying to live in, you're emotional. You see the kitchen and imagine your family at the table. When you're buying to rent, you see the kitchen and calculate what a tenant will destroy in seven years. You see the roof and wonder exactly how much longer before you're replacing it at $8,400. You see the foundation and think about whether you'll get sued if something shifts.

I've done 3,800 inspections in 15 years. About 40 percent of them now are investment properties, and Newmarket has become a serious rental market. The MLS data tells you why: average price of $1,155,205, average days on market of 20, and a high-risk era score of 72.7 percent. That last number matters. It means most of the rental stock in Newmarket was built between 1950 and 2000 — the years when builders cut corners and materials had shorter lifespans. Your risk score for the town sits at 56 out of 100. That's not terrible. But it's not good either.

Let me walk you through what I found at Mulock Drive, because it's exactly what I see in 60 percent of Newmarket investment properties.

The 1987 semi had been a rental for six years. The inspector before me (a home inspector, not experienced in investment properties) had passed it with flying colors. He noted cosmetic wear and tear. He didn't ask the question I ask: can this property cash-flow, or will it bleed money for the next three years?

The basement had active moisture. Not flood damage, but that weeping tile was failing. He'd noted it. I calculated $6,200 to excavate and replace. The roof was a 2009 shingle job with maybe four years left. He said it was fine. A replacement roof on a semi in Newmarket runs $8,400 to $9,200. The furnace was original to the house — 36 years old. He'd taken a photo. A new furnace here is $4,287 plus $1,100 for installation and ductwork cleaning.

The kitchen hadn't been updated since 1998. The tenant would pay maybe $1,850 a month for this place. The investor's carrying costs would be roughly $2,400 a month in mortgage, tax, and insurance. Before any maintenance.

Here's what separates an investment inspection from a primary residence inspection: I don't care about cosmetics. I care about systems that generate money and systems that cost money. A cracked backsplash doesn't affect your bottom line. A failing sump pump does. A dated floor doesn't cause tenant turnover. A roof that's failing does.

When I inspect an investment property, I'm thinking about three separate futures. First, the immediate future — what will a tenant see, and will they sign a lease? Second, the cash-flow future — what systems will cost money in years one through five? Third, the exit future — can you sell this property in five years without taking a loss on those repairs you deferred?

Newmarket has some strong neighbourhoods for investment bones, and some weak ones. Southgate, near the high school and the GO Transit terminus, attracts young professionals who'll pay $2,050 for a three-bedroom semi and stay for five years. Rogers Lake area is solid — older stock, but steady tenants, good schools nearby. The Botsford area closer to Davis Drive is tighter — those homes are smaller, tenants turn over faster, and maintenance costs per square foot run higher.

Yonge and Prospect is the wild card. It's gentrifying, but slowly. You might renovate a property there and find the neighborhood hasn't caught up to your investment. I inspected a duplex on Prospect last year that the owner had poured $34,000 into updates. He wanted $2,100 per unit. He had three months of vacancy in his first year.

The most common issues I see in Newmarket rental stock break down like this. Electrical panels built for 60-amp service when tenants now run 15 appliances. Plumbing that's original galvanized steel and partially blocked by mineral buildup. Roof age clustering in the 2005-2010 range, meaning 60 percent of the town's rental stock needs roof work in the next 36 months. Windows from the 1980s with failed seals. Basement moisture from aging weeping tile and grading that's settled over decades.

There's also a category I call "tenant damage versus deferred maintenance," and investors get confused here. If a tenant punched a hole in drywall, that's your cost. If a basement wall is crumbling because the foundation was never waterproofed in 1987, that's a pre-existing condition. The difference matters because one is recoverable from a damage deposit, and the other isn't. When I'm walking through a property, I'm documenting which is which. A landlord who doesn't know the difference will blame tenants for problems that were already there, and a good tenant will walk away from the lease.

ROI on repairs is straightforward math. The Mulock Drive property needed $6,200 in weeping tile work. If the owner waited five years, it would become $14,000 in foundation repair. At $1,850 monthly rent, that's $111,000 in gross income over six years. The $6,200 repair costs about 5.6 percent of that income. You do the repair now. If you wait, you're betting that a tenant won't report moisture damage or that you won't face liability. That's not investing, that's gambling.

Check the current risk assessment for Newmarket at inspectionly.ca/city-risk-score. It'll show you exactly what problem categories are clustered where.

Here's my honest take on the Mulock Drive property. The investor asked if it was worth $1,142,000. I said the property could work as an investment, but only if she budgeted $18,500 in year-one repairs and accepted that the roof would need replacing in year four. That meant her first two years of ownership would see maybe $180 a month in positive cash flow. Years three and four would be negative because of the roof. She'd break even in year five and start making real money in year six. She walked. Found something in Ajax that cash-flowed from month one.

That's the investor's prerogative. But she didn't make that decision blind.

Book an inspection at inspectionly.ca/book-an-inspection or call 647-839-9090.