Rental housing can generate cash flow while covering monthly expenses
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Calgary is gaining more attention from real estate investors in recent months as its cheap homes compared to major urban centers make it an attractive opportunity.
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This is the assessment of two seasoned investors in residential real estate: Patrick Francey and JG Francoeur with the Real Estate Investment Network (REIN)
“We have been very optimistic,” said Francey, CEO of REIN.
“When you buy this property you can put a tenant in it for rent that can cover the costs while still keeping some money at the end of the month. “
In the Greater Toronto Area (GTA), Vancouver and other parts of British Columbia and Ontario, this is a more difficult task for investors where prices are generally much higher.
Francey further notes that investors buy real estate for three reasons: to generate cash flow, to pay off the mortgage, thereby increasing equity and capital (or price) appreciation.
And the Calgary market currently offers all three advantages to investors.
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“What you can buy in Calgary for $ 550,000 or $ 600,000 you can always pick up (as a rental),” he says. “You have a hard time finding this quality of ownership in other markets. “
In comparison, a single-family home of a similar size in Peterborough, Ont., Costs $ 640,000, says Francoeur, director of growth at REIN.
“Then you have to invest an additional $ 100,000 to create a duplex,” he says, adding that the additional unit helps ensure that the investment is profitable. “But you can probably get a similar duplex in Alberta for $ 485,000.”
In addition, rental revenues have more room for improvement in Calgary.
“What I rent here in Peterborough for $ 2,300 rents between $ 1,600 and $ 1,800 a month in Calgary,” he says of a three-bedroom rental home.
At first glance, this may not seem like a good deal, but Francoeur explains that the lower purchase price means less rental income is needed to generate free cash flow after costs. Better yet, rents have more room to rise in Calgary as the pandemic ends and migration returns, boosting demand for rental housing.
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When it comes to capital appreciation, the resale market has seen increased demand that pushed prices up 10-15% in the spring, according to Calgary real estate agent Tim Jones of Re / Max Prime .
“We are barely nearing the prices of 13 years ago,” he adds, noting that Calgary could see further gains of 15-25% over the next two years.
“Compared to other major cities in Canada, the region offers great value to investors. “
The economic rebound expected from the pandemic is a potential driver of future demand. Additionally, Jones expects unprecedented economic stimulus combined with the city’s well-educated, resilient and entrepreneurial workforce to further stimulate economic growth.
“The majority of investors and, in general, buyers have a very positive outlook on the growth of our market, and now is a good time to buy,” he adds.
On the positive side, Francoeur warned investors about the city’s condominium market. Although cheap compared to Toronto and Vancouver, the segment is less in demand than single-family homes, townhouses, and semi-detached homes.
“As an investor, you have to consider what people are looking for, and most tenant profiles are looking for more space, an extra bedroom and a room for an office,” says Francoeur.
