Have you considered Investing in property in another area?
Many people invest in real estate in a neighborhood they know. Why? It’s comfortable and most of us know what’s going on. That local knowledge doesn’t always survive big surprises like recessions or the occasional pandemic, but its pretty good. Local real estate, realtors and conversations around the table help get an understanding that is hard to beat.
But for the sake of this short blog, we are going to assume you need tenants to keep cashflow going while you wait for the capital return you are banking on. Or at the very least, strong consistent cashflows to start building your investment empire.
RentPERKS is one of the only property management companies that operates across Canada (7 provinces, 46 cities) so we see lots of comparison points. We are not in housing sales, so this article can be written without any sort of commission we need to tell you about. But we see a LOT of data.
So lets get to the good bit. If your local neighborhood is Calgary or Vancouver, go right ahead and invest. If you need to choose between the 2, Vancouver. Why you ask? Isn’t Vancouver overpriced and doesn’t it rain a bit too much as well?
Here’s a big reason. We see all the rental tribunals and tenancy laws. As an investor with rentals one of your biggest criteria along with forecast capital and income flows, is tenancy laws. Steer clear of Ontario and Quebec as a primary place to hold property unless you see a highly favorable deal or are investing there to diversify your folio. In Ontario particularly, if something goes wrong with your tenant and they don’t want to pay rent, you can kiss cashflow goodbye for 6-12 months. Many other rules such as the inability to charge late rent fees and mandated rent increases each year make these provinces challenging. Ontario May well fix the 401 before they improve the Landlord and Tenant Board. We see more and more experienced investors looking out of these provinces.
Smaller towns and provinces present big buying opportunities with big potential percentage increases but in reality they are false economies. In dollar terms the percentage increases are not as impressive, labor is harder to find and the rental pool you have means you have lower income renters and the issues that brings. We also find the tenant laws more restrictive than the leading provinces with slower actions on late rent payments and restrictive rent increases.
Why Calgary? Because it is in Alberta. Alberta is the most favorable province for landlords. A tenant can’t dispute an eviction at a tribunal hearing if they don’t pay rent and you can issue a 14 day notice the day after rent is late. Rent increases are market driven. Just don’t allow leases to expire and move to periodic in Alberta. Edmonton also gets a special mention though the rate of new builds there could create issues.
So then why Vancouver? I’m hoping you have time to read this PwC(1) article as it is one of the best outlooks we have seen. It finally brings to light the volume of sustained off-market transactions stimulating the market. Despite some interest rate hikes, just like Sydney Australia, Vancouver is a top buy location for wealthy overseas Asian investors. Great growth rates, lots of tech, the highest population density, and world class parks in a desirable city with relatively moderate weather. We have seen an average of 55% rent increases in Vancouver in the last 2 years off already very high bases. Tenant laws are balanced but if tenants fail to pay it is one of the quickest provinces to assist owners with a 10 day notice and favorable tribunals. We recommend also considering Burnaby – great development are attracting high quality tenants.
The only thing you need if renting outside of your own town is a trusted friend with time or a professional licensed property manager.
RentPERKS is breaking down the cultural divide between owners and renters with a leading loyalty program that rewards renters for great behaviours. It has the industry’s lowest rent default rate and coordinates all your investment properties with local staff on the ground in every location. Rent Better. Anywhere.