Investing in Calgary Real Estate
Those who have invested in Calgary real estate might be smiling on the inside while watching market trends recently. They might feel proud that they made a smart move when they acquired properties here.
We invited a mortgage broker and seasoned real estate investor, Lindsay Labrecque, to share her insights on investing in Calgary.
Investing in Calgary Real Estate
As a mortgage broker, Lindsay talks to several people on a daily basis. Many of them are investors from Toronto and Vancouver who sold their homes or pulled their money from the stock market. They have a lot of equity on hand and looking to buy properties in Calgary.
More investors are now leaning towards real estate as it is more stable than the stock market, which is currently super volatile.
A man from Vancouver consulted Lindsay. He had about $300,000 to invest. Because there are so many little nuances that new investors are unfamiliar with, and they watch too much YouTube and HGTV, Lindsay had to walk backwards with him instead of trying everything shown online today.
Investing in real estate is a hit-or-miss business. You ought to know the step-by-step process before proceeding to anything firm. Talking to a mortgage broker opened this client’s eyes to so many ideas that he had never even thought or heard about.
Alberta has never had this number of people attracted to move here from other provinces. And who can blame these people for wanting the great lifestyle, high employment and high pay that Calgarians enjoy?
According to the Royal Bank of Canada, 80% - 90% of the average household income in Toronto and Vancouver goes to the average mortgage. In contrast, that number is only 38% in Calgary and 29% in Edmonton.
Perfect Rental Property in Calgary
Lindsay had another client who was close to retirement. His house is paid off, and he is now thinking if he should invest in a rental property. Lindsay suggested putting a basement suite in his existing home is better as that is already paid for.
Instead of shedding money to buy another property for rental, maximizing his house with a basement suite will give this client about $1,200 a month in extra cash flow. He can even save up this income to invest more in the future.
Different types of properties have distinct pros and cons. Sometimes, it can feel daunting to buy a larger building, like a fourplex. You might be overwhelmed, but you have four tenants in one place on the brighter side, which means easier management.
When investing in rentals, you have to think big now!
Some investors think there is no need to put property management in the calculations because the business is still small, and they can handle everything independently. For Lindsay, who owns 43 rental properties now, disregarding property management costs is the one thing she regrets doing.
For the 15 years she has been doing rental business, she learned that calculating the management cost from the beginning is very important. This will ensure that the numbers will still work down the road, even when they hit some bumps along the way.
And speaking of bumps, you also have to plan for the bad times. Unlike the real estate market in Toronto, which has been up forever, Calgary and surrounding areas have a different story. You can’t base all your calculations on all-time high numbers; otherwise, you might find yourself struggling or even bankrupt when numbers go down.
Lindsay has been a successful investor by setting up a proper system. She is now paying off the first two rentals she bought. Upon full payment, she will have an additional $3,300 a month, which she plans to use for more investments.
Run the Numbers
If you are thinking of starting your own rental business, Lindsay advises that you start with a fourplex or a multi-unit home. Then use one of the units as your primary residence. Collect the cash flow, save it, and buy your next property.
To help you manage your properties, you can use tools like Lendlord. This app will allow you to calculate if your expected rent will work well with your mortgage payment, interest rate, managing agent fee and all the other variables you may want to include in the math.
Make sure your cash flow will be enough to cover the entire duration of your mortgage. And again, plan for the lower times because Alberta is cyclical, and numbers are not steady going upward.
If you have questions about investing in the Calgary real estate market or need more data, you can book a call with us, and we will gladly help you with your decision-making. We can also connect you to Lindsay Labrecque if you have mortgage concerns.Posted by Jared Chamberlain on