Since prices are low, is it time to consider buying and investing in a rental?
You came to the right place. I have been in the investment rental market for nearly 13 years helping hundreds including myself buy, sell, rent, manage, and invest in real estate. Not to mention over a thousand lease agreement. I would be lying to say there is no risk involved when buying property to rent. The reason why you need to contact me is I virtually eliminate 95% of the risk and help you make the smart decision while managing your investment.
I recently sat down with a client to discuss which type of property we should buy. We are talking here about average rentals not full apartment buildings and commercial projects. We boiled it down to the 5 basic options: The affordable Newer 3 bedroom 2.5 bath duplex, The 2 bedroom condo apartment building, The 3 bedroom condo townhome, The old mature neighbourhood home with basement suite potential, The new home with basement suite potential. Here is a quick glance at how I think of each option. Keep in mind if you have questions about other properties contact me anytime.
If you are someone that has multiple real estate investments are need to diversify this is a great article to check out. It is very beneficial to not have all condo apartment rentals and to throw in some more liquid investments like duplex and single family home rentals. However the same goes the other way. It is smart to have some longer term low maintenance and low cost condo equity building properties that can last 10 – 20 years without shingles, giant renovations, etc. This allows you to buy and sell the liquid rental properties as markets flux, but hold on to the condo apartments till markets make significant change and appreciation over time.
The Affordable Newer 3 Bedroom 2.5 Bath Duplex
This in the past, present, and probably future has always been my favourite. It is a super popular option amongst most of my investors as well. This investment on average rents for $1400 – $1600 per month on a $290,000 – $320,000 investment which is honest cash flow (roughly $1100 mortgage with 20% down). These single family properties are priced perfectly in the largest sector of home ownership as well. This makes the investment more liquid than others. It is important to look for new as possible options unless price is extremely attractive with good location for older properties. Do not kid yourself. 3 bedrooms and 2+ bathrooms is a must. We need to be able to market to the largest group of tenants possible in order to get the best tenant at the right price. These properties rent like single family stand alone homes but require less maintenance, they are more affordable, more liquid, and just as easy to rent for very similar prices for less money.
The 2 Bedroom Condo Apartment
Welcome to the jungle. I could talk about this for days. However for this purpose I am focussing on the massive amounts of newer and older 4 story walk ups low rise apartment condos that took over our real estate space. Ok so the old stuff, basically old apartment conversions into condos, not bad, prices are as low as they have every been and some are in great mature desirable areas. Right now you can buy a 2 bedroom 1+ bathroom unit for $100,000 – $150,000. Condo fees on these units range from $250 – $450. They cash flow all depends on equity ratio and condo fees. The most important aspect of purchasing these rentals is quality building management, quality location, and quality price. Those will all add up to quality tenants and quality experience. The newer option. Well we can shop for weeks to see them all. In fact I have 10 guys that will sell to you right now if the price is right. The issue with the condo 2 bedroom apartments is that there are way too many, and when the market increases way too many more will be built. This makes them a very non liquid investment but a solid long term affordable cash flow. They fill an extremely important sector of our real estate market for affordable living in dense areas allowing for more amenities and economic prosperity. The issue is they are just a sluggish long term rental in the eyes of a normal real estate rental investor. Prices are as low as I have seen in 13 years. You can get a quality location, quality 2 bed 2 bath for $175,000 – $200,000 in and around the city that rents for $1100 – $1300 per month. In the best it is normal to rent for more as well. Also those numbers can easily change depending on location. There is just not enough time in the day for me to type out all the things we would need to discuss with regards to a 2 bedroom condo apartment. Simple answer is, YES it is a great time to buy one for a long term gain. I would buy a semi newer, 2 bed 2 bath 2 parking unit. Reasonably average location. Rock and roll. Get it for $185,000 is my guess with a potential of $230,000 would be my hope. Easy rent. Set it and forget it with reasonable cash flow.
The 3 Bedroom Condo Townhome
Looking to rent amongst mature homes, expensive properties, quality schools, busy locations? This is the answer. The mature 3 bedroom townhome was extremely popular in the 1970 – 1990’s and still being built today. Granted, they are quite different now but both are meant to serve a purpose. Family home in high density areas. Families have a hard time cramming into apartments and the townhome answers the call. They are affordable (roughly $190,000 – $220,000) which is similar to the 2 bedroom condo apartment but with more space and highly quality of living. I really like this market right now as they rent for $1200 – $1400 per month quite easily and have slightly better resale than the apartment condos. Sometime more space does have more maintenance but if managed correctly still works out ahead. Prices are low! Find a good complex and good location and its a winner. I would recommend older mature area with complex that has the exterior envelope work already done.
The Old Mature Neighbourhood Home with Basement Suite Potential
Another option that everyone seems to love. Back in the old days we would buy houses put a sink and stove and some sort of entrance separate form above. Call it a suite, and it was sweet. Now a days with the city and industry cracking down, it is important to get a legal suite. If you shop on MLS for properties right now you will find lots of places that have suite potential, basement kitchen, or potential separate entrance. It is much harder to find legal suites. And if you do, you need to check when it was legal as if it was legal 20 years ago, you change a furnace, bingo your suite is not legal anymore. Now here are two options. Buy an older house with suite potential, get the top floor rented and set up on its own. While making cash flow there renovate or finish the basement to today’s standard and code and get it legal before renting it out. Not only will this make it possible to rent it out with 2 doors it will drastically improve the property value and resale value of your home! Here is the typical numbers on a $350,000 old home suite project. Rent top for $1500, bottom for $1200, include utilities pay a $1200 mortgage, $250 tax, $400 utility bill and make $850 per month. Lots of sunk costs and yearly maintenance is normal but will pay off in the future. These are also fun work project that are not for everyone. I stay away as I am too busy but always love to buy the project when it is done and have the two doors! I just do not benefit form the sweat equity someone else put into the property.
The New Home with Basement Suite Potential
This is my favourite right now. Tons of homes are being built today with basement suites. Now that the city and most other municipalities have settled on a modern secondary suite bylaws and permit process these properties should maintain their value for years to come. I also like the aspect of new home warranty, less maintenance, newer areas, and quality location these new homes have to offer. I love negotiating with a builder to get the best price and walk into equity. Also have the entire property done new, form top to bottom, built for investment is huge. One project I am working on has a $400,000 house with 1 bedroom suite in basement and triple car garage for parking. This home is going to rent for $3000 per month and cost me $2000 in mortgage, taxes, utilities, lawn care, etc per month. Not to mention the future equity and quality home. This is a winner every time. Takes high initial investment and patience. Will pay off!
If you are looking to buy sell and invest in real estate contact me anytime 780-777-9703. I service Edmonton and area focusing on the Edmonton, Fort Saskatchewan, Sherwood Park, St. Albert and surrounding communities.
Have a great weekend!
