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Market trends give investors plenty to think about
Rental property investment can be a lucrative venture when market conditions are favourable. As vacancy rates fluctuate and rental demand shifts, investors and landlords have opportunities to maximize the value of their investments.
Rental markets across different regions can vary significantly, with some areas experiencing low vacancy rates and others facing higher competition. These market dynamics often influence rent prices and can contribute to broader economic trends.
In this context, savvy investors could benefit from strong rental incomes while also contributing to the housing stock in their communities.
As an experienced agent who has worked with numerous landlords, I’ve observed that the amount you can charge for rent depends on various factors, with the property’s condition being a crucial element.
While location significantly influences rental income, offering a well-maintained property is key to attracting quality tenants and maximizing your returns.
Below, I’ve compiled a list of issues that can deter potential tenants and negatively impact your rental income. By addressing these factors, you can enhance your property’s appeal and potentially increase your rental yields:
Up and comers
Neighbourhoods experiencing increasing popularity and attracting younger residents are ideal hunting grounds for investment properties. Prices will be below those of more established areas, offering good capital growth in the medium to long term.
Limit risk
Diversify your investments. Don’t plough all your money into one neighbourhood or even the same city. Your portfolio should be spread over several geographies to protect yourself from local volatility.
Cash conscious
Attracting good quality tenants is essential to your success. You can only do that by offering quality accommodation. However, you don’t have to buy gold faucets and the best of everything to do it. Purchase mid-range fixtures and fittings.
Debt danger
Don’t overleverage yourself. The rental market is producing record income for investors today, but don’t let a couple of empty properties tip you over the fiscal edge.
Favorite rentals
There’s pretty much a market for every type of property right now. Over the years, however, the family home has proven the most reliable at attracting loyal tenants and substantial income.
NOTE: The information in this article is general and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your circumstances.
Six tips for buying a great vacation rental
Owning a vacation rental or working towards a life in the countryside are fabulous ambitions for those who have already invested in real estate.
Owning your own home can give you many life choices down the track, especially when the family has grown up and moved out. Having a second residence or vacation rental is one of those #lifegoals achievements.
But is a vacation rental a sound investment?
While it can be the base for fabulous memories for you and your family, what is the possibility that you might make some money along the way by renting it out, using a property manager, Airbnb, or similar services?
As an experienced agent, I’ve learned that a vacation rental is rarely a get-rich-quick scheme. Your income will depend on the style and size of the property and the area in which you buy.
I’d also suggest that finding a profitable vacation rental requires more research than any other investment property.
It’s a good idea to talk to a local real estate agent such as myself about the area’s property values and vacation rental levels. You might also get some help online from Airdna (yes, Airdna!), which measures revenues and occupancy rates.
Here are a few issues to consider if you’re thinking of investing in a vacation rental. I hope they prove helpful to you:
- Revenue can be seasonal – It’s a rare property whose income doesn’t ebb and flow with the seasons. And remember, you can attract higher rents in peak periods. The downside might be when you wish to spend your time at the property.
- Location is critical—it will determine your income more than any other factor. Properties near a lake and a tourist spot will do very well compared with those in a town several kilometres from the nearest attraction. Try to find somewhere that’s a popular destination.
- Calculate costs—Due diligence is critical to ensure the rental does not become a cash-flow headache. Be sure you can handle any mortgage costs, insurance, taxes, maintenance, cleaning, and the rental company’s fees.
- Don’t underestimate maintenance. The property may stand empty for weeks at a time, which can lead to problems if left unattended.
- Check tax benefits – Use a professional financial adviser to maximize any opportunity to gain tax advantages and write-offs from your rental.
- Don’t be blindsided – If you spend a certain number of days in a vacation property or more than 10% of the days it’s rented, you could lose all tax benefits. Talk to your professional financial adviser to get the latest tax rules.
Nine-point strategy to find your ideal investment property
Finding a great investment property requires due diligence and discipline around the organization of your finances.
You need to be on top of mortgage and tax obligations and potential income and tax benefits and write-offs you’ll receive.
Focus on the anticipated financial benefits from an investment property: are you seeking an outright profit from day one, or is the purchase strategic to minimize tax or develop a long-term wealth portfolio?
As an experienced agent in Saskatoon, I’ll always suggest to my investor clients that they seek professional financial advice to avoid unforeseen costs.
Picking the right property in which to invest requires an equal amount of attention and research. And if you’re looking at an investment property right now, you’re likely ahead of the curve.
To help you search, I’ve listed nine critical considerations in deciding on an investment property. If I can assist you in locating a suitable apartment or house, please do not hesitate to contact me.
- Vacancies—Always look at the number of vacant rental properties in the neighborhood. You don’t want to invest where there’s an oversupply of properties—it’s a sure sign that rents will be going down.
- Rental income – Compare the rents being asked for similar properties. Can you make your numbers work at the going rate?
- Future developments—Are any significant new property developments about to come onto the market? A release of several hundred apartments places pressure on rental incomes and can result in a short—to medium-term fall in values and rental competition.
- Employment – Neighborhoods with readily available employment are usually rental solid performers. Find out about major local employers in your target areas. This can be positive if there is a strong hospitality and casual workforce, which is usually evident in tourism centers and university towns.
- Entertainment – Finding a location close to cafes, restaurants and movie theatres is gold if you want an apartment with young professionals as tenants.
- Neighbourhood—The locality influences the type of renter. Any location near a university or major hospital will attract students, lecturers, doctors, nurses, and others employed in those institutions.
- Schools – A rental property near a school with an excellent reputation can be an effective investment strategy, especially if you’re considering investing in a house. Families who rent are usually longer-term tenants. You may struggle to find a tenancy if education requires a long bus trip.
- Crime—Check local crime statistics, as vandalism and petty crime can diminish the value of your investment and diminish your returns.
- Taxes—Do your due diligence on your preferred locations. Look for areas with higher property taxes and local tax levies.
I hope you’ve found this list helpful. If I can help you secure an investment property, please do not hesitate to contact me. We can discuss tenant preferences and rental income trends and the best way to attract long-term reliable renters for you.
Eight buying tips as Canada waits for rebound
Industry data shows buyers oversee the property market, unsure how the latest cut in interest rate will affect prices against a backdrop of economic challenges.
Savvy buyers are already on the move, convinced values will rebound as the cost of mortgages falls.
It’s generally accepted that any central bank needs to cut rates by 1% to convince buyers to change their cautious behaviour.
Pundits reading the financial world’s tea leaves are convinced the Bank of Canada will cut even deeper into 2025. As a result, savvy buyers are active now, determined to strike a deal before property values rise due to cheaper access to loans.
Affordability is still an issue, but these buyers believe the short-term pain of today’s 4.25% mortgage rate will be worth the discount of buying at today’s prices.
We are already seeing this trend emerge.
The Royal Bank of Canada (RBC) reports that home resales were up 1.3% between July and August. Inventories are growing, too—they’re double the level of 2021.
And the MLS Home Price Index remains steady at $717,000, a 3.9% decline from 12 months ago.
The biggest unknown is the state of our economy, primarily as job security significantly influences property market confidence.
RBC said in a recent report that the labour market was “softening at a pace and magnitude consistent with prior recessions.”
However, it added that 80% of the rise in unemployment has come disproportionately from students and new graduates. So, the jobless rate of 6.6% is slightly misleading.
Here’s how to respond to today’s market as a buyer:
- Prioritise Search: The market moves quickly, and buyers wanting to capitalize on the current situation know they don’t have months to hang around. Focus on your target areas and the type and size of property you desire.
- Cash is king. Get your finances in order. Get a pre-approved mortgage so you can make offers with confidence.
- Talk to Agents: Demonstrate to an agent that you’re aware of the market’s current status. This signals that you’re an informed and serious buyer.
- Don’t Rush: The window of opportunity won’t last forever, but never rush into a decision. Don’t let FOMO (fear of missing out) sway your judgment.
- Due Diligence: There’s no excuse for skipping essential steps in the buying process. Always order a building inspection.
- Start Negotiating: Be ready to act decisively. Your research will give you a firm idea of the home’s value. If you’re serious about a deal, don’t low-ball. Make an offer and justify how you came to that number. Leave cash in reserve in case you need to give a little ground.
- Juggling Act: If you find more than one dream property, negotiate on multiple fronts. No rule says you can only focus on one property at a time.
- Extra Care: Always insist on conditions as part of your deal. These would include the property passing a building inspection and your ability to obtain the necessary finance.
4 Tips For Budgeting a Home Renovation
Renovations, especially when preparing your home for sale, can make or break how quickly your property will stay on the market. It’s easy to get caught up in the excitement of choosing new finishes for home projects or be blindsided by unforeseen hiccups that can dramatically increase costs. Deciding on how much to spend on home improvement projects can be tricky—lucky for you, I have compiled some tips that will help you stay on track and minimize any unwanted surprises!
Set Your Spending Limit
According to Zillow, you should spend no more for each room than the percentage of what that room values in the overall house value. For example, the kitchen generally makes up to 15% of the overall property value. If your home is worth $200,000, you will want to cap remodelling expenses at $30,000.
Another good guideline is not spending more than 10-15% of your home’s value on a single room. Any more than that will not proportionally add to the value of the home. HomeAdvisor states the average cost to renovate a kitchen at $4,000 – $60,000, a bathroom at $2,500 – $25,000, and a basement at $11,000 – $30,000. Keep in mind that older homes will often cost more to renovate if wiring and plumbing aren’t up to code.
You will also need to determine how you are financing your project! Your renovation budget will need to fit within the limit of available funds, whether it is by cash, loan or credit.
Prepare for Hidden Costs
This tip is possibly the most important of them all, so listen closely. Once you have concluded how much you can afford to spend, set aside 10-20% of your available funds for any unexpected expenses that may arise. You might have heard of the phrase, “things happen,” and it definitely applies to home renovations. Things go wrong or cost more than what was initially predicted, and by setting aside these funds at the beginning, you know that you will still have enough cash to cover no matter what happens.
Prioritize & Make a Plan
So long as there is no expertise required, consider doing some tasks yourself to help reduce labour costs. Things like pulling up tile, removing old cabinets, ordering your own fixtures and finishes, shopping for used or refurbished items, and doing your own painting are all easy to do yourself.
You’ve used all these tips and added value to your home, so now what? You don’t want to risk pricing too high in risk of not selling. Contact your favourite local REALTOR® for a free home evaluation!
Top 5 Benefits of Owning a Home
I’m not going to beat around the bush; a house is a big purchase and a huge life milestone. You want to make sure you are making the right choice. Have you been wondering if it is worth it to take the leap? Are you overwhelmed by all the information out there? While there are many benefits of owning a home versus renting one, here are some of the top ones you’ll want to consider!
#1 – It’s a Great Way to Build Equity
First off, what does equity mean? Equity refers to the probable market value of your property against any liens (such as a mortgage). The longer you own a home and pay towards the balance of any liens, the liens will gradually decrease as the property value and your equity in the home increase. The larger the home equity you have, the more borrowing and purchasing power you earn towards loans for home improvements, funding your children’s education, or other consumer goods such as a car.
While you build your equity as a homeowner with regular payments, your credit score will also receive a nice boost!
#2 – Your Investment Gets Better With Time
Investing in buying a house provides a better return than most other investments, such as a car. Depreciation begins as soon as you drive the car off the lot, where owning a home behaves in the opposite, appreciating in value over time (depending on market conditions).
Though even an experienced local REALTOR® cannot predict precisely what will happen with your home value in the coming years, they can provide past values for the neighbourhood. Looking towards the trends on values on homes in the area will help gain some understanding of what you can expect.
#3 – Less Expensive Than Renting in the Long Run
Yes, really! When buying a home, there are, of course, many upfront costs—down payment, appraisal fees, homeowner insurance, etc. And, similarly, you are paying a certain amount per month. However, as stated in the first point, you are paying to own the home, and your personal net worth increases. Whereas, with rental properties, you are paying to use the landlord’s property to live.
Check out Renting vs. Buying: Which is Better For You for a more in-depth comparison!
#4 – Plant Your Roots
Options for rental properties are often limited in terms of location. Buying and owning your home means you get to CHOOSE where you want to live; the neighborhood and proximity to schools, parks, your employer, and other amenities. By this choice, you can be sure you will have pride in ownership, not only in your property but your community, by forming relationships with fellow neighbors, local services & politicians and taking part in community events.
#5 – Freedom to Customize Your Space
This might be the last on the list, but it is certainly not the least. Actually, this might be the best reason of them all! While renting, you are at the mercy of your landlord in terms of colour and style choices made and cannot alter them. Ownership offers you the freedom to make changes. Paint the walls, rip up that carpet, install a secret door—the choice is yours! To make the deal even sweeter, not only will these changes make the house feel more like home, but they can elevate your property’s value as well.
Of course, there are countless other benefits and considerations for purchasing a house. However, the best way to ensure you are finding the perfect home for you and your family is to work with your very own REALTOR®.
Don’t have one? I’d be happy to help—contact me today!
