Investment Property - Downtown or University?

[alsinha]

I'm thinking of getting an investment property (probably a condo). For those of you who have experience, is it easier to rent out units in the downtown core or closer to U of C/SAIT? What about suburbs? TIA!

[A790]

University.

Suburbs are getting killed right now.

[Xtrema]

Originally posted by alsinha
I'm thinking of getting an investment property (probably a condo). For those of you who have experience, is it easier to rent out units in the downtown core or closer to U of C/SAIT? What about suburbs? TIA!

Seems like these days, only low ballers are renting. Units that used to go for $1500/mth are now being low balled to $1300/mth and renter quality is shit. This is in the suburbs.

I don't have apartments so I don't know if that market is any better.

And if you thinking of a condo, there may be a chance you will lose equity over the next couple years as well as so many new units are coming online. And I think it's harder to be cash positive. Even a $230K bachelor suite with a $180K mortgage will run you about $1100/mth. You probably won't get much more than that in rent.

I agree with A790, University seems to be a safe bet. If the Chinese ever start investing in Calgary, potential is there.

[Christian@IE]

Revenue properties that are walking distance from both the LRT and post-secondary institutions are easy to fill, however be prepared for heavy turnover. You'll likely get applicants who want it for a single semester, or max 2 but will want a reduced rent during the summer months.

There are a lot of units available downtown with high vacancy rates so it would be tougher to find a tenant unless you have a better-than-average unit that is aggressively priced or are offering an incentive.

The question you should ask is: would you rather have a unit downtown that may take a while to find the right tenant who may be long term, or rent to students with much higher turnover and the (potentially higher) risk of property damage?

[alsinha]

Thanks guys. I'd be looking at it as a long term investment and was thinking University as well. Downtown looks to be oversaturated with 40 year old rundown units that are probably already paid off that a new investor would find hard to compete with without taking a big monthly hit.

[ee2k]

Originally posted by alsinha
Thanks guys. I'd be looking at it as a long term investment and was thinking University as well. Downtown looks to be oversaturated with 40 year old rundown units that are probably already paid off that a new investor would find hard to compete with without taking a big monthly hit.

The 40 yo units are the least of your concern. I know of at least 6 brand new rental only mid to high rises that have sprung up this year and are advertising aggressively. Your new condo for rent would be competing with their marketing might - including incentives and all. Third option: maybe a rental property is not where you want to put your $ in at this time.

[Xtrema]

Originally posted by alsinha
Thanks guys. I'd be looking at it as a long term investment and was thinking University as well. Downtown looks to be oversaturated with 40 year old rundown units that are probably already paid off that a new investor would find hard to compete with without taking a big monthly hit.

When it come to condos, sometimes older has more challenges with higher condo fees, low reserves and special assessments.

And elevators, those elevators always breaks and cost a ton.

[HiTempguy1]

You're thinking wrong demographic. Places for old people are hot right now, boomers are in prime retirement age and are selling off assets and downsizing. If you are going to live somewhere in old age, might as well be somewhere that you don't have a liability on your hands.

Just sayin

[alsinha]

Yeah, I'm not planning on getting anything too old. But things like elevator repairs should be covered under the condo maintenance fees, right?

[alsinha]

Originally posted by HiTempguy1
You're thinking wrong demographic. Places for old people are hot right now, boomers are in prime retirement age and are selling off assets and downsizing. If you are going to live somewhere in old age, might as well be somewhere that you don't have a liability on your hands.

Just sayin

What do you do with old people that don't pay rent? I've rented while I was 18-25 so I kinda know the mindset of kids going to univ or those who have a semi-decent job...

[Rocket1k78]

Unless you've got a big down it might not be the best idea now. Take a quick look online and you'll see that vacancies are everywhere now and rent prices have/will decrease more imo.

[nobb]

No way I would rent to students. There are good ones, but keep in mind many of these will be people moving out on their own for the first time and have no experience with maintaining a dwelling (nor will they likely have previous landlord references). You also have to think about if you have to take them to court on a settlement, they likely wont have much assests to seize/garnish. Many will also not be local residents so it's easy for them to run away and not be accountable. Adult tenants can already be a headache so I can't imagine what students would be like.

Downtown condo's are also bad investments right now because it's hard to cash flow positive. It might only be good for people with a ton of cash to just park their money long term and don't care about monthly cash flow.

[lasimmon]

Not to mention university parties.

[alsinha]

Is this speaking from bad experience? Thinking back to my SAIT days, and its only going back 12-13 years, most of my friends/roommates and myself were pretty good with their apartments. Maybe because I was an out-of-country student(?) but even the local guys/gals were fairly tidy and responsible...

[Xtrema]

Originally posted by alsinha
Is this speaking from bad experience? Thinking back to my SAIT days, and its only going back 12-13 years, most of my friends/roommates and myself were pretty good with their apartments. Maybe because I was an out-of-country student(?) but even the local guys/gals were fairly tidy and responsible...

My experience is renting to student is always 50/50. But I guess I am seeing how guys treat their place. Female could be better, but I have seen some that is worse than guys, especially female students in technical fields.

Originally posted by alsinha
Yeah, I'm not planning on getting anything too old. But things like elevator repairs should be covered under the condo maintenance fees, right?

Any structures that charges a condo fees is used for maintenance. Like repair, common area cleaning, waste removal, insurance and any amenities upkeep etc. It's also used to build a healthy reserve fund in case of major disasters.

In the case where reserved funds is needed for major repairs and retrofits and is depleted, maintenance fees may go up drastically to rebuild the reserve. They could be a year or mutli year increase.

In the case that reserved fund isn't enough, a special assessment will be needed and every owner will need to come up with the money for the repair.

I like this as an example when condo ownership turned really sour:

https://www.realtor.ca/Residential/S...3A3V2-Edgemont

This is nice area, 26 year old condo. Given the size and location, you would think it would fetch at least $200K. Because similar units in the suburb that are new are asking at least $200K.

The problem is, the condo fee is $400 compared to $200-$300 for similar units. Yes there is a gym, pool and nice common area (with a CRT TV?) but still it's more than average.

And the fact that most owners 10 years ago had a special assessment against them for $20-$30K due to major water leak that took millions to fix. Those guys never see their money again.

Townhouse/detach has limited damages and more potential increase in equity. I'm sure there are some condos that are great investments but I found most to be risky.

[Manhattan]

House will probably see more appreciation if you're in it for the long haul. Condo stock will just keep rising. Developers can and will build a building with hundreds of units on any vacant piece of land. Condo fees also really eat into your cash flow. Your biggest risk in the long run is interest rates going up but it probably won't happen in the next 3 to 5 years with all these countries going into negative rate territory.

Why not just look at a REIT? You get immediate diversification with properties in many major cities in US, Canada, and around the world. Dividends as high as 9 to 10% and you can cash out at anytime without the hassle and selling costs.

[alsinha]

Ideally I'd like to get a house but its 100k+ compared to a condo...Still looking into it however. As far as REIT is concerned, I had no idea about it but will look into it. Having a "physical asset" however seems to have a higher emotional attachment even though if REIT gives me a higher return, I'd consider it for sure. Anything is better than sitting in a bank at virtually no interest. This is obviously some cash I have on top of my "rainy day" fund that I'd like to invest.

[Xtrema]

Originally posted by alsinha
Ideally I'd like to get a house but its 100k+ compared to a condo...Still looking into it however. As far as REIT is concerned, I had no idea about it but will look into it. Having a "physical asset" however seems to have a higher emotional attachment even though if REIT gives me a higher return, I'd consider it for sure. Anything is better than sitting in a bank at virtually no interest. This is obviously some cash I have on top of my "rainy day" fund that I'd like to invest.

I would say RE in Calgary long term is around 3%-4%/yr return. You may make more if catch the cycles right.

You just hope we get another 2004-2007 run where the the market almost doubled. Or the one Vancouver is going thru right now.

Otherwise, it's not glorious return but at least it's asset that won't vaporize overnight like other investment vehicles.

[Manhattan]

Originally posted by alsinha
Ideally I'd like to get a house but its 100k+ compared to a condo...Still looking into it however. As far as REIT is concerned, I had no idea about it but will look into it. Having a "physical asset" however seems to have a higher emotional attachment even though if REIT gives me a higher return, I'd consider it for sure. Anything is better than sitting in a bank at virtually no interest. This is obviously some cash I have on top of my "rainy day" fund that I'd like to invest.

If by emotional attachment you mean working evenings/weekends to deal with tenants or fixing things up at the rental property then yeah you'll be attached to it. Rental property and/or being a landlord is not for everyone. Make sure it's something you really want and going to be committed to because unlike an investment fund or REIT, you can't just turn around and sell it the next day and decide it's not for you.

Originally posted by Xtrema

You just hope we get another 2004-2007 run where the the market almost doubled. Or the one Vancouver is going thru right now.

Otherwise, it's not glorious return but at least it's asset that won't vaporize overnight like other investment vehicles.

If anything Calgary is still overpriced right now. I know this isn't the imminent housing crash thread but the number of million dollar homes in this city is insane. It's all built on historically low interest and highly leveraged mortgages. We're nothing like the international destination that is Vancouver and it's not going to change anytime soon.

[90_Shelby]

My vote is for University. My rental agreements did not change with the downturn and I've never had an issue finding tenants. I've had a mix of students and employed for both of my up/down suites, also close to C Train. Students are immature and they need to be walked through things like mowing the lawn, shoveling the sidewalk and cleaning the bathroom. On the other hand they always pay the rent since it's typically the parents picking up the tab. Full year lease agreements only. I've only had to evict one tenant and he was not a student.

The other advantage I see with a property near the University is, most lots are RC-2 and they'll eventually sell for lot value therefore condition of the home is virtually irrelevant. I have done minimum renos and maintenance on mine which helps keep the running costs low.

In my case, I rent out the garage separately, between the 3 spaces this rental property pretty much pays for itself and the mortgage on my primary residence. Since we bought the house 5.5 years ago its increased in value by ~40% based on current conditions. Closer to 50% at it's peak. I'm very happy with this investment.