Where Would You Invest ? Calgary, Edmonton, other ?

Question

Hello Newbie here with my first post.

My wife and I thinking of purchasing our first investment property with the plan to get a retirement income in 15 yrs from now.  We currently live in BC and due to expensive market are thinking of purchasing in Alberta.

Where and what would you purchase if you had approximately 100k down.   We may be able to get a attached rental with suite in Calgary or a detached rental in Edmonton.   Trying to balance out appreciation and monthly cash flow.

Suggestions and advice is greatly appreciated

Ryan

Anthony Therrien-Bernard · Answer

One thing to be careful with is the last 3 years have been atypical for the Calgary market, it's been a good run, but don't expect these kinds of returns long term.

Ryan F. · Answer

Wow !  This is fabulous information,   Thanks so much

Ken Didychuk · Answer

The cost of entry in Red Deer may be appealing to many as well. A legally suited detached with garage is around the $375k - 450k point (in decent shape). 3 bedroom, 1.5 bath main floor around 1100 sqft can rent for $2000-$2200 a month (utilities included). 3 bedroom, 1 bath basement can rent for around $1600-$1800. These are numbers for some of the nicer suites with separate laundry and nicer finishings but it gives you an idea of where things are at here. Often overlooked is the premium for storage space in the city. There has always been a shortage of garage space for rent. A 24x24 shell with no heat or insulation and 15 amp power can rent for $600 a month. That would be for a garage in a convenient location since these always get picked up by contractors for their tool and material storage.

Anthony Therrien-Bernard · Answer

Yes we always account for R&M, capex, vacancy, insurance, property taxes etc in our numbers.

It's definitely NOT all properties that are cashflow positive, but we are still finding them. Sometimes you also need to make it cashflow positive, lots of ways to do this in Calgary (renovations, adding a garage/renting a garage separately, etc)

DM me I can send you some examples

Kevan Baum · Answer

Can you share some of these properties?  Is it true cashflow or phantom cashflow?  Do you have yard maintenance, capex, repair and maintenance ect worked in?  Does it meet the typical minimum in a hot market of a 10% cash on cash return?  I know the Calgary market very well and I can't find deals that meet those criteria with realistic rent rates anywhere south of Red Deer right now.  I see lots of people with unrealistic rose colored proformas that I hope will be saved by an appreciating market.  I don't think Red Deer south is a smart bet right now.

Anthony Therrien-Bernard · Answer

Calgary condos are not terribly great investments either. In fact we just did a presentation on this last night we'll have a video out in about a week. But here are some really interesting numbers...

Ok so this one doesn't look too bad but notice how much more the townhouses and condos dropped in prices over the last downturn.

2007 peak to now isn't so good...

Before the 2007 run up to now is better, but even then, apartment condos performed the worse (so best case scenario, you have the worse performing asset type, worse case scenario you had a terrible return), and that's assuming you had nothing go wrong with the condo (special assessment etc)

But benchmarks don't even tell the whole story, because if you had a specific condo investment, and you tracked it's value overtime, benchmark prices isn't the right approach as it evolves overtime (benchmark price is the price of a typical property generated at each point in time). So what I did is I looked at median prices of 2 bed condos between 800-1200sqft built between 1980-1990, I did this to eliminate new condos being added into the pricing pool, and look at this rollercoaster...

Detached faired a LOT better, less variability in downturns, and much better return (for this chart I did not look at semi-detached, but the trend is closer to detached)

Anthony Therrien-Bernard · Answer

I can still find tons of cashflowing properties in Calgary, especially suited ones, 4plexes etc

Kevan Baum · Answer

Have and had are the two biggest factors here.  Calgary HAD the biggest appreciation.  No doubt about that.  My properties in the Calgary area all came close or doubled in value in the last 4 years.  My condos in Edmonton (the ones I bought earliest, 2 years ago) have gone up about 20-30%, but I just bought them 2 years ago to 4 months ago.  I believe Calgary appreciation has run it's course, but it's really an educated guess.  A half duplex in the Calgary suburbs where I live sells between 500-700k.  I purchased them at 275k 4 years ago.

Alberta builds homes faster than any other province.  It's why our market cycles are faster.  That goes for condos and single family homes though.  I think the Edmonton condo market is going to be the fastest riser in the major metros moving forward.  Again, that's an educated guess and not a fact.  They also have real cashflow that lets me hold it.  Most single family homes in AB, even suited ones, don't have real cashflow.

Theresa Harris · Answer

It really depends on what type of condo you buy.  I had a less expensive one and it did increase, but not a lot.  Others that were not quite double the cost, but were newer and more townhouse than apartment, have appreciated quite well.  Ones that were selling for $225-250K 3.5 years ago are now selling for $325-350K.

Ryan F. · Answer

Thanks I appreciate all the feedback and info.    I'm thinking the condos in Alberta would have the lowest appreciation and Calgary would have the most appreciation.  Trying to balance out cash on cash and overall house value over time.

Thanks again