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Best Cities to Buy a 1 or 2 Bedroom Home in BC and Rent It Out

I think that when someone pictures a ‘Real Estate Investor’, they think of older generations, perhaps paying cash for an apartment building.

Did you know that surprisingly 90% of my investor clients are in their 30s and 40s and are purchasing either an apartment unit to hold and resell, such as a presale, or they are looking for a detached home that has the ability to add a secondary suite, and rent out both the main floor and basement suite. I absolutely love to see younger generations getting into real estate investing!

Every client has their own unique goals and situation, so every one of them has their own reasoning for whichever route they take with investing, whether it be short-term investing, long-term investing, or mixed.

Buy and Hold [ A Long-term Investment Technique]

Today, I’ll review an investment strategy called ‘Buy and Hold’.

You purchase a property, find a tenant, ensure that you are as close to break even as possible (it is Vancouver/The Lower Mainland after all)…(but I can show you areas that will cash flow!), then you sit on the property for years or even decades).

The entire time, your mortgage principal is being paid down by the tenants (for my own portfolio, about $9,000 per year, per home) and they have covered much of your other carrying costs. You are left with an apartment that has gained value over the years and can be sold for a much higher number than when you bought it.

Which city should you buy in? Here’s the fun part! I’m a Realtor that includes real estate searches in other areas of BC, besides Vancouver and the Lower Mainland, because most of my portfolio isn’t even here locally – It’s held in the Okanagan and Vancouver Island.

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When people hear that I mainly invest outside of our local market, they usually ask “How come?”, or say “Hmm, I never thought of doing that.” To clarify, I do hold one property locally. But the other 5 rental suites are either in the Okanagan or Vancouver Island.

The answer to those questions are coming up.. Hang on while I first explain about the data that I use…

Data Collection

Every year, I take a week to scrape through the plethora of Craigslist rental ads and compile a spreadsheet of 1 bedroom rentals and 2 bedroom rentals. It’s a music-cranked, loads of coffee kind-of-a-week. I then compare those current rental market figures with recent stats of how much a 1 bedroom home and a 2 bedroom home would cost to buy. Ta-da! We can compare all cities and all rental incomes equally. Of course, there are further carrying costs to be included for expenses, so the figures I’ve calculated are Cap Rates and not Net Operating Income numbers. *

I have included 25 different cities in my search which include: The Interior, Okanagan, Vancouver Island, Fraser Valley, and Metro Vancouver areas. The results may surprise you.

How to get a higher Return-On-Investment

Some of the less expensive cities to purchase in, only have slightly lower rental rates than a city like Vancouver. So while their rental rates are only slightly lower, their purchase prices are tremendously lower. This generates higher returns for investors. As long as there is demand for their rental unit, they will cash flow heavily in comparison to Vancouver.

The part where investors get ‘stuck’ in their thinking, is they say: “Well Vancouver has the opportunity to appreciate more in value”. While that may be true and has happened in the past, right now, if you are holding a Vancouver condo, you have seen it drop in value more than almost any other city.

Meanwhile, many long-term homeowners that have owned in Vancouver for decades, have made quite a hefty profit on their home. So they sell, relocate out of Vancouver, and help drive up demand in other cities and other markets.

Nobody has a crystal ball and knows when the market will increase and by how much, let alone when they should time it right to sell. So instead, why not use actual hard, reliable numbers, such as the cashflow and perhaps there is a chance that the small city you invested in will also appreciate at a healthy rate, just as Vancouver may do.

The Findings

Below are the average rental rates, average purchase prices, and cap rates for 25 BC Cities. This may not come as much of a surprise to you, but Vancouver is ranked near the bottom of the list.

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*Cap Rates (Capitalization Rates) show the potential rate of return on the real estate investment. The higher the capitalization rate, the better it is for the investor. Net operating income, one of the metrics to compute the cap ration, is found by deducting the operating expenses from the gross operating income.

The operating expenses can be property taxes, maintenance costs, strata etc. Operating expenses however does not include depreciation. Capitalization rate gives teh first hand indicator of the investment worthiness of the asset. however, it in not an exhaustive measure by itself. – credit to Economic Times; economictimes.indiatimes.com/definition/capitalization-rate

If you have any further questions or want to learn more on how to get started in real estate investing, please reach out! I’m always happy to help: sold@danielleroyrealty.com.

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Kelowna Investments and BC’s 1st Solar Power Community

Since this time last year, we have seen sales volume INCREASE! In Metro Vancouver, there were 137 more detached homes sold last month compared to the year prior, 91 more condos, and 54 more townhomes. Great news right?!

Well, yes and no. Depends on which side of the fence you’re on – a seller or a buyer.

Benchmark prices are still down. Buyers have finally started putting in their offers as they realize that they have a lot of opportunity with lower interest rates and can negotiate hard against sellers. Sellers are still facing a difficult time getting their ask price, or selling their home at all.

Continue reading

Rent near your work, own where you can afford


It’s very common to hear many people in Southern BC complain about the high real estate prices. But, if you are in the real estate market, the high real estate prices have increased your net worth and you now have a ton of equity sitting in your house. Many homeowners have seen huge appreciation in their home’s value, more than they would have ever been able to save on their own from the income that they earn.  Continue reading

NEWS UPDATE!! Experience the Difference…

I’m excited to announce that I have rebranded as a Flat Rate Realtor in BC!

What does this mean?
It means you or anyone in British Columbia that owns a home, land, or recreation property can now SAVE a FORTUNE on real estate fees when you sell with me. There’s no catch! I also offer my clients OPTIONS to choose from when they list their home for sale. Who doesn’t love having options?!

Why?

Read more

Is your city on the list of cities that saw increases in prices last month?

MARKET HIGHLIGHTS

If I asked you: “Do you think the market is going up or down” you would probably say it’s going down. Why is that? Well, the media and everyone you speak to seems to take note when it’s unfavourable. What if I told you that there are many parts of the Lower Mainland that saw an INCREASE IN PRICE last month? You would be a bit surprised, since nobody is mentioning this, right?

Instead of me giving a very dry market report on what is decreasing, I want this to be fun and show optimism of what is INCREASING! Take note that most areas in the Fraser Valley have increased. Continue reading

Hot cities to invest in BC | January 2019 real estate market report

MARKET HIGHLIGHTS

We have seen a significant cool down in the market since last May. While the Lower Mainland realizes a slow-down in all housing segments and cities, other parts of BC have not seen the same decline. As many of you know, I was recently in the Kootenays to meet with brokerages, property managers, and scope out new investment/relocation areas. The Kootenays board was the only board last year to see an increase in sales prices, instead of an overall decrease. There are many Albertans relocating to the Kootenays and retirees from the prairies also relocating there. Ask me more about what you can get for $300,000 and also, how the rental demand is doing!

I’ve heard many people say “We’re going to wait to buy because the market may continue to slow down”. If you’re looking to buy, now is the time to do it. Why? Fixed rates have decreased because they are tied to bond yields, which have also decreased. A 5 year insurable fixed rate is 3.49%. Also, buyers hold a lot of power right now, so if you wanted to put in an offer, 10 or 20% below list price, you may not have any other competing offers. How much are you hoping housing prices will continue to decrease before you’re ready to buy? Continue reading

How to split the utility bills when you have an unauthorized suite

How to split the utility bills when you have an unauthorized suite

Splitting utility bills with an unauthorized suite

I had a recent buyer of mine ask me how I ‘normally’ charge tenants for utilities, when it’s an unauthorized suite. I realized that with the growing amount of NEW real estate investors purchasing homes with unauthorized secondary suites, this must be a common question on their minds. Continue reading

Should we buy or sell first?

A common question and dilemma from home owners that are planning on relocating is: should we sell or buy first?

As a real estate advisor, I like to say that you are in the driver’s seat and are fully in control of the decisions in the real estate process. The reason that I’m saying this will make sense when I address the biggest myth and therefore, issue that sellers think:

“If I sell my house first, then I could be left without housing for me and my family.” That thought is the number one reason why people feel they should buy first and then sell. But let me break this down a bit more. Continue reading