Explore Calgary Rental Segment: How It Works as Long-Term Investment
Sunday, January 24th, 2016
What do you think of an investment that comes with the promise of long-term appreciation plus an immediate return?
It sounds like it may be worth looking into – right?
With interest rates at an all-time low and stocks and bonds seesawing between volatility and the doldrums, real estate investment has emerged once again as a reliable vehicle for those seeking to build wealth. It is the rental market in specific that is enjoying a renaissance of sorts. For a number of reasons, urban dwellers are drifting away from homeownership and toward the rental market.
For the first time in several decades, investors in Calgary real estate with a focus on the rental segment are realizing an immediate income stream while building equity at the same time. This is due largely to the low cost of borrowing money combined with high rental rates, low vacancy rates, and societal changes that are pulling people back toward city centers. The result is that thousands of renters are now living in single-family homes or owner-occupied single-family homes with brand new secondary suites.
On top of the economic and social conditions that favor the growth of the rental market, the City of Calgary has recently enacted building code changes that make it easier to create a secondary suite or legalize an existing suite. Many homeowners are using income from secondary suites to pay down their mortgage, supplement monthly income, and help elderly relatives and young adults in need of a private, but affordable space.
In doing so, they are also building equity and adding to the value of their property at the same time. Others are purchasing a second investment property and using the revenue from the investment property to pay down the mortgage on their residence.
To illustrate how this works, let us take the real-life example of a brand new Highland Park property valued at $750,000 with a $562,500 mortgage balance to see how the presence of a walkout rental suite together with the main house rental generates immediate value for the property owner.
Building Summary:
Completed Value of Home $750,000
Deposit $187,500
Mortgage Balance $562,500
Rental Summary:
Main House Rental (3 bedrooms 2.5 bath with garage) $2400/mo
Walkout Rental (2 bedrooms, 1 bath with garage) $1600/mo.
| Expense Summary: | ||
| Mortgage @2.8% | $2,808/mo. | |
| Taxes | $360/mo | |
| Management Fee | $100/mo | |
| TOTALS: | $4,000/mo | $3,268/mo |
| Net to Owner | $732/mo | $8,788/year |
Combine this $8788 annual income stream with a mortgage principal pay down equal to $16,000 and a modest assumption of 1.5% annual appreciation and this property owner can boast of an investment yielding a 19% annual return – a healthy number by any standard!
If you are interested in becoming a real estate investor or if you are already an investor looking to enhance the value of your existing assets, work with an experienced Calgary Realtor. Returns like this sometimes only around only once in a lifetime. Do not wait too long.
Are you looking to Sell or Buy a home in Calgary and need someone who won’t rest until you’ve found your dream home or until your home is sold? I’ll work hard to earn your trust and to deliver exactly what you need. Contact me at 403-589-0004 or at TheHowardTeam.net.
About Bryon Howard
Bryon Howard and his team of Calgary real estate professionals sell an average of two homes a week. He is a member of the MLS Million Point Club, which ranks him roughly in the top 1% of productive realtors in Calgary. His aim is not just to please clients but to help them buy/sell a home in Calgary at the best price, in the shortest time, and with the least hassle. He is a member of the RE/MAX House of Real Estate that leads in the Canadian market. Learn more about Bryon at TheHowardTeam.net.
