Now is the time to invest in an income property?


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Monique Geurts and her husband Caspar bought an income property in Prince Edward Island in 2015, but the pandemic and the scorching Canadian housing market created a difficult environment.

ALANA SPRAGUE / the globe and the mail

When Monique Geurts and her husband Caspar bought Victoria Cottages – located in Victoria-by-the-sea, a village on the south shore of Prince Edward Island – none of the six cottages had electricity or running water. Many of them had become homes for the neighborhood foxes and raccoons. But the family was willing to work to get the perfect income property and they thought that was it.

It was in 2015.

Fast forward to 2019, the cabins have been completely renovated and the Geurts family, who immigrated from the Netherlands to Prince Edward Island in 2013, opened for a summer at full capacity. Things were improving.

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Then 2020 brought the COVID-19 pandemic, followed by an unexpected spike in the housing market. These factors have put a serious pause on their income property plans.

“The goal was to do this business together, but right now we have to invest so much time and money, and with COVID [happening], it’s just not doable, ”says Geurts, who has retained her full-time human resources job at the University of Prince Edward Island. “And with the housing market as it is and the cost of renovations and labor, it’s a lot more [expensive] in this market that we have right now.

Experts say the end of the urban exodus is approaching – for tenants at least – as people return to urban centers anticipating a return to pre-pandemic life.

ALANA SPRAGUE / the globe and the mail

Income properties are designed to make money, but the pandemic and the scorching Canadian housing market have created a tough environment for anyone considering investing in this area.

As rental vacancy rates decline in many cities and property prices across the country record record increases, it’s unclear whether now is the right time to buy an income property or to move on. build this house on a lane.

Experts say the end of the urban exodus is approaching – for tenants at least – as people return to urban centers anticipating a return to pre-pandemic life. Others argue that there is a new market for income property in rural or suburban areas for those seeking a quieter life, which could make it a good time to enter the income property market, little no matter where you live.

Jerome Deis, a real estate agent in Vancouver, says he has seen the signs, firsthand, of tenants returning to downtown areas.

When he put his own rental property, a downtown condo, on the market last fall, “it was on the market for three months,” he recalls. “I have never seen this happen before in the 10 years I have been renting this property.”

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Just a few weeks ago, when his current tenant gave notice, Mr. Deis put his condo back on the market with a rental start date of July 1. “The market is definitely changing.

But everyone’s advice is to do some research before you get started.

“Typically when we work with clients who are looking for investment property, we provide them with a few calculators that they can use so that they can see what the purchase price is, what your monthly rental income is, what are property taxes, what is the down payment, are there any renovations or improvements [needed]Says Audra Poole, a real estate agent in Victoria, British Columbia.

She explains that some properties could be more lucrative than others depending on the associated costs.

Condos, for example, often come with additional charges that aren’t factors for a detached or semi-detached property, so that’s something to consider, says Poole. “If you walk into a condo and you’re already paying a lot with a mortgage, [condo] fees – if you’re not going to manage it yourself, you’re paying a management company – so make sure you know if that monthly ROI will be worth it.

These can still be great properties to invest in, it might just take a bit of homework, she adds.

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For Ms Poole, one of the biggest changes, thanks to the pandemic, has been the location of income buildings as people move out of city centers to seek more space for less money. This has put a strain on rental markets in suburbs, small towns and rural communities as city dwellers flock to these less congested areas.

“I think people traditionally looked at rentals in the core,” says Ms. Poole, “but because of the way the pandemic has unfolded, people can look outward.”

The Ontario Real Estate Council (RECO) has a list of resources on its website designed to help potential buyers of income properties make informed decisions about the type of property, the insurance required and other factors. .

“Our advice to people looking to buy income property would basically be to choose the right real estate professional and make sure that you also use an accountant and an experienced real estate lawyer who can advise you on codes, laws, risks. , obligations and requirements ”, explains Christine Harminc, director of external relations at RECO.

As for Ms Geurts, she says that if the market was like today in 2015, her family might not have been able to afford the cabins. But with better prospects ahead, there is still hope that this seasonal income property will be the dream they once imagined it could be.

“If we had known what we know now we probably wouldn’t have done it, but honestly, being here now, I don’t want to be anywhere else. It is the most beautiful place in the world. “

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