Although the Alberta economy is still stuck in recession after more than 2 years of low oil prices, there are still some bargains to be had when it comes to investment properties. Sure, prices have come down, so buying a home to live in right now probably makes sense when you consider that you can still get a 5 year fixed rate mortgage for around 2.6%.
However, for rentals, the vacancy rate is a lot higher than it used to be, so getting good qualified renters might be harder than you think. For apartment rentals the vacancy rate hit 7% at the end of 2016. That is the highest it has been for 25 years. I couldn’t find any reliable statistics for house rentals, but I am sure the rate is also higher than it has been for a long time. This is not surprise considering that Calgary actually lost people to other provinces instead of gaining migrants as is usually the case. A lot of people that have lost their jobs have packed up and moved back to their home province since their prospects for employment here are probably pretty grim.
Having said that, just like always, when it comes to rentals you have to look at the numbers. Assuming that you can get a good renter, will you be cash positive? When you are doing your calculations, you should be very realistic when you estimate what your costs will be. Remember that the cost of utilities like power and gas are only going to go up with the new carbon tax that started on Jan 1st. I know that we have had a pretty cold winter but it seems like my Enmax bill has gone up dramatically since the tax kicked in. You would usually expect to have your rental home sit vacant once in a while since things happen with tenants not being able to pay or just moving out. However, in this economy you might want to be ready for even more vacancies since a lot of people are having a tough time with unemployment and just might not be able to pay their rent.
As usual, good areas close to transit and work centres are still the best places to buy for investment purposes and for your self to live in as well. The fundamentals of investing in real estate have not changed, you just need to be more careful and do your due diligence even more than you did before. Prices in Calgary have probably bottomed out and with oil prices sitting in the $50 range, the economy seems to be improving slightly, so I believe the worst is behind us. There are however, red flags going up for Vancouver and Toronto where prices are getting ridiculous. Watch the video below for more on that and know that Calgary does not have a problem with overvaluation.
If you do find a great rental property that works for you after considering all the possibilities, make sure you talk to a good accountant to see how your rental income will affect the rest of your income and how much tax you will have to pay. We have used Padgett Calgary and have been very happy with their services. Padgett Edmonton is also very good if you are buying properties up there.