If the Vancouver real estate market has you wondering whether it’s even possible to earn your desired passive income, we have a few tips to share with our valued Investors and Investors-to-be to help you decide and invest with confidence.
Tip #1: Always do a cash flow analysis. Always.
Vancouver real estate is very expensive, so before you decide to commit to an investment, the most important thing to do is to conduct a cash flow analysis. No matter where you invest, whether here in Vancouver, or in another city, province, or country, a cash flow analysis of your real estate investment will help you make the most objective decision.
What does a cash flow analysis tell us?
To put it simply, a cash flow analysis will help you visualize if your projected income will cover all of your relevant expenses. Additionally, it will help put your emotions aside as it creates objectivity in your decision-making.
Our advice? Do research, do a cash flow analysis, and leave it to the numbers to help you make a decision like a real estate investor.
Tip #2: Never go into a bidding war not knowing your upper limit
It’s important to know at what price you will have to walk away from a deal, for several reasons. First, you may (unknowingly) get too emotional which could easily lead to overspending. Second, there is no point bidding for a property that may end up making your cash flow negative, defeating your purpose of investing. Third, you don’t want to buy at the height of the market. In real estate investing, you buy low and sell high, just like any other investment.
Tip #3: Furnish
Furnished properties generally make anywhere from $300 to $500 more on monthly rent than unfurnished ones. This is definitely true here in Vancouver, where the vacancy rate has declined to less than 1% as demand for rental spaces outpaced supply (Fall 2015 CMHC BC Rental Market Report).
The tenant profile for furnished rentals is generally business executives, or out-of-town short-term renters such as students and workers.
So why not take this opportunity and have some fun furnishing your investment property and make a little more money along the way?
Tip #4: Be Open-minded
Have you considered investing outside of Vancouver? Being open to investing in other areas in BC such as Burnaby, Surrey or Kelowna, may lead you to investments that produce a better ROI (Return on Investment).
Additionally, properties outside of Vancouver are often more affordable while still achieving similar rents. Essentially, you would be paying less for the property, but receive similar monthly rental income. For example, a three-bedroom condo in Kelowna is priced at $365,000 while a comparable unit in Vancouver scores at almost $1 million. Even if you receive higher rents in Vancouver, it may not be cash flow positive, especially with expenses such as property tax and strata fees to cover.
To give you a better idea, consider these two properties:
- A Kelowna 3-bedroom condo, price = $365,000, monthly rent = $2,500
- A Vancouver 3-bedroom condo, price = $905,000, monthly rent = $3,700
Annual rental yield of Kelowna condo = ($2,500 x 12) / $365,000 = 8.2%
Annual rental yield of Vancouver condo = ($3,700 x 12) / $905,000 = 4.9%
*Figures were obtained from real comparable properties.
As you can see, the Kelowna property produces a higher annual rental yield than that of a comparable property in Vancouver.
Tip #5: Investment Realtor = Investor
Always work with a realtor who is also an investor with their own real estate investment properties. They will be able to provide you with a comprehensive cash flow analysis and they will already know the types of property that will make money. Therefore, working with an investment realtor will save you time that you would spend doing the research yourself.
Experienced investment realtors also have connections that can benefit you. Oftentimes, they will have a team of investment specialists (e.g. mortgage brokers, property managers, accountant, lawyers/notaries, etc.) who are already familiar with investment properties. This way, you can leverage the skills and knowledge of the investment realtor’s team.
Want to learn more? Contact our team!
If you have read this until the end, then it’s a good idea to call our team for more information. It’s never too early to start investing. If you are here, then you know you are interested and you want to learn more.
You never know what you’ll find out. Contact Point B Investment Real Estate Team today by emailing us at success@pointBinvestment.ca.
We look forward to hearing from you.