Calgarypuck Forums - The Unofficial Calgary Flames Fan Community - View Single Post

ranchlandsselling · 02-18-2012, 12:45 PM

You can't really compare the SFH market to rental market.

The SFH home is influenced too much by sentimental values or intrinsic values. The majority of houses are owner occupied. People don't buy houses as a rational investment looking at cash flow and break even factors. They determine what they can afford and what they like and buy. Much like buying an engagement ring. What I can affoard, what she'll like, end of story.

The best way to look at a rent vs. buy comparison is comparing apples to apples. The only way I can think of doing that is the apartment style condo vs. apartment buildings.

If you look at the buy/sell decisions of entities like Boardwalk, Mainstreet, Timbercreek, some of the other REITs.

They take their income, expenses, mortgage, ROI, and the NOI apply their cap rate and come up with a per door value. Whatever that value is I've never seen any of those come close to what a similar style condo would go for in this city.

An individual investor might be able to make it work, Put 20% plus down, maybe you eek out a few % a year return. Compare that to a 3.3% yield by Boardwalk REIT, the equity return should basically follow the Canadian rental market so you're on par with that either way. Unless you're into playing the area market. Buy one condo in Calgary as prices will go up more than Montreal etc. vs Boardwalk being more diversified. But you can probably find an area play REIT too.

Now imagine the effort in renting out a condo, time for repairs and maintenance (which like Photon said, everyone underestimates it), and costs of buying, selling, mortgages, etc. Vs. buying or selling a boardwalk unit.

I don't think there's many good opportunities to do well buying in the Calgary market right now with the intention of renting out. Prices are too high, rents aren't high enough.

That 3.99% mortgage that is available right now is pretty tempting for landlords I'd imagine. If you know your stuff I'm sure there's properties to be found, but not very many and you'd have to know your stuff.

02-18-2012, 12:45 PM	#2092
ranchlandsselling Powerplay Quarterback Join Date: Jan 2011 Exp:	You can't really compare the SFH market to rental market. The SFH home is influenced too much by sentimental values or intrinsic values. The majority of houses are owner occupied. People don't buy houses as a rational investment looking at cash flow and break even factors. They determine what they can afford and what they like and buy. Much like buying an engagement ring. What I can affoard, what she'll like, end of story. The best way to look at a rent vs. buy comparison is comparing apples to apples. The only way I can think of doing that is the apartment style condo vs. apartment buildings. If you look at the buy/sell decisions of entities like Boardwalk, Mainstreet, Timbercreek, some of the other REITs. They take their income, expenses, mortgage, ROI, and the NOI apply their cap rate and come up with a per door value. Whatever that value is I've never seen any of those come close to what a similar style condo would go for in this city. An individual investor might be able to make it work, Put 20% plus down, maybe you eek out a few % a year return. Compare that to a 3.3% yield by Boardwalk REIT, the equity return should basically follow the Canadian rental market so you're on par with that either way. Unless you're into playing the area market. Buy one condo in Calgary as prices will go up more than Montreal etc. vs Boardwalk being more diversified. But you can probably find an area play REIT too. Now imagine the effort in renting out a condo, time for repairs and maintenance (which like Photon said, everyone underestimates it), and costs of buying, selling, mortgages, etc. Vs. buying or selling a boardwalk unit. I don't think there's many good opportunities to do well buying in the Calgary market right now with the intention of renting out. Prices are too high, rents aren't high enough. That 3.99% mortgage that is available right now is pretty tempting for landlords I'd imagine. If you know your stuff I'm sure there's properties to be found, but not very many and you'd have to know your stuff. Last edited by ranchlandsselling; 02-18-2012 at 12:49 PM.