If you are thinking about investing in Real Estate for the first time, I encourage you to think about the monthly income from the property first.
You need a monthly rent cheque to pay the mortgage, property taxes and property insurance as the basics.
If you take one step back from a monthly rent cheque, you need somebody to give you the rent cheque in exchange for the use of the property.
So perhaps before you run out looking at properties you should give some thought to tenants. Who are they? Where do they live now? What kind of jobs do they have? Where do they work? Are they new to Calgary, or new to Canada, or first time renters, or long-time renters? How do you find them? How do you avoid bad tenants? How do you pick the best tenants? How do you treat your tenants after they move in?
For Rent ads and signs attract people that need to rent a place to live. The quality of ads and signs have a direct effect on the quality of tenant applications. You are never obligated to rent to anyone that applies. It’s your choice and the simple answer to anyone you do not want to rent to is “We’ve Decided to Rent to Someone Else”.
When you take the time to learn how to attract great tenants, you will get great tenants. If you are a lazy landlord willing to take the next person that comes along with a good story to tell and a cheque in hand you will get burnt 9 times out of 10. Bad tenants can spot a lousy, lazy landlord very easily.
Let’s get back to the Monthly Income a property will generate. Today, Nov 23, 2016, in Calgary on Rentfaster.ca there are 7,629 total rental listings that include apartments, basement suites, condos, duplexes, houses, lofts, main floors, townhouses and shared accommodations.
There are houses for rent in Calgary right now starting at approximately $1,200 a month on Rentfaster.ca. Today in Calgary there are 354 MLS Listed homes from $300,000 to $400,000 that would rent from $1,200 to $1,800.
If you take the low-end rent of $1,200 and deduct $300 for taxes and insurance you would be left with $900 to make a mortgage payment in a break-even scenario. Using my Canadian Qualifier Mortgage Calculator, I enter $900 as a payment amount, 2.5% as the interest rate and 25 years as the term and when I press the Loan Amount button it tells me that $900 a month will carry a $200,908 mortgage loan.
So, on a home that cost $300,000, you would need to put down $100,000 and rent it for $1,200 a month to break even on the monthly cash flow. You would, however, be making close to $500 a month from the paydown of the mortgage. The change in the value of the property goes up and down over time and only matters when you sell or refinance to take some profits out. Even at this break-even scenario, you would get a 6% return on your $100,000 investment. When rents go up and property values increase the return gets even better.
When was the best time to invest in Calgary Real Estate? Anytime before today. When is the second-best time to invest in Calgary Real Estate? Today!
Feel free to contact Jerry Charlton 403 831 0842 for more information.