Kelowna has recently been named the top market in Canada to invest in, so we went to two of the top investment specialists
Get some fresh ideas on real estate investing from two of Kelowna’s top Pro’s
Why is real estate a better investment than anything else you can think of:
Todd: Real estate is the only investment you will buy that somebody else will pay off for you. If you look at the richest people in Canada most made their first millions elsewhere but fortified their wealth with real estate holdings.
Allen: I think due to the nature of real estate as an investment it is hard to compare to others but for stable and reliable income property is hard to beat. I have half of my own investment assets in real estate.
I have seen charts in the financial papers from time to time showing how the stock market performs better than Real Estate. Can you comment on those reports?
Allen: You see those from time to time, normally when the stock market is doing well. During tough economica stock may slide, but a house will always generate some revenue. What those reports never factor in is that over the course of 30 years you get the house paid off for free by renters.
Todd: It would seem from our conversation that sometimes houses are up and sometimes the stock market is up. I would say that this would back up Allen’s point from earlier. You may want some money in both.
I have heard the expression cap rate what does that mean?
Todd: Imagine you put 25% down on a home that was 300k. That would be 75k invested. After all expenses etc if you ended up with $4,500 a year profit that would give you a 6% return on your original investment. This does not include any increase in price. The cap rate on this property would be deemed to be 6%.
So is it best to put down a big or small deposit on an investment
Allen: I would suggest you take your accountant and mortgage broker out to lunch and discuss your own personal situation with regards to that question. There are so many variables at play. Not everyone has a broker and accountant they trust, so I often connect people with professionals I know will take the time to understand your situation before advising you. There are many ways to buy a property and there is no one size fits all answer.
Do you suggest using a property
Todd: That too is a personal choice. Obviously that takesyour profit, it can be a lot less work with a professional screening and monitoring renters. Most of my clients will use a property manager.
Allen: I do not use a property manager for my rental units. However, if I had a vacation rental I would for sure.
Do you thinkor residential property is the best investment?
Todd: There areand cons to both. Commercial tends to be a larger outlay but tenants will be responsible for the building so you have less you are actually responsible for. If the plumbing starts to leak a commercial tenant calls a plumber not you. However residential has some benefits too and is very simple. Again, it’s a personal choice you need to work through with a professional.
Do you prefer a strata property or freehold as an investment?
Allen: I have both myself. Strata is certainly more simple as you get forced to set money aside (via condo fees) to maintain your investment. I make a better return on my freehold though. So do you want less hassle or more revenue?
What do you see for property values in the Kelowna
Todd: Nobody can accurately predict the prices of homes in the future. Perhaps more importantly for the investor, mortgage rates are super low right now. Most observers say they cannot stay this low for long so I think it’s a great time to invest regardless of fluctuation in values unless you plan to sell quickly. In which case a property may not be the best investment for you.
Allen: There are only two ways to make money in Real Estate. Buy, and hold. If you can make money at today’s price pick up the property. Hold it long term and you will always do well. There is not a single property in Kelowna not worth substantially more than it was 25 years ago and if you bought a rental then, it’s now paid off by renters!