While the world deals with the unprecedented problem of the Coronavirus, it is easy to forget that life continues to go on even if in a more limited way than before.
This is true of the real estate market, and just about every other business sector out there. Some have been hit harder than others, but almost none have escaped unscathed in an environment where people are being told to avoid one and other. That is totally opposite of how business is normally conducted.
Although you might think that the Calgary real estate market has ground to a halt because of Covid 19, there are still houses being listed and there are people making offers and closing on properties. In reality, we did see a steep decline in activity for the first couple of months of living with the virus with close to 40% declines in sales, however starting in June we started to see more of an uptick in sales and that increase continued to the beginning of July. Now activity is down only 2% compared to July of last year.
So, now is not a bad time to buy or sell a home that you wish to live in, but what about buying a home that you intend to use as a rental? That is a tougher question that depends on a number of factors and you will really have to do your homework. Ask yourself these questions before taking the plunge and buying a property for a rental.
Owning a rental property is a long term game where you hope that you can get good renters that will help you to pay off your mortgage while your property potentially goes up in value. Even if the price never appreciates very much, as long as you are mortgage free after 25 years you will be in good shape. However, you need to be confident that you will always be cash positive on your rental, which means that the rent you bring in each month covers all of the costs of the property including the mortgage payment, taxes, and insurance.
Good areas will always be desirable so there may still be properties that will work out as a rental but make sure you do your due diligence and get all the facts before buying. Research the potential monthly income you could get from a property by going to websites like https://www.rentfaster.ca/ab/calgary/ Find similar properties to one you are considering buying and see how much you could ask for rent. The market will tell you if renting a property in that particular area is feasible.
If you do find a home that you think would make a good rental, consult an accountant to understand how much of your rental income has to be claimed on your income taxes and how you can apply your write-offs such as repair bills, interest, and insurance. Padgett Business Services has a lot of experience with these types of scenarios. If you are thinking of investing in Edmonton, Rajiv Juneja is an accountant that has a lot of clients that buy rental properties there.
To summarize, is it a good time to buy a rental property? Probably not, but there will be some exceptions if you are willing to do the work to find them. The most likely scenario for the next year is that vacancy rates will rise and property values will decrease. No one knows by how much.
Let’s all hope we see better days soon.