Top 10 Rental Investment Tips
Grande Prairie has a unique market for investors looking to purchase rental homes. The nature of the industries that surround our great city, means that we tend to always be moving and shifting. Transient workers coming from everywhere, means that our rental market is almost always hot. If you are an investor looking at getting into the rental market in Grande Prairie, here are our top ten rental investment tips.
1. Consider the Demographics
Nearly 35% of Grande Prairie’s population are young adults from the age of 25-44, with another 21.8% being children under the age of 14. This makes our community particularly young at the median age in 2022 averaging the age of 34. What does this mean for investing in rental units?
When considering what property to look for to reduce vacancy rates and increase interest in the rental market, consider affordable homes and apartments that may accommodate young families. Homes that allow for pets and have yards are of particular interest to many tenants.
Another factor to consider, is that we have a large oil and gas industry and it typically comes with shift work. A lot of young men come to make good money in the oil field, and we often get men coming for their days on and going home on their days off. This means that affordable condominiums and apartments are often picked off of the market fast, this is particularly true if utilities are included in the rent.
2. Work with a Knowledgeable Real Estate Agent
Many real estate agents not only help investors, but are also investors themselves. They will have a good understanding of the holes in the rental market that need to be filled and the best way to evaluate the value of the property. Real estate agents also often have “pocket listings”, properties that are not listed publicly but are available to sell to the right buyer.
3. Location, Location, Location
As mentioned above, much of the demographic is young and could include young families. When you are considering what to invest in, make sure that you consider the schools, parks, and amenities that are in the vicinity of the property. Speak with your realtor about the different neighborhoods in the area to see which ones are popular and which ones to avoid.
4. Condition of the Property
Cash flow is the name of the game in rental units. Not only are you looking at the short term monthly income of your rental property, but also the long term equity. Ensuring that your investment is sound in all of it’s major structural components, can save you major head ache and money in the long run. This will also protect the equity. Getting a proper home inspection and considering the expenses of getting the home market ready will need to be a consideration in your purchase.
5. What are the Unseen Expenses
By this we mean, take into account all of the additional factors and expenses that it will take to rent this home. Maintenance, property taxes, insurance, condominium expenses, vacancy rates, and much more will need to be considered when you evaluate whether this will be a profitable addition to your investment portfolio. Talk to other investors, your realtor, and a professional property manager to measure all of these considerations.
6. Average Rental Prices
How much money can you reasonably charge for the rental of your home and will it be worthwhile? This is likely the million dollar question when considering purchasing a rental home. If you are charging too much for a home, you will need to factor in higher vacancy rates. If you undercharge, you may not be optimizing your investment income. Look at comparable homes on the market and gauge how long they stay actively available to decide what a fair market value for your rental may be. Our property management team can also help you with this!
7. Area Development
How is your area going to grow or diminish in the lifespan of your planned investment? This can affect the long term sustainability of your rental journey, as well as your exit strategy, should you have one. Factors to consider may be a forecast in the markets, interest rates, and area industries. While you cannot predict everything, you can take the information you have and make the best educated decision available to you at the time of your purchase!
8. Exit Strategy
While not everyone comes into an investment with an exit strategy in mind, when it comes to real estate investments, it is wise to be apprised as to the markets movements and plan accordingly. Depending on when you purchase your home, your exit strategy may change. If you buy while the market is high and sell when it is low, you may not make money on your investment at all. If you are purchasing when the market is low, and the market forecast is set to have a jump, you may plan to leave the market when it is at it’s highest and optimize your equity. This is where a knowledgeable realtor will be a great asset!
9. Risk vs Rewards
While the tangibility of a real estate investment makes it one of the safest investments you can make, there are some factors that you as a landlord will need to weigh. While equity and numbers have a predictability, people do not. We have seen time and time again, where the only factor that makes or breaks rental success is the tenant that is placed in your home. Does your profit margin allow for the potential of repair expenses or uncollected rent. While this isn’t always the case, to extend yourself without these considerations may leave you struggling.
10. Rental Management
Are you ready to take on the responsibility of managing your rental on your own, or does your investment allow you the security and luxury of a professional manager? There are times when the tenant screening, bookkeeping, 24/7 emergency phone line, policies, and degree of seperation from your tenants can actually save you time and even money. When you are considering the property you are going to purchase, you may find it worth it to factor in the cost of a property manager.