Life of a Landlord...BC or Not BC, that is the question!
As BC has continued to improve the rights of tenants (which can make life a lot more difficult for landlords) I am hearing from more and more investors thinking of selling their BC rental properties and investing in other provinces. I can understand that (I personally own a lot of properties outside of the Lower Mainland and several outside of BC) but I always advise clients to bear in mind a few things:
1. In areas outside of BC (or the Lower Mainland) while rents may be good, you need to make sure you don't buy a "lemon". Regardless of where you are buying, you should always have a good Realtor®-this is even more important when you are buying outside of the area where you live. While this number one rule may sound self-serving, it is likely the most important rule as a good agent can assist you with following the other rules below. Buyers generally don't pay the realtor so why not take advantage of the free service? I recently bought 4 "doors" in Newfoundland. While I know that province fairly well (and know the area I was buying in very well) AND I am a Lawyer and a Realtor, I still used a Realtor®-it's like a free insurance policy. If you are buying in an area where you don't know a good Realtor, we have a long list of good agents in many parts of the country who can assist you.
2. Determine whether you can manage the property on your own or whether you should consider hiring a property manager. With the exception of resort areas, property management fees are usually a small percentage of rental income and can be well worth it. Property management is not for everyone but don't let the management headache dissuade you from making real estate part of your investment plan. I have clients in Vancouver, who own properties locally so could easily manage them on their own. However many still choose to have us do their rental management as they feel it is very cost effective for them to rid themselves of the headaches and just collect the rents.
3. When buying outside of BC (or even just outside of the Lower Mainland) make sure you take into account reasonable appreciation levels for the area. In some parts of the country, expected appreciation could be ZERO percent. While you may get good rents, it is possible to own a property for decades without seeing any real price appreciation. This can be a shock to investors used to our local market appreciation rates. I own several properties that I do not expect to see any real appreciation on-but I am getting good rents and the tenants are increasing my equity each year creating a nice retirement nest egg. Even if you are buying in the Lower Mainland in the near future, it may be that we will see very limited price appreciation given the extensive government measures now in place to push prices down.
4. This last recommendation is not based on any advice from investment books or the investment experience of my many successful investment clients. However, one of my personal number one rules in investing (I also recommend this to clients unless they are overly picky!) is to ONLY buy places that you LOVE. While places I buy might never work for me to actually live in at this stage of my life, I still have to love them. I look for properties with great light, great locations and, where possible, views. I look for interiors that are able to be renovated to have a very nice "feel" (fireplaces are always a plus!). If I would never have lived in the place I am considering buying then why would others want to? I have bought some pretty run-down properties BUT always in amazing locations (location, location, location-the number one rule in real estate!). I can always make a property "pretty" before I rent it but I cannot move the location of the home if I find that renters don't like it. This rule is applicable even to fix and flip investments-the location and potential to be a "lovable" property still need to be there I have had many renters email me that they LOVE the place they are renting...happy renters are always a good thing! When buying outside of the Lower Mainland, this rule has served me very well. In the Lower Mainland the rental market is so tight that it is a lot easier to find renters for less desirable homes. However, one cannot count on this when buying elsewhere.
There are many other factors to consider when buying. If you are considering moving into real estate investment or are already an investor but would like to discuss options, please contact me.
If you would like to discuss the current market and projections for the future, please let me know.
I hope to continue to be, More than Your Agent, Your Ally.