Three Ways to Make Money in Calgary Real Estate—with Zero Appreciation!
*This post is sponsored by one of REIN’s Trusted Partners, Redline Real Estate Group. To become a contributing editor or to learn about our sponsorship opportunities, please contact us at [email protected]
It’s been six years since the summer of 2014, when OPEC began flooding the market with cheap oil in a price war designed to bankrupt US shale oil producers, and the beginning of this seemingly endless ‘economic downturn’ that Albertans have been forced to endure. By now, almost every real estate investor in the country knows of the turmoil in Alberta and wonders what the future holds for the province. We got a glimpse of this earlier this week when Premier Kenney unveiled “Alberta’s Recovery Plan,” a comprehensive 32-page report about the government’s plan to bring Alberta back to prosperity. If you are interested in seeing my assessment of the plan, you can read my review here: Alberta Government’s Recovery Plan: Will it work? https://youtu.be/ts9soe6ouCk
Economic hardship is not new for Alberta real estate investors. Some struggle to take action and have a hard time seeing past the headlines, but others are astute enough to recognize that opportunity exists everywhere, in any market condition. Calgary, in particular, has demonstrated this awareness over the past few years and currently has one of the best rent-to-price ratios in its history. The city has a high listing count rife with motivated sellers-both resale and amongst the new construction community-along with very strong fundamentals, including the youngest and best-educated workforce in the country and seven quarters in a row of population growth and positive net migration, as indicated by ATB. Investors interested in more information about this can watch the following video where I go through the pre-pandemic population growth report issued by ATB. Alberta Just Keeps Growing! https://youtu.be/fHudqLoDz08
The Calgary market continues to provide better and better net income to cashflow focused real estate investors, proving that even with zero growth-or, a lack of speculation-Calgary real estate investors can achieve double-digit returns. How is it possible? There are three ways to make money in Calgary right now, and none of them require appreciation to be successful:
1) New Construction-Guaranteed rent for condos, suited half-duplexes, fourplexes, and multi-family up to 10 or 20 units. Motivated builders are including property management in their sales. Pricing ranges from $200K to $2M, all with builder warranty and turn-key solutions for management People sometimes choose to look at the 2-10 HBW FAQs when it comes to these to understand it better. Down payments go up from $40K, and cashflows are $800K+ for some semi-detached options. Cap rates around 6% and RORs of around 18%/year are possible on conventional buy-and-hold options. This strategy is perfect for investors with a strong net worth and are seeking to build long-term passive income.
2) Short-Term Flips and Rent-to-Owns-Motivated sellers abound in Calgary. At the same time, it is harder for buyers to buy given uncertainty with employment prospects. My partners and I recently made $29,000 in a under 2 months with a very simple flip where we borrowed at 10% and invested none of our own capital. The goal is to buy under $400K and be able to sell under $500K. This strategy is perfect for hands-on investors keen to turn their working capital over quickly for better, faster returns.
3) Secondary Suite Conversions-Looking for cash flow AND a value bump? Well, up until 2021, it is possible to convert illegal basement apartments into legal income suites and achieve returns of over 20% while generating strong passive income. This is the best ‘bang for buck’ investment strategy in Calgary at present and only 18 months left to take advantage of it. Buy for between $325K and $425K, legalize a suite for between $10 and $15K, and add over $50K in value and cashflow of upwards of $500/month. This strategy is perfect for those seeking to add assets and hold for the long term with joint venture partners.
All with little to no appreciation! Curious about what the deals actually look like? Sign up *Here* to get on our brokerage’s distribution list and tune in for an upcoming ASK webinar next month where REIN members will have an opportunity to discuss the strategies in detail.
Thanks for reading and Happy Investing!
Brett Turner, Redline Real Estate