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Condominium investors buying units to be used as rentals could take a look outside of the Metro Vancouver market as they search for positive cash flow.
In Greater Vancouver, for example, the typical condominium sells for $436,000, while condominiums in smaller BC centres can be half that price, though rents can be similar.
In general, investors buying rental properties must put down a minimum of 20 per cent.
There are some issues to watch for when investing in smaller cities or towns in BC. The first rule is to buy in markets that are showing an increase in population and, ideally, have a pool of potential tenants, such as university students or construction workers for long-term projects. Recent appreciation in condominium prices is also a signal of an investment opportunity.
This narrows the search somewhat. According to BC Stats, only two regions outside of the Lower Mainland showed population growth from 2014 to 2015. Those were Vancouver Island and the Okanagan.
On Vancouver Island, perhaps the best small market to consider is Nanaimo, which posted a 1.7 per cent population increase last year, among the highest in the province. With 89,000 residents, Nanaimo is BC’s second-biggest city outside of the Lower Mainland. This year, a passenger-ferry link between Nanaimo and downtown Vancouver is planned; this could improve access to the “harbour city” and add to its appeal to Vancouver investors.
The apartment rental vacancy rate in Nanaimo is 2.9 per cent and the average two-bedroom apartment rents for $820 per month (condominiums normally rent for higher prices), according to Canada Mortgage and Housing Corp. As of mid-January there were 55 condominiums listed for sale in Nanaimo at less than $225,000 and a good selection priced at $155,000 or less. Condominium prices have increased modestly over the past year, rising about four per cent.
Another option for condo investors is Kelowna, the largest city in the Okanagan and the biggest BC city outside the Lower Mainland. Its population growth of 3.2 per cent last year, from 2014, led the entire province. The city’s 1.7 per cent rental vacancy rate is among the lowest in BC while its average rent, at $1,020 a month for a two-bedroom, is among the highest outside of Greater Vancouver. It is possible to find two-bedroom condominiums in Kelowna priced under $200,000.
With a 20 per cent down payment and today’s historic low interest rates, condominium investors may find they can achieve a positive cash flow (where rental income surpasses mortgage costs, taxes and strata fees) much easier in smaller BC centres than in most of the Lower Mainland.