There are a number of ways to profit in Winnipeg’s ‘slow and steady’ real estate market. One is to buy and flip houses, and another is buying rental properties. In a slower market, this second method works well for those who are willing to take a longer position in their portfolio. Not quick money, but steady income and an eventual windfall when you sell 5-10 yrs. down the road.
Buying Rental Properties: The long view
The idea is that initially, the investor is able to collect enough money to cover his expenses. Hopefully with a small profit at the end of each year. As the value of the home or condo increases, and rental rates increase along with it, the return improves over time. Then, a number of years down the road, the home should have increased by 15-25% in value. If the owner decides to sell, he will realize a nice profit at that time.
Lets take a look at some ways to calculate expenses of an investment condo, for example
As you can see, a lot depends on those condo fees. In this example, the property owner may realize a monthly profit of $150, however he should also budget for temporary vacancies, any possible repairs or condo special assessments and other expenses.
The return is approx. 113% on their monthly investment of $1,100. (not counting the potential sudden expenses just mentioned above)
So how about buying a house and using it as a rental property:
A client of mine owns a similar home and collects $1,500 per month in rent, plus the tenant pays for their own utilities. Now we are looking at approx. $500 per month profit, or a return of approx. 150% on their $980 expense.
Rental Properties that are not pretty
If you can see past the rougher neighbourhoods, and are willing to settle for a ‘not-so-pretty’ house, your bank account might thank you for it! Here are some actual numbers for a property coming to market soon:
For the investor, these numbers are very encouraging. Basically it amounts to 214% return on their low monthly investment. Low outlay up front, and a great return in monthly rental income. These lower-priced homes are excellent potential rental properties.