Kelowna Real Estate Blog – Paige Guernsey

Investing in Kelowna Real Estate

Posted by paige on June 2, 2010 | No Comments

The last 18 months has seen a number of my clients turn to real estate for investment purposes. When you’re considering this, there are 2 main points to consider:

1) Are you looking for rental income?

2) Are you looking for capital apreciation?

In Kelowna, if you shop well and take your time to negotiate the right price, you may be lucky enough to get both.  With Kelowna’s vacancy rate the highest it’s been in a decade at around 2.5%, it typically hovers close to the 0 or 1% mark… very attractive for landlords.  Prices and interest rates are also down.  In other words, it’s possible to purchase a property where you can have the vast majority of your costs covered by the rental payment.  As a basic rule of thumb, when I’m looking to invest personally, I look to see if my purchase price is covered 100% by the rental payment. For instance, I looked at a property the other day that I would pay $450K for. There are 3 rental units in it collecting $2700 per month. This would cover a mortgage of $450 at 5%.  The extra costs, or write off’s, at the end of the year would be insurance, maintenance, and property tax.  With the popularity of our market and the continued growth of our city, I believe that over time those write off’s will be offset by a capital appreciation making it all worthwhile.

For those looking at larger investments, most are searching for the elusive 8% cap rate. 5% is a real number right now in Kelowna and those that purchase are also expecting our market to pick up and surpass where it was at the peak in 08, ultimately raising the cap rate closer to the 8%.   I recently sold a 5 plex for $850K. This property had a cap rate of slightly less than 5% but had lots of potential to raise that number and lots of investors wanting to snag that rare type of property.  At the end of the day, it’s a great plan to have a loan that someone else pays for you leaving you with cash in your jeans.

If you have any questions or are curious about investing in Kelowna real estate, give me a call on my direct line at 250-862-6464.

Talk to you soon…

Paige