Flat prices extend holding strategies

“More investors are looking that the value gains they’ve made over the last five years of owning a property and they don’t line up with their targets, or expectations,” Randy Bett, head of BetterGroup.ca, an investor-focused realty group, told CREW Online. “It means that they’re deciding to hold onto the properties longer and focus on cash flow until market prices improve. As investors, we have made the same choice.”

A veteran of the Alberta industry, Bett is not alone, with other investors re-evaluating their business plans because of their relatively flat local market.

The phenomenon isn’t unique to Alberta, where average home prices remain more than 25 per cent off of 2007 values. Even eastern parts of the Lower Mainland – arguably the hottest region in terms of price gains last year – continue to chase pre-recession values.

The result has been a break in the hold strategy of investors traditionally swapped the equity in in an existing property for down payment on a new one after the five year mark.

That timeframe generally marks the point at which more capital investment – renovations, repairs and upgrades – are needed to grow or, even, maintain monthly cash flow.

By extending ownership of a rental property beyond that five-to-seven-year norm, investors may find it hard to swerve those expenses and the associated drag on ROI.

Still, that outlay is increasingly preferable to taking what in some cases can be a capital loss on the sale of a property, likely bought at the height of the market, argues Bett.

Investors may, in fact, have little choice but to hold onto those properties longer for another reason.

“There’s a dearth of move-in ready investment properties on the market,” Bett told CREW Online. “They’re tough to find and the competition for them is significant.”

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