Faced with the burden of choices – new versus pre-owned, single family versus condo, downtown versus the suburbs – it’s no wonder many would-be investors are getting caught in analysis paralysis. On top of that, while they’re slowed down by the overwhelming task of trying to make sense of all the options, the properties in the price-range sweet spot continue to increase by $5,000 to $10,000 per month.
There are many ways to analyze real estate returns, but the gross rent multiplier [GRM] is one of my go-to tools. The GRM is the ratio between the gross monthly rent of a property and its purchase price or value. Simply put, it’s the number of times you need to multiply your annual rents to reach your purchase price. With GRM, the lower the number, the better.
The box to the left shows a selection of properties, ranging from the least attractive to most attractive in terms of GRM. For those of you who still can’t seem to get double-digit appreciation numbers out of your mind, you’ll find comfort in the fact that, as we work our way down the list, the property type gets more and more scarce. This means the rules of supply and demand will be even more in your favour as developers bring on condos and town-homes. And you can expect to see the prices of single-family homes perform exceptionally well through the remainder of the decade.
AJ HAZZI is a Kelowna-based investor and broker/owner of Vantage West Realty, a boutique agency specializing in serving investors with quality acquisitions and investor-focused property management. Contact him at [email protected] and 778-765-0377, or visit vantagewestrealty.com.
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The Kelowna market is garnering a lot of attention, as it has some of the best economic fundamentals converging to create a boom of epic proportions. Still relatively affordable to boomers and gen x-ers cashing out of major markets like Toronto and Vancouver, Kelowna is drawing investors in droves, thanks to the four-season lifestyle, unrivalled aesthetic and investment potential of this gorgeous lakeside city.