Lincoln Farrell

Guelph Real Estate Is An Investment Hot Spot!

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Recently I was interviewed by the Canadian Real Estate Wealth magazine to discuss the Guelph real estate market and reasoning why it’s been, and continues to be, a great place to invest. Here are the questions and answers from the interview:

Why is Guelph a great place to invest in right now?

Guelph is just plain consistent across the board with all the metrics that make for a reliable investment. Vacancy rates are currently 1.9% and have remained below 2% for the past 3 years. Single detach dwellings last recorded year of negative return on property value was in 1996 at a measly -1.9%. Since then, the past 17 years have enjoyed an average appreciation of 5.9% per year. Property values continue to increase which is great for people already holding investments here, and for those just starting out or looking to come to Guelph the acquisition cost is still very low compared to major markets like Toronto, Calgary, or Vancouver.

How did Guelph’s market perform in 2013?

In a nut shell, fantastic! It was the best year on record for resale volume with an increase of 8% over 2012. Values were all on the rise as well with single detach homes up 5.9%, semi-detach homes up 11%, and freehold townhomes up 6.7%. It’s a relatively strong Seller’s market, but there are still a lot of great deals here for investors. With such a strong student population, there is a consistent turnover of rental housing. Parents are buying and selling homes all the time for their kids to live in while they attend University. Now more than ever I am fielding questions from clients about accessory apartments and multi unit dwellings. It seems to me that as I tour the inventory of homes on a weekly basis, there are more and more houses coming up for sale with some type of rental accommodation.

What is the average home price in Guelph?

For 2013 a single detach home ended up at $377,103; a semi-detach would have cost you around $295,090; and a freehold townhouse $308,141.

What are the average rents in Guelph?

According to CMHC, the average rent in Guelph for a 2 bedroom apartment is $957 and a 3 bedroom apartment is $1099. When it comes to students, you can expect anywhere from $400 – $600 per room with shared accommodations. My experience with any type of tenant is that they will gladly pay a premium for a location with walk able amenities and easy access to transit.

What kind of property is the best buy in Guelph?

My recommendation to many of my clients is to stick with single or semi-detach. Current zoning by-laws only allow for these 2 types of dwellings to have an accessory apartment. I’m also not a big fan of condo fees, and many of the condo corporations further restrict an investors options with regards to tenant selection. That being said, a condo townhouse or apartment may suit a specific need. I’ve sold plenty of condos to parents that want to be completely hands off while their kids attend school. Condos have seen the some great results with regards to appreciation too, but the versatility of a freehold single and semi-detach provide the most flexibility to investors and that’s the main reason why it’s my first choice.

Why are more investors looking to buy properties in Guelph?

The market indicators are an easy draw for investors, but I really stress to my clients the importance of the diverse tenant profile Guelph has. We have a world renownd University with 20,000+ students, approximately 60% of which seek off-campus accommodations. Sitting on the East edge of the Tech Triangle that is Kitchener/Waterloo, Cambridge, and Guelph, and being only 100 km to Downtown Toronto with GO Train and bus service to the GTA, Guelph’s location makes it a prime commuter community as well.

What is your outlook for the Guelph market’s performance in 2014?

I see no reason at all for Guelph’s values not to keep climbing. With mortgage rules forcing first time buyers to come up with higher down payments, the need for rental accommodations are growing and good tenants are renting longer. Our population is expected to grow another 40+ thousand over the next 15-20 years. That coupled with a stable employment rate and aggressive business initiative from the city, I see Guelph continuing its strong and steady climb as a prime real estate investment hot bed going well beyond 2014.

Want to receive email updates of new listing the instant they hit the market? Click here: Homes for sale in Guelph

So, what’s your take on all this? Would you invest in the Guelph real estate market? Have you already, or are you planing too? Please post your thoughts and comments below and let me know what you think…

Finding The Best Guelph Real Estate Opportunities

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Finding the right Guelph real estate opportunities can be an important concern for any investors who are interested in ensuring a superior return. Owning a property can allow you to earn income through a leasing agreement or provide you with a greater return on your investment should you choose to sell at the right time. Seeking out investment opportunities that will have more to offer can be an important step towards a more financially secure future.

Investment properties and other physical assets can provide investors with a way to diversify their portfolios, ensuring greater profitability regardless of unexpected market trends. Keeping all of your money in similar assets and investments could prove to be a very costly mistake. Learning more about investment properties will provide you with a range of investment opportunities you may not want to miss.

Seeking out opportunities that will provide you with a superior return can seem a little tricky, especially for investors who have limited experience in this market. Whether you are interested in a long term option that will allow you to profit from leasing agreements or the chance to sell your holding at a greater price, choosing the right property is paramount. Knowing where to find a superior investment opportunity could make more of a difference than you might think.

Location is always the chief factor in determining which properties will make a suitable investment. Even the state and overall condition of a property or location may be of less importance than where it is located. Targeting the right markets and seeking a property that offers the best location can make a huge difference in the outcome of your efforts.

Regional markets and cities where the property market has suffered a more pronounced impact from downward trends in the market are not the best place to search for your next investment. Locations that have a history of retaining their property values often have much more to offer. Assessing the right locations and investigating what each has to offer can be essential to the success of your efforts.

From residential properties that may allow you to sell at a greater price to commercial locations more suited to attracting paying tenants, choosing the right location is not a matter that should be left to chance. Conducting research into your options will provide a great deal of insight. Smarter investment decisions offer investors greater advantage.

The tools needed to investigate your options can play a key role in your search. Using the Internet to outline different markets and neighborhoods is a great way to begin your search. Online information about various properties and investment opportunities can often be gathered with far less time and effort than you might have thought possible.

Working with a professional who knows more about the local market and the properties that are available can also be of enormous benefit. Services that can allow you to more effectively seek out the right investment opportunities are not to be discounted. Having a little assistance can ensure you are able to find a property or location that will have more to offer.

Cash Flow Analysis & Buying Investment Properties

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Positive cash flow analysis plays a central role in determining whether a particular property will generate enough profit for it to be a worthwhile investment. A simple formula is used to accurately calculate this amount; the annual debts must be subtracted from the net operating income and the resulting figure represents the cash flow. This tool is useful for both assessing properties currently owned and those which one is contemplating buying.

Questions for Cash Flow Analysis

There are some very important questions that need to be answered regarding real estate investments, and more specifically cash flow analysis, to create a clear picture of the whether or not it will yield enough cash flow to suit your investment objectives:

  • how much money needs to be invested
  • when does it need to be invested
  • how much money does it produce
  • when will this money come out

There are also some key terms any investor must have an understanding of when involved in real estate investment. One such term is the “holding period”, this refers to the amount of time which has passed since the owner acquired the investment, in the case of property it begins when the contract of sale is drawn up. Profit is typically assumed to be gained at the end of each year of ownership.

Annual cash flow of the property can either be positive or negative and are calculated by deducting the amount of debt and expenses from the gross income it generates before taxes are deducted. Every investor wants this to be positive, as this indicates a profit, whereas if it is negative this means that it is more of a liability than an asset and is costing more than it brings in.

Calculating Cash Flow

The basic process used to calculate an investment property’s cash flow is carried out as follows. The actual monthly rental rate of the building or in the case where it is not rented, a going market-rate for such a property can suffice, needs to be multiplied by twelve which is the annual rental income. The amount of money lost due to vacancies must then be subtracted, which results in the EGI or “effective gross income”.

Now sum up all operating expenses incurred to run the building, such as management, repairs and maintenance, insurance, and property taxes, and any other recurring expenses but not the financing. This number must then be subtracted from the EGI and the result is called the NOI or “net operating income”.

Next, the amount of the loan payment must be multiplied by twelve to give the figure for the ADS or “annual debt service”, if only in prospecting stage, an estimated amount can also be used in this respect. The ADS must then be subtracted from the NOI which will produce either a positive or negative figure representing the flow of cash.

Creating a projection model of this type is referred to as a “real estate proforma”. Investors often rely on this forecast to help them make wise decisions when it comes to choosing properties to purchase, and also it can help indicate to them when selling a previously acquired property is the best choice.

My Service Area

Located in Guelph Ontario, I service the municipalities surrounding communities of Wellington County and Waterloo Region.

Office: 238 Speevale Ave West, Guelph ON, N1H 1C4

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I would love to hear about your upcoming projects. Your wants. Your needs. Tell me, what has you thinking about Real Estate? Drop me an email. I can help.

Or, give me a call at 519 831 5010

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