With a global pandemic and nearly a complete economic lookdown, we would have for sure expected to see a dip in the real estate market. However, what we have been witnessing has been the complete opposite. The economist may have predicted that employment disruptions would have negatively impacted the housing market, however, the pandemic only directly influenced about six percent of homeowners to sell.
RE/MAX Canada has published that they expect an uptick in national home prices by 4% - 6% in 2021, and 3% in Calgary. This uptick is driven primarily by move-up buyers and first-time home buyers who are taking advantage of low interest rates.
Calgary Remains Relatively Affordable
Compared the Vancouver and Toronto, Calgary is exceptionally affordable, and we can expect to see net migration to the city pick up again.
Why would people move to Calgary? Calgary has consistently ranked as one of the best places to live in the world. We might not see it as we take much of it for granted. Calgary also provides a tonne of opportunity. Historically, the city has heavily leaned on the energy sector for economic progress. While this has been in a glut, the industry ebbs and flows and there is reason to believe this industry will re-emerge sometime in the future. Calgary is also becoming a hub for entrepreneurship, the tech industry, distribution, and also a growing financial sub-hub to Toronto.
(Almost) Free Money
Low interest rates mean great opportunities to invest. Not only are the borrowing costs less for investors looks to rehab a property, low rates also improve the purchasing power of all buyers.
The current low interest rates have been driving buyers into the market as they look to take advantage of their increased buying power. This has especially been true for first-time homebuyers who previously would not have been able to afford the homes they wanted. For buyers who have maintained income throughout these times, the banks are more than willing to hand out the money.
Move-up buyers are also taking advantage of the low rates as a chance to upgrade into a new home or area.
Where are the Opportunities?
Generally, updated homes selling under $600,000 have been moving like hotcakes. Some of the older areas in the city not zoned for infills are in serious need of an upgrade and can be purchased at relatively decent discounts as the market is still slowly returning from the economic downturn and depressed home prices under the 10-year average benchmark.
Even updated homes between $600,000 - $750,000 in the right areas are still being absorbed at a good pace by move-up buyers.
Here's a Couple of Tips!
Know Your Market
Its usually best to choose a market you know well. Get to know they area, what's
attractive about it, and what homes usually sell for in that area, and what kind of condition the are in.
Know Your Buyers
Get an idea of who is looking to buy in the area. What draws them there? Is it good schools nearby for young families? Is it work opportunities? Close to certain amenities? Get an idea of who might want to live in that area, and get an idea of what their budget might be.
Know Your Numbers
Knowing the costs going into a project can be difficult. Each area is a little different in what is required in terms of the level of renovation required. Many investors make the mistake of overdoing it. It's a lot of fun to create something amazing, but can your buyers afford it? We recommend knowing what selling in the area in the past few months to get to understand a rough selling price on both a total basis and a per square foot basis.
ALSO! Don't forget many of the hidden costs that could eat up your profits such as selling costs, legal fees, financing costs and carrying costs.
Not sure how if you got a good deal on your hands? No problem! Hammerhead Construction can help you understand the numbers of your deal. Just shoot us an email and ask us about our House Rehab Financial Model.
Hire a Good Contractor
Unless you are going to do all the work yourself (which we don't recommend) hire a trusted and experienced contractor to oversee the construction. This will save you both time and money. An expereicned general contractor will have a good idea of what needs to be done on the property in order to project a total budget. They also have access to reputable trades that you can be confident will get the job done right. The last thing you want to happen is to do the work yourself, or have poor workmanship that either has to be redone, or decreases the selling value of your investment.
At HammerHead Construction, we provide partnership opportunities to those looking to invest in real estate.
ICYDR (In Case You Didn't Read)
Calgary's real estate market and current lending markets make for some great investment opportunities with lucrative returns to investors. Despite the current economy, first-time home buyers and move-up buyes are the driving forces in the current market demand. Make sure you take the time to understand the market, end users, and know your numbers going into a project.
Hammerhead Construction can help you. We offer real estate investment advisory solutions to investors as well as project management.
Written by Dusty Nickel
Dusty is a co-owner of Hammerhead Construction. Before joining forces with his fathers construction business, Dusty obtained his BBA in Finance before spending some as a Financial Analyst in the investment industry. Discovering his passion for the Real Estate Game, Dusty is obtaining his MBA in Real Esatate Studies from the Westman School for Real Estate at the University of Calgary. Dusty has also obtained his certificate in Real Estate Financial Modeling and Investment Analysis. His passion for real estate drives his dedication and continuous learning in the field of real estate.
Disclaimer: This article does not serve as investment advice and is the sole opinion of the author.