THE INVESTOR
J. Phagura Business Development Professional, 27
THE STRATEGY: Buy an older condo for investment
THE THINKING: Business developer J. Phagura calls himself a stereotypical millennial: university educated, in a relationship, in demand professionally and living with his parents. But instead of looking for a place of his own, Phagura plans to buy a condo and rent it out so he can build equity and get ahead of the game.
“I’ve looked at everything from new buildings to full renovations to things that need to be gutted,” says Phagura, who has scoped out properties across Metro Vancouver. The business school student has narrowed his sights on 20-to-30year-old condos in Burnaby or New West, where prices are more reasonable than in Vancouver but rents are high enough to cover costs. Now he’s just waiting for the market to dip a little deeper.
“Prices for apartments in those areas have dropped 10 or 20 thousand dollars, and if they drop a little bit further, I will be in a position to make a profit every month. It may only be $150 or $200, but as long as I’m not going negative I’m fine,” says Phagura, who is unfazed by the topsyturvy market. “It doesn’t scare me.
I’m actually hoping that there’s a dip with the older homes. That’s what I’m looking for. And then I want to buy.”
THE EXPERT: Somerville says the current market is potentially risky for investors for two reasons. The first is shifting policy at all levels of government, which creates uncertainty; second, much of the skyhigh demand for rentals over the last decade has come from millennials, many of whom are now starting families and moving into ownership.
“So you’re facing a riskier environment both in terms of policy and in terms of underlying demographics,” explains Somerville, “although things could still work out if millennials choose to rent for a more sustained period than people have historically.”
Davidoff has a different concern: many large new rental developments are about to hit the market, and that influx in a slowing real estate climate could put downward pressure on both real estate prices and rents. That would be ideal for first-time buyers and renters but not for new investors, who may not be able to recoup their costs again if they need to sell in a hurry.
“Your strategy might be, ‘I’ll rent it out, but if renting it out doesn’t work, I can always flip it and make some money that way,’” he says. “But you might end up doing the opposite.”