^ Prices for SFH legal suites are easily down 10%-15%. Looks like a great opportunity except that rents are down 10 - 20% depending on where you were at in 2014. I'm down about 10% on my turnarounds and spent probably 3x as much marketing and had 5x as many appointments to sell the place.
We have a structural problem in Alberta with our production costs . We need to do things cheaper. The wages in some oil & gas jobs had outpaced reality and we will need to adjust to a medium term lower price oil environment...and one that has the supply ability to sustain oil prices at low levels for a longer period of time. It is not a comment that Albertans don't work hard or sacrifice for their money. But maintenance staff in Ft Mac can't be making $70+ an hour when the world is competitive. Conference Board of Canada was one of the few forecasters with realistic forecasts for 2015 and they were right on target. Their crystal ball sees oil at ~$50 in 2018.
The problem is that the supply constrain on oil was artificial. The supply is readily available and oversupplied. It was just constrained to drive up prices. Do you think that OPEC will reform and create the supply constraint that balloons our prices again?
70% of the Alberta economy is driven by investment, but investment is leaving the province
Net provincial migration is negative and some cities are shrinking
News in the province is going to get uglier reinforcing consumer constraint (even positives like record car sales are being suppressed)
Economy will get worse before it gets better
You will have break-even or negative cash flow in the short term on most properties, even with today's low mortgage rates
VTB financing is equally dangerous because the interest rates are higher than the property yield, forcing equity underwater
Are you good at catching falling knives? Real estate is somewhere people
put their money once they have made a stack of it somewhere else. When buying in a falling market, you want to have a larger buffer for when rents fall. So if you bought in 2014 and had a DCR of 1.2, that means you had a 20% buffer where your income was 20% more than your debt servicing costs. Now with rents down 10% you have a DCR of 1.1. When rents fall by 15%, you will have a DCR of 5%.
There is opportunity if:
High cash reserves
Can find a mortgage with longer amortization and are willing to put 25% or more down
Focus on tenant profile right now, not on maximum rent