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CAP rates in Vancouver

seven3

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Hello:

Really new to the topic of RE investing. Looking at some numbers in areas around Lower Mainland / Vancouver - the CAP rates seem extremely low, nowhere near 8% or so most posts on this board seem to look for.

Are most investors in this area currently looking to wait it out until the cap rates fall into the target range?

It doesn`t look like its possible to achieve 8% CAP rates here. For example, $350k condos rent out for about $1400 a month.

Thanks!
 

Thomas Beyer

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QUOTE (seven3 @ Feb 21 2009, 11:51 PM) Hello:

Really new to the topic of RE investing. Looking at some numbers in areas around Lower Mainland / Vancouver - the CAP rates seem extremely low, nowhere near 8% or so most posts on this board seem to look for.

Are most investors in this area currently looking to wait it out until the cap rates fall into the target range?

It doesn`t look like its possible to achieve 8% CAP rates here. For example, $350k condos rent out for about $1400 a month.

Thanks!
Welcome to Vancouver ... 6% CAP rate is more common for average multi-family properties, and single family or condos would be sub 4% !

$1400 sounds high for a 350K condo .. more like $1000 to $1200 .. or more like 500K for $1400 rent .. where is this 350K condo that rents allegedly for $1400 ? Burnaby ? Surrey ?

Look elsewhere, such as smaller towns, AB, SK, US or ON !
 

Dan_Eisenhauer

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Thomas nailed that one. Vancouver, N Van, W Van, and to some degree, most of the Lower Mainland only have positive cash flow if you throw tons of equity into the purchase. That makes your ROI very low. With 75% of income going to buy a home in Vancouver, it is easy to see that rents are a long way from generating a reasonable return in Vancouver.

Look elsewhere.
 

seven3

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Yeah, $1300ish rent for a $330k 2 bedroom condo would be in Burnaby, definitely not downtown
 

Thomas Beyer

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QUOTE (Dan_Eisenhauer @ Feb 22 2009, 10:26 AM) Thomas nailed that one. Vancouver, N Van, W Van, and to some degree, most of the Lower Mainland only have positive cash flow if you throw tons of equity into the purchase. That makes your ROI very low. With 75% of income going to buy a home in Vancouver, it is easy to see that rents are a long way from generating a reasonable return in Vancouver.

Look elsewhere.
75% of average income because so many Vancouver homes are 2nd homes bought with cash (and no mortgage) by Asians (and Europeans to a lesser degree) as an alternative to gold, to establish an address or residence in Vancouver/Canada, to invest for their kids, to protect their wealth, to invest outside of Asia ..
 

Dan_Eisenhauer

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I could not agree more, Thomas. But, regardless of the reason for the high Affordability Ratio here, it still demands a very high down payment to make investing in Vancouver single family homes achieve positive cash flow.
 
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