The Winnipeg Free Press recently released an article stating that the Town of Stonewall is currently offering a deal to developers to build rental units. The article states that Stonewall has a lower than average vacancy rate and the Town is proactively trying to offer a tax break to developers who are prepared to build rental units. This kind of progressive thinking should be adapted to more rural towns surrounding Winnipeg. Rural renting has always been a unique endeavour however, it can be quite lucrative.
The biggest issue with rural or suburban investment properties is that there is a lack of information on how your investment will perform. In order to properly value a rental property, appraisers must use what is known as “the income approach”. The income approach is a way of gathering information about rental properties and calculate the income they generate against the expense to run them. Theses numbers are then applied to an equation which produces something called a “cap rate” or “capitalization rate”
A cap rate - is a rate of return that an investor expects to generate on an investment property. Not unlike an expected return from a stock or mutual fund. (www.investopedia.com)
With residential rentals, calculating the cap rate can be tricky because both the rental amount and the expenses on rental units can be hard to find. This is because the information is not always public knowledge. Hiring an appraisal firm is critical to obtain relevant accurate information. Unlike MLS with sales history, there is no forum or board that collects and manages rental information. It often comes from labourism conformation obtained by contacting property owners and agents.
The income approach is very common with commercial appraisals, however in residential reports it is quite uncommon to see. Through the past five years GVS has worked diligently to obtain and track this information in order to provide our clients with up-to-date information. We have built an impressive data base for rental properties inside and out of the city of Winnipeg. Because we are one of the leading firms in rural and suburban areas, we are in the unique situation to have accurate information to provide to our clients to give them an upper edge on the market. We believe we are one of the only appraisal firms in Manitoba that provides an income approach for single family residential properties.
“I think this information is important because there is not an investor out there that would purchase a rental property without knowing what the market rent is or an agent that would advertise a rental property without highlighting what the market rent is. I have had reports from GVS that have helped me make a decision to purchase a rental outside of the City.” (Jason Vitt, Vitt Developments Ltd.)
Our research has indicated a steady and strong market for suburban and seasonal rental properties. There are many benefits to investing in these types of income properties:
- Due to the low vacancy in some towns, the property will sit on the market for less time than even some areas of Winnipeg.
- Suburban rentals typically see a long tenancy because tenants who want to say in the town have limited options due to the lack of supply.
- This lack of supply can, in some situations, lead to a higer than average income as well.
- Suburban rentals have an advantage that only small towns can offer.... The tenants build a strong relationship with neighbors and the community. Tenants typically stay longer because they are closer to the community than they might be in a big urban center.
This can also include seasonal rental properties often advertised on VRBO or AirBNB. Recently, GVS has diligently been collecting data in this up-and-coming industry that has been seeing advertising for summer cottage rentals on Lake Winnipeg and surrounding communities.
Property owners who are trying to decide what they can get for a seasonal rental would benefit from an appraisal report that provides and income approach with a market rent. This way they can make sure they are maximizing the profit for the high season.
If you’re thinking of purchasing a rental property inside or out of the city, GVS is the firm to call. We will provide an accurate and honest opinion based on in-depth market research so you know you’re getting quality information to make the best decision.
GVS
Your home's worth…. Our firm's Word
*Jason Vitt is currently promoting what we believe is a fantastic investment opportunity with his new, innovative low maintenance housing development. Located in Selkirk, these homes offer an appealing option to tenants torn between the ease of a condo and the privacy of a detached home. Visit them online today at https://mezzohomes.ca or contact their agent Jeremy Zdrill at jeremy@jeremyzdrill.ca.
https://www.winnipegfreepress.com/business/stonewall-offers-deal-to-developers-505294362.html
#investmentproperties, #incomepropertry, #rentalproperty
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by Dwayne Grantham P.App, CRA, JD.
