Equity Rich but Cash flow Poor? This Strategy may be for you
by David Kitai
After a banner summer for home equity across much of Canada, the country is looking ahead at possibly murkier waters. The pandemic’s impact on immigration, as well as new restrictions during the second wave, could mean that as an investor, your priorities should shift from equity growth to income.
But how can you extract that income from your portfolio? Brett Turner, owner of the Redline Real Estate Group in Calgary, will be presenting at the upcoming CREW Investor Forum on November 4th explaining how, in our new normal, we can take advantage of an emerging trend to add income to our portfolios.
“If you’re buying property that is designed for cash flow and income generation and within a market at the bottom of the real estate cycle, then you’re not speculating,” Turner says. “Instead, you’re investing based on fundamentals. That’s a strategy that’s always going to win the day.”
The pandemic reality, Turner says, has reinforced that thesis and points to a trend that all income property investors should be watching. The reality of working from home, socializing from home, and spending pretty much our whole lives at home means that people want bigger, better, homes. The suburbs are now as desirable for renters as they were for owners and cashflow-minded investors can now get serious bang for their buck in the ‘burbs.
Turner’s strategy has been tried and tested within a market that’s been there before: Calgary. The Calgary market went through a shock and downturn in 2015 that has since generated a whole new asset class of income-generating suburban properties almost purpose built to offer cashflow to investors at a low cost of entry. Now Turner sees a raft of Canadian markets going the way of Calgary and he thinks his guidance and insight can prove key in getting investors the income they need.
He’s got the deals to prove it as well. In the Calgary market, Turner says, a $92,000 equity investment will generate $700 a month in income, $185,000 will produce $1,400, $230,000 thousand produces $2,400 and $300,000 of equity is going to get an investor $3,500 a month in income. While these numbers will vary market-to-market, Turner says it’s a viable strategy every Canadian investor should look at.
At the investor forum on November 4th, Turner will talk about exactly how an investor can make this strategy work for them.
“We’ll talk about how you can invest in the Calgary market or any other market that follows the model of new construction and suburban properties,” Turner says. “It works great in Calgary now, we've got great cash flow here, but it can be done equally well in other markets if you can find the right type of real estate. We'll talk about how we market it to long term tenants. We'll talk about how to structure deals, how to work with partners, to add income to your portfolio, as we move away from a large equity growth environment and more towards an income-based investment landscape.”