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Jan072016

Top 5 Metrics to Guide Your Investment Decision

Major cities like Toronto and Vancouver are no brainers as great places to invest, BUT... investment properties have become so expensive in these cities that it is almost impossible to find one that cash flows.  This in turn makes it very difficult to achieve secure financing. 

As a result, investors need to broaden their horizons.  The next best option is to look at the smaller urban centres for prospective investments.  With so many options available, how does one know where they should be looking?  The answer is let the metrics guide you.

1. GDP Growth (Look for 1%+) - This is a VITAL metric which indicates the economic health of the city.  Look for areas that have GDP Growth of over 1%.  The Canadian Chamber of Commerce publishes an annual report forecasting GDP growth in cities throughout Canada. 

2. Unemployment (Look for less than 7%)- Another obvious metric which demonstrates the economic health of the city.   The National unemployment rate is in an around 7%.  Look for an area with less than 7% unemployment.  StatsCan releases regular monthly figures.

3. Vacancy Rate - (Look for less than 3%) You want to ensure your apartments are always full and are easy to rent on turn over.  Look for areas that have a low vacancy rate, ideally under 3%.  CMHC releases regular annual and semi-annual statistics. 

4. Rental Rate - (Look for $800+ for 2 Bedroom) To get the biggest bang for your buck look for rental rates above $800 for a 2 bedroom.  This will ensure you are bringing in enough revenue to service your debt, pay your expenses and have positive cash flow.  Again, this info can be found in CMHC reports.

5. Population Growth - (Look for positive growth) More people looking for rental accomodation means lower vacancy rates and higher rental rates.  Avoid areas with declining populations.  StatsCan releases numbers on population growth every few years.

Author: Paul Kondakos, BA. LL.B, MBA - Professional Real Estate Investor

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