Real estate investing is once again becoming very popular and profitable. Interest rates are at near-historic lows. These means it easier to find properties where the rental income covers the mortgage payments. Second, there is strong demand by tenants looking to live in rental housing. Demand on the North Shore is good, and supply is quite low. Low vacancy rates makes it easier to find good tenants who will pay top rent. Third, the stock market and mutual funds have not been good investments over the last while. On the other hand, real estate prices have been very strong, with price increases of between 8 - 14 per cent across the North Shore in the last year. Given the inherent leverage that purchasing real estate properties provides via a mortgage, returns on invested capital (assuming a 25% down payment) have been in the order of 30 - 50 per cent in 2002.

IS REAL ESTATE A GOOD LONG TERM INVESTMENT?
How would you like to own an investment that increased in value more than six times over the past twenty-five years? That's what would have happened if you had bought a home in Vancouver in 1975. The average sales price of $57,763 has now skyrocketed to a benchmark price of approximately $400,000.

Population and income growth have driven price increases and the numbers are forecast to keep increasing since BC will be the fastest growing area in North America, says David Baxter, head of the Vancouver-based Urban Futures Institute, which studies land use and community change. Baxter expects the population of the metropolitan Vancouver region to grow by 58 per cent to 3.3 million people during the next 25 years. That's 1.2 million more people than are here now. "While most of this growth will be in the 45 and older population, all age groups will grow," says Baxter. The baby boom generation, now aged 36 to 55, makes up about one third of our population. Their aging will result in a surge in the over 55 population of 145 percent by 2026, who will eagerly "move out of the suburbs and back into the urban environment, while others will be more than content to remain in their single detached homes," according to Baxter.

As well, Vancouver will remain an internationally recognized magnet attracting a higher percentage of immigrants than other provinces because of our mild climate and strategic location on Canada's Pacific Rim. With real estate, prices can only go up, since housing demand is forecast at 29,600 new housing units per year. Single-family homes will remain the most preferred housing type. But as the population ages, lower maintenance, higher density homes such as townhouses, apartments, and small lot, single-family homes will become popular. Higher density will be a fact given that Vancouver is geographically constrained by the Gulf of Georgia, the North Shore Mountains and the Canada-US border. This results in high land prices and limited land available for development.

FINANCING CONSIDERATIONS
Most lenders will finance up to 100% of the purchase price and associated costs using an applicants principal residence as additional security. Lenders cannot exceed 75% of the combined values of the two properties and the applicant must meet their qualification requirements (i.e. credit rating, income, etc.). If the applicant does not wish to use their existing real estate as security then most lending institutions will lend up to 85% with CMHC or GE insurance or up to 75% conventionally. Some lenders will consider up to 100% of the rental income and apply it directly against the mortgage payment for qualification purposes.

BEING A LANDLORD
Not everyone is cut out to be a landlord. Finding good tenants, dealing with ongoing maintenance and repairs and evicting bad tenants can be time consuming and stressful. For more information check out the Residential Tenancy Office website. Another great resource for landlords is CMHC's Guide to Renting a Home. If the property is close to where you live, it is a little easier to manage and keep an eye on it. However if you don't have the time, temperament or talent to handle these issues, you can hire a property manager to look after the property on your behalf. They usually charge a monthly fee of $65 to $100, plus disbursements. Most also charge a half-months rent for re-leasing the property. Please note that the British Columbia Residential Tenancy Act is currently being re-written and we will post the relevant changes once the legislation has passed.

INCOME TAX CONSIDERATIONS
Please check with your accountant or tax advisor regarding the income tax considerations of owning an investment property. You will have to keep accounting records of your income and expenses and include these items on your income tax returns. Normally the sale of real estate, unless it is your principal residence, will be subject to capital gains taxation. You can get more information, including Tax Guides for Rental Income and Capital Gains at the Canada Customs and Revenue Agency website.

HOW WE CAN HELP
We are the right choice for your Investment Realtors. We come from a business background and have a combined 28 years in the real estate industry. We know the North Shore real estate market, what product to buy for investment, how to finance it, and how to structure the deal for investors. We can also refer you to some excellent licensed property managers. Contact us for more information on investing in real estate on the North Shore.