Last week we looked at the different ways that real estate offers a return on your investment. This week I’m going to take a look at the current state of the Dawson Creek rental market. What is available, what rents look like, different levels of risk, and return available to real estate investors in my hometown.
First, some facts: The vacancy rate in Dawson Creek is 1.4% according to the most recent rental report provided by CMHC. We are tied with the Vancouver metro area for the lowest vacancy rate in the province. More importantly the average rents in Dawson Creek relative to the price of real estate is very attractive. Average rents of $1042 per month place Dawson Creek rents third highest in the province. Vancouver is the highest at $1401, a difference of 35%. Compare those numbers with average sale prices of $245,000 and $660,000 respectively, a difference of 169%. You can start to see how Dawson Creek real estate is a pretty sweet investment right now.
It is probably because I am in the business, but I seem to be having a lot of conversations about the local rental market recently. There is plenty of anecdotal information flying around about who-is-renting-what-to-who-for-how-much. In general terms there seem to be three different rental markets in Dawson Creek. The conventional market, furnished homes furnished rooms.
First, you have your conventional unfurnished apartment with the tenant paying most utilities. The rents in this category are the lowest of the three. However, you can get long term, high quality tenants. It is also the lowest cost to get into and therefore it should be the lowest risk. This is a great option for a first time investor or someone who wants the lowest hassle option. A quick Google search shows me that a 2 bedroom apartment goes for about $1200 per month and the tenants pay utilities.
Second you have furnished rentals. These obviously require more cash to get set up. You have to use your cash or credit to totally appoint these units. That includes dishes, small appliances, bedding in some cases plus the big stuff like beds, sofas and TV’s. According to Google a 3 bedroom furnished home rents for around $2500 per month. Keep in mind that in this category the landlord pays all of the utilities including cable and internet. That means that vacancies are more costly. Rents are higher but they are more costly to get into and carry a somewhat higher level of risk.
Lastly you have furnished rooms. These are rooms in peoples houses, that they rent out short term to people that do not want to stay in a hotel for a week. Most of the information that I have about this interesting market category I get from conversations (for example: “I know a lady renting out rooms for $1000 a month!”) or from the trusty bulletin board at Bill’s news. Based on those two sources it appears that furnished rooms rent for around $250 per week. They are short term and therefore high maintenance. You also have people living in your home. Not all of us are cut out for this level of intimacy with a tenant.
As you can see from these examples real estate isn’t that different from other investments. The more risk that you are willing to take on (or discomfort, as in the case of having people live in your house) the more revenue you can generate. Risk equals reward – never forget that. If it looks too good to be true it is. But if you’ve got the money to burn then let it ride, just make sure your financial bases are covered.