Let’s talk about Canmore rental properties. Often these days, in my discussions with property investors I’m finding more and more that buyers are seeking cash flow when they make an investment property purchase. Lots of buyers are initially brought to our market here in the mountains with the idea of owning an Airbnb or nightly rental property, but sometimes they have trouble “making the numbers work” upon closer inspection.
While nightly rentals can generate some great revenues, their popularity as of late has caused prices to spike. With some nightly rental properties gaining as much as +$100,000 in market price in the past 18 months, as well as tough financing requirements (35% down), positive cash flow can be hard to come by.
With this in mind, in this article I’d like to explore some of the advantages of owning a long-term (monthly/yearly) rental here in the Bow Valley – especially if you’re looking for cash flow.
In this article we’ll cover:
I’ve broken down some of the types of investment properties here in the Bow Valley in my other article here, but below is a quick overview.
For any asset, cashflow equals revenues minus costs. When it comes to real estate, often the biggest cost for many investors is their financing obligation. Nightly rental properties often will draw real estate investors in with their high revenues, but when their costs are equally high, it can be tough to get the cash flow you desire. Nightly rental properties often require 35% down payment at a higher interest rate, compared to only 20% down payment for a conventional mortgage on a residential property.
Consider the following benefits of a long-term rental property in Canmore or Banff:
If you’re looking for your own ski-chalet to use each time you head out to the mountains, unfortunately you’ll have to stay at one of the fabulous local hotels we have here! With your property being consistently occupied by a tenant, the main drawback is that you won’t be able to use it yourself whenever you’re in town (unless you’re in between tenants or using seasonal leases to meet your vacation needs). If the property is in Banff, unless you have a need to reside (ie. a job in town yourself), you won’t be able to occupy the property even when its not rented.
Long leases are preferred by landlords, but sometimes they don’t appeal to tenants. With the seasonal nature of the Bow Valley economy being geared towards summer, its not uncommon for tenants to hit the road when fall rolls around. Having a secure lease and tenant in place can help reduce seasonal volatility – professional management can really help here.
Also, if you’re looking to add your own touch through furniture & decor, you likely won’t want to do this with a long-term rental as the tenant can just use their own furniture. Sorry, HGTV fans!
Gross revenues on a long term rental property will understandably be lower compared to a nightly rental, often to the tune of 50% less than a moderate-performance Canmore Airbnb. But with this in mind, it’s important to note how much lower your running expenses can be – especially if financing is a factor in your purchase.
When it comes to investing in real assets like rental properties, its always important to consider cash flow in addition to potential capital gains when you’re looking for a return over time. Bigger revenues don’t always mean bigger profits!
If you’re looking for an investment property to diversify your retirement plan, or rent out until you can move to the mountains yourself one day, let’s connect! I specialize in helping people find the best properties in Canmore & Banff to meet their needs.
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