There’s a common plan for many investor homeowners: Buy a property, rent it out and have that money cover your mortgage costs and hold onto the property as a potential nest egg.
Of course, two important parts of the equation is knowing how much rent you can charge and figuring out whether it’ll let you cover your mortgage costs and knowing the area’s vacancy rate to figure out your chances of having someone rent out your property.
In Canada, the average rental vacancy rate for primary purpose-built apartments was 2.7 per cent in April 2014, which remained unchanged from the year before, according to the Canadian Mortgage and Housing Corporation’s (CMHC’s) Spring Rental Market survey.
“Demand for rental housing continues to be supported by population gains from net migration and stable employment levels for young workers aged 20 to 24,” said Bruno Duhamel, CMHC’s Manager of Economic and Housing Analysis, in a press release.
But some cities offer higher rental rates compared to others. For example, both Edmonton and Calgary had low vacancy rates of 1.4 per cent. The lack of supply contributed to a driving up average monthly rental price, which was $1,267 in Calgary and $1,180 in Edmonton, for a two-bedroom space. Only two other cities boasted such high monthly rents, which were Toronto with an average rent of $1,241 and Vancouver with an average rent of $1,274.
If you own an investment property in Alberta, you’ll be glad to hear the province boasts the highest average rental rate of $1,190, which is up by $73 from the year before. Secondary property owners in British Columbia and Ontario also enjoy high rental rates of $1,090 and $1,072, respectively. Ontario cities that let you charge higher rents, along with Toronto, are: Ottawa-Gatineau ($1,136), Kingston ($1,057) and Barrie ($1,052).
On the other hand, you might want to rethink the idea of owning a property in the Quebec cities of Saguenay, Trois-Rivieres and Sherbrooke, unless you can purchase the home for a cheap price. These cities have rental rates below $600 a month, which have only risen by a small amount since last year.
Also, you may have issues renting out your property in New Brunswick and PEI with a 9.1 per cent and 8.5 per cent vacancy rate, respectively. In New Brunswick cities Moncton and Saint John, the vacancy rate worsens into the double digits at 10.7 and 10 per cent, respectively.
Keep in mind that these rental rates apply to the city and there will be some neighbourhoods that are more desirable to rent in compared to others. Also, landlords are responsible for more than simply providing a place to live and you need to ensure the space you provide is safe.
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