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Rent is up, vacancy is down… rental properties make sense

Real Estate Investment Image, Feb 2018

Rental properties are a secure long-term investment. Note the emphasis on “long-term”.

Check out any seven-year period over the past 50 years (anyone who has read this news site knows that I always recommend buying and holding for at least seven years). Property values have almost always risen.

Sure, the last five or 10 years have seen fantastic appreciation in almost every part of Canada. But, let’s leave capital appreciation out of the equation for now.

Why aren’t we talking about rental income? Or, how about the equity growth through your mortgage being paid down each year?


Rents have definitely gone up with inflation (or even higher, in many cases, as we have seen in urban markets like Toronto and Vancouver). This is part of what makes rental properties attractive rent rises with inflation and, in many cases, even higher. This is how you create your own pension or retirement income!

Here we are, it’s February 2018. Click on any newsfeed about real estate and you’ll surely hear about rising mortgage rates and the anticipated falling house prices (yes, they could be declining).

It seems like the media doesn’t want to talk about investing in real estate. Are we all just looking to make a quick buck? What happened to investing for the long-term?


Real estate investment isn’t as exciting as pot stocks or bitcoin, but I’d rather have less excitement when it comes to my hard-earned savings. Boring is fine with me… it’s also good enough for most of our wealthiest individuals as they continue to grow wealth through real estate.


Did you know… today, you can buy an investment condo in the GTA for less than $450k with market rents of $2,250/month? These properties will carry themselves with a 20% down payment that’s $90k down. A $360k mortgage, with a 3.59% interest rate and a 30-year amortization equals monthly payments of $1,629. Condo fees are $350/month and property taxes are $2,300/year. That adds up to a positive cash flow.

Not a fan of condos? Try a townhouse or a semi-detached home. Rents are high due to the low supply of rental units. And with home sales slowing, we’re going to see the rental market tighten even further as new immigrants continue to poor into Canada. People have to live somewhere. And they must either rent or own.

And you don’t need to stick to the GTA, Vancouver, or other large markets. Many of the smaller urban centres offer strong real estate potential, with rent more than covering the mortgage and operating costs.


We’re still experiencing low mortgage rates. The average mortgage rate over the past 50 years is about 7%. We’re currently in the mid-3% range for fixed rates and below 3% for variable rates.

If we take a $360,000 mortgage, in five years, you’ll have paid it down to $323,000. That’s a $37,000 appreciation… and remember, you invested just $90k. You made $37,000 in five years. That’s just on your mortgage being paid down.

Keep it for another five years and your mortgage balance is now $280,000. You just made another $43,000.

After 15 years, your mortgage balance is $227,000. Another $53,000 earned. And, remember, we haven’t factored in any rental increases (rent has always gone up), and property value increases (can anyone show me a chart where property values haven’t at least doubled in a 15-year timeframe?).

It’s not sexy. It’s not exciting. But it works. Just ask any property investor who’s been in this for the long haul.


Six years ago, I saw a rare article in the Financial Post that included some positive stats on whether it made sense to buy a rental property or invest in the stock market. It’s so rare to find a financial newspaper reporting on the merits of owning real estate rentals.

I had to comment. Click here to read the article.

Like any investment, you must understand the risks and be able to handle any market fluctuations in rental or mortgage rates (although, rent has been on a steady rise for many years now).

If you plan to buy, count on owning for at least seven years. Set aside 5% of rent as a contingency fund for repairs and unexpected expenses. Visit your property regularly to ensure it’s being kept in good repair. Choose your tenants wisely.

Speak with an experienced mortgage broker to see if an investment property is right for you. It never hurts to ask.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114;

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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