It was about 1 year since I implemented The Smith Manoeuvre in my personal life and after seeing how impactful implementing the Cash Flow Dam was in moving my non-deductible mortgage debt to fully deductible I wanted to find additional opportunities to speed up this process. I wanted a pre-construction property as I liked the ability to plan and pay my deposits over time. I decided to look at another real estate investment opportunity; and my search lead me to Calgary for a number of reasons, to name a few:
- Significantly lower closing costs due to:
- No Land Transfer Tax
- No HST which meant for an investment I did not have to worry about the HST Rebate up front
- Significantly lower purchase price vs. rental rate
- Guaranteed rent for 3 years provided by the builder
- It had to be relatively turnkey, both up front based on time available (2 kids both under 5 at the time)
| Location | Property Type | Purchase Price | Down Payment | Closing Costs | Total |
| Chestermere, Alberta | Detached, Freehold | 489k | 108k* | 2000 | 110k |
| Burlington, Ontario | Condo | 700k | 140k | 12475 | 152,475 |
* The Down Payment on the Calgary property is higher by 10k than anticipated, as the bank wanted me to come up with an extra 10k as there was potential of the builder providing a rental guarantee of up to 15k over three years. Results may vary based on who you go with, and whether or not they review the rental guarantee portion of the deal.
So far, the Calgary investment looks pretty good. Roughly 43k less out of my pocket in up front costs to set this up.
The other benefit this builder provided was a rental guarantee program which supported the following:
- Once I had a signed contract with the property manager, and shared the contract with the builder, they would cut me a check of $4k (of the $15k 3 year guarantee). This was a relatively easy process with no hiccups.
- Once I had a tenant in place, and I had obtained fair and reasonable rent based on the market, the builder would guarantee the difference between actual rent and the rental guarantee program. In my case, because many units were closing at the same time and the builder had not completed the 2 car garage at this point for all these units, it meant we needed to be competitive with other properties. We reduced our rent to $2k, with builder providing us a top up of $200 per month once they were provided the lease.
However, one thing to keep in mind; I physically went to Alberta to close, meaning I took time off work, flights, food etc. For me I actually was excited to go, but lets say that 4k provided by the builder up front vs. my cost to physically close in person were a wash.
The Unseen
In addition to the initial financial aspect, there were some unseen items which were important to me in my next opportunity:
- Buying something freehold, owning land
- Buying something with less debt overall; it was clear to me how overleveraged Ontario was at the time and I wanted to be a bit more conservative in my thinking.
- a 20% drop on the Ontario property is significantly more than a 20% drop on the Alberta property
- Growth potential (we have seen what has happened to GTA in 2023)
- Thinking long term, its not a ‘flip’ for me, ‘set it and forget it’ type of mentality
- I also am bullish on the expected rent in Calgary over the next 4-5 years and am expecting year on year rental increases of 5% minimum as the area further develops
Conclusion
For most I speak with, investing out of province sounds great in theory but its only a slim number that I personally know who have invested there. My network must not be that big as my discussions with different builder sites is roughly 70% of those buying to live or invest in their pre-con sites are from Toronto or Vancouver, or overseas. I suspect I will continue to get the question on the appreciation aspect of Calgary given its historical ups and downs suggested to be due to the oil market, or the governments prior management of it.
Having said that, I am quite impressed with the approach Calgary’s current government is taking towards Calgary, which includes a significant amount of investment into the Tech industry as well as incentives for downtown development to name a couple. I suspect this amongst many other things will support the resilience of the Calgary economy and is why I’m bullish on the real estate stampede. I actually have purchased another investment opportunity in Calgary as a result of my experience to date and will discuss that in future.
I’m still vested in GTA, I live here, my family is here and we have real estate assets here as well, but adding Calgary to ones portfolio is a welcome addition. I think there will be great opportunities to come in the GTA in 2023, having access to ready capital will be crucial.
For anyone interested in investing in Calgary, dont hesitate to connect with me at me@montybhatia.
References
Amazon, Plug and Play, Mphasis drive huge demand for tech workers among Calgary’s IT talent
Alberta announces $23M to create new quantum hub at University of Calgary
Calgary renters struggle to handle 21% average hike to rent
Telecom giant to hire 8,500 Albertans with $430 million invested in Calgary
Calgary named world’s 3rd most liveable city by Economist Intelligence Unit
Amazon to open cloud computing hub near Calgary with promise of $4.3B investment, 950 jobs
Infosys Digital Centre Opens in Calgary with Commitment to Creating 1,000 New Local Jobs by 2024
2023 ECONOMIC OUTLOOK: CALGARY FORECASTED TO AVOID RECESSION