Investors and property buyers don’t usually get scared or think too much about the risks involved in an investment because they already know for a fact that any kind of investment does come with its share of risks.
That being said, it would be stupid to totally overrule the chances of negative impacts of the investment and not count the potential risks in the calculation.
Mentioned below are four major risks involved in buying a property in Canada.
- Economic Risk: Thankfully, both the real estate market and economic conditions in Canada are currently better than most of the other parts of world. Both foreign and domestic investors are investing in big numbers considering the fact that market is smooth and booming. But, still there are few risks that have to be considered. The first thing to take note of is the interest rate. Throughout the current year the interest rates are expected to be low; that being said, the rates have been low for quite some time now and slowly the things would starting moving towards the upside. At present the rate is fixed at 1% but the big risk is that as and when the rate goes up, it is expected to shoot up very high, which could potentially cause problems in mortgage repayments.
- Legal Restrictions: Rent control is something that has to be though about. Each province in the country follows its own set of rules. As an example, Ontario, British Columbia, PEI and few others have their laws on books that need the landlords to increase the rents following provincial guidelines. The rules also keep changing as per changing political scenario. For example you buy few houses and give away those houses for rent in grande prairie or any other part of Alberta you should know all the important rental rules of the province of Alberta. Understanding the tricky laws and other pending legislation is the only way to mitigate these kinds of risks.
- Vacancy Rate: At present, in most parts of the country the landlords are making benefit of lower vacancy rates. The average vacancy rate across the country as per one of the recent surveys was 2.3%. This is lower compared to one of the studies made in 2012. When you have such low rates, you can enjoy the honeymoon period but the fact is that with such low rates the changes will only take it to the higher side and you should know that you can’t really avoid the increase in vacancy rate. The smarter decision would be to invest in a region where the economy is favoring and the future shows lower vacancy rates.
- Property Risks: Selecting and purchasing a property itself is a risk. If you purchase a property, which is damaged in any way or has works going on then you know that it is you who would cough out the money for the work. This is called as negative flow of cash, which should be a strict no for any new investor.
If you keep these things in mind, and invest smartly in a hot property in Canadian markets, you’re bound enjoy great capital appreciation.
Gerald Hill is a real estate agent based in Alberta who assists clients in making smart realty investments, and even finding properties to rent in Alberta, Grand Prairie prairie and neighboring regions. He enjoys traveling, reading novels and watching movies when he is not assisting his clients.
