Real Estate Investment Property

For monthly discussions of the Vancouver Real Estate market, the opportunities and downfalls, please see here.

There are basically 2 types of Investment PropertyCommercial and Personal.

Here, we specifically target Personal Real Estate Investment, available to anyone and everyone who are interested in getting into Real Estate Investing.  Within the Personal Investment Property realm, there are 2 aspects to consider: Cash flow and Capital Gain.

What’s the difference between Cash flow and Capital Gain?

I’m sure you have seen others in the Real Estate Industry, or even family and friends, who bought a condo and rent it out. They may put a down payment large enough to get the monthly mortgage payments just below the monthly rental revenue.

Have all the costs for an Investment property been taken into account?

What about the monthly Strata Fees, annual property taxes, utilities, special assessments, maintenance, insurance, etc.?  Let’s say everything has been taken into account and they come out with a $100 surplus a month.

Is that what “positive cash flow” is?  Despite what many in the industry say, the answer is arguably “NO”.

  • Did you consider the $200k down payment?  Did they forget about that?
  • Take a minute, or a day, or a week or a month, to look at where in Metro Vancouver you can actually have a positive cash flow.
  • With the surging home prices, an average $1M home rents for $3500 a month.
  • After paying all the utilities, Strata Fees, property taxes, maintenance, insurance, etc.,
  • And don’t forget the interest on the mortgage, it is nearly impossible to obtain a true positive cash flow.
  • Even if you wait long enough to obtain that (let’s say 25 years as the standard mortgage amortization period), and you bought the unit brand new,
  • You will be looking at special assessments like new roofing, building membrane repair, elevators, lobby upgrades,
  • Not to mention upgrades in your own unit to bring it to a condition that’s competitive in this market.
  • The risk is high with little promise of profit.

CAP RATE is actually the key in determining the maintainability of an investment.  Cap Rate = Annual Rental Income / Investment

How do investors take advantage of the Vancouver market and make money?

This brings me to Capital Gain.

Capital Gain is the profit from selling a property after buying it for less.  I’m sure you have spoken to friends and/or family who told you how they or someone they know bought a presale a couple years ago.  It has just completed when they listed it for sale and made double their money back.  Seems straight forward.

  • How do you know that the market will continue to go up in the coming years if you buy now?
  • What’s the current market doing for an investment property?
  • The market doesn’t grow, and you have to sell it at a loss?
  • The government intervenes to slow down the market?
  • What if the Strata get sued and the property value declines?  Also high risk.
  • So again, how do Real Estate Investors capitalize in this current market?

The answer is a good balance of Cash Flow vs. Capital Gain.

  • Cash Flow does not earn you a living while you sit on the couch all day.
  • It is to reduce risk and hedge the danger of a market decline.
  • It gives you the luxury of waiting it out until the market rises again to a point where you can sell and make Capital Gain.
  • These specific units are rare and far in between in this current market and in low supply.
  • Once they pop up, they are sold within a week, and chances are they are above market value.

Market Value

Market Value is subjective but can be forecasted and estimated with statistics and trends relative to locations and home type.  The media tends to give a broad growth/decline number from the entire region.  Those are AVERAGE numbers, meaning there are better and worse investments within the entire region.  Grasping the understanding and knowledge of each sub market as prospective investment properties change is key to success.

To sum up, it’s not as easy as one may think, but the payoff when done right can be substantial.  Please do give us a call if you are looking into becoming a Real Estate Investor. There are more details to consider than outlined here, but our group of Real Estate Professionals will gather all the information exclusively pertaining to your situation and goals, to present you with a viable strategy personalized to your needs.

No one has a crystal ball, so here at Yao Real Estate Group, we choose to manage your risk through honesty, integrity, and expertise. Please do feel free to check out our TESTIMONIALS page to see what many of our clients have to say.

Please give us call, text, or email, and we would love the opportunity to speak with you regarding your needs and goals.


Alex Yao Investment Property Specialist

Alex Yao
Realtor, Managing Partner & Founder
Yao Real Estate Group