Good morning everybody. I'm just confused about something and need the experts opinion. I've never bought apartment buildings but from my research apparently the long term growth in price happens through two ways if I'm not mistaken. One is to buy an undervalued building and renovate it to increase the rent and add value and the second is through normal market rent increase over the years depending on the economy and the rental market in general.
Now regarding the first method I'm not confused but what is confusing me specially in Edmonton and Calgary is the second method which is the normal market rent increase. So from many posts here and from my looking at listings in Edmonton I noticed the prices didn't come down in the last few years whereas the rents came down substantially maybe 20-30% and the cap rate deteriorated accordingly. So the price didn't come down to match the decrease in rents.
Now what I'm confused about is in the next few or more years when the rents go back up to where they were in 2014 will the price go up knowing that it didn't initially come down along with the rents so it can go back up again? Or it will stay flat until it matches with 2014 rent levels then start going up with the market?
Now regarding the first method I'm not confused but what is confusing me specially in Edmonton and Calgary is the second method which is the normal market rent increase. So from many posts here and from my looking at listings in Edmonton I noticed the prices didn't come down in the last few years whereas the rents came down substantially maybe 20-30% and the cap rate deteriorated accordingly. So the price didn't come down to match the decrease in rents.
Now what I'm confused about is in the next few or more years when the rents go back up to where they were in 2014 will the price go up knowing that it didn't initially come down along with the rents so it can go back up again? Or it will stay flat until it matches with 2014 rent levels then start going up with the market?