With an extremely hot real estate market the second year running, combined with near 0% residential vacancy rate many have been jumping in to the Okanagan to ride the seemingly endless ride up. It is worth noting that when Edmonton and Calgary bounced back fairly quickly after 2008 Kelowna remained depressed until 2015. I have lived here for 3 years and it has been know as a very tough market for employment and businesses. I chose to invest today in Alberta and Saskatchewan as I believe a rebound is inevitable, and the Okanagan scores quite low on the REIN scorecard. Is anyone currently investing, or plans to invest, and how do they plan to mitigate the risk of a sustained downturn in this challenging environment?

http://www.castanet.net/news/Kelowna/197804/Tough-times-across-region#.WSYu1fvioIw.facebook

Yeah - I'm choosing Kamloops instead. Can still get reasonable waterfront, job market and economy are more diversified, and it's still the ground floor for their wine industry.

Sent from my SM-G935W8 using myREINspace mobile app

Many folks with cash though looking to retire, semi-retire or set themselves up for retirement with a second home - REGARDLESS of economy or local job prospects in the Okanagan. As such I decided to invest there to sell new but affordable homes, currently townhomes but soon micro-homes & duplexes. That is very different than AB or SK as baby boomers do not flock there, except perhaps Canmore.

Folks come from AB & SK, from Lower Mainland or cashing out their AZ or CA condos at a substantial lift with a strong US $. So I agree with Cory that rental properties are tough to fill with quality tenants that can actually pay the sizable rents you need for a $500,000 house but lower end townhouses or duplexes still make sense to me in the Okanagan.

More here www.oliverlanding.ca and www.oliverheights.ca

Currently selling a duplex in Penticton as it went up 25% in a year from $610,000 to over $760,000 in case you are looking to buy and rent each side for $2000.

This makes sense. Yes it is and will be a desirable place to live and retire. Several friends and former coworkers have moved in the past year alone, a trend that's likely to continue. Most are looking for turnkey new places so your surely onto something there. Also makes sense to go outside of Kelowna, it's less busy and more bang for your buck.

CorySperle said:

This makes sense .. makes sense to go outside of Kelowna, it's less busy and more bang for your buck.

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Yup !

Vernon, Summerland, Peachland, Penticton, OK Falls, Oliver all make sense to me right now !!

Anything that you can hold with break even cash flow for 3+ years is likely a good buy especially if close to a lake, close to a river, with loads of land outside the ALR or with views !

You can find suited homes for $380-450 or low 3's to put a suite in and yes even better to find a chunk of land with a house on it that you can put a few town homes on.

Vernon, Coldstream, prices way less than Kelowna. I haven't explored much in Lumby or Lavington but also may have potential being a short distance from amenities in Vernon. Lake Country also being close to the airport between Vernon and Kelowna.

In addition to the retired, there are a lot of families that come here and can work remotely and bring up their kids and enjoy the lakes, Silver Star and a slower pace.

I have a slide deck hot off the press attached from a meeting I had yesterday with the City of Vernon! Too large to upload but pm me if you would like a copy.

I am new to the site and fairly new to Vernon. I'm just beginning the process of trying to get a rental property in Vernon. I am thinking a house with a suite or a full duplex if possible. Anyone with some good areas of town I should be looking into or avoiding. Like I said I am fairly new to town so I don't know which places to weed out without driving to each house that hits the market.

brad ell said:

I am new to the site and fairly new to Vernon. I'm just beginning the process of trying to get a rental property in Vernon. I am thinking a house with a suite or a full duplex if possible. ...

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That makes sense. Vernon is quite small. Aim for lake view and/or large piece of land. Land hopes up in value, not the property on it.

brad ell said:

I am new to the site and fairly new to Vernon. I'm just beginning the process of trying to get a rental property in Vernon. I am thinking a house with a suite or a full duplex if possible. Anyone with some good areas of town I should be looking into or avoiding. Like I said I am fairly new to town so I don't know which places to weed out without driving to each house that hits the market.

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Very few duplexes exist. Better to buy something that you can suite rather then suited already, price point too high. I would avoid Mission Hill, Alex Park, Harwood, Downtown and would look at Bella Vista, OK landing, East Hill and Coldstream.

We raised our children on the North Shore in the Lower Mainland and a good number of "kids" now in their 30s/early 40s are moving or talking about moving to Coldstream - apparently love the mountains, water etc. Hearing it is desirable.

We live and have rentals in kelowna and doing well.
It can cash flow if you do your proper analysis, understand the area and where to focus.
Yes, the Okanagan doesn't make the REIN list but I still believe in it.

Here is some additional food for thought. I will use for Example Kelowna vs. Edmonton. Currently it is a tale of two cities. One has had prices and rents fall significantly since 2014 and has bottomed out in 2017. The other has seemingly perpetual rent increases, massive price gains, and near zero vacancy. Wages are higher in Edmonton, a ton of industry, and you can rent for in many cases 40% less than what you would pay in Kelowna. In Edmonton if you purchased in 2014 you have now seen your rents drop 15-20% and you are likely struggling. It is therefore not reasonable to pay Kelowna's inflated prices as the expectation to hold the current high rent levels is far from assured going forward. BC has been in an impressive economic run the past few years, where Alberta has been in the toilet. I predict a price correction down for BC, and slight gains for Alberta in 2018-2019. A few more points on my mind that I would love to hear feedback on.

- if you had invested cash in Edmonton and Kelowna in 2007, you were likely back to the positives by 2012 in Edmonton, Kelowna by 2015. The cycles up and down seem more severe.
- Edmonton is 4 times the population, with many rent and housing options.
- wages are significantly higher in Edmonton than they are in Kelowna, a solid industry base, and there are very few high paying jobs here by comparison.
- mortgage qualification just got a lot tougher with increased rates and new criteria hence less buyers (investors and home owners).
- BC has rent controls and there are talks of reducing increases even more.
- The NDP government in BC has already shown its intent to stall the economy and raise taxes, including the carbon tax.
- The NDP government in Alberta will be toast in 2019, and pro economy policies will resume.
- There is a massive building boom of condos, similar to 2007 taking a long time to absorb. Many will become rentals hopefully easing the rental crunch.

Will the run continue for another year, two, perpetually? Or is an adjustment imminent? I think if you are buying you should stress test your mortgages for 2% higher, and have significant cash reserves to sustain rent decreases, and take a long position of 7-10 years at least. Yes I get the argument that it is a desirable place to live, but it was a desirable place to live back in 2008 as well.

Great point Cory !
Very good perspective indeed . Only if we had a crystal ball eh?

Yes indeed. Let me ask you this, if you lived in Winnipeg and had to chose to invest simply for profit potential in Edmonton or Kelowna, which would you pick assuming all things equal?

I would still invest in Kelowna (please don't throw holly water) for the following reasons
1) Despite most places the rental market is not only based on economic fundamentals but rather the fact our market is focused towards vacation renters and students.
2) Regardless on the economy the Okanagan valley will be always a destination of choice (to live) for baby boomers and millennials which are more than ever focused on the life style. (Baby boomers used to be focused on their jobs and "getting it done" )
3) The migration rate to Kelowna last year was close to 10% hence about ~ 20,000 people and the trend for 2017 is pretty much the same.
4) The current vacancy rate is close to zero and understanding item 3 won't get better anytime soon. (Even with the peek in construction)
5) The overall natural and region resources are hard to march elsewhere (lake, mountains, weather, etc...)
6) The fact Kelowna isn't in the spotlight is a plus for those who are investing in the area.
That's my logic .... I may be crazy but .... I've been called worst.

Just to clarify .... item 1) "Our market" means our own investment approach

Carla Reis said:

Just to clarify .... item 1) "Our market" means our own investment approach

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Until the government shuts it down as sub 6 month rental are generally against Canadian zoning laws in residential neighborhoods. While tolerated in many cities many are also outlawing short term rental like AirBnB and VRBO now.

I'd side with Cory here and would say that Kelowna had a massive 7-8 year run from 2009 and little upside left. More downside risk than upside potential.

Okanagan will continue to feed of higher house prices in Calgary & Lower Mainland but it is getting so expensive now that folks look further north towards Vernon or further south like Summerland, Penticton, Oliver and Osoyoos which all have lower prices and are as beautiful and not nearly as congested and busy.

Big unknown is 15% foreign buyer tax for all of BC, new BC rent control laws and mortgage tightening.

Not a slam dunk anymore like most other places in Canada. Microlocation, sharp pencil & impeccable management remain key going forward.

Thanks for your perspective Carla! I do agree with much of what you say, but the millennial logic is somewhat of a mystery to me, yes they want to move here, but surely they have to work to earn a living like the rest of us?

I also agree with Thomas about the short term rental situation, as it is getting a lot of media attention as of late, especially for exasperating an already desperate rental situation by replacing already scarce rental spaces with short term ones. Alarm bells started going off after I was speaking to a couple of realtors who say things appear to be finally slowing down, and getting pre-approved to buy an investment property last week and learning their criteria has changed drastically. Not only do you have to qualify at a higher rate, the HELOC option has disappeared and rules have changed drastically. RBC told me they had a solid applicant earning $80,000 a year with very minimal debt, and he was only able to qualify for a $200,000 mortgage, and he likely could have gotten 300K+ only 6 months ago. So yes folks are streaming in with buckets of cash, but I wonder how long it will last. Smaller areas as Thomas describes are cheaper, but hot markets as well and transportation access can be downright awful, especially in summer.

FYI we have a small real estate club in the Kelowna (Okanagan Real Estate Investors) and we get together downtown on the third Thursday of every month. Would love to have you join us for your perspective!

https://www.facebook.com/groups/429881607198317/?ref=bookmarks
https://www.meetup.com/Okanagan-Real-Estate-Investors/

Thanks Cory ! We are actually planning to attend this Thursday meeting.
We have tried in the last 3 months but we were away for one reason or another.
See you then.

Stephanie3745 said:

You can find suited homes for $380-450 or low 3's to put a suite in and yes even better to find a chunk of land with a house on it that you can put a few town homes on.

Vernon, Coldstream, prices way less than Kelowna. I haven't explored much in Lumby or Lavington but also may have potential being a short distance from amenities in Vernon. Lake Country also being close to the airport between Vernon and Kelowna.

In addition to the retired, there are a lot of families that come here and can work remotely and bring up their kids and enjoy the lakes, Silver Star and a slower pace.

I have a slide deck hot off the press attached from a meeting I had yesterday with the City of Vernon! Too large to upload but pm me if you would like a copy.

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Can you please send me a copy? Thanks, Mike