Grande Prairie Real Estate Market

[MonteDobson]

Hello fellow GP investors,

Just thought I would start a thread to get others opinions and insight into the Grande Prairie real estate market. From my perspective, it has taken a real kicking over the past few years in both property values (down 10-30%) and rents (down 20-50%). Vacancy rates have gone from zero to 10%+. Housing is overbuilt and new housing supply is putting downward pressure on resale home values and rents.

It is a very natural gas based town with many transient workers coming in and out of town. And with the abundance of "cheap" shale gas in the US, natural gas appears like it will remain low for a long time, if not indefinitely. Forestry is still struggling with the downturn in the US economy and the agriculture sector around GP has is experience its 2nd year of drought.

I hate to sound all doom and gloom, but what are other GP investors experiencing and and what is your outlook for the future of GP real estate? We bought the majority of our properties there in late 2006 and early 2007 and would like to exit that market at some point, but not sure if I want to hold on up there for another 3-5 yrs.

Your thoughts??

 

[greg12]

Not a Grande Prairie investor, but I wonder why Fort St. John and Dawson Creek just across the border seem to be doing ok. Their rents are steady with low vacancies despite the low gas prices. The mayor of Dawson creek also said at a BC REIN meeting that the recession has largely passed them by and companies were still pouring in. I think gas prices is a factor, but it might just be an excuse for poor government policy.

I strongly believe however that there will be a rebound in gas prices before the end of this year - probably towards $8 mmbtu. The excess shale thing is overhyped and will deplete faster than most pundits think. Hopefully that will bring much needed relief to GP. But as usual, the real estate market will lag the recovery by 6 months to 1 year. So I wouldn`t suggest selling anything in GP until mid-late 2011.

 

[MonteDobson]

QUOTE (greg12 @ Jul 8 2010, 11:12 AM)
Not a Grande Prairie investor, but I wonder why Fort St. John and Dawson Creek just across the border seem to be doing ok. Their rents are steady with low vacancies despite the low gas prices. The mayor of Dawson creek also said at a BC REIN meeting that the recession has largely passed them by and companies were still pouring in. I think gas prices is a factor, but it might just be an excuse for poor government policy.


Yes, this has been a head-scratcher for me as well...any other NE BC investors care to chime in??





QUOTE
I strongly believe however that there will be a rebound in gas prices before the end of this year - probably towards $8 mmbtu. The excess shale thing is overhyped and will deplete faster than most pundits think. Hopefully that will bring much needed relief to GP. But as usual, the real estate market will lag the recovery by 6 months to 1 year. So I wouldn't suggest selling anything in GP until mid-late 2011.


I agree, there are already signs of "green shoots" in GP and I believe it is just a matter of time and it will be rocking again. My prediction is a healthy rebound by mid-late 2011. A person just need to be as diligent as possible and patient investors with cashflowing properties will prevail. When we bought in GP, we bought for the significant cashflow, which has now been eroded. We knew there would be swings, but did not expect them to this extent. I like Godfried's summary and thoughts on the natural gas market: http://myreinspace.com/rein_members_only/Members-Only_Discussion/81-17330-Is_natural_gas_bottoming.html



Our plan is to keep holding as this is a long term game, although we do have one property that we're trying to exit via Rent to Own, however have been unsuccessful to date.

 

[LAndersen]

We bought our properties in GP last summer fall. Unfortunately, while prices are down which was great to buy, we didn`t see the vacancy rate skyrocketing. Things seem to have stabilized now though. I am hearing those out there in the narural gas / drilling sector saying that they feel prices will be $8-9 by winter / next spring. Rents have now stabilized although they don`t seem to be going up to much anytime soon. We are planning on a five year exit / review starategy on our properties at this time. I think that with the recent land sales in the area should bode well for the local economy as there will be more drilling this drilling season. The recently signed IDP with the county should bode well for future growth. I am starting to look at Edmonton and area as it seems a bit mroe stable from an investor perspective. I don`t know if that helps.

 

[Stephen1151]

I bought in Grande Prairie in mid 2007, Right when Rein was praising it as its number 2 town to invest in. Since then I have experienced price decline as well as rent decline and now have to subsidise the mortgage. (even though I had bought a "good deal")My only Issue is having paid thousands of dollars to Rein and lost tens of thousands on my property, Why do we not hear a peep on Grande Prairie? I paid for the expert advice of the Rein Group and now I am not even allowed into the "insiders" forum. Not only that when I post and ask what is going on I hear defensive replys from loyal rein members saying things like "your a day trader" or "if you cant handle it you should not be in this business". These unintelligent replys do not answer the questions I have.Why is Rein quiet on Grande Prairie? Why do they not take responsibiltiy that they promoted the heck out of it!




hope the posters here are right and that things will turn around

It’s a renters’ market in Alberta

Job slump, more home ownership push rents down, vacancies up
By Bill Mah, edmontonjournal.com June 16, 2010 Comments (9)[/color]

• StoryPhotos ( 1 )

<IMG id=ecxstoryphoto class=ecxthumbnail border=0 alt="A weak job market and people moving out of province pushed Alberta`s apartment-vacancy rates up and rents down in April, says a new report from Canada Mortgage and Housing Corp."> <H1 id=ecxphotocaption>A weak job market and people moving out of province pushed Alberta`s apartment-vacancy rates up and rents down in April, says a new report from Canada Mortgage and Housing Corp.</H1><H2 id=ecxphotocredit>Photograph by: Rick MacWilliam, edmontonjournal.com</H2>EDMONTON - A weak job market and people moving out of province pushed Alberta`s apartment-vacancy rates up and rents down in April, says a new report from Canada Mortgage and Housing Corp.
There is no more dramatic example of the softening rental market than Grande Prairie, where the vacancy rate skyrocketed to 14 per cent from 8.5 per cent a year earlier.
The average monthly rent for a two-bedroom apartment in the northwestern Alberta city plunged by $118 to $851 in April.
The Grande Prairie area posted both the province`s highest vacancy rate and the largest decline in rents, according to CMHC`s Spring Rental Market Survey released Tuesday.
"We`ve been in business for about 20 years so we`ve seen the cycles over the years, but this one has definitely been the quickest and most dramatic," said Mark Rousseau, client relations manager with Grande Prairie-based Prime Property Management.
"We went from a vacancy rate of virtually zero to about 15 per cent overall in Grande Prairie in a very short period of time."
The city`s resource-based economy "went wild" from 2005 to the first part of 2007, but it and the rental market were drastically affected by depressed natural gas prices.
Reduced drilling and exploration activity caused high-paying jobs and people moving to the city to dwindle, Rousseau said.
Exit surveys of vacating tenants also showed that as home ownership became more affordable, more renters were buying their own properties, he said.
Vacancies increased across all five of the province`s largest "census agglomerations," according to the survey.
"Weaker labour market conditions across the province coupled with interprovincial migration losses have dampened the demand for rental units," said Lai Sing Louie, CMHC regional economist.
Not all increases were as dramatic as Grande Prairie`s, but the trends were similar.
The Edmonton census metropolitan area saw vacancy rise to 5.2 per cent in April, from 4.7 per cent a year earlier. It`s the highest rate since 2007, when CMHC reintroduced its April rental market survey.
"Low mortgage rates, which have provided the incentive for some tenants to move into home ownership, have also contributed to the rise in vacancies," said Richard Goatcher, CMHC`s senior market analyst for Edmonton.
With rental demand cooling in Edmonton, average apartment rents also fell this spring. An average Edmonton-area two-bedroom suite cost $944 per month, down from $1,059 a year ago.
Calgary`s vacancy rate rose one percentage point to 5.3 per cent from a year earlier, while monthly two-bedroom rents averaged $1,082 in the spring, down $24 year-over-year.
"Employment losses, particularly within the primary age group that tend to occupy rental housing, have contributed to higher vacancies," said Richard Cho, the federal agency`s senior analyst for Calgary.
In Wood Buffalo, which includes Fort McMurray, vacancies nearly doubled to 13.2 per cent in April from 6.9 per cent in April 2009.
Average monthly rent for a two-bedroom apartment fell to $2,060, down from $2,165 a year earlier but Wood Buffalo still retains the highest rents in the province, said CMHC.
Lethbridge was the only centre among the five largest census agglomerations to record an increase in the average rent to $843, up $18 from a year ago.
The average apartment-vacancy rate in Alberta`s urban centres was six per cent in April, up from 4.6 in April 2009. Rates ranged from zero in Sylvan Lake to 14 per cent in Grande Prairie.
The provincial average rent for all apartment types was $937 per month in April, down from $962 a year earlier.
Wood Buffalo had the highest average rent among urban centres at $1,968, while Medicine Hat had the lowest at $649 monthly

 

[REINteam]

Hi Stephen,
Sorry you feel that way. At the end of the day REIN does research to identify areas for investment based on long term holding...and sometimes things go off in a number of different areas to undermine the fundamentals, similar to what`s going on for GP. With that said, I can tell you that a number of REIN Staff own in GP including someone who has over 100 doors in GP right now...and despite vacancy rates and hype he is sitting at right around 4% vacancy (not the posted average by any stretch). Did he have to work harder when things took a slide? Yes, but as a business owner he stepped up and took control. I`m not saying you didn`t take control, not discounting anyone`s experience in GP, just giving another perspective on vacancy rates.

Have rents come off - yes, happened in many many markets, not just GP.

Have prices come down - yes, same with many markets, real estate doesn`t just go up. Overall, a drop in price should not hamper business unless you`re selling or looking to refi. But, as stated in the reports and at our meetings, we look for a 5 year hold. Where have you lost thousands? Did you have to sell prematurely? Is the property mismanaged?

GP is a different market all together, cyclical to say the least, and in order to be successful in that market you have to be proactive with your investments - good management is critical here as is being aggressive with your marketing and realistic with your rent. Where are you having the hardest time? Asking for help with your particular situation would probably be far more beneficial than the post presented above.

With that said, REIN is not quiet on GP (our opinions differ), but it has moved down in the top towns list. However, we still have members and staff that buy there and we put out cautionary clauses as we have in the past - GP is very cyclical and you must know that going in. I can tell you that no matter where you invest, some days are better than others, so keep your head up!

I can`t comment on the other posters or their advice, but I can say that if you ask for help they may be able to respond with tangible solutions. That is what this community is about - look for Solutions.

In the end I`m kind of lost on what it is you`re looking for here....

If you would like help on a certain situation, if you have obstacles you can`t overcome feel free to call me at the office: 1-888-824-7346 or email [email protected] and I`ll see what I can do. But, if this was just a "Vent" not much I can do.

Hope this helps.

 

[Patrick]

Hi Stephen

Further to Ray`s comments and for your information.

My partner and I began building an investment portfolio in Grande Prairie in 2005. Prior to joining the REIN management team in 2008 I had been a member since 2001.

When we chose to begin investing in GP some of our decision was based on the fact that my partner was very familiar with GP. He has family that has lived in the area their whole life, and he had some strong connections within the business community.

As we made our buying decisions we were also back testing the math based on the ongoing conversation and question of what happens when (not if) rents come down. Having been through the 80`s oil boom I was not `all in` that the pace of GP (read cash flow) was sustainable. So we tested against rents dropping as much as 30%. Of course in hind sight it is obvious we should have used a higher percentage.

At the end of the day, we were making decisions on what we were actually experiencing...which was supported by REIN and every economist in the province. Including CMHC I might add. So I have to laugh a little at CMHC who is now over the top bearish on real estate and the rental market in GP.

No one...including the largest and most successful oil and gas companies stood up to say oh oh...natural gas is going to tank because of the Shale plays in the US. Beware, Warning, Warning. What we were focused on was a political play/glitch called changes to Royalties... which we agreed with Don was a short term political get elected play anyway.

So what is there really to say about GP. What I heard back as a REIN member in 2005 was only in addition to what I was actually experiencing in GP. My experience was not an illusion. Don and the REIN team were not talking me into investing in GP... they were simply supporting what we were actually experiencing.

So now, do I wish I had more real estate in Edmonton than in GP...yes, that would definitely be easier.

>But I don`t, so we work very hard and stay very focused to manage our own portfolio, manage our cash flow, and pitch deals to potential clients (tenants). We honour the support team we have built in Grande Prairie. We highlight the value we bring to the table for our clients and do our very best to look after every tenant as if they were the last one standing. We still manage to keep our rents higher than average (which is still low). Our team are sales people first, not order takers and we have a minimum of weekly meetings with our team in GP to deal with issues as they occur.

I am not sure what I can offer here other than the encouragement to stay focused. I believe this too shall pass. And like a kidney stone, until it does pass, it will be painful. Treat it like a business. Spend the time and energy rising above the average investor and less time assigning blame, blame simply isn`t profitable.

My partner and I were at the meetings too and have very different perspectives. On a more positive note, I have included an article from Western Investor in case you missed it.

Best of Luck

 

[Stephen1151]

Unfortunatly I cannot look at the PDF file cause im not a memeber but thanks for the reply`s.

I feel that I have the best property manager and they are doing amazing dispite the rental market. I have had to lower rents and and pay for the remainder out of my own pocket. dispite what grande prairie has done in value I am impressed with my self how I have handled everything to this day. I havent sold so technically I havent lost tens of thousands but with Rein fees and rental loss it has been in the thousands.

As of now I dont need advice this was more of a Vent session, as well as cautionary word out to other prospective Rein members. If you join Rein , do it to surround yourself with like minded investors but understand that what happened to me can happen to others, You can spend thousands on Rein for advice and still get caught in a bad market situation, and when your a small time investor trying to get up and running you need every bit of leverage you can. The fact of the matter is every thing I do I try to get the best advice possible and when you pay a high amount for that advice there is an expectation that you get what you paid for. In this situation that still may happen but it could be 5, 10, or 20 years down the road.

I like your analogy of the kidney stone. once again thanks for both your perspectives. They were thoughtful and well articulated.

 

[housingrental]

Hi Stephen,

I`m sorry to read about your difficulty.

However it is a given with investing in any business that the market can turn. From what I`ve what I`ve seen REIN has always been clear on this - and advocate:
Lower leverage - Provides a lower break even point
Stress testing your portfolio under different scenario`s - ie higher expenses, lower rent
A large reserve fund
Maintaining employment separate beyond your real estate investment company
Being aware of the factors that will impact your business in the future

It is hard to see how anyone could be left with an impression that being a rein member completely insulates you from down markets? Why did you think this?