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- Aug 30, 2007
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We all want cash-flow AND equity upside. This used to work quite well in W-Canada, specifically in Alberta. This is now much more difficult as prices have risen substantially in AB, SK and BC, and cash-flow is low.
What is better: a house or building with ongoing cash-flow but little or low equity upside, but lower risk due to cash-flow .. or: a low or no cash-flow property (i.e. low CAP rate) with rent growth and more equity upside ?
I.e. what is better: a building in Ontario or Texas or Oklahoma or BC with 3-5%/year rent growth but substantial cash-flow with a 70-80% LTV mortgage (i.e. betetr cash-on-cash ROI), or a highly priced building in Alberta with significant rental and equity upside, but almost no or negative cash-flow even with a 65% to 70% mortgage ?
We argue for the former .. more sustainable cash-on-cash ROI upside with less risk .. more sustainable .. and we have commented extensively on our website on what other markets beside Alberta make sense today ... but I`d like to hear your view !
What is better: a house or building with ongoing cash-flow but little or low equity upside, but lower risk due to cash-flow .. or: a low or no cash-flow property (i.e. low CAP rate) with rent growth and more equity upside ?
I.e. what is better: a building in Ontario or Texas or Oklahoma or BC with 3-5%/year rent growth but substantial cash-flow with a 70-80% LTV mortgage (i.e. betetr cash-on-cash ROI), or a highly priced building in Alberta with significant rental and equity upside, but almost no or negative cash-flow even with a 65% to 70% mortgage ?
We argue for the former .. more sustainable cash-on-cash ROI upside with less risk .. more sustainable .. and we have commented extensively on our website on what other markets beside Alberta make sense today ... but I`d like to hear your view !