7 Canadian real estate markets to consider investing in

Looking to invest in real estate in 2015 – besides owning your principal residence – and don’t know where to begin?You may think only large Canadian markets offer opportunities to buy investment property. But that’s not necessarily the case.Here is our list of seven markets in Canada that are worth considering for investment properties – and not all are large cities.The key things to look for are a solid and growing local economy, stable employment conditions and minimal new apartment construction. These combine to produce a tight rental environment, which is what you want.

Investment strategy

Using an investment strategy known as “buy, hold and rent,” where you buy a property and rent it out over a period of five to seven years, you benefit in three ways:

• Positive cash flow, meaning you rent it out for more than your expenses (mortgage, taxes and other costs)
• Tenants pay down your mortgage
• Property value appreciation over time

Among of the key things to learn about, as an investor-landlord, are vacancy rates. Canada Mortgage and Housing Corp. (CMHC) summarizes these, along with average rents, in twice-annual rental market reports.An increasing rate means rental supply is growing, and renters have more units to choose from. Declining vacancy rates mean supply is tightening and your property may be in higher demand.

A vacancy rate between two and three per cent is considered a balanced market, so anything below that is ideal.

Vacancy rates

As an investor, you’re looking to select areas where:• The vacancy rate is low and ideally tightening further• The economic fundamentals are strong• The area is desirable for renters and the building type is suitable for the local tenant profile• Tenants in the area will pay what you have to charge for rentHere are seven Canadian real estate markets to consider investing in in 2015, based on the Fall 2014 Rental Market Reports from CMHC, for two-bedroom units.

Edmonton

Vacancy rate is 1.7 per cent in October 2014, up slightly from 1.4 per cent a year earlier. Average rents increased to $1,227 from $1,141, a 6.1-per-cent increase, following a 5.6-per-cent jump from 2012 to 2013.

Calgary

Vacancy rate climbed slightly 1.4 per cent in October 2014 from 1.0 per cent in October 2013. Average rents climbed 5.9 per cent to $1,322 from $1,224 – after a 7.2-per-cent hike the previous year.

Toronto

Always a squeaky tight rental market, the vacancy rate here remained at 1.6 per cent from October 2013 to 2014. Average rents increased 2.6 per cent to $1,251 from $1,213, on the heels of a 2.9-per-cent increase from October 2012 to 2013.

Guelph

Yes, Guelph – where the vacancy rate is a super-tight 1.2 per cent, down from 1.9 per cent a year ago. Rents are on the rise, too – up three per cent to $988 from $957, after rising 3.3 per cent the year before.

Oshawa

Another surprise, perhaps, but not when you consider the town’s vacancy rate tightened to 1.8 per cent in October 2014 from 2.1 per cent the previous year. Over that period, rents increased 2.8 per cent to $1,010 from $985, following a 4.6-per-cent rise the year before.

Hamilton

Well known as a performer among investors, Hamilton benefits from proximity to Toronto and other key areas in southwestern Ontario, but with much cheaper housing prices. The vacancy rate dropped to 2.2 per cent from 3.4 per cent, while rents increased 2.8 per cent to $959 from $932, after rising 3.1 per cent from October 2012 to 2013.

Kitchener-Waterloo-Cambridge

A thriving tech sector and student population make KWC worth a look, with vacancies down to 2.3 per cent from 2.9 per cent. Rents are on the rise – up 1.6 per cent to $975 in October 2014 from $952 a year previous, on the heels of a 3.2-per-cent hike from October 2012 to 2013.