Is now the time to invest in an income property?
Open this photo in gallery Monique Geurts and her husband Caspar purchased an income property on Prince Edward Island in 2015, but the pandemic and the red-hot Canadian housing market have created a challenging environment. ALANA SPRAGUE/the globe and mail  When Monique Geurts and her husband Caspar purchased Victoria Cottages  located in Victoria-by-the-sea, a village on the south shore of Prince Edward Island  none of the six cottages had electricity or running water. Many of them had become the homes of neighbourhood foxes and raccoons. But the family was ready to put in the work to get the perfect income property and they believed this was it. That was in 2015. Fast-forward to 2019, the cottages were fully renovated, and the Geurts family, which immigrated to PEI from the Netherlands in 2013, opened to a full-capacity summer. Things were looking up. Story continues below advertisement  Then 2020 brought the COVID-19 pandemic, followed by an unexpected spike in the housing market. Those factors put a serious pause on their income-property plans. The purpose was to do this business together, but right now we have to invest so much time and money, and with COVID [happening], its just not doable, says Ms. Geurts, who has kept her full-time job in human resources at the University of Prince Edward Island. And with the housing market the way it is and the cost of renovations and labour, its way more [expensive] in this market we have right now.  Open this photo in gallery Experts say the end of the urban exodus is coming  for renters at least  as people move back to urban centres anticipating a return to pre-pandemic life. ALANA SPRAGUE/the globe and mail  Income properties are designed to make money, but the pandemic and the red-hot Canadian housing market have created a challenging environment for anyone considering investing in this area. With rental vacancy rates easing in many cities and property prices all over the country seeing record increases, its hard to know whether its the right time to purchase an income property or to build that laneway house. Experts say the end of the urban exodus is coming  for renters at least  as people move back to urban centres anticipating a return to pre-pandemic life. Others argue there is a new market for income properties in rural or suburban areas for those seeking a quieter life, which might make it a good time to get into the income-property market, no matter where you live. Jerome Deis, a real estate agent in Vancouver, says hes seen the signs, first-hand, of renters returning to city centres. When he put his own rental property, a downtown condo, on the market last fall, It sat on the market for three months, he recalls. Ive never seen this happen before in the 10 years Ive been renting out that property.  Story continues below advertisement  Just a few weeks ago, when his current tenant gave notice, Mr. Deis put his condo back on the market with a rental start date of July 1. The response was overwhelming, he says. The market is definitely shifting.  But the advice from everyone is to do some research before plunging in. Typically, when we work with clients who are looking at investment properties, we provide them with a couple of calculators that they can use so they can see whats the purchase price, whats your monthly rental income, what are the property taxes, whats the down payment, are there any renovations or improvements [needed], explains Audra Poole, a realtor in Victoria, B.C. She explains that some properties might be more lucrative than others depending on the associated costs. Condos, for example, often come with extra fees that are not factors for a detached or semi-detached property, so this is something to consider, Ms. Poole says. If you get into a condo and youre paying a lot already, with a mortgage, [condo] fees  if youre not going to manage it yourself then you are paying a management company  so make sure you find out if that month-to-month return on investment is going to be worth it.  These can still be great properties to invest in, it might simply require a bit of homework, she adds. Story continues below advertisement  For Ms. Poole, one of the biggest shifts, thanks to the pandemic, has been the location of income properties as people move out of the city centres to seek more space for less money. This has put a strain on rental markets in suburbs, small towns and rural communities alike as city dwellers flock to these less congested areas. I think people traditionally looked at rentals in the core, says Ms. Poole, but because of the way the pandemic has played out, people can look outwards.  The Real Estate Council of Ontario (RECO) has a list of resources on its website designed to help potential buyers of income properties make informed decisions about the type of property, the insurance required and other factors. Our advice to people looking to buy an income property would essentially be to pick the right real estate professional and to make sure you also use an accountant and an experienced real estate lawyer who can advise you on relevant codes, laws, risks, obligations and requirements, says Christine Harminc, director of external relations at RECO. As for Ms. Geurts, she says if the market was like it is now in 2015, her family may not have been able to afford the cottages. But with brighter prospects ahead there is still hope that this seasonal income property will be the dream they once imagined it could be. If we had known what we know now, we probably wouldnt have done it, but honestly, being here now, I dont want to be anywhere else. It is the most beautiful spot in the world.