Specializing in investment property since 1975. Apartment Building Sales.

Current Comments - January 2019

2018 was an interesting year in the Calgary Multi Family Marketplace. There were approximately 35 to 40 sales in buildings over 9 units. The price range per unit varied from a low of $125,000 per unit to a high of over $300,000 per unit. Be careful with this data as the sale prices were determined by all the necessary factors to set pricing; location, construction, parking, quality of the cosmetics, unit mix of suites, amenities, upgrades to the buildings systems, boilers, roofs etc.

People keep asking me about Cap Rates. This tells me two things. They do not know what they are talking about and want to impress me with jargon or they have never bought a Calgary apartment building. Cap Rates matter most were there is rent control. Alberta does NOT have rent control. Cap Rates matter in Alberta when the property is actually operating at the optimum market rent on that date. Not the existing rent, but the market rent. Most, and I mean most, incumbent landlords who have owned their property for many years are not even close to current market rents. You can change the Cap Rate with a 90 day notice to increase the rent and there is no limit to that increase. Welcome to Alberta.

When you see a proforma on this web site you will note we have the existing rents and the market rents that the building should achieve now in the current market. Why do incumbent landlords leave the rents below market rent? Their current rents are much higher than when they bought the building and their resident managers do not like turn over or they have a management company that keeps rent below market to look good with high occupancy rates. It's that simple.

Who are the renters for multifamily units in Calgary? How much do they earn and why are they still renters? Firstly, older buildings have long term renters who may be renters for life. These people are making minimum wage or slightly better. Do the math yourself. What can they afford for rent? Secondly, if renters are making over $40 per hour and live in an older building it is because they are saving for a down payment to own their own place. The new towers are not competing for these renters any more than a Mercedes dealership is competing for the KIA crowd.

I have been selling multifamily buildings for over 40 years through more ups and downs than you can imagine. These comments are what is true in this market place.

So get a good location, good bones, fix up the cosmetics and let renters pay for the building until it is clear title and you can have more money than you can spend.
January 2019