Yes, Income Is a Common Driver for Real Estate Investment.
One of the key benefits of investing in residential real estate is the ability to receive monthly rental income from tenants. Income in excess of a property’s expenses and mortgage payments results in positive cash flow.
Cash flow is a key driver of returns for real estate investors, with appreciation being another major return driver. Cash flow is more predictable and investors have more control over it than appreciation. When you buy a rental property, you have a good idea what you can expect your cash flow to be since you know the property’s historical income and expenses. You can also control and increase the cash flow since you can increase your income or decrease your expenses.
Appreciation, or the increase in value of the property due to economic market forces, is less predictable. You have no control over the economic factors that cause natural appreciation of your property since you can’t control inflation, interest rates, and population growth. If you are investing exclusively for appreciation, you are making a bet that the market will go up in order to get a return on your investment.
Finding Income and Wealth Across the Western Arc.
The management team at Westbow Capital doesn’t want to gamble on the market appreciating in order to get a strong return. For these reasons, Westbow focuses on investing in high cash flow markets across Western Canada. Even though Westbow’s corporate headquarters are in British Columbia, we haven’t had a primary focus on acquiring rental properties in that market. The cost of real estate is much higher in BC compared to other Western Canadian markets which can result in a lower positive cash flow. We still consider BC acquisitions if they fit all our investment criteria, but with a high focus on positive cash flow for the portfolio, we have found more opportunities in other Western provinces.
Westbow Capital looks at other major cities in Provinces such as Alberta, Manitoba, and Saskatchewan to build a diversified portfolio with robust cash flow. There are many key criteria that need to be considered when strategically selecting markets to acquire residential rentals. Some key criteria to look for are consistent population and job growth, as well as diversified industries in the market. A growing population results in an increased demand for residential rentals. Job growth and diversified industries usually contribute to strong employment rates, resulting in a population that is consistently employed and able to pay their rent on a monthly basis. By researching data that has been collected about these key metrics, it allows our management team to make very informed and data-driven decisions about what markets to invest in
Why? The Gems Can Be Anywhere!
Westbow Capital continues to identify high cash flow residential rental properties in major cities such as Winnipeg, Edmonton, and Saskatoon. Within these markets, we look for properties that have operational inefficiencies and opportunities for renovations. Improving the operations or conducting renovations allows for the cash flow and the value of the property to be increased. This creates a diversified portfolio with strong cash flows, making it resilient to recessions because it is able to withstand drops in occupancy.