Investing in Real Estate in Alberta's Secondary Cities
December 3, 2024 - Written by Jamie Palmer, President & Broker of Power Properties
Investing in real estate can be a great way to build wealth and generate income. However, it can be difficult to know where to start, especially if you are a first-time investor.
In this blog post, we will discuss the advantages of investing in real estate in Alberta's secondary cities. We will also provide a case study comparison of Medicine Hat, Lethbridge, and Calgary.
Why Consider Secondary Cities like Lethbridge and Medicine Hat?
Secondary cities offer several advantages for real estate investors, including:
Lower entry costs
Real estate in Medicine Hat and Lethbridge is more affordable than in Alberta's larger cities like Calgary or Edmonton, making it easier for both first-time and seasoned investors to enter the market.
Stable demand
These cities have strong local demand driven by employment stability, educational institutions, and healthcare centers
Community growth
Medicine Hat and Lethbridge have shown steady population growth, leading to potential property appreciation and rental demand increases.
Real Estate Market Trends in Medicine Hat
Medicine Hat is a growing city with a strong economy. The city is home to a number of major employers, including the Medicine Hat College, the Medicine Hat Regional Hospital, and the Canadian Forces Base Suffield. The city’s job market in sectors like energy and healthcare supports strong rental demand, making cash flow-neutral operations achievable.
The average house price in Medicine Hat is currently around $300,000. This is significantly lower than the average house price in Calgary, which is currently around $600,000.
Real Estate Market Trends in Lethbridge
Lethbridge is a diversified city with a strong economy. The city is home to a number of major employers, including the University of Lethbridge, the Lethbridge College, and the Chinook Regional Hospital. Lethbridge’s diversified economy supports strong demand, with low vacancy rates and rental stability. Real estate in this market provides opportunities for consistent cash flow.
The average house price in Lethbridge is currently around $350,000. This is also significantly lower than the average house price in Calgary.
Rental Property Comparison Across Southern Alberta
Lethbridge
Purchase Price: CAD 350,000
Down Payment (25%): CAD 87,500
Mortgage Amount (75%): CAD 262,500
Assumption: Cash flow-neutral scenario, where rental income covers operating and financing costs.
Appreciation Amount (3%): CAD 10,500/year
Return on Initial Investment (Equity Gain Only):
ROI=(10,500/87,500)×100 = 12%
Medicine Hat
Purchase Price: CAD 300,000
Down Payment (25%): CAD 75,000
Mortgage Amount (75%): CAD 225,000
Assumption: Cash flow-neutral, with rental income covering mortgage payments and operating expenses.
Appreciation Amount (3%): CAD 9,000/year
Return on Initial Investment (Equity Gain Only):
ROI=(9,000/75,000)×100 = 12.0%
Calgary
Purchase Price: CAD 600,000
Down Payment (25%): CAD 150,000
Mortgage Amount (75%): CAD 450,000
Assumption: Cash flow-neutral scenario, where rental income offsets operating and financing costs. *It is harder to cash flow in Calgary as the rents are unlikely to cover the higher mortgage costs.
Appreciation Amount (3%): CAD 18,000/year
Return on Initial Investment (Equity Gain Only):
ROI=(18,000/150,000)×100 = 12.0%
Using leverage, a 3% appreciation leads to a 12% return on the investor’s initial down payment. Secondary cities like Medicine Hat and Lethbridge provide a lower-cost entry point with similar ROI potential when compared to larger markets like Calgary.
Taking the Next Steps
If you’re interested in learning more about Investing in Southern Alberta, talk with Power Properties’ licensed Realtors in Medicine Hat and Lethbridge to understand rental demand and market trends.
If managing a rental property feels overwhelming, partnering with a professional property management company like Power Properties can make all the difference. By taking care of tenant screening, lease agreements, maintenance coordination, and financial reporting, property management services handle the complexities of daily operations. This allows you to enjoy the benefits of your investment while minimizing stress and ensuring your property is well-maintained and profitable.
Want to save this information for later? Download a copy of our free eBook on the Advantages of Real Estate Investing in Alberta’s Secondary Cities.
Written by Jamie Palmer, President/Broker of Power Properties Ltd.
Jamie Palmer is the President and Broker of Power Properties. He holds a Certified Property Manager (CPM®) designation, the highest designation in Property Management in North America. He earned an Honors degree from the University of Toronto, and he has over two decades of experience in property management.About Power Properties Ltd.
Founded in 1980, Power Properties has been providing hassle-free property management services to property owners, property investors and non-residents with homes in Calgary, Alberta for over 40 years. Our full-service property management includes everything from move in to move out, so you don’t have to worry about the day-to-day operations of your rental property. With a team of licensed professionals, years of experience, and award-winning service, you can rest assured that your property is in good hands.
