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Real Estate

Calculating Return-on-Equity (ROE) for Real Estate Investments

Calculating return-on-equity (ROE) is a critical part of making real estate investment decisions. It helps you decide between investments as well as structure your financing appropriately to maximize returns while being mindful of cash flow. Defining return on equity (ROE) for residential real estate Return-on-assets (ROA) is a measure of the profitability of an investment relative to the total asset value. On the other hand, return-on-equity (ROE), is a measure of the profitability of an investment relative to the equity invested. It’s important to note the last part of that sentence. It’s relative to the equity that you have invested,…
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Housing Affordability Crisis in Vancouver: We’re Focusing on the Wrong Problem

I certainly agree that there is an Affordability Crisis in Vancouver’s crazy real estate market. But let’s be clear on what affordability means. It’s a measure of incomes to mortgage payments. There are three main variables that affect affordability: House Prices Mortgage rates (which drive monthly payment amounts for a given price) Incomes The focus of the conversations, media attention, and government debate is always focused on the first point, prices. Vancouver is consistently in the top three least affordable cities in the world. It’s right up there with cities like Hong Kong, Sydney, London, and San Francisco. I think it’s important…
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Using an Excel Decision Tree to Decide Whether to Sell or Keep a Rental Property

I was recently faced with a decision on whether we should sell our rental property or hold onto it given it just went cash flow negative due to a special levy and increased maintenance fees. Since the best course of action was immediately obvious, I decided to map out a decision tree in Excel to help me decide. You can download a copy of the Investment Property – Decision Tree Template and use it or tweak it to your own situation. I’ll walk through how I’ve set it up and used it for my decision. Firstly, the only decision we are making…
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Should I Sell My Rental Property Now or Keep It?

For the last five years, we’ve rented out a two bedroom condo we own in the Vancouver area. We’ve owned it for 10 years, the first five of which we lived in it as our primary residence. It has been a fantastic investment with one tenant for five years and it has been slightly cash flow positive the entire time. Unfortunately that picture changed unexpectedly this year. The strata had the mandatory depreciation report completed, and it uncovered significant concrete repairs needed throughout the complex. Some repairs are needed immediately, while the rest will need to happen within the next 10 years. The estimated…
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