Multifamily prices and rental rates vary from one neighbourhood to the other depending on neighbourhood characteristics and environments. The Edmonton real estate market is no different so we will look at how location affects your apartment building’s profitability.
In general, the price of a multifamily property varies according to two broad factors.
One, the value of a amount of features of the dwelling or building itself, such as number of rooms, number of bathrooms, size of dwelling units and other inner facilities, which constitute the tangible part.
The other less tangible component includes neighbourhood services and environment, including average income of households in the neighbourhood, house and lot size of the neighbours, accessibility to main arterial roads, adjacency to green spaces and ravines, amount of natural areas, availability of good schools and community centres, and adjacency to nuisances, such as, electric power lines, industrial areas, etc.
For example, properties in the McKernan neighbourhood of South Edmonton have traditionally fetched a much higher price than those in North East Edmonton, in areas like Beverley or Abbottsfield. This should come as no surprise, as McKernan is adjacent to the University of Alberta, has easy access to the Edmonton river valley, and contains a surplus of trendy bistros and restaurants. This is in addition to low crime rates overall. A good location will affect an apartment building’s profitability.
Abbottsfield, on the other hand, has traditionally had higher rates of crime and is often considered to be a less expensive part of the city to live in. The average price of rent is lower, amenities are less abundant, and the commute to downtown is much further for residents in Abbottsfield than it is for almost any other area in the city. These factors all contribute to lower real estate prices and rents.
For multifamily building investors, there is a clear benefit to buying in a more expensive neighbourhood, and this goes far beyond charging higher rents for your units. Additional costs may come into play in the lower income neighbourhoods, which ends up truly tipping the scales in terms of the benefits versus negatives of buying in a cheaper neighbourhood.
The Hidden Costs of Buildings in Low Income Areas
- Litter Cleanup: There is nothing that residents of multifamily buildings love more than having a nice, tidy property to enjoy. With that being said, less expensive properties must deal with greater amounts of waste like garbage, dog excrement, and cigarette butts. That just means that property management company representatives will need to spend a little extra time sweeping, washing and collecting trash, or designating smoking areas and providing cigarette butt containment units.
- Security: Due to a much greater population density and higher overall crime rates, it is likely that low-income apartment building investors will always need to spend a little more on security. This could mean putting better locks on doors, installing cameras in the parking lot, or even having a guard on duty for larger complexes.
- Parking Lots: Whether you have underground parking, a covered lot, or just open air parking in your building, there are challenges associated with urban locations. Not only is better security often required, but also there is a greater need for regular cleanup and maintenance. Repaving or painting a parking lot can not only give the building greater curb appeal but also deter crime and litter.