How Much Investors Are Earning in Calgary Right Now

Calgary real estate is breaking every record. On average over 2023, Calgary real estate appreciated 15%, and since most of our projects are condos and townhouses, those specific property types appreciated 19% and 20% respectively. So, unlike Toronto, 2023 was an excellent year for Calgary real estate, and of course for those who took our advice about this promising market. Now, after a relatively quiet January, buyers are back on the market, and it looks like this February will once again break every sales record, though I don't think that'll last long. The traditionally hot spring months are still ahead, and everyone's expecting lending rates to come down soon. So Calgary real estate is set to break more than a few records this year.

Today, I want to talk about the kind of returns people are earning by investing in pre-construction real estate in Calgary. Let's take a typical multi-unit condo project in Calgary, built in one of the nearby suburbs, roughly a 20-25 minute drive or LRT ride from downtown Calgary. We've had more than a dozen projects like this pass through our hands in 2023. These are typically 4-5 storey complexes within a master-planned community, meaning not just standalone condo buildings, but centrally planned development across a large area, where all the infrastructure needed for comfortable living is being built alongside the residential units at the same time. Complexes like this typically hold 200-300 units. A good two-bedroom unit with parking and a locker in a complex like this costs around $400,000. And that's the first advantage of Calgary: a comparable unit in Toronto would run around $800,000. The second advantage in Calgary is that there are no additional charges at closing once the building is complete. If the contract says $400,000, that is the full price of the unit; the only thing the buyer needs to pay when taking title is roughly two and a half thousand dollars in legal fees. In Toronto today, closing alone will run you at least $40,000-$50,000, because of additional charges like land transfer tax, development charges, park levies, and so on. And Ontario municipalities' appetite for these fees keeps growing by the day.

To buy a $400,000 unit in Calgary, you only need to pay 10% of the price over the course of a year, in a few installments, and that's another pleasant surprise, since buying a unit in Toronto requires 15%, and sometimes 20%. And the less of your own money you put into an investment, the higher its return. So you buy a unit, paying $40,000, which is 10% of the purchase price, and you have 4 years of construction ahead of you. What will that unit be worth in 4 years? Appreciation comes from two components: overall market appreciation, and appreciation specific to the development area itself, driven by major infrastructure changes happening there, assuming, of course, that the area was chosen correctly. We're experts in both Toronto and Calgary, and we know exactly which areas offer the best return on investment. For example, most of the projects our company sold in 2023 were located in east and northeast Calgary. Statistics released in January of this year by the Calgary Real Estate Board clearly show that these exact areas appreciated more than any others over the year. So we're not just collecting a paycheck for nothing. But let's not even use the 20% appreciation we saw in 2023, though I'm confident that 2024 and 2025 will bring very significant price growth in Calgary as well. Let's use half of what Calgary real estate is genuinely appreciating today. So for our calculations, let's use 10% appreciation instead of 20%.

And in fact, choosing the right area alone already accounts for roughly 5% of that appreciation. So to reach a combined 10% growth, we only need the broader market to appreciate by 5% a year, four times less than what Calgary real estate is actually appreciating today. So, you've put in $40,000, 10% of the $400,000 purchase price, and if the market rises 10% a year, your deposit is effectively earning 100% annually. In other words, the $40,000 you put in, which you don't even need to pay all at once, is earning you $40,000 every single year. Not bad, right? The same held true in Toronto during its hottest years. But that's not all. Your project will take 4 years to build, and even under the very pessimistic numbers we just walked through, a unit bought today for $400,000 will be worth $585,000 by the time construction wraps up in 2028.

In Calgary today, almost every bank bases financing not on the original purchase price, but on the unit's market value at the time construction is completed. So you'd be able to get a mortgage for 80% of $585,000, which comes to $468,000. You bought the unit for $400,000, putting in $40,000 of your own money. So at closing, you'd owe the developer $360,000. That means at closing, you not only get your entire deposit back, you also walk away with $68,000 in profit. And you haven't even sold the unit. You still have 20% of your own money in it, which comes to $117,000. And the unit keeps generating income for you. It gets rented out. As a reminder, almost all of our projects come with the option of guaranteed rent and free management, so there's nothing you need to do yourself. And the $108,000 you receive at closing can easily be used to buy two more units under the exact same model. This is what we did in Toronto for 20 years, building genuinely impressive investment portfolios for many of our clients along the way. Yes, this doesn't work in Toronto anymore today, but it works beautifully in Calgary, where the market sat flat for more than 10 years. While Toronto tripled in price, Calgary prices stayed exactly where they were. Now it's Calgary's turn.

As for Toronto, don't count it out. Everything will be fine here too, there are already positive signs, and this market will return to normal soon enough, with prices starting to climb here as well. But right now, this is Calgary's moment. Right now, this is exactly where investors are making their money.