What You Need To Know Before Investing in a New City

What You Need To Know Before Investing in a New City How do you know whether a city is actually a good place to invest in real estate? A market can have cheap houses. It can have great-looking cash flow. Population might be increasing. Property values might be rising. And it can still be a terrible place to build a long-term rental portfolio. In today's episode of the Canadian Real Estate Investing Morning Show, Wayne and Gabby answer a question from listener Carmen: What do you look for when deciding whether to invest in a new city? Wayne breaks down five of the major factors he looks at before putting money into a new real estate market. The goal is not simply finding the city with the highest appreciation or cheapest properties. The goal is finding a market where you can buy a profitable rental business, operate it successfully, and have confidence that it can remain sustainable for the next 20 years. The Framework Comes Before the City Wayne explains that he does not start by falling in love with a city and then trying to make the numbers work. He starts with his investment framework. Then he asks: Does this market fit? If it does not fit the fundamentals, he moves on. Gabby describes it as trying to fit the correct peg into the correct hole. You do not start sanding the corners off because you really want the deal to work. The standards stay the same. The market either meets them or it does not. 1. Landlord and Tenant Laws One of Wayne's first considerations is the legal environment where the rental business will operate. A city can have: Great cash flow. Strong population growth. Excellent rents. Good appreciation potential. Low vacancy. And attractive properties. But if the landlord and tenant laws prevent you from operating the rental business effectively, that can be enough for Wayne to walk away. Wayne uses Ontario as an example. Issues such as restrictions surrounding lease termination, rent increases and lengthy dispute processes can materially change the risk profile of owning rental property. Gabby makes an important point: Managing the property properly is how you ultimately make money. You can make money when you buy. You can have great appreciation. You can have positive cash flow. But poor operations can destroy all of it. Wayne wants to know that both landlord and tenant are held accountable to the agreement they signed and that there is a reasonably efficient process when somebody does not fulfil their obligations. Before researching individual cities, understand the landlord and tenant laws of the province. 2. Cash Flow Potential Cash flow is one of the most important filters Wayne uses. If the type of property he wants to purchase cannot generate sufficient cash flow in that market, he will not buy there. Why? Because Wayne does not view rental real estate as simply purchasing an asset and hoping its value increases. He is buying an asset and operating a business from it. A business consistently spending more every month than it generates is not attractive simply because the building might eventually appreciate. Cash flow is also Wayne's primary risk mitigator. The greater the cash-flow cushion, the more room the investment has to absorb things outside the investor's control: Higher interest rates Vacancy Lower rents Increasing expenses Job losses Economic changes Unexpected repairs Wayne uses the 5% Rule™ Cash Flow Test as a minimum standard for evaluating this. Understand the Specific Neighbourhood Do not simply search: "What is the average rent in this city?" That is not enough. Different neighbourhoods attract different tenants. Different property types command different rents. One side of a city may perform very differently from another. Wayne and Gabby recommend researching the actual properties competing with the one you intend to purchase. Wayne gives an example from recent market-rent research. There were only a handful of comparable rentals available, and his property was clearly superior to the competition. Instead of simply copying the average asking rent, he decided the property could justify charging more. Market rent is not just a statistic. It is the price your property can command relative to the alternatives available to tenants. 3. Market Size Small towns can sometimes produce incredible-looking cash flow. Properties can be inexpensive. There may be almost no rental competition. Rents may appear exceptionally strong relative to purchase prices. That can be tempting. But Wayne sees a major problem: Sustainability. Everything can look fantastic while the town is booming. Then one employer closes. One construction project ends. One mine shuts down. One mill disappears. One economic event hits the dominant industry. Suddenly the rental demand that supported your investment disappears. Wayne generally prefers major cities with populations of approximately 500,000 or more. That is not a universal rule for every investor. It is his preference because larger markets generally provide more diversification and resilience. What About Smaller Cities Around Major Centres? Gabby adds an important exception. Smaller communities immediately surrounding a major metropolitan area can function as extensions of the larger city. Examples around Edmonton include: St. Albert Sherwood Park Spruce Grove Beaumont Residents may live there while still working, shopping and participating economically in the larger metropolitan area. Sometimes those communities offer lower purchase prices while maintaining similar rental demand. The important distinction is whether the smaller community has a genuinely diversified economic connection to the larger centre or exists primarily because of one local employer. 4. Industries and Employment Once Wayne identifies a potential market, he wants to understand: Why do people live there? Where are the jobs? How much do those jobs pay? Are those jobs sustainable? Are more jobs being created? Is the city dependent on one employer or industry? A market dominated by a single mill, mine, manufacturing plant or temporary infrastructure project creates more risk. If that employer disappears, the rental market can change extremely quickly. Wayne prefers markets with diversified employment and industries capable of producing good-paying, long-term jobs. Temporary Growth Can Fool Investors Imagine a small community suddenly gets thousands of workers because a major highway, mine, pipeline or infrastructure project is being built. Rental demand explodes. Vacancy disappears. Rents increase. Investors see the numbers and rush in. But what happens when construction finishes? If those workers leave and there is no permanent economic reason for people to remain, the rental demand can disappear just as quickly as it arrived. Wayne wants investments that can survive for 20 years. Not just the next construction cycle. 5. Population Growth and Migration Population growth is another major factor. More people moving into a city creates additional demand for housing. Initially, many newcomers rent. Eventually, some become homeowners. That can create pressure on both: Rental demand and Real estate values. Wayne wants to study the history of population growth and net migration. But historical numbers are not enough. He also looks forward. What projects are being announced? What employers are expanding? What new industries are arriving? What infrastructure is being built? What will cause people to move there over the next five, ten or twenty years? Follow the Jobs Wayne gives a theoretical example of a major new project creating thousands of construction jobs followed by thousands of permanent jobs. During construction, many workers may become renters. That puts pressure on rental supply. Later, some of those workers may take permanent jobs and become homebuyers. If you own the right type of property, you can potentially benefit from both phases. First, strong rental demand. Later, increased homebuyer demand for the same type of property. That is exactly the kind of long-term market dynamic Wayne looks for. Real Estate Prices Going Up Is Not Enough A city can have rapidly increasing real estate prices and still be a poor rental market. Gabby discusses communities where outside buyers drove prices higher while local residents increasingly struggled to afford either rents or homes. That creates a disconnect. Wayne repeatedly comes back to the same principle: You are not simply buying a box and hoping the box becomes more valuable. You are operating a business from the property. The market needs to support that business. The Five Filters When Wayne begins evaluating a new real estate market, five of the major things he considers are: Landlord and tenant laws Cash flow potential Market size Industries and employment Population growth and migration These five factors are only the beginning. Once a market passes those filters, deeper due diligence begins. What neighbourhoods? What asset classes? What tenant profile? What vacancy? What property values? What rents? What long-term development is happening? The purpose of the first analysis is not to prove that you should invest somewhere. It is to determine whether the market deserves further investigation. A Rare BRRRR Opportunity in Edmonton Wayne and Gabby also discuss an opportunity brought to the previous night's REI Masters coaching session. One student operating a wholesaling business found an Edmonton property that Wayne believes could potentially make an excellent BRRRR. The renovation appears relatively simple, potentially around $10,000 to $20,000 in cosmetic improvements. The strategy would be: Buy the property. Complete the renovation. Increase the value. Refinance. Recover the invested capital. Then hold the property as a cash-flowing rental. Based on the analysis discussed during the coaching session, Wayne says the property performed exceptionally well on the cash-flow test. He describes opportunities like this as increasingly rare and says Edmonton has not offered many comparable BRRRR opportunities in several years. Weekly REI Masters Coaching Wayne and Gabby also share several wins and challenges discussed during their weekly REI Masters coaching session. Students are currently working through: Condo document due diligence Off-market acquisitions Wholesale assignments Joint venture partnerships Finding deals for money partners BRRRR opportunities Financing Legal issues Market selection The coaching sessions are designed around helping students solve the actual roadblocks preventing them from reaching their next objective. REIcon – The Summit Series REIcon begins tomorrow in Edmonton. September 11–13, 2026 Wayne and Gabby will be there Friday and Saturday. On Saturday morning at 8:00 AM, the Canadian Real Estate Investing Morning Show will be recorded live on stage. Wayne and Gabby are also presenting during Saturday's sessions. Get tickets at: www.reiconference.ca Use discount code: REIMASTERS15 for 15% off. REI Masters Mentorship Work directly with Wayne and Gabby on market selection, acquisitions, financing, deal analysis, property management, joint ventures, wholesaling and building a profitable Canadian real estate portfolio. www.reimasters.ca The 5% Rule™ Learn Wayne Hillier's cash-flow framework for evaluating Canadian rental properties. Search The 5% Rule by Wayne Hillier on Amazon. Watch the Morning Show Join Wayne and Gabby every weekday morning at 7:00 AM Mountain Time on YouTube. Follow Wayne Hillier – Real Estate Investing Coach on YouTube. Questions for the show: info@reimorningshow.com Upcoming Events REIcon – The Summit Series Edmonton, Alberta September 11–13, 2026 www.reiconference.ca Discount code: REIMASTERS15 REI Masters Annual Retreat Edmonton, Alberta October 17–18, 2026 www.reimasters.ca Sponsors Calvin Realty – Edmonton Investor-Focused Realtor Team www.calvinrealty.ca Finngo Bookkeeping & Tax Specialized bookkeeping and tax services for Canadian real estate investors. www.finngo.com/rei Kirkwood & Brennan Mortgage Group Investor-focused mortgage planning for Canadian real estate investors. www.kbmortgages.ca keaton@kbmortgages.ca