I get asked fairly often about Merritt as an alternative to Kamloops. The short answer: both can work, but for different investors at different stages. Here is how I think about the comparison.
The Two Markets at a Glance
Kamloops is a mid-size city of roughly 110,000 people. It has Thompson Rivers University (TRU) generating consistent rental demand from students and faculty, Royal Inland Hospital anchoring a healthcare employment base, and a diversified local economy that includes retail, logistics, and construction. Entry prices for a single-family home with a suite run $550,000 to $750,000 depending on neighbourhood and condition.
Merritt has a population of around 8,000. It sits at the intersection of two major highways (the Coquihalla and Highway 5A) and serves as a hub for the surrounding ranching and forestry communities. Entry prices for a single-family home run $350,000 to $500,000 — meaningfully lower than Kamloops.
The Cap Rate Reality
Cap rate is net operating income divided by purchase price, before financing costs. It is the primary screening metric for investment properties (more on cap rate vs cash-on-cash here).
In Kamloops, residential investment properties typically run at 4 to 5% cap rates. In Merritt, you can find properties at 5 to 7% cap rates, driven by the lower purchase prices relative to achievable rents.
On paper, Merritt looks better. In practice, the gap narrows when you account for several factors.
The Liquidity Question
This is the factor most small-town investment comparisons underweight: how easily can you exit?
Kamloops has a deep enough buyer pool that a well-priced property sells within 30 days in most market conditions. If you need to sell — because of a job change, a financial emergency, or simply because you found a better opportunity — you can. The market absorbs supply regularly.
Merritt's buyer pool is far thinner. In a rising market, that does not matter much. In a flat or declining market, you might sit on a property for 60 to 120 days. If you need to sell quickly, you may need to discount significantly. That illiquidity risk is real and it is not priced into the cap rate difference.
Economic Concentration Risk
Kamloops's economy is diversified across healthcare, education, retail, and construction. No single employer or industry accounts for more than 15 to 20% of local employment.
Merritt's economy is more concentrated around forestry, the highway corridor, and a few large employers. Forestry in particular has had a turbulent decade in BC — mill closures and curtailments have direct downstream effects on Merritt's rental demand and resale market. If a major employer cuts staff or a mill goes offline, vacancy rates can spike quickly in a market that size.
Who Each Market Suits
Kamloops is the right first investment for most BC Interior investors. You are buying into a more liquid, more diversified market. The cap rates are lower, but the risk-adjusted return — accounting for liquidity, economic stability, and resale potential — is better. When I ran my own first-property numbers, the lower cap rate in Kamloops was worth accepting.
Merritt makes sense as a second or third property for an investor who already has a Kamloops or Kelowna asset providing stable, liquid equity. At that point you can absorb the concentration risk, you understand the due diligence required, and the higher cash flow yield makes sense as a portfolio diversifier rather than your only holding.
The Cash Flow Picture
I want to be direct about something most BC Interior investment posts gloss over: almost all residential properties in both Kamloops and Merritt are negative cash flow on a month-to-month basis when financed at current rates (5% range). The investment thesis is appreciation plus mortgage paydown, not immediate cash flow. I wrote out the full line-item math in a separate post.
Merritt's lower purchase price does improve the cash flow position relative to Kamloops, but it does not typically produce positive cash flow either. A $400,000 Merritt property with 20% down is still running at roughly break-even to slightly negative once you account for vacancy, maintenance, and property management.
My Take
I focused my own search on Kamloops. Better liquidity, stronger tenant pool from TRU and RIH, and a market I understand well enough to move quickly when the right property comes on. Merritt stays on my radar as a potential second acquisition — particularly if I find a duplex at a price point that gets the numbers closer to positive cash flow.
If you are starting your BC Interior investing research, I would suggest spending time in both markets before deciding. Drive the streets, talk to property managers, and look at actual lease comparables — not just Zillow estimates.