First home, Investment property, or Building lot with a view???

Hi Everybody.  This is my first post as a contributer.  I thought I’d start with a real world example for those of you interested in values.  We have a new listing located at 5606 Portland Street, listed for $620,000.  It’s actually a property that we’ve managed for the past 10 years.  We had it rented for $1200/month.  It’s located on the South Slope of South Burnaby.  The home is was built in the late 40’s-early 50’s.  It has 2 bedrooms/1 bathroom.  The house has been maintained over the years, but is in pretty much original shape.  The basement has potential for a 1 or 2 bedroom suite.  The lot is 50 ft x 121 ft with southerly views of Richmond, White Rock, etc…Some people would say this property is a perfect starter house, others would buy the home purely as an investment.  Builders would argue it is a prime building lot.

 Someone who buys this home as a starter home will most likely have deep pockets, or will have lots of help from family.  An investor looking at this property will be attracted to the potential of a basement suite.  On a more long term plan, an investor is going to be attracted to the big lot, with a view.  A builder is going to knock the house down, and build the biggest house allowable.  I’m interested in what you think…

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27 Comments

Filed under Aaron Best

27 responses to “First home, Investment property, or Building lot with a view???

  1. Deedub

    [i]I’m interested in what you think…[/i]

    I think this reads a lot more like an advertisement than a genuine quest for discussion.

    Which is ok – your site, your rules – but you did ask!

  2. aaronbest

    Deedub**It’s not suppose to be an add, that is why I didn’t add any pictures. It is interesting to me, because I know lots of families who would like to live in South Burnaby. New homes are selling for a million plus. Does that mean families are looking at houses like this one, or are they moving to condos, or moving further out?

  3. WoW

    WoW – how does one make an “investment” return on that cashflow, assuming funds have to be spent to create the suite (with related rental income). I don’t understand the math, and how people expect to make a decent return once the market normalizes – and this is not a normal market, in my opinion.

    Well, good luck with the listing in any event.

  4. Bluephoenik

    I live in South Burnaby myself – for the price you’re listing at – there’s waaaayyyy bigger houses/properties in New West for much less.

    And myself – I’d much rather live in New West then South Burnaby.

  5. So, if I was interested in buying the property you would furnish more details and a pic or two? If not, this is a discussion; if so, it is an advert. I am interested in the property, your call.

  6. Bluephoenik**My parents live in South Burnaby also. I live in New Westminster. I figure the only way I’m going to be able to move back into Burnaby is by inheriting the house. Personally I like both Burnaby & New Westminster, but if the truth be told I’d rather be living in Gastown. I make the small sacrifice because I’d rather own than rent.

  7. Steve**This post isn’t suppose to be an advertisement. I’m not going to get into semantics of the post. If someone is interested in the property, they can contact me privately.

  8. Bluephoenik

    aaron – why do you think South Burnaby prices are so much higher then New West?

  9. Jim

    aaron: welcome to the discusion. The numbers on this property make it a losing proposition. It returns 2.3% les maintainance and taxes. I get 2.5 times that with zero risk.

  10. robchipman

    Ad vs. discussion subject matter is a tough call. We advertise in more effective areas. Advertising on the blog is counter-productive. We market everywhere. I don’t think anyone could deny that blogging is also marketing if the blogger is in business.

    Still, this is a real estate blog, and some people are interested in more than the daily numbers. Also, you never know where a discussion will lead. Aaron and I talked about that, so when he says that this is supposed to be a discussion, it is.

    Old wisdom says include the address OR the price, but not both. People want information, so if you omit some, they’ll call you. You then close them (sell them the subject property, another listing, or mine them for a listing).

    Blogging wisdom says let people have as much info as they want, because its already out there and you can’t control it. You won’t convert internet leads through traditional selling techniques anyway, so let them learn as much as they want about you and your product. If they decide they want to do business with you they’ll reveal themselves when they’re ready. Let the consumer make the decision.

    Which is more accurate?

    I think that Steve’s challenge about whether to call the post an ad or a discussion based on whether Aaron contacts him or not is, consequently, equally old fashioned. The sign is up, builders are calling, the listing info is available elsewhere. If Steve asks for the info and Aaron doesn’t provide it, Steve can get it elsewhere anyway, and can complain that Aaron is trying to monopolize information. If Aaron provides the info, Steve says he’s advertising. Aaron gets damned both ways, and real world examples of real estate doesn’t get shared in the future.

    So, what’s the take away? There are at least three options for this property – starter home (what do you think about entry level homes being priced at $600,000+?), investment property (what portion is capital appreciation speculation, and is it justified based on area trends) or building lot (lot price + building cost/profit = final sales price in 6 months – is there room here?).

    And of course, we don’t know what other subject matter may come up through discussion.

    So, my site, my rules. I like the raw material and the questions. I like that hostility to ads was quickly expressed (lesson there for future posts). And I like the rest of the feedback so far. Win, win, win.

  11. mk-kids

    hahahahahahah. this market kills me!

    more than a half mill for a house in burnaby that needs work and rents for $1200?

    aaron should definitley sell to those interested builders who are calling! normal folk need to give their head a shake!

    no value here. maybe at half the price the numbers start to make sense.

  12. aaronbest

    Bluephoenik**That’s a good question. Geographically New Westminster could just as easily be an extension of South Burnaby. From strictly an observational point of view. New Westminster has had problems with crime. New West has also had problems attracting and keeping businesses. In turn there hasn’t been much demand for development & re-development. All that has begun to change over the past few years. More and more people seem to be rediscovering the heritage and charm of the city. I for one love the old heritage homes located around Queens Park.

  13. aaronbest

    Jim**I can’t say I disagree with you. From where I sit, the numbers make the most sense for a builder.

  14. Paulb

    Hmmm sounds odd. I can’t imagine a 1200$ rental house selling for 620k even with the possibility of doubling the rent with a 30k suite. So hold for appreciation……I think that’s a dangerous assumption. 2 bed 1 bath…. well, please let us know IF it sells.

  15. Jim

    Ok. So a builder has to build to max fsr and in todays market that is $200 a sq ft. including c.o.c. So figure .42(max fsr) X $200ft2, X 6000 or approx. =$500k for a “spec house” more if its a custom. Add lot value= $620k plus about 15 k to demo and scrape the lot. Plus hook ups. +Realtor commish.
    Conservatiely builders costs are $1,050,000.00. Gutsy builder.

  16. robchipman

    Jim:

    I don’t want to argue with your numbers, because I think that it is pretty thin for builders, and not just with this scenario. But they’re still building. Are they really spending $200 sq. ft.? Sometimes I wonder. Nevertheless, its still very thin.

  17. vintage

    I live a stone’s throw from the place.
    Beautiful, big houses in this area were selling for around $250,00 seven, eight years ago. I know, because I was looking then.
    This is an old, small dwelling with a need for many updates. The price is pretty much the going price in the area. It’s pretty sad, frankly. Or funny… you chose.

  18. Jim

    Rob: Fair comment. $200 is West Side finishes and RS5 zoning(and financing) so it could be done for less in Burnaby. I am shcocked at some of the building practises I have seen to either build margin, or due to lack of knowledge. Building to code and city inspections in no way guarantees quality product. I stopped building when quality started to cost to much.

  19. ObserverX

    Couple of comments:

    1 – Aaron: Why wasn’t “ball & chain” one of the options in your thread title?

    2 – When the govt calculates inflation, they apply “hedonic adjustments” (inflation # is set lower than actual cost because you’re getting a better product this year than the last year). I wonder if they set the inflation # *higher* because the quality of the house is worse than last year …

  20. aaronbest

    ObserverX said…”Aaron: Why wasn’t “ball & chain” one of the options in your thread title?”

    Hahahaha. Who said anything about getting married?!

  21. ObserverX

    If you equate ball & chain with marriage, then maybe b & c is an understatement — at least with marriage you can get a divorce if it doesn’t “work out”.

  22. aaronbest

    ObserverX**Marriage is expensive. Divorce is even more expensive. At least with Real Estate you can wait for the market to rebound, should there be a crash!

  23. aaronbest

    Just a quick heads up. We just sold the property full price, no subjects…

  24. Warren

    Wow, congrats Aaron. To a builder? Investor? Lunatic?

  25. aaronbest

    To a local builder. Apparently loves the neighbourhood, and wants to build a new home for himself…He seemed very level headed!

  26. Pingback: Sale Update and Building Costs « The Best Real Estate Anywhere!

  27. Building

    We are building on the west side right now with mid-high finishings and it’s coming in at slightly over $200/sq.ft. (Including demo, etc.)

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