Thursday Numbers

There were 231 new listings Thursday and 252 sales, for a sell/list of 109.09%. Of the sales 40, or 15.87%, went over list. 14 of those were on the Westside. 10 were in East Van, 4 were in Richmond, 1 was in Port Coquitlam, 5 in North Van, 2 in Coquitlam, 2 in Burnaby, and 2 in Surrey.

Average list price of the over list sales was $650,055,  and 16 days on the market, while average list price of all sales was $552,692, with 32 days on market; average sales price of all over list sales was $633,750, (a difference of $16,305, or +2.58% over list), while average sales price of all listings  was $540,564,  a difference of $12,129, meaning the average sale went for 1.78% under list price. 28 properties went for list price. One property went for 55%($438,000) under list while the highest over list was 11% ($81,000) over. There were 15 million dollar plus properties sold, with 1 over $2 million. Again, average days on market to sale was 32.

There were 80 price changes, of which 6, or 7.50%, were increases. The average original list price of price changes was $679,457; the average new price was $656,764, a difference of $22,692, meaning the average price change was -2.95%.

Inventory in my target area dropped to 11,822, while over 90s dropped, reaching 2,222, a percentage of 18.80%.

0.63% of all active listings in my target area had their prices reduced Thursday.

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70 Comments

Filed under Daily Numbers

70 responses to “Thursday Numbers

  1. deb

    I think I will go wash my hair until this whole thing is over.
    Those who are selling are doing well and good luck to them.

  2. tqn

    another smoking day! the july benchmark price might make a new high; we will know by this time next week.

  3. WoW

    I was wrong, the market has defied my expectations of 14,000 active listings by now. Pre-approvals jumping in? I dunno. But until we go beyond this number, the market is intact and can march on, despite the excessive valuation, no matter how you measure it (at least when you use actual numbers and a calculator).
    I guess things will sell for whatever someone will pay for it. But this does not mean that is what it is ‘worth’.

  4. ObserverX

    “But this does not mean that is what it is ‘worth’”.

    Yes it does … for today.

  5. tqn

    “I guess things will sell for whatever someone will pay for it. But this does not mean that is what it is ‘worth’.”

    then the true value depends on who the buyer is. It’s worthless to you, but worth something to that particular buyer. Who to say it’s right or wrong.
    For a given property with five appraisers, my best guess, will have five different numbers!

  6. Crabman

    “But this does not mean that is what it is ‘worth’”.

    There are two different definitions for ‘worth’. One is value, the other is price. Right now price is high, but value is low. I think price is the short-term, and value is the long-term worth. This is why I believe that prices (in the long run) will have to come down significantly to reflect the value of RE. IMHO.

  7. s.p.

    (off topic)
    subject: investing
    as my wife and son leave our rental in vancouver (top floor for $ 1700 – coke heads lived in the basement) for a house in n. burnaby (whole house for same price) our vancouver landlord says to me:
    ‘get some money and start converting houses into 2 – 3 units – you can make a lot of money!’

    she further explains how she went from one bank to the next until one of them assessed the rental house we were living in at 60K more than the other banks. she explained that she is going to leverage this amount and buy another house and do the same thing. she also explains that you can buy cheap cabinets, flooring, appliances out in surrey – so you can make even more money*!
    * our rental was in crap shape – it was poorly renovated – paint on floors, grout chipping away from kitchen floors, the list goes on…*

    from her perspective – she said year over year the assessments have gone up and its like getting free money!

    just wondering, is this who is snapping up the house?

  8. ObserverX

    The TSE index was “worth” 14,646 at one point last week. At the moment it’s “worth” 13,833. What’s it really *worth*?

  9. Noname

    ObserverX said – “What’s it really *worth*?”

    The ‘worth’ of the stock market is derived from the expected revenue/profit the companies whose stocks are available in the market.

    Similary, the worth of a house could be derived from its revenue generating potential. Revenue is derived from rents. Of course, there is an ownership premium attached to owning additionally to the expected revenue generating potential.

    So, unless a buyer is expecting rents to skyrocket or a buyer is willing to pay 50% for owning than renting, houses today in Vancouver, are NOT worth it.

    Of course, one can speculate on appreciation but if its underlying value derived from ownership premium and revenue generating potential does not match the price, it’s only a matter of time until the two reallign.

    Just like with stocks, many companies may be overvalued but if overtime their price does not match their revenue generating potential, the price aligns.

    Personally, I don’t expect rents to skyrocket so the only conceivable way I can see Vancouver prices remain high is people buying today are willing to pay for the ownership premium.

    Noname

  10. Noname

    50% for owning = 50% more for owning

    Noname

  11. tqn

    ownership premium >< Van-City Slumlords = priceless

  12. WoW

    Nortel was trading at about 30times higher than its current price about 6 years ago – was it worth it, or was that just the price of it?

    Price and value are two different things, according to Warren Buffett. Price is what you pay, value is what you get. Sometimes price is above value and others it is below value. Generally, making money is done by buying at a reasonable price-to-value manner. Guess all those day-trading folks of a few years ago were buying value? Perhaps not – money can be made in overheated markets, but if/when the music dies down, then we will see if current price/value holds or changes. Time will tell, I think in the US we are seeing the other side of the coin, perhaps we only have one side to our coin, but again, time will tell, and its never different this time.

  13. Hmmm

    ‘get some money and start converting houses into 2 – 3 units – you can make a lot of money!’

    I thought Vancouver bylaw allows only 2 suites legally? (2 kitchens). When house shopping, I saw one house that had 3 bedrooms upstairs, 1 bachelor suite upstairs, and two 2 bedroom suites downstairs. The listing realtor was handing out the house specs along with the city order to shut down 2 of the suites. I guess if someone reports you, you’d be in trouble.

  14. Snick

    Please see my comments on yesterday’ post. I am being told that what I am seeing isn’t WORTH a damn.

  15. fish

    This market is till hot. Talking to some realtors about who is bying. Trade-ups, off-sore money and Alberta money mostly.

    Lots of big money which is shown in the over $1-2 mill range sales numbers.

    Not something most non-RE owning tax paying Vancouverites can compete against.

    Once again this is a tale of two markets. The rich -local/Alb/Hot monet from off-shore buying at whatever price, and the locals struggling with their d/p and looking at suiting to cover costs.

    I am holding out for now. Feels like NASDAQ 2000…The last crazy frenzy.

    Time will tell.

  16. robchipman

    Snick:

    Its not what you’re seeing. I’m sure that what you report seeing is accurate.

    Its what you’re concluding. Asking prices don’t indicate anything other than potential seller feelings. You’re not looking at willing buyers and sellers. You’re not even really looking at willing sellers.

  17. robchipman

    Fish:

    Sorry, typo on my part in Thursday’s numbers. I hope that it didn’t skew your thinking.

    Out of 252 sales there were 15 over $1 million, and 1 of those was over $2 million. That’s 6% of the market.

    Average sales price was $550,000. I agree that’s a lot of money, but I’m not sure I can agree that there is “lots” of big money in the $1 million to $2 million range. I don’t track West Van, its true, but I do track the Westside. However, counting back from right now and including yesterday, there were 9 sales in West Van over $1 million, with 1 over $2 million. That’s not huge.

  18. fish

    Rob- that’s more like it. Your typo made the over $2 Million a mind-blowingly high number. However who was I to doubt it, we trust your data implicitly.

    I know we mustn’t mention the US anymore, but there is out-right carnage there in the mortgage market. Lenders going out of business, even agency paper is dropping (FNM etc)…that’s what happens when people borrow more than they call swaloow and then rates or God forbid the asset drops in value.

    Based on numbers and comparables, I would say Vancouver is up there amongst the most expensive cities n N.America. Remember comparables (some small pull-down shack on the Westside with San Diego/NY/SF)

  19. Noname

    Fish said – “I know we mustn’t mention the US anymore, but there is out-right carnage there in the mortgage market. Lenders going out of business, even agency paper is dropping (FNM etc)…that’s what happens when people borrow more than they call swaloow and then rates or God forbid the asset drops in value.”

    Any local speculator not getting even a little bit nervous about what’s unfolding down South must be living in one heck of a fantasy land (given that he/she is aware of what’s happening).

    Noname

  20. Snick

    “Any local speculator not getting even a little bit nervous about what’s unfolding down South must be living in one heck of a fantasy land (given that he/she is aware of what’s happening).

    Noname”

    Well said. I am sure a lot of “investors” are getting nervous at the very least. At least the ones who objectively appraise the spin that is “spewn”.

  21. Snick

    “I’m sure that what you report seeing is accurate.”
    – Rob

    Gee, thanks.

    As I wrote in may recent reply to you on Wednesday’s post. the ball is now in YOUR court to cite evidence that contradicts my “laughable” observations.

  22. Snick

    Rob,

    I forgot to mention. Another new listing in Coquitlam in the Meadowbrook area. A three bedroom SF 20 year old house with suite potential. Very nice condition.

    ASKING price = 399K.

    Now, what would YOU rather have? A condo or a house? Take your pick.

  23. Snick

    I am such a dumkopf! It HAS a basement suite.

    Bid it up!

  24. wtf

    Why would any investors be nervous, haven’t you seen the new licence plates. You guys are crazy

  25. Geezer

    Snick said:
    “Now, what would YOU rather have? A condo or a house? Take your pick.”

    If they are both in Coquitlam and both in good condition I would take the house but it’s all in the location and the details. If the condo is in Downtown Vancouver it’s a no-brainer for me – I’d take the condo.

  26. Snick

    “If the condo is in Downtown Vancouver it’s a no-brainer for me – I’d take the condo.”
    – Geezer

    For THAT inflated price? When it will likely show a significant price decline at the end of this correction?

    I think you would be making a big mistake. At least with THIS place, you can cover SOME of the impending losses by renting out the suite.

    Right, Rob?

  27. Geezer

    Snick said:
    “For THAT inflated price? When it will likely show a significant price decline at the end of this correction?”

    Like I said, it’s all in the details. How do you conclude that the unspecified, unseen condo is overpriced compared to the house in the sticks?

    I was glad to see you acknowledge that after a decade of almost zero growth we are currently in a correction but I’m not sure why you would expect prices to significantly decline when it finally ends? And remember, recent numbers suggest there may be a lot more steam in it yet. Maybe it will go up another 30% and then drop 5% – who knows?

    Snick also said:
    “I think you would be making a big mistake. At least with THIS place, you can cover SOME of the impending losses by renting out the suite.”

    Maybe, but you would have to live in Coquitlam – that’s almost in Alberta! For some of us that would be an unacceptable price to pay.

    Which area do you think has the most potential for long-term capital appreciation, a physically confined, thriving downtown core surrounded by water or a distant, sleepy suburb with severly limited, traffic-choked access to Vancouver? Remember what they say, Location – Location – Location; with all due respect, Coquitlam ain’t it.

  28. Snick

    Okay. You win.

  29. Skeptic

    Geezer, you’re on the right track, a week ago people were extolling the virtues of Chilliwack. Coquitlam is decidedly central when compared with Chilliwack. Location, Location Location is the three ‘L’s of property.

  30. Strataman

    Geezer:
    “Which area do you think has the most potential for long-term capital appreciation, a physically confined, thriving downtown core surrounded by water or a distant, sleepy suburb with severly limited, traffic-choked access to Vancouver? Remember what they say, Location – Location – Location; with all due respect, Coquitlam ain’t it.”

    I do a lot of trouble shooting for downtown condo stratas’ and I agree with Geezer completely. What I can’t understand is the shock condo owners have when things don’t work right (or at all) in their buildings. As I tell the strata’s who employ me “sorry people you bought location not quality”! Most all finally come to that realization as they struggle with the maintenance budgets after developer warranties expire. In my professional opinion most of the present condo towers (and I live in one-love the lifestyle) will be very expensive to operate in 10 years from development. Personally I would only look at a maximum 10 year holding time for investment purchases before buying a newer model. Todays condos are sorta like computers and their high tech operating systems (fire systems, security systems, DDC water and heating systems for example) rapidly become obselete. I am already replacing door entry computer systems, with new updated computer hardware and software as the strata is no longer able to source parts!

  31. robchipman

    Yeah, but….I own rentals in even older buildings. The buildings have problems, trust me, but they still make me money. That tends to make me less concerned with age (and yes, I’ve witnessed plenty of leaky condo remediation too). After all, the tenant pays for it all in the end, right?

    Tell me this: how would you compare the downtown stuff you’re talking about now with, say, the ’70s era West End boxes?

  32. Snick

    “Coquitlam is decidedly central when compared with Chilliwack.” – Skeptic

    Oh, so you CAN be lucid at times.

    Bravo for modern pharmacology!

  33. Strataman

    “Tell me this: how would you compare the downtown stuff you’re talking about now with, say, the ’70s era West End boxes?”

    If I compare the original construction to the building standards of the day they were built extremely well. Most now are rundown due to lack of maintenance. As always maintenance is left until crisis state. The differance is (much like the 60’s cars compared to todays), now a revamped high speed elevator system for example is proportionally way more expensive then redoing a 1970’s elevator. Just as rebuilding a 1970 engine can be done by a skilled handyman, rebuilding a current OR 10 year old Mercedes is not possible with out a highly elaborate shop and ver skilled assorted technicians. Bottom line you got roughly the VALUE you paid for in the 70’s, now you get the absolute minimum quality/value required by law irregardless of what you pay. For instance a batch of homes I recently was involved in on First Nations Land (basic housing) have much better quality construction, plumbing, appliances, and millwork then all but the most expensive penthouse condo’s. Go take a look at the Squamish housing that was finished and you will see my point.

  34. Geezer

    Wow, I find myself agreeing with pretty much everything that was posted in reply, that’s a first!

    Certainly a big consideration with any condo is the age, construction technique and condition of the building. Buying into either an old or new building with inherent design problems could be a disaster.

    Older stucco buildings erected after the big building code changes (in the early eighties?) are an obvious red flag although I am sure some are just fine. Personally I am also very nervous about some of the newer places literally thrown up in the last 5 or ten years, particularly after the start of the current building boom when finding “good help” started to be an issue for developers. Remember “Faulty Towers” at Coal Harbour?

    I think some real deals (relatively speaking) can be had with some good quality older buildings. I would expect to pay a lot less per square foot than a newer, equal quality building. If you allow an amount that will easily cover “worst case” plumbing, roof and elevator assessments you may be safer than buying a newer place with questionable design or quality.

    An older place should also have fewer “hidden” problems thanks to strata council meeting records and you also know the monthly fees are real and have been proven over time, not the developers optimistic best guess.

    As an example, consider a 15 or twenty year old good quality building. It will probably have 2 or at most 3 elevators. Cost to do serious overhaul of everything mechanical and electrical will likely be under than $100,000 each. I was recently quoted $70,000 for a major overhaul of an old elevator in a 10 floor building.

    Replacing the roof will probably be around $5,000 per suite depending on size and number of suites and floors. These numbers are probably reasonably “ball-park” for a 100 unit building.

    Replacing all the plumbing, allow about another $5,000 per suite.

    If it is a concrete building with a well designed and well built envelope it should not offer any major problems, just caulking and perhaps painting or power washing. For the sake of argument allow another $2,000 per suite.

    So, if my single malt scotch hasn’t fogged my reasoning, we arrive at a grand total of around $1,114,000 for a 2 elevator building or $1,214,000 for a three elavator building or, for 100 suites $11,114.00 or $12,140,00 per suite for the most unlikely worst case disaster type situations where everything goes wrong at the same time.

    Conclusion? If you can find a well done, recently renovated suite in a good, well managed and maintained building you should be able to get it for a much larger discount per square foot than the potential worst case costs. And remember, that brand new suite isn’t brand new the day after you move in.

    Other important considerations, location (of course) and who lives there – crack heads or lawyers? (take the crack-heads) 🙂

    Some older places look like major bargains when compared to the newer shoe-boxes I see on offer.

    That’s my ten cents worth.

  35. Geezer

    Hey Snick, I wasn’t trying to “win”, just a difference of tastes, needs or opinions – thank God we are all different! Thanks for the gracious response though.
    Cheers 🙂

  36. Snick

    Check out how I’ve been “edited” on yesterday’s posts.

  37. Whybuywhenucanrent

    Rob wrote: “After all, the tenant pays for it all in the end, right?”

    Only if the property gets enough rental income to pay for expenses…

  38. Snick

    What a manipulator. See how Rob has rearranged and DELETED yeasterday’s posts.

  39. tqn

    “yeasterday’s posts.” or is it yesterday?

    oh my oh my, my 8 years old niece can tell the difference between listing price and sold price. why those listings could not be sold at the first place? OVERPRICED. That is why they have to reduce it.
    And listing prices do not count toward month end stats, SOLD prices do. And last time I checked, June 07 was in second record of smoking hot.
    Only tofu brain thinks that due to a few overpriced houses dont sell, the market is tanking!
    Come on, if you really want to learn, go making an offer on a property and dont remove subjects, you waste someones’ time, but will learn a ton more than you can ever dream.
    Oh, I bet, Miami link is coming up.

  40. Snick

    Who asked YOU?

  41. -A-

    tqn/rob:

    here is a surprise from a bear: a positive article from Florida.

    “Florida Real Estate Boom Due in Part to Foreign Buyers
    November 28th, 2005 | Housing bubble, real estate indicators, Appreciation, Investment, Mortgage
    The State of Florida definately is full of sunshine these days. Low unemployment, property values soaring, and a hedge against real estate depreciation. Inman News has an article today explaining how the influx of foreign home buyers from Latin America and Europe are creating an unprecendented demand in the Miami area.”

    Sounds a little like what is being said in Vancouver now.

  42. Coq_Mike

    Out of all the U.S. markets to pick from why always Florida?

    That State is a total vacation property and retirement community for the whole world. During the boom nearly 30% of all condo sales were just to British buyers.

    Looking for work in Florida is nearly like looking for work in Hawaii. Basically, most people will be working in the service industry.

    Is there not any better place in the U.S. to compare Vancouver to?

    Florida does get my vote for being a great example of real estate doom and gloom.

  43. tqn

    “Is there not any better place in the U.S. to compare Vancouver to?”
    that is the best they can come up with!

  44. Snick

    “Is there not any better place in the U.S. to compare Vancouver to?”

    San Diego

  45. -A-

    Coq Mike: There are better examples, but why bother, it’s the Re marketers themselves that hype the connection, the weather, the retirees, the foreign billionaires etc.

    I’m willing to bet that when the Vancouver market craters, the explanations and denials will be the same.

  46. Snick

    “I’m willing to bet that when the Vancouver market craters, the explanations and denials will be the same.” – A

    I’m sure you’ll see it here first.

  47. -A-

    Go on Snick, surely you don’t think Skeptic/Tqn/Rob would give us a “spin” surely not!

    Here is how it will play out:

    When it becomes too obvious that the boom has gone bust, Rob, will stage a rude exchange with a bear, and shut down the blog.

  48. Coq_Mike

    -A- said:

    “Here is how it will play out:

    When it becomes too obvious that the boom has gone bust, Rob, will stage a rude exchange with a bear, and shut down the blog.”

    This is by far the best post I have read.

    Thanks!

  49. Crabman

    Anybody know the current number of condos planned or under construction downtown? VHB used to keep a list.

  50. Skeptic

    I can’t speak for Rob or tqn but when you’re right, I’ll admit it.

    Its not yet.

  51. The unthinkable"Renter"

    Burn baby burn

  52. -A_

    okay, okay, Rob/Skept/Tqn
    Florida is in the US- but this is a little closer to home.

    http://albertabubble.blogspot.com/

    “Inventory in both cities is now over 10,000 including the commission free listings. Based on my rough calculations, at the current rate of sales, Edmonton has at least 5 months of inventory and Calgary has around 4 months worth of product”

  53. The unthinkable"Renter"

    A,

    how many months of product does Vancouver have?

  54. Snick

    If you want some interesting reading, check out this site: “Sacramento Area Flippers In Trouble”.

    What a mess.

    And, it’s coming to a town near you.

  55. robchipman

    -A-

    When the market turns I’ll start pointing out good purchase opportunities.

    Snick:

    “What a manipulator. See how Rob has rearranged and DELETED yeasterday’s posts”.

    “Check out how I’ve been “edited” on yesterday’s posts”.

    You and I both know you’re making that stuff up. You haven’t been edited or deleted. Tell the truth and shame the Devil now, young fella 🙂

  56. Snick

    Oh, there you are. Well, I’m not the only one who noticed. Things were getting quite strange there. It seems back to normal now, though.

    Earlier posts were deleted, and new ones were added. Things were also out of sequence. How can it all be explained?

    Beats me. I’m no computer whizz.

    And that’s the truth, so there.

  57. robchipman

    TUR:

    End of June, 2007: 14,093 active listings/4429 sales for June = 3.18 MOI

    Last June: 12,218/4,175=2.92 MOI

    Some say a buyers market exists when MOI is 6 or more.

  58. Snick

    Rob,

    You never did answer the question. “Is it FUN to pretend to be peering out from a confessional booth?”

    What is it you would like to confess to?

  59. Snick

    Be sure to also check out this site: Charles Hugh Smith”.

    His latest article is about the possible RE “Swan Dive” that is likely looming.

    Ugly. Very ugly

    Yet good. Very good. For some.

  60. Jesse

    i enjoy this site and thank Rob for taking his time and enery to provide the numers…

  61. robchipman

    Snick:

    Glad to see you got the whole edited and deleted thing worked out. What did you do? Press “refresh”?

  62. Annon

    Hmm… if a RE agent thinks there many good buying opportunities at a time like this, not sure if buyers really need a RE agent to tell them about good buying opportunities when it becomes apparent that the market has been declining with no signs of recovery near term. No offense, Rob. Just judging purely by simple logics.

    ————— taken from a blog ————-
    … “Commercial real estate is through”. I asked him why and he told me about cycles: Residential followed by commercial followed by industrial, and how they peak in that order. He went on to tell me about how Sam Zell marked the top in commercial and there was at most one year left or so in industrial. The developer I was speaking to “cashed out” over the past few years.
    —————————————————–

    Another interesting yet true comment: “People sell at a high price when they could and keep the cash. If people sell when they have too, losses tend to result from it. This is especially true when comparing Sam Zell and Bear Stearns.

  63. tqn

    Snick, A
    Don’t be sourgrape. I know you have missed the opportunities, but if you go further east, there is plenty.
    Nice pointing our the albertabubble blog; come on man, what do you expect it to say? price will go up forever? even a bull blog does not say it. You gotta think harder!
    Price up, price down, inventory build up, florida, miami yada yada yada…we have been beating these things to dead. I accept the market as it happens. If there’ll even be a crash or correction or a whatever, I would accept it and deal with it. Acceptance will make you feel better!

  64. robchipman

    Annon:

    I think you might be misinterpreting me. I’m not saying that there are many good buys out there right now (there are some); in terms of the value of me pointing out good buys when they do come around, or whether those buys will be obvious, let’s simply reflect on the fact that when prices are low and metrics are good most people don’t buy, even if they should. We see evidence of that on this blog, time and again, and I have seen it in action a million times. Believe me, if we have a crash and you can buy positive cash flow real estate in Vancouver for 10% down, people will still run from it.

  65. ObserverX

    Rob: How about giving us the numbers for one of these “good buys” right now and see how many people agree it’s a good buy?

  66. robchipman

    ObserverX:

    I supplied the numbers on a recent duplex. Blog gave it a thumbs down. Some experienced investors competed to get it. We sold it over asking, and over appriased value, but under tax assessment.

    In my experience there is no shortage of people who will give an investment a thumbs down. That doesn’t necessarily speak to the quality of the investment.

    Anyway, 7000 blk of 4th Street, Burnaby. Its in the blog a few weeks back. Take a look, see what you think.

  67. ObserverX

    The one discussed in the Jun 15 post? I think only one person responded so hardly a “Blog gave it a thumbs down”.

    In any case, I’m not clear on your assumptions re: the numbers. You say it’s under-rented as a house for $2K/mth and that it could be made to be cash flow positive by suiting and generating $4200 to $4500. And you say it’s an $800K property.

    How much will it cost to suite? How about the time and cost of permitting? I presume converting from a house to 4 suites is not just a paint job so let’s say it’s $100K to suite. I haven’t a clue what is the effective cost of permitting.

    In any case, with 25% down on the original $800K, that’s a $600K + $100K reno = $700K principal. At, say, 6% interest rate (or is it more because it’s a loan on an investment property??), that’s a monthly payment of $640/$100K*$700K = $4480 per month or already at the top of your gross rental income range. This is before taxes, maintenance, etc. Factor in contingencies and I don’t see how you can break even.

    If that’s the best that the market can offer, I’ll pass.

  68. robchipman

    $100k per suite is so far out of the ballpark that its funny. The whole place will be reno’d for less than that, and done well.

    You don’t pay more on mortgages for rental property (at least nobody I know does).

    Breaking even at 25% down in Vancouver is a great deal. Period. At any time. It makes 5% per year 20%. Long term we do better than 5%. If you’re going to pass on a property because it doesn’t break even at 25% down (with exorbitant reno costs and unrealistic mortgage costs) when the market is very high and cash flow positive properties are hard to find, I can respect that.

    But, I think it points out that there is a difference between you and the experienced property buyers who competed for the property, which is my point. That place positively reeked of value. Mortgage lenders saw it. Appraisers saw it. We saw it. (And I mean mortgage lenders who weren’t lending on it, and appraisers who did appraise it).

    Yes, if the market reverses then the buyers don’t get fast appreciation, but are they in trouble? It will cash flow with about 30% down (yes, including all costs), and if the market goes up any more this year, figure out the gain: for every $100 of price they paid $30. If the $100 goes up $5 they make 16.67%. If the market drops, they hold and cash flow at 30% down. If you’re pre-disposed to real estate that thing was a smoker! I would have bought it myself or sold it to my brother.

    With the reno they probably mortgaged about $650k. ($825+$100=$925*.7=$650K @ 5.29% (which is the rates were were getting at sale time)=$3,880/month). Its a good deal. (Plus, you’ve got a good argument to get your taxes reduced, since it sold for less than assessment).

  69. ObserverX

    Clearly I was saying $100K total, not per suite. Unless the house started off with 4 kitchens and 6 baths (you’re not gonna get $4500/mth total rent in Burnaby if they’re all 1 bath units), I can’t see how it’s gonna get renovated for much under $100K.

    OK on the 5.29% now, but what about when you have to renew in 5 years? Don’t you want a cushion? So you’re at $3900 and think you can get $4500 so that gives you $600/mth which I grant will probably cover taxes & maintenance, but I doubt it leaves anything to deal with contingencies.

    I don’t think you’re gonna get a tax reduction if you’ve added a $100K improvement — I suggest the tax dept would be more likely increase your taxes!

    Plus you went from an initial position of saying it would cash flow at 25% to now saying it’s 30%.

    Not trying to say that this place isn’t a good investment *relative to other places at this time*, but simply saying your optimism may be a bit, well … optimistic.

  70. robchipman

    ObserverX:

    I can only say that rental properties are my stock in trade. I’ve rented thousands, and sold hundreds. This one is a winner. Time will tell, anyway.

    (Sorry about the $100k per suite – first time through I was sure that’s what you wrote – sorry).

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