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Victoria's residential rental market


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#441 Casual Kev

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Posted 29 September 2018 - 12:00 AM

In the Lower Mainland, specially in the suburbs, you deal with some absolutely ridiculous rent-to-property value ratio. You still see full houses in neighborhoods where pretty much every SFH goes for at least a mil renting at low-mid 2,000's. Once the ratio becomes this disconnected, you're no longer in the business of renting; you're speculating on the property. And if the business is speculation then there's no point in building purpose-built rentals. 

 

you would only be going in the hole if the value did not increase whatsoever.  what if it went up just $20,000 per year in value?

 

450,000 today

470,000 in 2019

490,000 in 2020

510,000 in 2021

 

now you are up $24,000

 

In the Lower Mainland, specially in the suburbs, you deal with some absolutely ridiculous rent-to-property value ratio. You still see full houses in neighborhoods where pretty much every SFH goes for at least a mil renting at low-mid 2,000's. Once the ratio becomes this disconnected, you're no longer in the business of renting; you're speculating on the property. Sure you can still turn a profit on a condo you're renting even if rent doesn't come close to covering the bills... but the underlying assumption is that to realize the gains you have to flip the property. And if the business is flipping then there's no point in being a professional landlord.



#442 tjv

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Posted 29 September 2018 - 06:46 AM

Seems to me that renters aren't very good at math. Take for instance a purpose built apartment building on the Veterans Memorial Parkway, now being sold as condos. $450,000 for a 2 bedroom on a noisy street. Suppose I had $45,000 for the down payment. Lets do the math.

 

Mortgage payment.......$2120.00 per month

Property tax..................$200.00 per month

Insurance.....................$100.00 per month

Strata fees...................$150.00 per month

 

Not including maintenance and repairs, that is $2570.00 per month, and I would be really, really lucky to get $1500.00 per month in rent.

 

So I would going in the hole $1070.00 per month. Not a very good investment.  Maybe Armpit SK is the place to be.

I looked at buying a condo as an investment earlier this year.  It was already rented so it was easy to calculate my expenses and my math was similar to yours so of course I didn't pursue it.  Rents in Victoria need to go up substantially and I think we will see that over the coming years

 

you would only be going in the hole if the value did not increase whatsoever.  what if it went up just $20,000 per year in value?

 

450,000 today

470,000 in 2019

490,000 in 2020

510,000 in 2021

 

now you are up $24,000

Except the real estate market is now flat and I think we will either see a slight decrease over the next few years or at best flat



#443 snub

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Posted 29 September 2018 - 10:39 AM

$150/mo in strata fees?  Where do I sign up?

I'm assuming your strata fees are higher? How much do you pay?



#444 Nparker

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Posted 29 September 2018 - 11:27 AM

I own a 2 bedroom/1 bath almost 900 square foot condo, and my monthly assessment is quite reasonable at just under $300.



#445 spanky123

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Posted 29 September 2018 - 11:54 AM

 

Except the real estate market is now flat and I think we will either see a slight decrease over the next few years or at best flat

 

True but property taxes, assessments, insurance, maintenance and utilities won't be flat. I would estimate that many one bedroom condos downtown are close to $700-$800 in monthly costs even if the unit was free.



#446 Casual Kev

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Posted 29 September 2018 - 12:31 PM

I'm assuming your strata fees are higher? How much do you pay?

 

My brother owns a no-frills 1+den 90's condo and he pays $250/month. I don't think I've ever seen anything larger than a 1 bed pay anything less than $200/month to strata.



#447 sebberry

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Posted 29 September 2018 - 04:37 PM

I'm assuming your strata fees are higher? How much do you pay?

 

Mine are around $380 for 2br/2ba, 1982 condo.


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#448 snub

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Posted 29 September 2018 - 07:16 PM

^

$380.....wow, I had no idea they were that high. Thinking back about the ad for the condo, it actually said "maintenance fees", not "strata fees". I am/was assuming they are one in the same.



#449 tjv

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Posted 30 September 2018 - 07:44 AM

True but property taxes, assessments, insurance, maintenance and utilities won't be flat. I would estimate that many one bedroom condos downtown are close to $700-$800 in monthly costs even if the unit was free.

True, and you might be seeing a few percentage points increase in those items year over year.  I would think $700-800 in those costs are at the bottom end



#450 spanky123

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Posted 30 September 2018 - 08:27 AM

True, and you might be seeing a few percentage points increase in those items year over year.  I would think $700-800 in those costs are at the bottom end

 

And if you had even a $300K mortgage, the interest costs alone would mean that you would have to charge at least $1,500 a month in rent just to break even. As interest rates continue moving up so will that number. 

 

The point is that it is not greedy homeowners who are causing the problem. As housing prices start to flatten out and the promise of at least a lift in asset value starts to diminish, fewer and fewer people are going to bother renting their properties. They instead will be sold to those who can afford to pay the prices and rental stock will drop even further.


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#451 MarkoJ

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Posted 30 September 2018 - 03:15 PM

For cash flow purposes you have to buy small condos -> http://victoria.citi...do-in-victoria/

 

The closest I've seen recently to cash flow neutral would be studios at the Ironworks pre-sale. They had 400 sq/ft studios at $279,900. I calculated those around $100 to $200 cash flow negative depending on the rent and 3% mortgage at 20% down payment.

 

The bigger you go the more you'll be bleeding every month.


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#452 spanky123

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Posted 30 September 2018 - 04:02 PM

For cash flow purposes you have to buy small condos -> http://victoria.citi...do-in-victoria/

 

The closest I've seen recently to cash flow neutral would be studios at the Ironworks pre-sale. They had 400 sq/ft studios at $279,900. I calculated those around $100 to $200 cash flow negative depending on the rent and 3% mortgage at 20% down payment.

 

 

 

The bigger you go the more you'll be bleeding every month.

 

You would be hard pressed to get a fixed mortgage these days at 3%


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#453 tjv

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Posted 30 September 2018 - 04:03 PM

so the best deal is still cash flow negative! wow.  Are you thinking about dumping some/all of your rental properties with sale prices essentially flat now?



#454 MarkoJ

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Posted 30 September 2018 - 04:10 PM

You would be hard pressed to get a fixed mortgage these days at 3%

 

I've never taken a fixed term mortgage and doubt I ever will in my lifetime (unless for some reason fixed mortgages at time of mortgage end up being cheaper than variable).

 

Lots of places you can get a 2.7% variable right now and most of my clients going fixed are getting 3.29% so 3% is right in the middle.


Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2023 | Fair Realty

www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#455 MarkoJ

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Posted 30 September 2018 - 04:15 PM

so the best deal is still cash flow negative! wow.  Are you thinking about dumping some/all of your rental properties with sale prices essentially flat now?

 

Once I pay capital gains not really worth....long term retirement plan. If I have 10-15 rental properties mortgage free by 50 yrs old not only do I have cash flow I can live off monthly, but I am also sitting on solid asset value.

 

and I would buy something that was a couple hundred negative cash flow if I thought the property had upside in a flat market. I never ever bet on the market itself.

 

but not going to go out and buy something that is $500-$1000 cash flow negative.


Edited by MarkoJ, 30 September 2018 - 04:16 PM.

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www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#456 Casual Kev

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Posted 30 September 2018 - 04:21 PM

Liking your strategy Marko, you could teach the people who sink incredible amounts of money trying to get rich quick a lesson.



#457 MarkoJ

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Posted 30 September 2018 - 04:28 PM

Liking your strategy Marko, you could teach the people who sink incredible amounts of money trying to get rich quick a lesson.

 

Even when I bought my first pre-sale condo from Chard at 23 yrs old it was a super long-term plan. I want to try to hit 10 rental properties by 40 and then switch (shorten) the amort on the mortgages to cash flow neutral and depending on rents and interest rates should have everything paid off by 50 or sooner.

 

The quick rich crap is complete non-sense. If you go to those things, you'll notice the participant common sense level is low at those events.


Edited by MarkoJ, 30 September 2018 - 04:29 PM.

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Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2023 | Fair Realty

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#458 Mystic-Pizza

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Posted 30 September 2018 - 05:12 PM

Even when I bought my first pre-sale condo from Chard at 23 yrs old it was a super long-term plan. I want to try to hit 10 rental properties by 40 and then switch (shorten) the amort on the mortgages to cash flow neutral and depending on rents and interest rates should have everything paid off by 50 or sooner.

 

The quick rich crap is complete non-sense. If you go to those things, you'll notice the participant common sense level is low at those events.

 

They are also almost ALWAYS a Pyramid Scheme of some sort.


Edited by Mystic-Pizza, 30 September 2018 - 05:13 PM.


#459 tjv

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Posted 01 October 2018 - 05:52 AM

I've never taken a fixed term mortgage and doubt I ever will in my lifetime (unless for some reason fixed mortgages at time of mortgage end up being cheaper than variable).

 

Lots of places you can get a 2.7% variable right now and most of my clients going fixed are getting 3.29% so 3% is right in the middle.

The last thing I would consider is a variable mortgage right now, rates will very likely go up again later this month and I would plan on another 3-4 rate increases next year.  With the US fed increase last month we are 0.75% behind the US right now, so expect a lot more rate increases to come

 

You investment strategy isn't for me primarily because I like positive cash flow which is easy to get in commercial real estate, but to each his own.  Plus you can have solid tenants like national retailers and banks where you know the rents will be paid each and every month without worry and you bill all expenses, maintenance and management fees right to the tenants thru triple net



#460 MarkoJ

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Posted 01 October 2018 - 11:09 AM

The last thing I would consider is a variable mortgage right now, rates will very likely go up again later this month and I would plan on another 3-4 rate increases next year.  With the US fed increase last month we are 0.75% behind the US right now, so expect a lot more rate increases to come

 

You investment strategy isn't for me primarily because I like positive cash flow which is easy to get in commercial real estate, but to each his own.  Plus you can have solid tenants like national retailers and banks where you know the rents will be paid each and every month without worry and you bill all expenses, maintenance and management fees right to the tenants thru triple net

 

I've saved a small fortune going variable my entire life so far. My rule is if the spread at the time of the mortgage is more than >0.5% I am going variable every time. 1 in 10 times you will do better with fixed, but 9 out of 10 times variable will beat it out. At this point I am so far ahead that I can afford to roll the dice and take a few loses. There were times I went variable and then unexpectedly the rates dropped making for a huge savings.


I find people go five year fixed due to some sense of "security," problem is if rates exploded you are 100% screwed. What are you going to do at the 5-year mark when you have to refinance at 10%?

 

As far as commercial properties pretty difficult to get into that right off the bat. I was still working at VIHA when I had purchased my first two pre-sale condos. 

 

I also have a ton of spin-off stuff of pre-sales....

 

- I typically know about the pre-sales in advance so I always get the best possible price

 

- On top of the best possible price I get another 3%100k+1.5%balance discount (my commission)

 

- I treat my tenants fairly so I've already had two tenants purchase properties with me.

 

- When real estate is slow I'll go on as the strata president or treasurer in the buildings where I own. I did that at 834 Johnson for a couple of years and I must have got at least 10+ listings out of it. Simple concept, I stand up at an AGM, introduce myself as a REALTOR®, go on the strata council and then when people want to sell they are like hmmmm...isn't our strata president a REALTOR®?

 

- Etc., basically I have spinoffs that I wouldn't with commercial. 


Edited by MarkoJ, 01 October 2018 - 11:14 AM.

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www.MarkoJuras.com Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


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