23 replies to this topic

[Mike K.]

Not sure. I know they quoted a Trieagle rep but not sure if that is where those stats came from.

This artcle was specifically about why developers can't afford to build rentals but the stat should still apply. Either way 8-12 % profit is not the massive amount everyone seems to scream about.

Are they counting profit as a percentage of the acquisition, soft expenses, bank loan and development costs, or, what, exactly? I realize the article may not have explained this adequately (that's a shame if it didn't, but I wouldn't be surprised) but unless we have a definition of profit the term and its percentages are meaningless.

[G-Man]

Yeah no more info than that but I am sure that someone could write the author and find out.

[Ms. B. Havin]

Quote from p.8, MondayMagazine, April 3-9, 2008, "Nowhere to Go" by Jason Youmans:

"It's not economically feasible to build a rental," says Steve Copp, president of Canadian Home Builders' Association Victoria. "Building an 800-square-foot condo at, say, $350 a square foot -- which is what they're worth -- means they're worth about $280,000. What are you going to get for rent? Maybe $1,000 or $1,200 a month? Do the math. It just doesn't make any sense. Your return on your money is not even close."

Copp says developers typically look to make between $40,000 and $60,000 gross profit per door on multi-unit projects.

Note: gross profit, not net.

The article also points out that building rentals is a non-starter because rents have stayed artificially low here. (That's funny, I've never exactly heard that Victoria's is a renter's bargain paradise...)

And it points out that "Bad policy starts at the top," with problems inherent in our tax system, especially the capital gains tax, which basically penalizes people who might build rentals. When you build a condo, the buyer pays the GST, not the developer. But if the developer builds rentals, s/he's stuck with the GST. On the capital gains issue, see also the article by Cindy Harnett in today's T-C:

Legislation would give incentives to landlords
Victoria MP Denise Savoie's support based on experiences in city politics
Cindy E. Harnett, Times Colonist
Published: Tuesday, April 08, 2008

Victoria NDP MP Denise Savoie is throwing her weight behind a bill before the House of Commons to give landlords a tax incentive to buy low-cost residential rental property.

Bill C-532 would create new affordable rental housing in Canada by allowing small investors to defer payment of capital gains taxes on the sale of rental properties to invest in other properties.

"This is one piece of a much, much bigger problem, but the only way we're going to tackle it is one piece at a time," Savoie said.
(rest of article here)

Y'all know Canada doesn't have a federal housing policy, right?

[Caramia]

BC does have rent control. When I was working in property management we saw a cost rise of almost 15% for our residential properties, but we were limited to being able to raise rents at about 4% for that year. What that does is create a disincentive for landlords to rent to long term tenants, or to behave in a way designed to keep tenants - since when a suite changes over the rent can be raised to meet costs (and make up for suites that are not changing tenants.) I am not sure what the answer is, since I rent myself and certainly don't support unregulated rent hikes, but there is something awry in the system.