88 replies to this topic

[IPH]

This is true. I'll note that the OP was referring to ROE (I think he meant ROI). Financing expenses would normally be included in a ROI calculation. ROI will vary though, as it depends on your financing terms.

 

What's the average cap rate in downtown Victoria these days? I imagine its pretty low. 3.5%?

 

Not sure about individual condo units but multi family buildings appear to be going around 3-3.5% in the downtown area.  They can creep up to 4 or 5 in some of the outer municipalities or for older buildings that have had significant deferred maintenance but then anyone buying something with a lot of deferred maintenance will have to spend a lot to bring them up to snuff which will also impact the cap rate.   

[MarkoJ]

one bed without parking just rented out at $1,650... so if the pricing point is at 330k, the ROE would be 6%.

 

 

the real question is does 330k make the square foot price into low $700? Those units were sold out within the first week for the savvy ones.....

 

Just my 2 cents

 

I have a friend that owns 5 units at the Jukebox and $1,650 without parking is not realistic for that square footage. Try more like $1,395 to $1,450 max if you want a quality tenant. 

 

Something like this is 100 sq/ft bigger and you can pay extra to get parking (would be a tough option at Jukebox) -> https://www.usedvict...Jr-1BR_33812255

 

And there are way better deals on usedvic as we speak. 12th floor, 530 sq/ft unit at Promontory with parking for $1,475. 

 

I think $1,395 is solid, but let's not get carried away with numbers.

Edited by MarkoJ, 17 September 2019 - 02:33 AM.

[ovovov]

I have a friend that owns 5 units at the Jukebox and $1,650 without parking is not realistic for that square footage. Try more like $1,395 to $1,450 max if you want a quality tenant. 

 

Something like this is 100 sq/ft bigger and you can pay extra to get parking (would be a tough option at Jukebox) -> https://www.usedvict...Jr-1BR_33812255

 

And there are way better deals on usedvic as we speak. 12th floor, 530 sq/ft unit at Promontory with parking for $1,475. 

 

I think $1,395 is solid, but let's not get carried away with numbers.

 

well, Marko, the quality tenants in this case are international students whose parents have deep pockets or selling vaping products just across the street.

seen from the fancy cars at the parking lots and dealing with juice cartridges on their e-cig

 

Also there is something called Wechat where the potential buyers and renters gather and communicate- the real underground /virtual economy now hits Victoria downtown- that now is distorting the market. 1395-1400 is for local market rate, and there are people willing to pay for a premium for the new suites.

[Mike K.]

A $300k unit with a 20% down payment would be carrying a $240,000 mortgage that would yield an $1,120 monthly commitment if you qualify for a rate at 2.9%. Add to that strata ($150), insurance ($100) and tax ($150), you’re looking at $1,520 per month to carry that unit (YMMV of course, give or take $50).

In that scenario you would need $1,600 to make it work. But if you’re putting down 30-40-50%+ you’re in a very different position, too.

[Victoria Watcher]

I have a friend that owns 5 units at the Jukebox and $1,650 without parking is not realistic for that square footage. Try more like $1,395 to $1,450 max if you want a quality tenant.

s.

this seems counterintuitive. does a lower rent move you toward a higher quality tenant? seems it would be the opposite.

Edited by Victoria Watcher, 17 September 2019 - 05:19 PM.

[LJ]

this seems counterintuitive. does a lower rent move you toward a higher quality tenant? seems it would be the opposite.

I don't think so, with the lower rent the renter knows he got a deal and will look after the place so that he can stay there.

 

Higher rent just means you have more money but might feel entitled to take liberties with the property.

 

When we were renting out we always priced lower than market, got good tenants and told them not to bother us if a light bulb burned out etc.

 

Although we wound up with one clown, an engineer no less, had an element fail on the coil top cookstove. We were away, he called an electrician to come fix it and presented me with the bill. They were gone the next month.

[Mattjvd]

this seems counterintuitive. does a lower rent move you toward a higher quality tenant? seems it would be the opposite.

Lower rent means you'll get more applications and can pick the best tenant after meeting them in person.

[Victoria Watcher]

I see that makes sense.

I’m still not sure a poor quality but higher rent paying tenant does over $200 damage to the unit each and every month of her tenancy. that’s a lot of light bulbs. or even stove fixing electrician visits.

Edited by Victoria Watcher, 18 September 2019 - 04:06 AM.

[Mike K.]

It all comes down to how much you can put down as a down payment, mostly. Rates are edging down now which is helpful, but you still need 25-30% down to make $1,400/month rent work.

[Victoria Watcher]

It all comes down to how much you can put down as a down payment, mostly. Rates are edging down now which is helpful, but you still need 25-30% down to make $1,400/month rent work.

why put that $150,000 down though? for it to sit and do nothing for you. if you can move that $150,000 to something that pulls in 10% you’d be foolish to use in for a down payment to reduce your 3% mortgage.

[Mike K.]

If it were easy to make 10% on only $150k wouldn’t everybody be doing it?

There is no safer place for your money than a GIC, but the best you’re going to get with rates falling is 2.45% on a five year term according to GIC Direct. Ouch.

Whereas investing that $150k into real-estate gives you the opportunity to have the monthly carrying costs covered, and over the medium-long term the value of that purchase is likely to grow while the principal on the debt diminishes.

And if you need capital, there is a lending institution likely to give you a low-interest loan secured against your real-estate asset.

[Victoria Watcher]

well that’s probably what you should do. put the least down you can to get your lowest mortgage rate then take out a 2nd to get some of the money back to use in higher return investments. smith manoeuvre essentially.

[Mike K.]

If you put down the least you have to, you may not meet the criteria for rental rates in the current market.

It’s a bit of a toss up. But of course you can always sell your real-estate asset and recover your investment, and quite likely some appreciation as well depending on how long you’ve held it.

[Victoria Watcher]

it’s a toss up for sure. I know guys that have no interest in real estate investing. they’d rather rent a $3 million home for $7,000 a month and put all their money in other investments. and it works if they are experts in that other field and don’t suffer some bad luck.

and that $7000/mo. gets them a far nicer rental home than a $7000 mortgage wound ever get them.

Edited by Victoria Watcher, 18 September 2019 - 06:26 AM.

[Mike K.]

That’s sort of ...odd. To spend $84k a year on rent. But hey, all the power to them if they have other investment vehicles.

[ovovov]

well that’s probably what you should do. put the least down you can to get your lowest mortgage rate then take out a 2nd to get some of the money back to use in higher return investments. smith manoeuvre essentially.

as long as the income supports 2nd loan.

and the 2nd loan better generates more than the current market lending rate.

 

The risk in Smith Manueuvre is the highly leveraged position and it's costly to liquidate the position ( well unless the individual has ways to reduce the selling cost like being a realtor  etc)

[MarkoJ]

Lower rent means you'll get more applications and can pick the best tenant after meeting them in person.

 

Exactly this. I've been renting multiple personal condos downtown since 2011 and it is all about having enough applications to find the perfect tenant. I remember once I had 8 applications for my unit at the Promontory but I didn't have a good gut feeling about any of them and I went away to Europe for a month. Then I came back and rented it out to a medical resident who stayed there for two years and I never heard from him once.  I lost two months in total but for me dealing with BS is just not worth it.

 

I've seen too many **** shows in my career when it comes to selling tenanted properties. The few newer trashed condos I've dealt with the rent was always above market value. i.e., tenant couldn't find anyone else to rent from so they paid more than market. 

 

Also, a lot of super complicated/difficult tenants when the landlord was in a hurry to rent out.

 

And just use common sense which isn't that common. Would you as a tenant rather rent for $1,650 from an amateur landlord or for $1,550 from a professional management company and the unit is 100 sq/ft bigger where you can get parking anytime you want?

 

If I have an application for $1,650 I first thing in the back of my head is why aren't they renting from Bosa for $1,550. They could be super incompetent with craigslist/usedvic (unlikely) or for some reason Bosa doesn't want to rent to them (more likely).  

 

4 months ago I rented out a one bedroom at Encore and 2 months ago I rented out a unit at Promontory.....the rental market isn't crazy anymore like it was 2-3 years ago.

Edited by MarkoJ, 19 September 2019 - 01:23 AM.

[MarkoJ]

That being said in terms of making the numbers "work" the Jukebox would be the closest thing to that.

 

There are 800k units at Encore renting for $2,500/month with strata fees of $475/month. 

[ovovov]

Exactly this. I've been renting multiple personal condos downtown since 2011 and it is all about having enough applications to find the perfect tenant. I remember once I had 8 applications for my unit at the Promontory but I didn't have a good gut feeling about any of them and I went away to Europe for a month. Then I came back and rented it out to a medical resident who stayed there for two years and I never heard from him once.  I lost two months in total but for me dealing with BS is just not worth it.

 

I've seen too many **** shows in my career when it comes to selling tenanted properties. The few newer trashed condos I've dealt with the rent was always above market value. i.e., tenant couldn't find anyone else to rent from so they paid more than market. 

 

Also, a lot of super complicated/difficult tenants when the landlord was in a hurry to rent out.

 

And just use common sense which isn't that common. Would you as a tenant rather rent for $1,650 from an amateur landlord or for $1,550 from a professional management company and the unit is 100 sq/ft bigger where you can get parking anytime you want?

 

If I have an application for $1,650 I first thing in the back of my head is why aren't they renting from Bosa for $1,550. They could be super incompetent with craigslist/usedvic (unlikely) or for some reason Bosa doesn't want to rent to them (more likely).  

 

4 months ago I rented out a one bedroom at Encore and 2 months ago I rented out a unit at Promontory.....the rental market isn't crazy anymore like it was 2-3 years ago.

 

sounds like Marko is really doing well with his condo investments. Just curiously to know how much did you pay at Encore when you brought it? I assume it is one bed room?

Did you sell the other unit you brought? 

[Victoria Watcher]

I've seen too many **** shows in my career when it comes to selling tenanted properties. The few newer trashed condos I've dealt with the rent was always above market value. i.e., tenant couldn't find anyone else to rent from so they paid more than market. 

 

 

but if the rent was say $300/mo. over market were they trashed to the tune of $300/mo?  you might say "well i never heard from the great tenant i selected for 2 years" but you also lost $7,200.  i'd replace a few light bulbs for $7,200.

Edited by Victoria Watcher, 19 September 2019 - 02:55 PM.