991 replies to this topic

[magmazing]

So say I buy one of the units on the Johnson Street side because I make less than $69k a year. What issues/limitations would come up if/when I want to sell down the road? (which for me would be more likely long term) 

 

Is that tower going to be built with cheaper materials and bare bones amenities and no parking?

[MarkoJ]

So say I buy one of the units on the Johnson Street side because I make less than $69k a year. What issues/limitations would come up if/when I want to sell down the road? (which for me would be more likely long term) 

 

Is that tower going to be built with cheaper materials and bare bones amenities and no parking?

 

This finishing would be fine....no need to worry about that. The issue and limitations is re-sale value.  I talked about it earlier in this thread in reference to Dockside Green.

 

The details are super bad.  For example, the seller must pay out of pocket for an appraisal before the unit goes on market and then you can only sell for 80% max of the appraisal (they rarely sell for 80% of max, usually 70 to 77% as the market doesn't even support 80% for these units).  The appraisal is only valid for 6 months and in slower markets the units take longer than 6 months to sell.  The buyer has to be a resident of Victoria for the last 12 months prior to purchase, has to live in the unit (fair enough), [the units cannot be rented out by owner], but a bunch of other stuff.  At one point with the Dockside Green affordable units you weren't supposed to own a car but I think they amended that.

 

Not sure why anyone would buy an affordable two bedroom.  It would make way more financial sense, in my opinion, to buy a 1 bedroom market unit at Yates on Yates and rent a two bedroom across at the street at Yellow.  You would have a foot in the market with better appreciation and you would be living in a two bedroom.

 

As I said, I really like the concept but people really get shafted on re-sale.  I am not smart enough to figure out a better way but there should be one...like maybe after 5 years of ownership you can sell for 85% of appraiser value? After 10 years 90%, etc.

Edited by MarkoJ, 14 May 2017 - 08:15 AM.

[MarkoJ]

So say I buy one of the units on the Johnson Street side because I make less than $69k a year. What issues/limitations would come up if/when I want to sell down the road? (which for me would be more likely long term) 

 

Is that tower going to be built with cheaper materials and bare bones amenities and no parking?

 

To make it really simple, some theoretically numbers.

 

You buy a market affordable unit for $250,000 and 10 years later it is worth $270,000.00

 

You buy a non-market affordable unit for $300,000 and 10 years later it is worth $400,000

 

If you want a roof over your head and don't want to deal with Landlords, great. If you think one day you might want to buy a bigger condo or a single family home not sure if they are a great idea from what I've seen at Dockside Green.

Edited by MarkoJ, 14 May 2017 - 08:15 AM.

[Nparker]

I am puzzled why the Johnson street building isn't being built simply as a rental property.

I'd also like to see more glazing and less hard surface on the upper floors of both buildings (as hinted at in some, but not all, of the renderings).

[MarkoJ]

I am puzzled why the Johnson street building isn't being built simply as a rental property.

I'd also like to see more glazing and less hard surface on the upper floors of both buildings (as hinted at in some, but not all, of the renderings).

 

It is a pretty massive capital investment with a 2 to 2.5 year build out which leaves a lot of market risk on the table. Dave is a super smart guy, I am sure he knows what he is doing.

[Nparker]

It is a pretty massive capital investment with a 2 to 2.5 year build out which leaves a lot of market risk on the table. Dave is a super smart guy, I am sure he knows what he is doing.

I don't doubt that the financial logistics have been well-considered, it just seems like it would have been easier to go the full rental route, à la Hudson Walk.

[Mike K.]

Depending on when the land was purchased, rentals may be too risky of a proposition in this market.

Even there is a finite amount of renters capable of carrying the cost of top-end rentals, whereas with condos you have both the buyer-resident market and the investor market to make the math work.

[Nparker]

Depending on when the land was purchased, rentals may be too risky of a proposition in this market.

And yet it is almost guaranteed that 50% of the units purchased in the market-rate condo building will be rented out by their owners. Can the "subsidized" units in the Johnson Street building be rented out or must they be owner-occupied to meet the purchasing criteria?

[Mike K.]

The risk is far more manageable when approached piecemeal.

For all we know the banks said no, that there are 500 top-end units coming online and we can't risk another 120 with a move-in date of summer 2020. That's not to say that's what happened, but without ANY government intervention in the rental market sometimes developers get cold feet and move towards a near certainty scenario.

[Kapten Kapsell]

And yet it is almost guaranteed that 50% of the units purchased in the market-rate condo building will be rented out by their owners. Can the "subsidized" units in the Johnson Street building be rented out or must they be owner-occupied to meet the purchasing criteria?

There's no absolute guarantee that this will happen- apparently the Wave was 80% owner occupied when first built and the Aria was majority owner occupied when first built. I suppose we have to wait and see what will happen in this development...

[Nparker]

There's no absolute guarantee that this will happen-

The only absolute guarantees in life are death & taxes. I would be VERY surprised if a large percentage of the units in the market-rate building aren't rented.

[VicHockeyFan]

Can the "subsidized" units in the Johnson Street building be rented out or must they be owner-occupied to meet the purchasing criteria?

 

Must be O/O.

[sdwright.vic]

Sorry there is no risk to a rental building when the rental vacancy rate is as low as it is. A purpose built rental will be filled just as quickly as a purpose built condo. To say there is risk to building rentals right now is, well... foolish.

[VicHockeyFan]

To say there is risk to building rentals right now is, well... foolish.

 

Sure there is, that's one reason why hardly any were built from the 70's until recently.  The risk is the interest rate on the money you borrow to build it.  And have to pay back over 15 or 20 years.

[Mike K.]

A 20-storey tower carries about $50-million worth of risk.

New-build, high end rentals appeal to a very small segment of the market that can afford to carry the cost of the rental. This market is fickle, and this market is also the likeliest to make the move from a rental to an owned unit. Currently across the region there are about 1,000 high-end new-build rentals under construction throughout the region, about half of which are in the downtown core. There's a lot of risk whenever you're building the most expensive of something, and once completed that's what Chard's tower would have delivered.

Also of note is Customs House is not longer part rental part condo, it's all condo.

[sdwright.vic]

Sure there is, that's one reason why hardly any were built from the 70's until recently. The risk is the interest rate on the money you borrow to build it. And have to pay back over 15 or 20 years.

The risk is not as low as a vacancy rate. Sorry will not believe that their is no opportunity to make money in rentals here. There are MANY Apple like mu self that have no purpose in buying something. I am not going to leave a condo to a dog. I want no responsibility and do not care if the rent is higher if it has a washer and dyer. You highly underestimate the DINK community in this town and their need to own something.

Edited by sdwright.vic, 14 May 2017 - 05:23 PM.

[Nparker]

...You highly underestimate the DINK community in this town and their need to own something.

I suppose I am a SINK. You even get stuck with a lousy acronym when you're not part of a couple in our society. 

[Kapten Kapsell]

Another risk to building rentals - implied in Mike's post- is the risk for higher vacancy rates in the rental market at some point in the future. This could come about for any number of reasons- a shift in population/demographics, an uptick in the supply of rental units, or an increase in the percentage of the population that owns rather than rents.

In time, of course, today's higher end rentals will lose some of their lustre as they compete against newer inventory. This will force some landlords to cut rents or renovate to stay competitive, either of which will reduce profits. It's worth noting that some of the most affordable market rentals in Vancouver's West End were amongst that city's most expensive rental units at the time they were built.

Finally, I don't think Chard is in the business of operating rental housing. The Yello on Yates is being built for another organization to operate/lease, and the decision to build condos in 800 block of Johnson could simply be related to the lack of a suitable partner to operate the rental housing.

[VicHockeyFan]

In time, of course, today's higher end rentals will lose some of their lustre as they compete against newer inventory. This will force some landlords to cut rents or renovate to stay competitive, either of which will reduce profits. It's worth noting that some of the most affordable market rentals in Vancouver's West End were amongst that city's most expensive rental units at the time they were built.

 

That's right, for sure.

[VicHockeyFan]

Finally, I don't think Chard is in the business of operating rental housing. The Yello on Yates is being built for another organization to operate/lease, and the decision to build condos in 800 block of Johnson could simply be related to the lack of a suitable partner to operate the rental housing.

 

That's right, he's not.  But he might have/had a partner in some way, I suppose.  And that might have changed.  As Marko says, he's a smart guy, he has it worked out.