Things are changing fast and furious on the employment front for myself and the Mrs these days and we may be looking for a new place again. I started looking this weekend, not physically, but just online. I went and re-read the post over at Langley Financial Planning about how Mohican buys a house, and I completely agree with both his rationale and math. Is it possible to find a deal like this in Victoria today?
So here's a bit of a challenge to all the readers of this blog. Find me a condo, townhouse or a SFH with a suite, that I can realistically buy today (not necessarily asking price here, think lowball offers that may get accepted, target Tuscany Village, Reflections etc... places we know are struggling with sales and economics and can realistically throw low offers to). Benchmark these places against Craigslist's dreamland of market rents and lets make a deal. Keep 10-15% down, 25 year mortgage, price under $425K parameters in mind. I'll keep looking too and do up the math on your suggestions and grow this post over the next week or so.
UNIT COMPARISON #1
Here's the first one. It's a 2-bed 2-bath unit on the Gorge. I have no way of knowing if it is the same unit for sale as for rent, so this isn't exactly accurate science here folks, but close enough for a comparison non?
Craigslist ad: rent at $1295 plus hydro.
MLS # 247947: currently for sale at $245K after 107 DOM (original price $264,500) incidentally, it's neighbour is also for sale at $259,900 after 119 DOM and original price of $279K.
Here are the numbers: Rent = $1295 per month. Ownership costs = (10% down mortgage, 5.25% over 25 years = $1315 per month) + $173 strata fees + $95 property taxes = $1583 per month.
Price to rent ratio is 189 (funny how it mirrors the graph above eh?). Monthly payment difference is 19%.
Can we make it smaller? This seller, according to my PCS account, is "motivated". That means make an offer. So I go in and offer a whopping 15% off the price, which is about $210K. We agree on $215K. I redo the numbers as: $1135 mortgage + other expenses = $1403/month for
Price to rent of 166, and monthly payment difference of 8%.
There are two problems with this scenario: 1. I think $1295/month for a Gorge Rd condo at Tillicum is inflated compared to market rent, probably by as much as 15%/month; and 2. I don't think that a seller that isn't in distress, and is just "motivated" at this stage would be willing to consider an offer that is almost 20% lower than their original asking price. I could be wrong, but even if I am, I'm still overpaying for this property.
When I do up numbers like this, it really hits home for me just how far out of whack this market has gotten, and how far it needs to fall to return to a balanced state. So when you read the local real estate pumpers punditry that this market has returned to "balanced", remember they aren't speaking of market fundamentals, they're speaking of buyers vs sellers, and they're wrong anyway, because clearly, it's a definite buyer's market.