Monday, November 26, 2012

Nov 26, Monday Market Update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.


November 2012 month to date
Net Unconditional Sales: 289 (210, 140, 40)
New Listings: 594 (451, 323, 116)
Active Listings:  4525 (4577, 4648, 4397)
Sales to new listings ratio: 49% (47%, 43%, 34%)

November 2011
Net Unconditional Sales: 482
New Listings: 847
Active Listings: 4329
Sales to new listings ratio: 57%
Sales to active listings ratio: 11% or 9 MOI

Not much to say about that.  Sales are down significantly YoY, while listings are almost on pace.  I'm thinking north of 11 MOI for the month.

The mortgage industry continues to hyperventilate about the rules and cry government interference in a market that only exists because of said interference.  Luckily some cooler heads are out there, including CIBC's Benjamin Tal, and suprisingly, the head of Royal LePage, who said
“I’m being contrary again. I think the impact of mortgage regulation is being blamed far too often these days in what is clearly just a natural cyclical slowdown in the market driven by overpriced homes. We were due for a slowdown. The timing was unfortunate but it’s not a major event. I think chances of it (the regulations) being reversed are close to zero.”
In other news, the Bank of England poached Mark Carney.   I wonder what this means for the Bank of Canada's rate position.. 

214 comments:

1 – 200 of 214   Newer›   Newest»
caveat emptor said...

"I wonder what this means for the Bank of Canada's rate position.. "

My guess - very little. With the Canadian dollar at parity any BOC governor will most likely wait till the US Fed acts before raising rates here. And I don't see the Fed raising rates for a couple of years minimum.

koozdra said...

"I wonder what this means for the Bank of Canada's rate position.. "

I think their hands are tied. If they could, they would raise the interests tomorrow and throw vulnerable households to the wolves.

Introvert said...

I'll be doing cartwheels if, in just under two years' time, I can renew my mortgage for another 5 years at an all-time low fixed rate.

Right now, this seems likely. But I'm not celebrating just yet.

About said...

/^\
|

Ditto to what Introvert says, except I have 1.5 mortgages (shared income property)

Marko said...

Certainly glad I went with a variable last year, 13 months into it at .9% less than the best 5-year fixed I could obtain at the time. I am figuring I'll be in the low 2s for at least another year, who knows, maybe 2 more years.

Marko said...

Affordability improving slowly.

3848 Stamboul St, a nice townhome in a solid location just sold today for $445,000. 5 years ago it was purchased for $480,500.

Price dropped slightly, interest rates have dropped as well, and wages have gone up a small amount too. Strata fees increased $36 per month in that span.

dasmo said...

I don't see them moving either. It's working out pretty good so far. Low enough to prevent crash, enough restrictions to stop crazy borrowing and price inflation. Looks like they wan't to breed Halibuts (who like to swim 10% under the peak). I noted from the article that the UK's lending rate is .5%! This still makes me think they could even lower rates come spring. .5% makes 3% seem like a lot. (I wouldn't bet on it mind you).

SilverSurfer said...

I'm also in agreement. I don't see them increasing rates 'til at least 2015, barring the low probability (by then) of a US bond market crash. 2016and beyond though, potential risk in the loss of confidence in the US bond market may result in a T bond yield reversal whose impact we haven't seen since 1980. Back then, interest rates climbing to ~20% was Fed induced, this time around it will be the bond vigilantes triggering the yield reversal a la PIIGS in Europe right now, except the imapct will be three times+ worse globally due to the US being a reserve currency (held by over 130 countries globally). Sovereign bond market crashes are the worst of all crashes because they tend to translate into immediate "high inflation" (10 to 30% per month!) through massive currency debasement. An entire nation loses significant buying power overnight during a bond crisis. All imports JUMP in price very significantly overnight. Think Argentina, Brasil, Angola, Costa Rica, Cuba, Egypt , Pakistan, Ukraine, Vietnam, Mexico, Gambia, and dozens of others.

Given Owebama has been elected, and he does not control both congress and house, (and even if he did, laying down the "law" and seriously reforming the US financial system and pro-actively restructing their debt is not something that is politically palateable), I seriously doubt there will be any significant turn around in the sovereign debt of the USA to mitigate a future bond crisis. If anything, budgest point to more debt and greater deficits despite the rhetoric.

The best hope is that behind the scenes "they" are working to:

a) Continue to * sloooowly * and in a relatively controlled fashion debase the US currency vs other major currencies, but especially the emerging markets. Something they've had little success in - given QE globally is the name of the game (aka. race to the bottom).

b) Establish a credible plan for a replacement of the US dollar as the reserve currency which at minimum the G8 and ideally the G20 agree to. This is extremely difficult to achieve given each country has their own agendas, power grab priorities, currencies and financial structures - but it is the only real hope. If this fails to take place, a pop in the US bond "bubble" will crash nearly all markets globally worse than 2008.

Remember your history folks, global reserve currencies don't last forever, and the US dollar hegemony is on its last legs.


The #2 reason why I hold gold is because I don't have the faith they (G8 or G20) will be able to agree on a new reserve currency, and thus gold becomes the historical default currency. Or even if they manage to achieve the feat, I think it will no longer be a single national currency that will be the reserve currency but a basket of different currencies, and also a percetage of gold since it would be silly to replace one failing fiat currency (US dollar) with multiple other fiat (paper backed by thin air) currencies.

At any rate, whatever happens, all it would take to really crash the Canadian real estate market is a 3 to 5% rise in interest rates. Back of the envelope calculations suggest that would be the equivalent of rates rising to 20% in the 1980's. Major reason being, back then we didn't have a housing bubble (house prices many multiples of average gross family income), thus with a signficiantly higher house hold debt level, a lower mortgage rate increase is required to enact the same effect.

Introvert said...

^ Now that's what I call a wall of text. Are you serious, SilverSurfer?

totoro victoria said...

"At any rate, whatever happens, all it would take to really crash the Canadian real estate market is a 3 to 5% rise in interest rates. Back of the envelope calculations suggest that would be the equivalent of rates rising to 20% in the 1980's."

I agree! Ideal for an all cash buyer and pretty crummy for most everyone else.

SilverSurfer said...

I should add that I don't see the US 'blowing up' financially should a major global financial system restructuring occuring (i.e. the election of a new accepted reserve currency). This being because the USA has a plan B, namely 8,000 tonnes of gold in Fort Knox, only surpassed by the combined gold of the European Union at 10,000 tonnes.

But Canada?! yeah we have lots of gold mines, but our current reserves are 90%+ in US dollars and less than 5% in gold. At the current rate of gold non-accumulation by the BoC, when TSHTF, Canada will be SOL!

SilverSurfer said...

Sadly, I'm quite serious. The accelertion of EU problems (domino contagion going from small countries (greece & portugal), to larger ones Spain, Italy and soon France), will serve only to cause further demand for US Treasury bills. Add China's woes into the mix and Brazil and India's GDP slowing in 2013, and the US T bill bubble grows even bigger.

Do not confuse the recent and upcoming global rush into US T bills a sign that they are a safe haven, it is more like a game of tag, while Europe is "it", everyone rushes to the USA... when Europe eventually gets restructured or whenver there is a more acceptable alteranative to the US treasury market, that will be the day the bubble will pop. Buffet, Soros, and several other major investors are already in agreement, the USA treasury market is on its last legs. It is highly probably (barring pro-active massive restructuring) that it will be a question of WHEN not if, the bubble pops. Some analysts I read suggest it won't be a political trigger, but rather a black swan event (i.e. Iran war spiking oil prices, triggering a severe recession in USA and globally, to restrict the necessary volume of US tbill purchases to meet the US's needs, at which point the Fed is forced into monitizing most or all of the debt resulting in a total loss of confidence in the US ever paying back its debts and a run on Tbills).

It seems impossible, only because it's never happened before. That is, bond market crashes have *always* occured in non-reserve currencies. So one might argue that the probability of this occuring to a global reserve currency to be near zero, but the thing is, this reserve currency is on its last legs.

I don't pretend to be an expert here, I am only paraphrasing and regurgitating a very brief summary of several dozen articles written by so called experts. What I've mentioned are significant probabilities, not certainties. When things approach SHTF scenarios anything can happen, but the odds of the outcome translating to an immediate prosporous time for all is extremely low.

dasmo said...

What currency would become the reserve currency then? The US has more than gold to keep it so. The have military might. My favourite theory as to why they actually invaded Iraq was because Sudam was going to stop trading oil in US currency in favour of the Euro. A shift of the USD to Euro as the default currency for trading oil is certainly a WMD of the financial kind... Since we are on conspiracy theory grounds, I might also add the World bank HQ is in NYC...

Introvert said...

... this time around it will be the bond vigilantes triggering the yield reversal ...

Ah, the bond vigilantes. The ones who never come despite all predictions to the contrary spanning the last four years.


Given Owebama has been elected ...

Reality check: the U.S. budget deficit is not growing but shrinking under Obama.

Just Jack said...

If our market continues to have flat prices, then we should see more of the same as this year.

Higher months of inventory and fewer sales.

The average price of a home in Victoria City may remain at half a million, but only a dozen may sell a month.

Which is completely bizarre to think that an industry can survive at such few sales. It's like owning a grocery store and selling only one can of soup a month for $10,000.

reasonfirst said...

3848 Stamboul St, a nice townhome in a solid location just sold today for $445,000. 5 years ago it was purchased for $480,500.


Even better:
-- 5 years ago the BOC rate was 4.5%
-- prime was 6%, now 3%
-- The BOC reported 5 year conventional mtg: 7.39%, now 5.24%

(http://www.bankofcanada.ca/rates/interest-rates/canadian-interest-rates/)

dasmo said...

"It's like owning a grocery store and selling only one can of soup a month for $10,000." Well...It's more like owning a virtual grocery store where you only sell the cans on consignment so you don't need a store, employees, or inventory. So the 10 grand a month still ain't bad. Can only afford one Jag now.
I think the part timers will move on that's for sure. The easy money is done for a while.

Dave said...

Fun with rates:

'81-'86 -- 5yr mtg rates plummet from 18% to 10%, prices plummet

'86-'90 -- 5yr mtg rates soar from 10% to 14%, home prices soar

'05-'08 -- 5yr mtg rates again soar 40%, home prices soar

'08 -- rates plummet, home prices plummet

Introvert said...

Which is completely bizarre to think that an industry can survive at such few sales.

It's really only the realtors who are suffering. And the renters who are dying to see a real estate price meltdown that never seems to come.

Introvert said...

'08 -- rates plummet, home prices plummet

Where in Canada are home prices "plummeting"?

Just Jack said...

It isn't just fewer homes selling. This is the destruction of an industry. Quite possibly big Real Estate companies going out of business. These businesses have been keeping the economy of Victoria afloat. This would cause a serious contraction in the local economy. Real estate companies make a lot of money, and they also spend a lot of money in the community.

ks112 said...

i think most people are laughing paying all in $2000 a month rent in for a 600k house :)

hap pychucky said...

JJ

A bit of an exaggeration.

"Realestate companies have not kept
the economy affloat"

dasmo said...

Big real estate companies are not floating our economy. Gov, military, education, tech, health, financial, tourism, retail, and real estate floats our economy. Real estate also includes construction, property management, etc. not only sales. First you must answer what percent of our economy is fueled by real estate sales. Then take that percentage and drop it by 30 - 40 % and that is the impact on our local economy.

Dave said...

Our homes are floating (financing) our economy (retail, tourism, finance, gov).
It will become painfully obvious as 'Credit Lake' continues drying up, and we enter recession.

Just Jack said...

Whatever makes you're boat float, Introvert.


CS said...

"But Canada?! yeah we have lots of gold mines, but our current reserves are 90%+ in US dollars"

Only 52% of Canada's $68 billion of reserves are in US dollars. So if the US dollar went to nothing we'd lose about $35 billion or 0.01% of GDP, a loss we'd hardly notice.

It's an ill wind that blows nobody any good. And if the $US dollar slumps, ours will go with it, which will mean a massive boost to home industries. So for the unemployed and the marginally employed (tens of millions of them in the US) a US dollar crash would be a very good thing.

Craig said...

"Reality check: the U.S. budget deficit is not growing but shrinking under Obama."

After a one-off stimulus that pushed the deficit over $1 trillion Obama has kept it over a trillion every year and plans to keep it over a trillion until the federal debt doubles from under $10 trillion when he took office to $20 trillion when he leaves.

He actually wanted to spend more, but even the Dem controlled Senate rejected his budget by a bipartisan 97 votes to 0.

That you would cite a decline of a few billion from one year to the next as a "reality check" makes me wonder if you're being deliberately obtuse or are simply too dumb for words.

Leo S said...

@dasmo first you claim that real estate doesn't float our economy and then you say you don't know what percentage It makes up. And you don't take the wealth effect from increasing home prices into effect

Leo S said...

To answer my own question. About 13-14% of Victoria employment is from FIRE industries

Like you said, let's drop by 30-40%, which result in about 4-5.5% drop in employment (or rather, 4-5.5% that need to find other jobs). Sounds pretty significant to me.

Leo S said...

After a one-off stimulus that pushed the deficit over $1 trillion

After a one-off bailout under which president?

I assume you would have preferred to see austerity instead of stimulus in 2009 when Obama came to power and the economy was in full meltdown mode? Remind me to ask Greece how that's working for them.

Obama has kept it over a trillion every year and plans to keep it over a trillion

It's called a realistic projection. Totally different than a goal, which is sustainable deficit reduction.

Marko said...

2005 - $3,206,969,321
2006 - $3,373,171,099
2007 - $4,146,651,569
2008 - $3,111,882,746
2009 - $3,775,730,705
2010 - $3,239,493,835
2011 - $2,981,977,290
2012 (estimate) - $2,850,000,000

Sales volume is down but it isn't a huge drop.

dasmo said...

@Leo I do know that tech is the number one private sector from a dollar point of view for our economy. Plus the misunderstood me. You need to subtract 30-40 % from real estate SALES which is only a percent of the industry. That is the percentage we don't know. The industry also includes rentals, roofing, and other related real estate activities I'm sure.

dasmo said...

Ok so more like -3% from the percent of the "real estate" sector that is sales and that is the impact....

Introvert said...

That you would cite a decline of a few billion from one year to the next as a "reality check" makes me wonder if you're being deliberately obtuse or are simply too dumb for words.

It's a decline, ain't it? I'm right, and you're rude!

Leo S said...

I do know that tech is the number one private sector from a dollar point of view for our economy.

Continuing the floating analogy, the 99% of the boat that doesn't have a hole isn't the important part.

You need to subtract 30-40 % from real estate SALES which is only a percent of the industry.

The dollar volume of sales alone is only the tip of the iceberg. Wealth effect from housing (people spend about 6 cents for every dollar their house appreciates) is a huge effect.



Leo S said...

Sales volume is down but it isn't a huge drop.

Down 31% from peak.. Fairly sizeable.

Value of building permits in thousands:

2003 568,214
2004 537,329
2005 720,247
2006 776,350
2007 914,384
2008 837,907
2009 794,130
2010 764,746
2011 640,786

Down 30% from peak (also 2007).

CS said...

New home sales in the US were down 70% from peak to trough, so we have a way to go yet!

CS said...

But the rate of decline is accelerating.

dasmo said...

" (people spend about 6 cents for every dollar their house appreciates)" But Houses haven't really appreciated for years so how would this cause some kind of economic shock?

koozdra said...

"But Houses haven't really appreciated for years so how would this cause some kind of economic shock?"

Walk down Fort. It's rare to pass a block that doesn't have a for lease sign hanging in one of the business' windows.

Introvert said...

New home sales in the US were down 70% from peak to trough, so we have a way to go yet!

We do? Who says that Canada's experience must match that of the U.S.'s.

Where does this type of thinking come from? And more importantly, why do we think it's OK?

koozdra said...

"Where does this type of thinking come from?"

Because the real estates charts of both countries look exactly the same except one is shifted to the right by four years.

"And more importantly, why do we think it's OK?"

Because, despite your confirmation bias, it has become unaffordable to purchase a home. Is that OK?

koozdra said...

Introvert, will be the next Marie Antoinette. "Let them eat condos"

totoro victoria said...

I don't find it unaffordable to purchase a house right now. Just no strong financial impetus to do so because prices are flatish and might drop. Then again, I don't spend six cents of every paper gain on real estate either.

I view affordability as what is the monthly payment all in and is it in my budget and does it make long-term sense.

Lately I find myself a bit bored with the real estate market here. I've started looking elsewhere.

Introvert said...

Because the real estates charts of both countries look exactly the same except one is shifted to the right by four years.

Course: Charts 101
Instructor: koozdra

Lesson One:

Take any two charts; shift one chart ahead by four years; the second chart necessarily begins to match the first one.

Over time, the second chart never deviates from the first one. Never. We know this about charts.

patriotz said...

Then again, I don't spend six cents of every paper gain on real estate either.

You've already told us that you've been spending more like 100% of it - on more RE. So have a lot of other people.

Marko said...

http://ca.finance.yahoo.com/photos/5-things-you-didn-t-know-about-canada-s-mortgage-market-slideshow/we-own-the-majority-of-our-homes-photo-1040586725.html

Leo S said...

I don't understand why blogger can't autoparse links. So annoying.

koozdra said...

"OWNER IS WILLING TO LEASE BACK SUITE SIDE PLUS 1 CAR GARAGE FOR 1 YEAR AT $2000 MONTH IF THAT HELPS"

http://www.realtor.ca/propertyDetails.aspx?propertyId=12509173&PidKey=-1247534239



Below assessed value... in Gorden Head.

Assessed: $586,000
Listed: $579,000

http://www.realtor.ca/propertyDetails.aspx?propertyId=12332914&PidKey=-345469384

Dave said...

BoC 2012 Monetary Policy Report found "the extraction of housing equity through borrowing has increased substantially over the past decade" (BoC Graph)
meantime our savings rate is at a historic low (Savings rate graph)

BC is the only province with an outright negative savings rate

If we did own the majority of our homes, it could allow the market to correct faster, not having to wait for lender approval on short sales.

dasmo said...

Who want's to save right now. There is no pay off. I pulled everything out of GICs and mutual funds and moved it over to misc equities. RIMM regained everything I lost from those useless mutual funds within a month... Does the "savings" data track investments or just cash rotting in the bank?

Dave said...

Cash in the bank has outperformed Canada's equity market in 2012 (TSX Composite Index) and 2011 too, I think.

It's one thing to choose not save, like yourself, but for people to dig themselves further into debt each year is another.

Albertans are saving at a rate of 15% compared to BC's -4.2%. They must be doing something right.

Introvert said...

Albertans are saving at a rate of 15% compared to BC's -4.2%. They must be doing something right.

The fact that house prices in Edmonton and Calgary are significantly lower than in Vancouver and Victoria, of course, has nothing to do with people's personal savings rate. And that Alberta has no sales tax is not important, either.

hap pychucky said...

Introvert

Looks like prices are pretty close to each other. Using our Mean to their average.

http://blogs.calgaryherald.com/2012/06/01/calgary-single-family-house-prices-crack-half-million-dollar-mark/

dasmo said...

The Dow is up 25.78% since this time 3 years ago. AAPL is up 193.9%!

CS said...

" Who says that Canada's experience must match that of the U.S.'s."

No one!

The US experience was quite different from that in Canada -- so far. They had 17 consecutive interest rate increases beginning in 2005 and raising the Fed funds rate to 5.25% in 2006. That pretty well guaranteed a national property crash, which makes you wonder: what was the Fed thinking?

As long as Carney's replacement doesn't do what Greenspan did in 2005/06 our national real estate market seems unlikely to crash. But Victoria is unlike most other Canadian markets except Vancouver's. We have a crazy price to income ratio, which makes a crash in prices conceivable.

That the average price is currently holding or even rising suggests that at, at the top end, vendors are beginning to capitulate, i.e., taking low-ball offers, like five million on an asking of eight million reduced from 21 million. That sale alone added tens of thousands to the mid-month average price.

There are other big reductions in the one-million-plus category: Weald Road off 20%, a new house on Uplands offered at 10% below the original asking, etc.

If such realism hits the bottom end, then mean, modal and median prices will all be on the skids.

patriotz said...

The fact that house prices in Edmonton and Calgary are significantly lower than in Vancouver and Victoria, of course, has nothing to do with people's personal savings rate. And that Alberta has no sales tax is not important, either.

You do realize that's an argument for RE prices in BC to be lower than those in Alberta?

Going back to the original topic, the real reason why Alberta has such a high savings rate is that it has a very large number of people (many from out of province) who work there and go elsewhere to retire or work in less well paying jobs. Alberta has the youngest population in Canada, by far.

That does not however make BC's negative savings rate any more tolerable. Before someone argues that we have the highest % of retirees, we don't. The East Coast has far more.

Leo S said...

Does anyone know the definition of savings rate as used in that TD report? I think their data source on that is statcan but I can't find the relevant table with provincial savings rates.

Leo S said...

Based on CanSim 380-0004, it seems the savings rate is defined as (Income - Outlay) / (Personal disposable income).

Outlays are classified as either:
Personal Expenditure on Goods and Services,
Transfers to Government (taxes, EI, etc)
Transfers to corporations (?)
Transfers to non-residents (money sent home)

So if I buy 100 shares of RIMM, does that count as a goods and service and hence not classified as a savings? If so it would be true that a low savings rate alone is not necessarily a problem if people are purchasing investments instead of saving.

But how to explain a negative rate? There was some discussion on VancouverCondoInfo on this topic last year.

I'm thinking there is huge unreported income from pot (~$6 billion a year) and suite rentals.

totoro victoria said...

"Then again, I don't spend six cents of every paper gain on real estate either.

You've already told us that you've been spending more like 100% of it - on more RE. So have a lot of other people"

Nope. I have never borrowed against home equity to invest. Just full of assumptions.

Leo S said...

Nope. I have never borrowed against home equity to invest. Just full of assumptions.

The wealth effect doesn't mean that people actually take out 6 cents of equity for every dollar that their house appreciates. It says they spend an extra 6 cents.

When your first house appreciates your bank takes that into account when deciding what amount they will lend you for the next one. You're saying you would have the exact same portfolio of real estate today if none of it had ever appreciated?

Introvert said...

In other news, the Bank of England poached Mark Carney.

First, tigers in India; then elephants in Africa; now, our beloved central banker.

totoro victoria said...

"When your first house appreciates your bank takes that into account when deciding what amount they will lend you for the next one. You're saying you would have the exact same portfolio of real estate today if none of it had ever appreciated?"

Yes and no.

Yes, I would qualify for all my current properties without appreciation because of rental income. No, because some of my down payment for two properties was from one house sale - but that was also partly my down payment and principal paydown. I haven't sold the others.

Also, I differentiate between appreciation captured and on paper. If people are spending paper gains this is not the same as spending realized (after sale) gains to me. In addition, there is a difference between spending and investing.

I don't spend any funds that I make from real estate, I invest them.

Also, you may want to research the "wealth effect" further. It relates to CONSUMPTION and not investing. Consumption is defined as spending and the wealth effect is based on "perceived wealth" as opposed to money in the bank.

Finally, I don't consume more when prices appreciate. Why would I? I'd rather retire earlier.

totoro victoria said...

Patriotz, you have no idea of my personal financial situation, and, although it really is none of your business, it is also irritating to have you state things without knowing, particularly when you are incorrect.

patriotz said...

It's our business because you've been telling this forum about your RE investments and making claims about their profitability. So don't get all offended if any of us try to analyse your financial position.

The fact is that you've recently bought a property in Victoria with borrowed money. That's what Leo and I were talking about.

Sai Trades Group said...

A round of applause for your post.Much thanks again. Great.


cooler sales in werribee

koozdra said...

Totoro, you give advice from your personal situation. You say that you don't give in to the wealth effect. This puts you in a minority of people. It might work out for you. But you have to admit the amount of people that are financially prudent like you are in the minority.

koozdra said...

"Priced $68,000 UNDER assessed value!"

Oak bay starting to falter?

http://www.realtor.ca/propertyDetails.aspx?propertyId=12637328&PidKey=-1891771253

totoro victoria said...

I've set out my position for real estate without stating what what my other assets.

I am not spending 100% of my gains on any one thing, which is what you asserted.

I seem to recall that you made the same type of statement ie. not based on any facts but only on your rather rigid view of what "must be" in relation to my vacation rental in the Okanagan (ie. it would be impossible to rent a property on a lease for ten months and then use it as a vacation rental in the summer).

I am sitting on my sofa in the Okanagan right now drinking coffee and looking out at the lake which is steps away while my tenants downstairs pay my mortgage.

CS said...

Re: York Place.

It doesn't help that it looks like a barn. If the took off another 50% it might look reasonable.

From yesterday's WSJ:

this trade-dependent nation [Canada]—far less scarred by the recession than its larger neighbor to the south—is suddenly looking vulnerable, just as a number of indicators suggest brighter days ahead for the U.S.

While the recession laid global peers low, Canada's strong bank balance sheets funded continued consumer spending during the recovery. Years of that easy credit in turn helped give rise to a housing boom that has underpinned an economy already benefiting from another surge—in commodity prices.

Today, global commodity prices are weakening, and home prices in some of Canada's hottest markets are leveling off or falling. Canadian households, meanwhile, are as leveraged as they have ever been after years of extremely low interest rates. Since September 2010, the Canadian central bank's benchmark interest rate has been at 1%.

"As the rest of the world deleveraged," said Tim Quinlan, an economist at Wells Fargo, "Canadians got geared up."

This comes at a time when the continued strength of the Canadian dollar makes conditions harder for some manufacturers.

All that is filtering into headline economic numbers: Last month, Canada scaled back growth forecasts for 2013 to 2% from 2.4%. Finance Minister Jim Flaherty recently postponed by a year, to 2016-17, government plans to balance the budget, blaming lower commodity prices expected to sap revenue.

totoro victoria said...

Koozdra - I'm not sure if I'm in the minority. The "wealth effect" is not accepted by all experts ie. read David Backus.

I only speak from my own personal experience because that is what I know. In addition, it appears to be working so why would I not put it out there for others to consider as a possible route?

dasmo said...

Sorry Kooz, That's still a fortune for a giant, ugly 80's box... Let's see what it sells for.

Introvert said...

Re: York Place.

It doesn't help that it looks like a barn. If the took off another 50% it might look reasonable.

From yesterday's WSJ:

this trade-dependent nation [Canada]—far less scarred by the recession than its larger neighbor to the south—is suddenly looking vulnerable, just as a number of indicators suggest brighter days ahead for the U.S.

While the recession laid global peers low, Canada's strong bank balance sheets funded continued consumer spending during the recovery. Years of that easy credit in turn helped give rise to a housing boom that has underpinned an economy already benefiting from another surge—in commodity prices.

Today, global commodity prices are weakening, and home prices in some of Canada's hottest markets are leveling off or falling. Canadian households, meanwhile, are as leveraged as they have ever been after years of extremely low interest rates. Since September 2010, the Canadian central bank's benchmark interest rate has been at 1%.

"As the rest of the world deleveraged," said Tim Quinlan, an economist at Wells Fargo, "Canadians got geared up."

This comes at a time when the continued strength of the Canadian dollar makes conditions harder for some manufacturers.

All that is filtering into headline economic numbers: Last month, Canada scaled back growth forecasts for 2013 to 2% from 2.4%. Finance Minister Jim Flaherty recently postponed by a year, to 2016-17, government plans to balance the budget, blaming lower commodity prices expected to sap revenue.


First info and now CS has provided us with another top-notch copy/paste job! I thought I'd copy and paste it again myself, just to emphasize its wonderfulness.

koozdra said...

Did Carney really do a good job?

http://www.businessinsider.com/canada-housing-market-2012-11

Introvert said...

I am sitting on my sofa in the Okanagan right now drinking coffee and looking out at the lake which is steps away while my tenants downstairs pay my mortgage.

Totoro, it clearly galls patriotz that some people can leverage themselves responsibly and to substantial advantage. This can't be!

According to some on this blog, you, Totoro, and I should be stress-bags who get no sleep and worry about how we're going to make ends meet and regret ever buying property and long for the days when we were renters.

More than half of my mortgage payments are instantly paid for by my wonderful tenant below. What have been the expenses associated with my suite over the last year? A few hundred bucks for electricity and water (we share the cost)--chump change compared to rental income.

In my case, historically low interest rates + double-income-no-kids + rental income = a winning formula.

ks112 said...

Maybe in a year or so your tenants will also be in your shoes having bought house and having a tenant pay for their mortgage. However if they bought a similar house as yours they may only be taking on a mortgage $100k less than what you had done :)

Alexandrahere said...

I have some friends currently looking for a condo to rent. There are quite a few of them just sitting out there empty. Even 8 months ago, ones that could have rented at around $1500-$1800 per mo. are sitting vacant at asking rents of $1175 - $1350 per mo. The rental market is definitely changing. I know of homeowners also that are no longer having luck in renting out their "in-law" suites. Even when they have dropped their rents considerably, their phone still isn't ringing.

Introvert said...

Maybe in a year or so your tenants will also be in your shoes having bought house and having a tenant pay for their mortgage.

Nope. Like most renters, my tenant is not in a positive financial situation. From what I can gather, my tenant is in debt and has a poor credit rating. Do the math: buying a house in Victoria is not in the cards.

Dave said...

I too couldn't believe the number of vacants. I'm paying $1200 for what was getting $1800 a few years back. Same story with the few condo landlords I know.

introvert
If you want the real "winning formula", it's knowing when to sell overvalued assets and then buy them back when they are undervalued. That way you and your partner would never have to work again for "double-income".

Be nice to your tenant, they may be the only buyer in a few years, willing to give you what you have in it.

Introvert said...

If you want the real "winning formula", it's knowing when to sell overvalued assets and then buy them back when they are undervalued.

Too inconvenient. I wouldn't want to own, then rent, then own, then rent. Although I will concede that it's a smart strategy.

Be nice to your tenant, they may be the only buyer in a few years, willing to give you what you have in it.

Setting aside your grammatical atrocities, I am very nice to my tenant. And maybe you didn't read what I wrote before, but my tenant will likely never pay off the credit card debt that is owing, let alone purchase property. Sad, but true.

I do feel quite lucky to be in my situation; and I certainly do not pretend that it has everything to do with economic acumen.

Life deals you cards; mine happen to be pretty decent.

Leo S said...

>> I am very nice to my tenant.

Aside from telling the world about how poor their financial planning is.

The fact that a DINK like yourself (us as well for another few months) feels the need to share their house with a renter should make the overvaluation clear. This is a peculiar BC thing that people think having a house with a tenant (even if you make well over the average household income) is normal.

The point was never that people who make way over the average income can't afford (part of) a starter home. Not sure what youre trying to say. In a healthy real estate market a couple making that kind of money can expect to buy their own average or above average house, not feel the need to pllay amateur landlord to maintain some semblance of affordability.

dasmo said...

"If you want the real "winning formula", it's knowing when to sell overvalued assets and then buy them back when they are undervalued."

I think there are a lot of people on the losing side of that formula...

MD80 said...

"Do the math: buying a house in Victoria is not in the cards."

I'm actually with Introvert on this one. The days of people with poor credit and no savings (ie. no more 40-year, zero-down, stated income mortgages) actually getting a mortgage for a house in Victoria are over.

Do the math: tighter lending = fewer buyers ≠ sustainable prices.

You'll wish your renter could buy!!

Marko said...

This is a peculiar BC thing that people think having a house with a tenant (even if you make well over the average household income) is normal.

Unless I become a multi-millionaire (5+ million) which is highly unlikely can't ever imagine buying or building a home without a suite even if I can afford to forgo the suite. Suites make a lot of sense, at least to me anyway.

Rather collect $1,000-$1,400 per month from renter and work a bit less.

Just Jack said...

Of the 1,624 single family homes that sold in the core districts in the last year, 451 of them had suites.

That really hasn't changed much from a decade ago when out of 2,561 single family homes sold, 669 had suites.

A decade ago, the average price for a home with or without a suite was about the same.

Today, the average price for a home with a suite is about 10% less than a home without a suite.

Their are most likely many contributing factors to this, one of them being that people value their privacy.

Just Jack said...

I disagree that people think having a suite in your home is normal. 3 out of 4 purchasers prefer not to have a suite.

CS said...

" I thought I'd copy and paste it again myself, just to emphasize its wonderfulness."

What's up, Intro.? You got a sore wisdom tooth or sump'n?

Introvert said...

Aside from telling the world about how poor their financial planning is.

Leo, this was in response to someone else speculating that, one day, my tenant might buy me out. Should I pretend like that's possible with my current tenant?

Moreover, I don't believe that any comments I made regarding my tenant were inflected with tinges of superiority; any traces that you found of the latter were of your own creation.

--------------------------

This is a peculiar BC thing that people think having a house with a tenant (even if you make well over the average household income) is normal.

Sometimes the world changes. I don't think that Victoria's market will ever be "balanced" the way it once was.

Similarly, do you think average incomes in Canada will ever rise enough to offset the significant cost increases seen, over the last several decades, in many areas including postsecondary education, house prices, food, etc.? I sincerely doubt it.

The beneficial ratios my parents--who are boomers--experienced will not return for me and my generation.

Mortgage-helpers in Victoria, Vancouver, and maybe Kelowna are here to stay. I'd bet on it.

caveat emptor said...

"This is a peculiar BC thing that people think having a house with a tenant (even if you make well over the average household income) is normal."

OTOH it is a peculiar North American thing that people think having 2000-3000 sq ft of living space all for one family (or couple) is normal.

koozdra said...

"Similarly, do you think average incomes in Canada will ever rise enough to offset the significant cost increases seen, over the last several decades, in many areas including postsecondary education, house prices, food, etc.? I sincerely doubt it."

Given this statement, do you still contend that these house prices are sustainable?

The only thing you should be concerned about with regards to your renter is they find a better deal else where. The rental market is about to get very interesting.

Leo S said...

Unless I become a multi-millionaire (5+ million) which is highly unlikely can't ever imagine buying or building a home without a suite even if I can afford to forgo the suite. Suites make a lot of sense, at least to me anyway.

This makes no sense to me. The huge draw to a house is that you're not sharing walls or floors. If you want to share walls you can make do with a much cheaper townhouse or condo and you don't have any of the hassle of renting out the space.

Rather collect $1,000-$1,400 per month from renter and work a bit less.

Or buy a cheaper smaller house, a townhouse, or a condo and work less (5 times rather live in a 1000sqft place without a suite rather than a 2000sqft place where the bottom half is a suite).

Marko said...

This makes no sense to me. The huge draw to a house is that you're not sharing walls or floors. If you want to share walls you can make do with a much cheaper townhouse or condo and you don't have any of the hassle of renting out the space.

I don't buy that living in a townhome or condo is much cheaper when compared to a home with a suite, especially long term. For example, when my folks bought their Fernwood home in the 1990s decent condos at Regents Park and Spencer Castle were a similar price ($180,000). Fast forward to 2012, they've collected more in rent from tenants than what they paid for the home and the home would be worth approx $500,000 if they hadn't updated it. Those Regents Park/Spencer Castle condos are in the 280-350k range.

Marko said...

Or buy a cheaper smaller house

Problem is you have to go $200,000 cheaper to offset the $1,000/month income a monthly cash flow basis.

From what I've seen, I rather live in the upstairs of a $700,000 home with a suite than most $500,000 homes without a suite.

totoro victoria said...

I totally understand folks who don't want a suite. I think life is not about owning a house or renting or tenant or no tenant - it is more about happiness for me. I just happen to feel happy about investments as opposed to SFHs.

SFHs have always seemed wasteful to me. I lived overseas for five years in smaller spaces - was totally fine. I have downsized our family living space and it is great. Personality plays into this a lot.

I view homes as an income producing asset and a home. I'm not going to change that because I enjoy it a lot and have sound-proofed everything :). I have rules for multi-family - everyone gets their own washer/dryer, yard area and separate parking and entrance.

I find that my quality of life is enhanced by the freedom created by this income. I would feel different about roommates - I don't want them anymore. Money would not be worth it.

CS said...

@Intro:

"Sometimes the world changes. I don't think that Victoria's market will ever be "balanced" the way it once was.

Similarly, do you think average incomes in Canada will ever rise enough to offset the significant cost increases seen, over the last several decades, in many areas including postsecondary education, house prices, food, etc.?"

Another way of saying this time it's different.

Actually, it is different this time from any time in the last fifty years because interest rates have never been as low. So Intro.'s point seems to be that interest rates will never rise, which may or may not prove to be the case.

But even if rates remain low for years, there's no scope for higher prices for the reason's Intro. states, i.e., increases in the cost of living exceeding increases in income. That alone will tend to drive prices down. But then if prices begin to fall, who wants to invest their life-time disposable income in a losing asset? Fewer, one might expect, than in recent years.

The idea that an increase in the number of home owners renting a suite will allow continued price increases only makes sense if a rental suite generates more income than the capital invested in rentable space can earn if invested in other assets. To many, that will seem a doubtful proposition.

CS said...

Re: the return on a suite, Marko above, estimates the cost of a suite earning $1000 per month at $200 K. So the alternative investment must earn 5% to match the return on the suite. That seems a pretty easy target to reach, and there are no associated maintenance, management and repair costs or the inconvenience of sharing a house.

Marko said...

Re: the return on a suite, Marko above, estimates the cost of a suite earning $1000 per month at $200 K. So the alternative investment must earn 5% to match the return on the suite. That seems a pretty easy target to reach, and there are no associated maintenance, management and repair costs or the inconvenience of sharing a house.

You are assuming the buyer is buying with cash.

For 5% investment return you have to take on some kind of risk.

Introvert said...

The only thing you should be concerned about with regards to your renter is they find a better deal else where.

Fortunately I live very close to UVic and not that far from Camosun College. Finding tenants has never been an issue, nor do I ever expect it to be.

The rental market is about to get very interesting.

More "here it comes soon" talk that this blog specializes in.

-----------------

This makes no sense to me. The huge draw to a house is that you're not sharing walls or floors.

Yes, a house is great when you're not "sharing" it, but having a stranger pay a large chunk of my mortgage is also great.

Also, you're overlooking the fact that I have a choice: once my tenant leaves, I can choose not to rent my suite. It's not as if I am bound to rent my suite forever.

Right now, it makes sense to rent it. It puts useless space to work making money for me. When the time comes to reclaim the space because I want or need it, I will.

Leo S said...

From what I've seen, I rather live in the upstairs of a $700,000 home with a suite than most $500,000 homes without a suite.

I'd take the $500k home any day. To each his own.

Similarly, do you think average incomes in Canada will ever rise enough to offset the significant cost increases seen, over the last several decades, in many areas including postsecondary education, house prices, food, etc.? I sincerely doubt it.

I doubt it too. There is one other alternative...

The beneficial ratios my parents--who are boomers--experienced will not return for me and my generation.

I think you're being too pessimistic. Victoria average family income is about $70,000. As a DINK, probably professional of some sort, I assume your household income is significantly higher, so looking at the income stats:

$90,000 to $99,999 (percent) 5.3%
$100,000 to $124,999 (percent) 9.1%
$125,000 to $149,999 (percent) 4.1%
$150,000 and over (percent) 8.5%

Figure out where you are, then think about whether there's any disconnect between your income relative to the rest of Victorians, what you bought, and the average house price in a city with 70% ownership rate.

CS said...

"For 5% investment return you have to take on some kind of risk."

Yes, but that's true whether you're investing in houses or stocks or mortgages or gold bars.

But I question whether a suite really costs $200K. If you have an unfinished basement, how much does it cost to finish a thousand feet? Not more than $100 K, surely. In which case, if the suite rents for a thousand a month, the return on investment might be hard to beat.

mrmike said...

A lot of people have suites they don't rent but could if they had to.
I have an updated vacant 900 s/f suite down stairs that I haven't rented since 02 but is there if needed. I do use every now and again as a man cave...beats the dog house ;)

mrmike said...

^ point is...sfh with suites are not a bad idea. rented or not.

Marko said...

But I question whether a suite really costs $200K. If you have an unfinished basement, how much does it cost to finish a thousand feet? Not more than $100 K, surely. In which case, if the suite rents for a thousand a month, the return on investment might be hard to beat.

What I was getting at is a suite renting for $1,000/month covers $200,000 worth of a mortgage at current rates.

totoro victoria said...

The math works. If you buy a $600 000 home with a suite that rents for $1000/month it is similar to buying a $400,000 home EXCEPT you are paying the mortgage off on a $600 000 home and when appreciation kicks in this works in your favour.

StalJ said...

Would it not be better to buy a rental like this for $600 000near hospital and university
, than a house here with a suite? Then with all the cash flow, you could rent a nice place here and have lots left over to live on. What’s more, you would have no rental problems and probably gain in capital appreciation until things finish depreciating here. Just abedtime thought.

totoro victoria said...

How do you know what "all the cash flow" is from this place? Do you have the cap rate? The local vacancy rate is 6.2 (Victoria is around 3).

Have you seen the financial statements? Have you factored in property management fees? What is the condition of the building? Commercial properties are subject to higher financing costs/rates. Have you done the math?

Also, you have not accounted for the capital gains tax exemption for primary residences with a suite. When you sell there is no tax on the gains if you did not claim CCA. There is tax on the apartment building appreciation.

I have considered both Hamilton and Thunder Bay but decided against it. I don't know the markets really well and, even if the ROI is better, I don't want to go to these places regularly. If I had some reason to visit annually then I might do it. The increased ROI did not justify the risk/inconvenience for me.

This might work our really well for the right person though if the numbers are right.


Just Jack said...

Age restricted condominiums continue to get a bashing in this market. Like the recent sale of a two-bedroom suite of some 1,300 square feet along Hillside Avenue. When the retirees were moving here back in 2003, this condo sold for $170,000. Today it fetches $198,000. A lackluster gain in appreciation relative to other complexes without a 55 and over restriction.

Where have all the retirees gone?
- probably Phoenix

Leo S said...

The math works. If you buy a $600 000 home with a suite that rents for $1000/month it is similar to buying a $400,000 home

That math doesn't even work remotely. That $1000 rent will cover only the mortgage payments on $200,000 dollars.

To the expenses add
Extra property tax (~$900)
Opportunity cost on the extra down payment ($1200)
Maintenance and rental expenses (despite Introvert's idea his suite costs him only utilities) - $1000-$3000/year

From the income subtract:
Taxes (hard to estimate, depending on how creative you get with your deductions maybe $3000-$4000)
Vacancy rate (let's say a month every 2 years, or $500/year).

So now we have $20,000 in income to pay for $28,000 in extra expenses. Nevermind we haven't even gotten into paying yourself for your time to manage a rental (I assume you don't do it for fun).

But I forgot about the EXCEPT. EXCEPT you are paying the mortgage off on a $600 000 home and when appreciation kicks in this works in your favour.

Should kick in any day now.

Just Jack said...

Voodoo math skills going on here to justify overpaying for a home with a suite.

The value of a home with a suite over a similar home without a suite is only around one to two years gross rent of that suite. About the cost of installing the cabinets, plumbing and fixtures.

Not two hundred thousand; not $100,000, not even $50,000.

Marko said...

Most suites are non-conforming; therefore, property taxes often do not reflect the existance of a suite.

$1,200 for opportuntiy cost for downpayment? Per year I assume?

Vacancy allowance of 8% is a little high if you are in the core, especially close to uvic. My parents have had 1 month vacancy since they bought the home and this was to carry out upgrades.

Not sure how it adds up to $28,000 in extra expenses.

totoro victoria said...

You are correct that there are some extra costs on the overall unit as a result of the higher purchase price.

You fail to account for the additional principal paydown of approximately $500/month that the tenant pays for in your calculations. This adds $6000 back in to the black (assuming you don't have to sell if prices fall and can wait it out).

What rental expenses are you referring too? I have none for advertising given the free online services. As far as maintenance, there is some but not anywhere close to $1000/year. Maybe if it is in poor condition to start.

Finally, try to find a SFH or similar quality space and yard as the space you get to live in for $400 000 in a nice area in Victoria. In my case, we had approx 1700 square feet with four beds, two baths, rec room, fireplace, full separate backyard.

I know this is not a favourable option for you, but it works for many folks in a way which is more positive than negative. Again, if you can buy and hold for a real estate cycle the positive effects are compounded.

Marko said...

We've haven't really discussed the benefits of suites....I've visited several of my parent's tenants (primarily uvic students) in their respective countries and had free accommodation.

Then there was a time in my early 20s when my mom rented out the suite to two really good looking uvic girls. Did not mind hanging out in the basement with them whatsoever.

Also makes it is a little easier to go on vacation if you have a tenant in the home.

totoro victoria said...

Who is overpaying for a house with a suite? What "voodoo math" would you be referring too? The market sets the purchase price.

I have put in my own suites (hiring trades though for many aspects) which cost approximately $25,000 to do.

Marko said...

I don't know why we are using the $600,000 figure. I just had clients buy a nice 1980 home in the Swan Lake area for $475,000 with three bedrooms up and a one bedroom suite down rented for $850 could probably fetch $900 with a bit of TLC. 7,000 sq/ft+ lot.

Good luck finding comparable space to the upstairs with a yard for $300,000 or less than $1,500 rent per month.

Dave said...

PEI is voted the second best place in the world to "retire in luxury", next to Ecuador. You could literally drive across the bridge if you wanted to check on your investment in Moncton.
http://www.sailorsrest.ca/SR/public/pei_map.gif

You have to admit, it is tempting. Does anyone know how long a drive it is to the Big Apple? Is it a day trip?

totoro victoria said...

I too have experienced a zero vacancy rate on my properties in Victoria and the Okanagan. I started to rent my first property out 4.5 years ago.

Good condition, nice location and appropriately priced and they are filled with free advertising.

I know there are many horror stories out there about tenants but, in my experience, you need to screen and check references and be up-front about the deal. In addition, regular visits are great to monitor things. Living on-site, even part-time, reduces any issues.

My only negative experience came with inheriting some sketchy tenants when I purchased a property. Luckily they were not keen to continue with the landlords living on-site and they gave notice immediately.

totoro victoria said...

Dave, I agree it is tempting if you are open to selling here and relocating. Just like Leo doesn't want tenants, I wouldn't move for money. Even big money. Family and friends and history are part of what I enjoy.

My kids are fifth generation Vancouver Island. I suspect they will settle here as adults and I plan to stick around for that.

totoro victoria said...

Regarding accounting for time spent managing rentals...

I do not account for my time because, yes, I actually do enjoy this and, in fact, there is little to manage except with a vacation rental, but I hire out the cleaning and on-site work for this and it is accounted for.

Once a place is rented there is little for a landlord to do except some minor fixing of things when necessary.

Showing places does take time, but I generally have to do 1-3 showings before renting. I have to do the annual maintenance tasks anyway as I live there part-time and am responsible for them. My tenants are responsible for yard maintenance at one property.

To date, I've never been called because something was not working. I do make sure my properties are well maintained to start with.

I also spend a little time on seasonal decorations - but that really is my idea of fun. (no response required folks)

Introvert said...

The estimate of $1,000-$3,000 per year on rental maintenance is bonkers, unless, as Totoro said, the suite is in poor condition at the outset.

a simple man said...

Most suites are non-conforming; therefore, property taxes often do not reflect the existance of a suite.

Careful. I know two people in Oak Bay who have in the past six months been found out by Oak Bay and had to rip their suites out to the studs because they were non-conforming. They are not pleased as one just purchased the house with the suite in it.

totoro victoria said...

Yes, Oak Bay is particularly difficult and seconday suites are not permitted. They actively monitor.

When I purchased a home in Oak Bay the municipality sent someone out to my home to inspect the garage/home and makes sure there was no illegal suite. There wasn't but it was a really large house with a rec room with a bar so I guess they just thought they'd check it out.

Most municipalities are complaints based but OB is not - they will also monitor listings for unauthorized accommodation.

Secondary suites can be legalized in Victoria and Saanich. I personally like having legal suites as I don't want the potential hassle.

In the Okanagan vacation rentals have been legalized. In Victoria they are not legal.

Marko said...

Careful. I know two people in Oak Bay who have in the past six months been found out by Oak Bay and had to rip their suites out to the studs because they were non-conforming. They are not pleased as one just purchased the house with the suite in it.

I know someone who had to remove a stove, but to tear up the drywall? Never heard of that.

totoro victoria said...

Yes, I have only heard of stove removal as well. Perhaps there was some issue with safety of wiring/plumbing work?

http://www.canada.com/victoriatimescolonist/news/story.html?id=4982c310-0b38-4570-9a25-0bc50b228557&k=63901

totoro victoria said...

Estimate is one in eight homes in OB has an illegal suite.

a simple man said...

The previous owners had done extensive renos in the suites without permits. Same as the house recently sold on Larkdowne that was flipped - I heard the inspectors came in (they were down the street looking at something else and saw all the contractor trucks) to find the owner had done a lot more than he had permits for and the "fix" cost $70K.

Yes, a lot of suites in OB - just walk around an you quickly notice how many homes have man-doors punched into old garage spaces with another mailbox hanging there. if the inspectors wanted to, they could bust 8 a day for the first few months at least.

Marko said...

The previous owners had done extensive renos in the suites without permits.

Like every other house in Victoria?

Jack and Cate said...

Dave - Retire in PEI. It takes 2 hours to drive to Moncton, $48 in bridge toll.

Live there for a year and then consider luxury as no physicians or medical care. Waiting list of 2-3 years for a doctor, HST coming in April, Second highest income tax in Canada and after you drive the island a few times you'll be looking back at B.C.

We did...... good luck

a simple man said...

Like every other house in Victoria?

Exactly. Just do not get caught doing it in Oak Bay. Something for prospective purchasers to consider.

Leo S said...

Most suites are non-conforming; therefore, property taxes often do not reflect the existance of a suite.

The scenario was very specific. $1000 in rental income will cover an additional $200,000 in house cost. I'm not arguing about the cost effectiveness of suites in general.

$1,200 for opportuntiy cost for downpayment? Per year I assume?

Yes.

Vacancy allowance of 8% is a little high if you are in the core

1 month every 2 years is 4%.

Not sure how it adds up to $28,000 in extra expenses.

It doesn't. It adds 4000 in expenses to the 24000 in mortgage costs.

You fail to account for the additional principal paydown of approximately $500/month

The scenario was cashflow, not ROI.

What rental expenses are you referring too?

ROMS is one. Most of that cost is maintenance.

As far as maintenance, there is some but not anywhere close to $1000/year.

And you're amortizing the periodic renos and major appliances over every year? Of course regular maintenance is low, but when you spend $20k every X years to reno the place then you can't just ignore that number.

Finally, try to find a SFH or similar quality space and yard as the space you get to live in for $400 000 in a nice area in Victoria.

Totally beside the point. We're talking about $1000 in rental income offsetting $200,000 in house cost. Feel free to use examples of 800,000 and 1,000,000 if you want.

I know this is not a favourable option for you, but it works for many folks in a way which is more positive than negative.

I'm arguing specifically against that one scenario ($1000 carries $200,000), not suites in general. That is a totally different discussion.


Dave said...

Jack & Cate

Moneysense magazine did the research on PEI, not me. They claim a couple can live on less than 30K per year. I'm sure they do their research before publishing.

$48 isn't bad. Half the cost as here, to get to the mainland. Health care sounds the same. I haven't been able to get a doctor here for my family.

I think BC's health and other gov services are about to get a lot worse as the deficit is out of control and have to make some serious cuts.

http://www.timescolonist.com/business/Revenue+shortfall+blamed+budget+deficit+ballooning+billion/7622526/story.html

hap pychucky said...

http://hlr.coldwellbanker.com/PressRelease.html

I like to know the prices of some of the houses in the top market before the crash. Victoria is a bargain.


mrmike said...

I once got popped for a non-conforming suite ,as Marko said I just had to remove the range. He did make me disconnect the range wire from the panel also. I could keep the fridge, d/w and everything else in place. If you design a suite properly, all you have to do is open the suite entry 45 min fire door and it's not a suite anymore.

Introvert said...

ROMS is one [rental expense].

Yes, I did forget to add that in.

So that's $115/year, and a portion of this expense is a tax write-off.

Still not sure how we can legitimate the $1,000-$3,000/year estimate.

Introvert said...

Only half of Saanich (everything south of McKenzie) allows for the voluntary opportunity to legalize one's suite.

Saanich has an estimated 9,000 suites in total. The mayor and council openly acknowledge the necessity of suites in Saanich.

Frank Leonard's words from a Saanich News article:

"In many ways, they're essential to afford a home or to afford housing, depending on if you're a landlord or a tenant," he said. "As a result, our enforcement policy is fairly passive."

Suite legalization is still in the pilot stage and, last I heard, the number of residences choosing to legalize was abysmally low (something on the order of 18).

Also, it's important to be mindful that the illegality of a suite does not render void any agreement made within the B.C. Residential Tenancy Act. In the eyes of the Act, whether your suite is legal or illegal makes absolutely no difference.

patriotz said...

Dave - Retire in PEI. It takes 2 hours to drive to Moncton, $48 in bridge toll.

But going back to PEI it's free. I don't think it works like that for Vancouver Island.

a simple man said...

So it's free to get there yet you have to pay to leave?

Hmmm. Warning bells.

StalJ said...

@totoro “The local vacancy rate is 6.2 (Victoria is around 3).”

You are close, but Moncton vacancy rate is 5.0%, Victoria is 3.5%, Nanaimo is 7.0% in the 2012 cmhc report...I talked with someone at Proline who thinks Vic is already closer to 5% and as high as they can remember. I believe it will peak closer to 8% with all the new buildings going up. That and purpose built apatrments and conversions like QV hotel.

Just Jack said...

Anne Shirley: How would you like to have nasty things said about you? How would you like to hear that you're fat, ugly, and a sour old gossip!

Leo S said...

ROMS + utilities and you're already at about $500/year. Now amortize in the cost of maintaining 5 appliances and 15k of renos every 20 years and you're at $1500. That's without any contingency for accidental flooding or anything else that can come up

info said...

@StalJ

The vacancy rate in Victoria is indeed favourable to renters. I know that between 2009 and 2010 the vacancy rate tripled in Victoria. Since then I have seen much more available as I drive past apartments, etc. In James Bay, for example, there is hardly an apartment building that doesn't have vanancy and many have multiple vacancies. This would have been unheard of 5 years ago in any neighbourhood, much less James Bay which has traditionally been tight.

The vacancy rate does not include condos, townhouses and houses for rent. As time goes by, there are many more units being added to the pool and this will continue as more building is completed.

If I was a renter and looking, I would be very selective right now. I tell people that are looking for a rental to negotiate a rent decrease and to limit the length of the lease. Many have done this successfully.

Unfortunately some people still have the idea in their head that the rental market is tight. That has not been the case in recent years.

Apartment managers that I know in Victoria have told me that they have had as many as 6 to 8 units available in a 3 story walk-up and they have had to lower rent.

totoro victoria said...

You have a lot of valid points Leo but when I said the math works I was not referring to cash flow.

The property investment analysis I used takes all these factors into account and gives credit for principal paydown. This cannot be counted as a cost to the extent it is paying off an asset in my view. If you have a 20 year mortgage and you wait twenty years your renter will have paid the entire mortgage for that portion of the home at today's rates.

Whether you use the same matrix or not really the point as it was my statement and I never referred to cash flow, although overall cash flow is really important for investment properties and you'd be hard pressed to find this in Victoria now outside of a small number of multi-family properties.

totoro victoria said...

I don't belong to ROMS. I don't see the value for myself personally, although I can see how it could be of value to landlords.

Introvert said...

ROMS + utilities and you're already at about $500/year. Now amortize in the cost of maintaining 5 appliances and 15k of renos every 20 years and you're at $1500. That's without any contingency for accidental flooding or anything else that can come up

Well, in my case it's four appliances. Depending on the cause, my home insurance will likely cover accidental flooding. And you're not accounting for the fact that a portion of all costs associated with the suite are tax-deductible (e.g., hydro, water, home insurance, ROMS, appliance repairs and replacement).

Also, keep in mind that a portion of my mortgage interest is tax-deductible, too.

The aggregation of these tax deductions makes a difference.

totoro victoria said...

@totoro “The local vacancy rate is 6.2 (Victoria is around 3).”

"You are close, but Moncton vacancy rate is 5.0%, Victoria is 3.5%, Nanaimo is 7.0% in the 2012 cmhc report..."

Yes - correct. I was looking a NB major centres in this article quoting CMHC for the 6.2 figure: http://www.marketwire.com/press-release/vacancy-rates-increase-in-new-brunswick-1668158.htm

What is interest is that vacancy rates differ across rental types. The vacancy rate for units with three or more bedrooms declined in BC this last year.

The highest vacancy rate appears to be in apartment buildings (like the one advertised in Moncton). In addition, I expect certain sub areas are higher or lower ie. near the university is likely much lower. Quality of housing also plays into this and there is no category to collect stats on this.

totoro victoria said...

I buy most of my appliances second-hand. I haven't had to replace anything yet, but when I do I know that I can buy quality used appliances online for about the following costs:

fridge - $150
stove - $100
washer/dryer - $150

People are often upgrading and appliances last a long time.

Roofs are an expense but I would have to pay for my roof anyway. What else is there if your suite is fairly new other than replacing flooring and repainting and a new water tank every ten years? Honestly, if you want to upgrade scan usedvictoria for building supplies and start buying them in advance.

None of these things is a huge cost. We could do minor repairs ourselves if needed.

totoro victoria said...

Also, my tenants ALL pay their own utilities. They are either:

1. separately metered;
2. are wired separately and have an an electronic electricity meter attached to the subpanel;
3. are allocated on floor space/number of people.

totoro victoria said...

Actually, I'm incorrect, all my suites but one have a dishwasher and I did buy a new dishwasher for $300.

mrmike said...

A house with a suite that you would have your Mom live in, has way more value than a similar house with no suite.I just don't understand the argument, it's like 2 for 1.
Ask any appraiser...they see a second kitchen, price go's up.
It's reality. I have two young boys who will more than likely move in my suite and that's great. They will have to share, but they'll also have to share mowing my lawn, cleaning my windows, cleaning my gutters, and anything else the Wife and I demand.
It's nice to know we have a place for the kids...cuz it's starting to look pretty ugly out there.

totoro victoria said...

Why would you need $15,000 in renos - or $750/year? My duplex was built in the 1950s and it has all the original hardwood flooring and kitchen which still looks good. Upgrades have already been done to plumbing and wiring. My new laminate I put in one unit came with a 30-year warranty.

Yes, things can get expensive if you are thinking of totally redoing kitchens and bathrooms. We are thinking of doing this but only for our living space.

totoro victoria said...

"It's nice to know we have a place for the kids...cuz it's starting to look pretty ugly out there."|

I really hope my kids do this too. I can't think of a better hand up or something I would love more.

mrmike said...

Would also like to add, if the roof leaks you don't have to rip it off and replace it...you can repair troubled roof shingles very easy by crawling in the attic, finding the leak and replacing the area...not the entire roof! might cost $150

totoro victoria said...

Yes, another topic perhaps, but the scale of craziness in the reno business is overwhelming at first. You can get wildly different quotes and ideas on how things have to be done - we saved $20 000 by questioning everything, buying used, and not hiring a general contractor.

I can't take credit for this because it is my handy partner who took charge of that part. Not my forte. I was more of unskilled labour with moderate design sense.

Dave said...

Why doesn't someone develop a spreadsheet for a house with a suite vs without? Sounds like some of you have thought extensively about it. It could be useful to have a permalink to one.
Roger? Totoro?
Dave3

patriotz said...

The aggregation of these tax deductions makes a difference.

The expenses of any investment are deducted from the revenue to get the income. You're talking as though expenses are increasing your ROI when of course they are decreasing it.

patriotz said...

It's nice to know we have a place for the kids...cuz it's starting to look pretty ugly out there.

So connect the dots for the future of the RE market.

Leo S said...

And you're not accounting for the fact that a portion of all costs associated with the suite are tax-deductible (e.g., hydro, water, home insurance, ROMS, appliance repairs and replacement).

I actually did account for this. Hence the only 3-4k tax on 24k income. Of course ymmv.

Leo S said...

Why doesn't someone develop a spreadsheet for a house with a suite vs without? Sounds like some of you have thought extensively about it. It could be useful to have a permalink to one.

Roger's rent/buy spreadsheet can do this (sidebar of the blog). There is a cell for suite income.

Alexandrahere said...

As far as my experience goes, the only thing you would have to rip out of a house if the municipality says you can't have a suite is the stove and the 220 wiring to it. No one can stop you from having a rec room vs living room 2nd fridge (many people have 2nd fridges and freezers on the lower livel,a fourth sink, or built in cabinets in what ever room you please....dining rooms, living rooms, rec rooms and bedrooms have them in many sfhs.

totoro victoria said...

I'm not really good with drafting spreadsheets. Add that to the list of things I should learn! Clearly others here have much better expertise.

The ready to go spreadsheet with some additional modifications I use is here: http://www.biggerpockets.com/tools/REIPropertyAnalyzer.xls

Alexandrahere said...

Oh, and also, no one can prevent you from having a border or sharing your home either....so he lives without a stove....loads of batchelors could care less about that especially if the rent is reduced accordingly.

totoro victoria said...

I think the typical solution to this issue is the hotplate plus toaster oven. Most of asia gets by on this.

Alexandrahere said...

eww my god....forgive me grammar/spelling kings...

livel = level
batchelors = bachelors....sorry

VP said...

I’ve rented suites in 3 of the 6 houses I’ve owned. Never, ever, will I ever again.

Reasons include,
> Noise - I’ve used extra insulation, sound bar, thicker drywall, staggered wall studs, ear plugs - you can never come close to concrete bldgs for sound proof.
> Getting high when I don’t want to get high.
> Fire - yup $30,000 damage to one place and lost many of my belongings to smoke damage.
> No pets usually means hide pets from mean landlord. I hate snakes! It never got out that I know of. Gave me the willys none the less.
> get to hear bed banging wall and moaning for half an hour when trying to get to sleep. OK, I was a little jealous.
> “I’m going to be late again on rent this month”, try kicking someone out. Turns out you can get fined for assaulting your tenants.
> tenant enjoys half hour showers, “wonderful!” as I get to set another new record for shampooing hair in freezing cold water.
>>I’ve got more, but I’m getting too tense again.
It’s not worth it. It took me 3 houses to learn my lesson. Yes, I’m a slow learner.

Leo S said...

A house with a suite that you would have your Mom live in, has way more value than a similar house with no suite.I just don't understand the argument, it's like 2 for 1.

Sure. But the statement was that $1000 in rent covers an additional $200,000 on the house price. It doesn't. The relative benefits or economics of suites is a completely different issue, and I don't have a strong opinion or interest in it.

totoro victoria said...

And, as a counter:

1. Noise - resiliant channel, two layers of drywall and rocksol insulation. Plan the location so sleeping space is not under sleeping space if possible. I do have some noise transfer but it is pretty good because of the soundproofing.
2. Getting high when I don’t want to get high - strict no-smoking anywhere on property in written agreement. Warn and then serve a Notice to End Tenancy for Cause. I have had a tenant smoke cigarettes outside although the agreement says no smoking anywhere on the property. I let that go as the smoke was not in my space and I liked her.
3. Fire - proper home insurance. Transfer liability to tenant in written agreement along with requirement for them to insure their residence. No solution to prevent except don't allow smoking and we provide fire extinguishers.
4. No pets - written agreement and serve a Notice to End Tenancy for Cause if no compliance. I have not had this problem and, in fact, I'm okay with some types of pets although no tenants currently have any.
5. Get to hear bed banging wall and moaning for half an hour when trying to get to sleep - no solution other than renting to retired singles (like one of my tenants), don't put a bedroom near yours. I have not encountered this.
6. “I’m going to be late again on rent this month" - serve a 10-day Notice to End Tenancy immediately. I have not encountered this.
7. Tenant enjoys half hour showers, “wonderful!” as I get to set another new record for shampooing hair in freezing cold water - get another hot water heater and link them or a larger capacity one. You have to plan for enough hot water for two suites if sharing plumbing connections. I prefer separate connections to separate tanks.

That said, bad experience can sour you to wanting to have anything similar ever happen again. Don't; however, minimize the amount of control you have to choose tenants wisely and resolve matters through taking action.

totoro victoria said...

Since we are on the topic of being a landlord I always keep in mind what it was like to be a tenant and I make sure:

1. The wiring in the house is adequate.
2. The soundproofing in the house is excellent.
3. Everyone has their own washer/dryer.
4. No shared entrances.
5. Separate outdoor living space.
6. Separate metering if possible and if not separately wired to subpanel with electronic meter.
7. Everyone gets a full bath.
8. Everything is maintained to a better than average standard.
9. All windows are new with double-panes and screens.
10. Consistent small dollar cost improvements are made (painting, putting in new lino, improving landscaping, upgrading a faucet, tiling a backsplash).
11. Separate heating and controls for each unit.

mrmike said...

Notice to End Tenancy...make them live in fear. It usually only takes one. It's a hassle for people to move...they will more than likely obey and STFU.

VP said...

Yup, been there, spent that, did it all. Sounds great in theory. When it came down to it my 20 page tenancy agreements didn’t mean a whole lot. And the Notice to End Tenancy, then to court, still ended up being out about $2500 on one. INFuriating. Big mess, but at least I got rid of him. The strangest thing I remember was having the best tenant 1 month-nurse,etc- then for whatever circumstance - teenage kid has to move back, new boyfriend…. Everything changed on a dime.
Maybe I’m the exception, but I would never look at buying a suited house again. Now that I think about it, no one who knows me would either. At least my family can laugh about it now. Well, more so they laugh at me.

totoro victoria said...

Terrible situation.

I'm curious as to why you were you out $2500? Could you not collect on your RTB order? You can get your costs of filing and enforcement and lost rents and any damages caused to incoming tenants. You can collect through garnishing accounts and wages if there is no voluntary payment.

I can see why it is not something you would want to repeat.

mrmike said...

It's not easy, in most cases it just takes a simple kind warning. Most people living in basement suites have failed a property management application. If it gets complicated, go to the residential tenancy office and explain there are required upgrade renovations that are needed. This will have them out of your hair in 60 days, if they refuse to pay rent, they now only have 10 days to vacate.

mrmike said...

^And no I'm not an asshole, But people will try to push the limits, and I learned how to play the game.

totoro victoria said...

I have a written application process for tenants.

You will lose a month's rent if you serve notice for renovations.

You have to serve the ten day notice prior to the first of the month if you want them to leave at the end of that month. They have ten days to pay not leave. If they do not pay you have to get a writ of possession.

mrmike said...

Well it's a good thing I'm not a landlord anymore...probably be sitting in the court house all week.
My wife hated it, made me pack it in.
Kids will have a nice flat though.

a simple man said...

Sale on Epworth today. Assessed at $707 and sold for $610.

VP said...

totor
um, he didn't show at court. Whatever order the judge gave me, it was enough to scare a relative into paying me ..something, I'm pretty sure... he of course vanished. No one hadn't seen him. He was probably out of work anyway...
Some of the 2500 was damages, which was part of the order, but certainly not enough. That was mid nineties, so some fogginess. Blood from a stone, comes to mind.

info said...
This comment has been removed by the author.
Introvert said...

The best way to deal with tenant trouble is to prevent it in the first place. Do your due diligence and don't make hasty decisions.

Even the threat of a credit check tends to deter most shady characters right off the bat. (And I don't just threaten credit checks; I'm prepared to do them.)

Renting to people with whom you have some degree of familiarity is also a good thing, in my experience. Acquaintances would be embarrassed to cause you any trouble, so they usually don't.

If renting to strangers (i.e., not acquaintances), perform monthly suite inspections. It shows the tenants that you're paying attention, and it offers you the opportunity to identify and address any potential issues--before they become big issues.

Don't use the basic tenancy agreement offered on the government website. Instead use an agreement such as the one ROMS offers its clients; this agreement is lawyer-written and litigation-tested. Should you ever have to go to court, you will be in a strong position.

Just a few tips from me. I like Totoro's tips, as well.

totoro victoria said...

Yep, some folks are just shady. Who needs the stress they can cause! Its kind of like bad employees, better to get rid of them early and even better not to hire them at all.

It goes both ways because there are shady landlords too. And there are landlords renting substandard spaces.

Giving more than average for a good price and doing due diligence gives me some peace of mind and has worked so far.

I also don't use the standard residential tenancy form. I prefer to use a more comprehensive agreement. I attach the standard res ten terms and conditions as an appendix to the agreement.

patriotz said...

Good quality tenants who are willing to pay a high rent to live in a basement are not in unlimited supply.

When the rental market and economy go south they get hard to find. I've been a landlord during a recession and it's no picnic.

totoro victoria said...

Yes, changes to the rental market can happen.

I suppose I should mention my other criteria for suites/rentals: no basements.

All of my places are above-ground. I would not like to live in a basement myself so I see no reason to go this way given the large number of places out there suited for above-ground suites.

Leo S said...

If renting to strangers (i.e., not acquaintances), perform monthly suite inspections.

No offense, but I would never rent anywhere that did that. Total invasion of privacy and lack of respect. I guess you're lucky that your tenants are such pushovers.

Also have never encountered or heard of a rental that did that.

totoro victoria said...

Absolutely agree. I have never done any interim inspections viewing it as an invasion of privacy. If I was concerned I would much rather offer to upgrade something nice for the tenant with their agreement and casually check things out that way. People don't usually like to feel like they are being monitored for negative behaviour.

totoro victoria said...

Absolutely agree. I have never done any interim inspections viewing it as an invasion of privacy. If I was concerned I would much rather offer to upgrade something nice for the tenant with their agreement and casually check things out that way. People don't usually like to feel like they are being monitored for negative behaviour.

Chickinvic said...

I too would never live in a place (nor have I ever encountered such a place) where the landlord wanted to do a monthly inspection. Are you kidding? That wouldn't fly with most people I'm sure. I've never had a landlord come in other than if I've requested it for repairs, etc, or other maintenance type stuff (which would normally be annual such as chimney cleaning and that sort of thing).

Chickinvic said...

I too would never live in a place (nor have I ever encountered such a place) where the landlord wanted to do a monthly inspection. Are you kidding? That wouldn't fly with most people I'm sure. I've never had a landlord come in other than if I've requested it for repairs, etc, or other maintenance type stuff (which would normally be annual such as chimney cleaning and that sort of thing).

Al + TOH said...

Being a long term happy landlord with happy tenants takes not only work, but also certain types of personality, especially in shared houses.

The fact is that, other than areas around universities, suite thingy does not really exist widely in most other cities; but they are everywhere here in Victoria.

This has something to do with vacancy rate, but it also means that the suites do make money contribution, so even people who are neutral to the idea and wouldn't do it in other cities will do it here, to help higher housing cost, or/and to live in a nicer house, or/and to work (other work) less.

Enjoyment and making money can be two different things for someone, or the same thing for someone else.

For people who dislike or/and not built for the suite job, no money or good tips (like those given above) will make them enjoy it. So there is no point trying to convince each other on the enjoyment part.

p.s. We manage house rental for friend, mostly to UVic students. Sometimes, we do one inspection in the 2nd month after they move in, and yearly after that, and when they move out. IMHO,if you feel that you have to do monthly inspection with someone, then you shouldn't rent to these tenants in the first place, as you don't have enough trust/faith in them.

Renter said...

I feel I need to tell horrible landlord stories to counter some of the horrible renter stories.

This is my favourite awful landlord story. We did our due diligence moving into a mostly above ground first floor suite back in 2001. We got refs on the landlords, had a good relationship with them. House was owned by an older man, their son and his girlfriend lived upstairs. It wasn't really well insulated (you could hear the click, click, click of the dogs nails on the hardwood floor a lot of the time) but that didn't really matter until the son and girlfriend broke up. Son then went through a long spell of coming home drunk late at night with various hookups, blasting music at 2 am, loud screaming sex, etc. And he couldn't hear the phone ringing when we'd call to ask him to turn it down. Fortunately that didn't last long because the dad put the house up for sale after a couple of months of complaints. It was bought by a trio; two sisters and a girlfriend. All seemed to go well, except that when the couple were gone, younger sister threw wild parties - so wild that we actually had to call the cops on our landlord. That is a very interesting call to have with the police, by the way. They can't quite believe that we don't have the scenario backwards. (and yes, it was a valid call, they arrested some of the partygoers, just so that's clear). Then the house is sold again, and we have slid completely down the hill of landlords. Loud parties all the time, they ever party on the damn roof, houses at the other end of the block are complaining, and guys on motorcycles have no compunction about revving their motorcycles on the lawn directly under our windows. They refuse to answer the phone if we call to complain, they refuse to answer the door when we knock to complain. At that point, we had been saving diligently to buy a home - this pushed our hand and we started shopping, even though our downpayment was not what we wanted it to be. It was good timing on our part, because they serve us notice that they want us to move out because "a brother is moving in downstairs". It's bullshit, because if brother was part of this, we would have gotten an Notice to End Tenancy when they took possession a mere 2 months before. We were just harshing their cool. They started leaving junk (mattresses, other furniture) out in the yard, people were smoking pot outside our door, and we made an offer on the first place that was even halfway suitable. Then they served a 10 day eviction notice on us because my partner lost his temper at another 4 am block-waker of a party and yelled at them. We took it to appeal, because we didn't get possession of the new place until the end of the following month. We won hands down, especially after providing angry letters about the parties from all the neighbours to the mediator. Oh, and they trashed my garden, stole the firewood we had stored outside (used it for their own purposes whenever they wanted) and stole our deck furniture to use inside their suite.

And we had to take them to residential tenancy again because they wanted to refuse to pay us our damage deposit back. (There was some damage to the carpets (in a fairly hidden spot) done before we moved in, which was on our original inspection notes with the original landlord and there were maintenance issues with some of the appliances that we had reported and had asked to have fixed, which they didn't do and then tried to claim was damage we had done.)

Al + TOH said...

they serve us notice that they want us to move out because "a brother is moving in downstairs".

Hi Renter,

In this case (landlord ask you move out due to relative move back or reno), they should give you one month rent back, or you don't need to pay for the last month. This is the BC rental law.

dasmo said...

"When the rental market and economy go south" "When" here is a tad preposterous IMO. "IF" would be more appropriate.

Al + TOH said...

Also, in this case (landlord gives you two month notice due to relatives move in or reno), if you find another place before the two months end, you can just give 10 days notice and move out. Not only you don't need to pay for the time you moved out, and they still have to give back one month rent to you.

Introvert said...

I feel I need to tell horrible landlord stories to counter some of the horrible renter stories.

That's a pretty crazy story. I guess renting isn't all that it's cracked up to be. Who knew?

Introvert said...

No offense, but I would never rent anywhere that did that. Total invasion of privacy and lack of respect. I guess you're lucky that your tenants are such pushovers.

No offense taken. I've rented to three different tenants since I bought my house. Two of the times, I was renting to an acquaintance; I did not, of course, find it necessary to perform any inspections during those tenancies. There was absolutely no need.

In the only other case, when I was renting to a stranger, I did perform monthly inspections. I made perfectly clear that I would be doing monthly inspections long before we signed any paperwork, and the tenant was fine with this. The inspections were simple and short--a quick peek in the rooms and I ask if s/he is having any issues or if anything needs repairing, and then I'm gone. Three minutes.

I understand that many people would not be comfortable having their landlord drop by to take a peek once a month, but some definitely are.

I'm not there to be pals with my tenant. It's a business arrangement between two parties. I'm well within my rights to perform monthly inspections, so long as I provide written notice at least three days in advance. Further, I do not spring this on my tenants after they sign the rental agreement; I ensure that they go into this arrangement with eyes wide open.

Monthly inspections give me peace of mind and serve a very practical function. ROMS recommends landlords do them; maybe I'm the only one who's doing them, but there you have it.

Tell the landlord who has to deal with unexpected damages to the suite that exceed the damage deposit that monthly inspections wouldn't have made a difference, as damage usually accumulates over time. Yes, it's possible for a landlord to force the tenant to cover the damages above and beyond the damage deposit, but it's a huge hassle that may involve going to court.

And tell the landlord who has had to deal with the extensive remediation costs of a marijuana grow-op that monthly inspections wouldn't have made a difference (in fact, the threat of monthly inspections would have prevented the grow-op).

I would rather protect my interests and assets and be uncool, then be cool and not do monthly inspections when I feel they are warranted.

totoro victoria said...

If the tenant agrees in advance I think this is different. Hopefully the wouldn't have a grow op in the suite of your house while you live there. Be pretty silly strategy - especially since you pay utilities!

info said...

Time Magazine not seeing a soft landing for Canada's housing market.

Quoting:

Real estate prices have risen so high, in fact, that many housing analysts believe the bubble is about to burst. Housing economist Robert Schiller told CBC news in September, “I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.”

Of course, few analysts in America predicted that the U.S. real estate market would blow up in the spectacular fashion it did in 2007, either.

(CMHC, of course, says) the Canadian real estate market will go through a rough patch and nothing more. But anybody who was paying attention during the American housing crisis can remember similar assurances, which turned out to be just plain wrong.

Dave said...

"When the rental market and economy go south" "When" here is a tad preposterous IMO. "IF" would be more appropriate.

It's only preposterous to those not keeping up with the news. "When" is already here.

http://www.theglobeandmail.com/report-on-business/top-business-stories/top-business-how-canadas-economy-stumbled/article5808393/

This summer's numbers show we are growing 4.5 times slower than even the morose US economy. We will be entering recession early next year and BC is already one of the hardest hit provinces. Most of us knew the rental market was heading south, now we have data showing why.

totoro victoria said...

Oh good grief. Even if vacancy rates rise if you have a good place at a good price you will be okay.

People are waiting to buy right now and they have to live somewhere. If you are an owner you can be way more responsive to market conditions and renter desires than you can as a property management company.

Don't get me wrong, I do appreciate the blog and the posts. I just get tired of people talking from their armchairs on stuff that they read in the paper.

Renter said...

@ Al + TOH

Hi Renter,

In this case (landlord ask you move out due to relative move back or reno), they should give you one month rent back, or you don't need to pay for the last month. This is the BC rental law.


Hi, :-)
This was back in 2005. We were aware of our rights and acted on them, but it certainly didn't make that last month any easier. We had provided a year's worth of rent checks (postdated) and contacted the bank to cancel the final months and all succeeding months. The landlord tried to cash it anyway and tried to take the bounced cheque charge off of the damage deposit. (Forgot to mention that.)

It took us time to find a half-decent place to purchase and then we needed to wait for the owners of our new condo to move. They kindly let us start moving things in early when we told them of our situation (especially small fragile things). As soon as the deal closed, we were sleeping at the condo, even before we finished moving out of the suite. We'd have given 10 days notice as you suggested, but the eviction date was actually quite convenient from a "finding a place, packing, and moving point of view" (just not for our sanity).

This was 7 years ago. I sold the condo in 2009 and am renting again, but I can't say we didn't have some trepidation about that given previous experience. But the value of the condo had increased so much that we just had to sell.

Leo S said...

"When the rental market and economy go south" "When" here is a tad preposterous IMO. "IF" would be more appropriate.

Vacancy rate has doubled and you may have read about how Canada's economy has flatlined in every paper today. It has already happened.

Leo S said...

I've rented to three different tenants since I bought my house. Two of the times, I was renting to an acquaintance

So all your sage advice on how doing your due diligence will prevent problems is based on a sample size of 1 actual tenant and a couple friends.
Great if it works out, but you've got one tenant, certainly not enough to conclude that you can filter out every bad one.

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