Monday, March 2, 2015

February 2015 Monthly Stats

Pretty strong February.  Sales up 31%, inventory down 8%.   The trend towards improving market continues at a surprisingly steady clip, with prices matching inflation for the last year and a half.   


SFH prices basically dead flat from last year.   If we see another strong month though this graph will jump.


Another way to visualize the change in the market since 2013 is to look at the change in inventory from the same month the year before.


Only sign of anything different is an increase in new listings over last year.  Haven't seen that since last May.  With more chatter of a better market, it might lure some potential sellers out of the woodwork this spring.



272 comments:

1 – 200 of 272   Newer›   Newest»
SJ said...

Thanks for the graphs. Makes it easier to see what's happening.

If these 2 projects go ahead as planned, the market should get interesting . That is a lot of office and commercial space to fill. It's hard to believe Victoria is ready for that much new footage.

http://www.timescolonist.com/business/summer-start-is-goal-for-two-major-building-projects-in-victoria-1.1776656

DavidL said...

It all depends on the neighbourhood... Some parts of Victoria have seen fairly substantial increases over the past year, while others continue to slide. The assessments in my Saanich East neighborhood were down 2% to 5% last year - enough that I was able to appeal my assessment and get an extra $14K taken off.

Tren said...

always nice to see charts. great job.

Marko said...

Condos only 4.9% off peak?

Leo S said...

Surprising the strength in condos. Could just be noise of course, but I would have expected weaker market given all the new product.

Numbers Hack said...

Leo Great Charts. I would pay you to teach me how to make those fancy graphs!

************************
Debt Service Ratios from
BMO Feb 27 2015

How many BORROWERS IN VICTORIA would fit this profile?

http://www.bmonesbittburns.com/economics/current/focus.pdf

One in eight households is heavily indebted
About 12% of families have debts greater than 250% of disposable income, nearly double the number since the start of the millennium, and they owe about 40% of
outstanding debt....... With
little cushion in the event of job losses or higher borrowing costs, this group of heavily indebted households is at elevated risk of default and reduced spending.

Numbers Hack said...

RE going up Factors:
1/ Interest Rates
2/ Demographics
3/ Supply/Demand

RE going down
1/ Shocks
1/8 avg Canada is too loaded with debt. They account for 40% of all mortgages owed.

My opinion:
if you are not in rush wait for the shock event and then perhaps you will get a systemic discount.

if you are in a rush, follow JJ's advice and look for those "deals".
But then again, no one has the info that JJ has haha. Might be worthwhile to pay him to find you good deals or at least highlight them on a weekly basis. I'd pay $10/week for that.

S-J said...

@ jwalbren

"@just Jack, ah, you got me! I am secretly a real estate agent born and raised in Victoria, who is trying to lure a couple bitter basement dwellers into buying expensive houses.

My brilliant plan is working.

Luckily we haven't met anyone as nasty as you so far, most people here are super friendly and welcoming."

I guess you are new to HHV, otherwise you would know that Just Jack is one of the most valuable contributors to this Blog. I am pretty sure he is also one of the longest running commentators since it began. He is an appraiser in Victoria and willingly gives us readers of this blog great insight and facts into the real estate market of Victoria. He also has a great sense of humour, which apparently you have missed!

Just Jack said...

The difficulty in trying to find the "deals" is that you assume that the asking price is reasonable. That isn't always the case. There are properties that are intentionally under listed to create an auction. And there are properties that are far too overpriced to be competitive. And there are properties where the home owner changes their mind and opts not to sell anymore.

That's why the Sales to New Listings Ratio is a wide range between 40 to 60 percent for a balanced market or to put it another way why it is necessary to have 2 new listings for every property that sells. You have to account for the expired and cancelled listings.

If I were to build a program that would sift through the data it shouldn't have the asking price as one of the parameters. I think it can be done but you have to re define the problem around the notion that the best deals for a prospective buyer occur when the purchaser is likely the only bidder for the property.

There ya go, any IT people want to build an APP?

dasmo said...

As usual, thanks for the graphing Leo. It a big reason I still come here besides scrapping with the Bears... Heck with everyone. @JJ we simple need a zillow here. Sales history on the house plus tons of other data for instant access. It's like Leo graphs, evaluebc but I limited to one year, pad mapper and the mls stats rolled into one. If you put your house up for sale its data is all there...

Introvert said...

I missed your straw man arguments introvert.

And I missed your know-it-all manner.

Introvert said...

I guess you are new to HHV, otherwise you would know that Just Jack is one of the most valuable contributors to this Blog. I am pretty sure he is also one of the longest running commentators since it began. He is an appraiser in Victoria and willingly gives us readers of this blog great insight and facts into the real estate market of Victoria. He also has a great sense of humour, which apparently you have missed!

One can almost hear the sound of the kiss being applied to Just Jack's ass here.

Of course, one person's "value" is another person's "meh."

Tren said...

JJ: I am willing to put up 20k to sponsor you "deal" project. I also have some project management background in IT.

dasmo said...

You will going up against the CREA and if they bow down zillow will just roll in a destroy you. Best outcome is you come up with some patented algorithm so they buy you... http://www.zillow.com/homedetails/13233-6th-Ave-NW-Seattle-WA-98177/48695230_zpid/

Just Jack said...

I'll tell you a dirty little secret about individual comparable sales they cause more problems in analyzing a property than they are helpful.

All they are is a small judgement sample of the marketplace and tends to make you concentrate on the small things while missing the big picture.

It's a mandatory requirement that I provide a judgement sample in my residential reports.

Yet in most cases I have already come to the conclusion of value before looking at a single individual comparable sale. That's because I bracket the data and look at medians in the neighborhood, along the street, in the same complex and trend the past sales history of the property itself. And reconcile all of these values relative to the property I'm appraising and to current market conditions. If its a sellers market then the value conclusion will be at the higher end of the market range. A buyers market would be at the lower end of the market value range.

In the end, the judgement sample ends up with the real estate agents and appraisers cherry picking through the data in order to support their opinion. That's not the way it's suppose to be performed, however lending requirements and management companies have interfered in how the appraiser chooses the sample. By doing so these parties influence the selection of the comparable sales and introduce a bias into the sample.

In summary, I'd say that using a small judgement sample is old school. In most cases it isn't necessary to analyze individual sales.

DavidL said...

CBC News: Toronto Real Estate Board demands brokers halt online sales stats
Brokers cave in following threat they could lose access to MLS database

Thank goodness that VREB is more progressive!

Just Jack said...

With any IT that solely relies on an algorithm you're going to have someone, somewhere sue for a patent infringement. I think that's the fastest growing sector in the IT world.

That makes any company that sells to the general public through an internet site with just an interactive algorithm susceptible to rightful or wrongful law suits.

Like Dasmo said, the point is to shut you down or extort money from you.

Leo S said...

>> Thank goodness that VREB is more progressive!

Looks like these brokers were opening up the info to essentially the public, rather than just their clients. VREB would likely react the same way.

Leo S said...

>> You will going up against the CREA and if they bow down zillow will just roll in a destroy you

This. The issue is the data access, not the programming of the interface.

DavidL said...

@Leo
Looks like these brokers were opening up the info to essentially the public, rather than just their clients. VREB would likely react the same way.

One of the big issues seems to be previous sales amount and re-listing information. Companies like ViewPoint in Nova Scotia make this information available.

The PCS Matrix (based on VREB data) available in Victoria does not disclose re-listed properties (unless you happen to mark one as a "possibility" or "favourite", it gets re-listed and sort your saved properties by address). The information is in the VREB database, just not easily available!

Marko said...

I wish the VREB/all boards would just open up the database for the public...I waste so much of my time sending buyers/sellers previous sales, expired listings, etc. My time could be better spent.

dasmo said...

Zillow gives listing changes, price changes and sales history. Plus Tax History, Comparable Homes recently sold and for sale. Popularity, it's own value estimate over time, Neighborhood info, school rankings, even a rent estimate... So much more open.

Just Jack said...

If you want a free estimate of your property just google Zooappraisal.

Then you can see the accuracy of automated valuation models AVM's.

In fact put in three recent sales that you know about see how close the zooappraisal can be.

SJ said...

Looks like we're along for the ride this time with our big sister.

Vancouver real estate shifting to first sellers' market in 4 years
http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-shifting-to-first-sellers-market-in-4-years-1.2980124
Modest Vancouver home a seller’s dream as bidding wars return
http://www.theglobeandmail.com/report-on-business/economy/housing/modest-vancouver-home-a-sellers-dream-as-bidding-wars-return/article23276211/
He bought a modest home in the trendy Kitsilano neighbourhood on the city’s west side for $279,000 in 1983. Last month, Mr. Farrow decided to cash in, agreeing to sell the property for $1,875,000. “If you look at pictures, you will see the house doesn’t have character. I’ve fixed it up, but there are no granite countertops or fancy kitchen,” he said in an interview Tuesday.

That's a serious tax free windfall at age 57!

Leo S said...

>> The information is in the VREB database, just not easily available!

Yup. If someone had the realtor interface the programming would be more or less trivial to track re-lists and such. But the board keeps an iron fist on this. Opening it up to the public removes one more reason to work with a realtor.

Just Jack said...

And it isn't free either. If VREB did open up to the public they would have to charge for the information. And you would have to become a member and abide by their regulations which would mean no mass circulations that would be contrary to the interest of its members.

You'd be looking at $3,000 a year and not be able to do much with the data.

It's easier and cheaper to just call Marko.

Leo S said...

>> You'd be looking at $3,000 a year and not be able to do much with the data.


Happy to pay the $3000 if I could put a web frontend on it and charge for access. Not going to happen though.

Jerry Neudorf said...

As a measure of the utility of the Zoopraisal program, hear my example.

I typed in my Fernwood property details and it came uo with a very large number. I then noticed the lot size details were incorrect, showing 6200 instead of the actual 7200 so I corrected the lot size and ran the program again to find that my property had changed value by $400,000.

$400,000 LESS with a larger lot.

A rather blunt instrument.

Marko said...

I have a subscription to the Landcor Real Estate appraisal tool and it isn't too bad on average; however, sometimes it is horribly off as in too high or too low.

patriotz said...

Household saving rate nears five-year low as financial risks increase

That 5 year low is 3.6%. With the odd blip, it has been declining since the beginning of 1982, when it was 19.9%

SJ said...

Folks must figure "why save any paycheck when my investments are making me rich, and my savings account don't pay no damn interest."

Just Jack said...

The recent drop in the interest rate seems to have affected quick sales in the core districts. Properties listed and sold in under 30 days went from 44 in Feb 2014 to 71 in Feb 2015. With the typical home selling at 105% of its assessed value a year ago to 107% this year.

So who signs Poloz's paycheck the people of Canada or the banks?

patriotz said...

"why save any paycheck when my investments are making me rich"

For most folks, that is simply "why save any paycheck when my house is making me rich".

By comparison, the current US savings rate is 4.9%. It reached a low of .8% in - surprise - 2005. Interestingly, in the last decade it was highest (8%) in mid-2008, when house prices were falling fastest.

SJ said...

I dunno, my stocks & bonds have done alot better than RE.
The NASDAQ for instance has quadrupled since '09.

current US savings rate is 4.9%. It reached a low of .8%

Maybe if we decline from 3.6% to .8% it might signal a correction...possibly.

totoro victoria said...

Yes, but you likely were not leveraged on your stock purchases. Going up or going down that makes a huge difference. Check back in 5 years and compare the initial cash invested with the ROI.

dasmo said...

Not having to buy a single share for 500k with or without leverage is an advantage of the stock market not a disadvantage.

Just Jack said...

That's something people have not really had to worry about who have bought leveraged real estate in the last decade.

If you're stocks drop by 10 percent, you still have money. You can sell and use the money to pay the rent, go on vacation, move to a better job.

If your highly leveraged property drops by 10 percent your entire initial investment is gone. You ain't going nowhere.

That's a risk and for most people buying today I suspect they consider this risk to be zero.

Is that reasonable?

The buyers are looking back over the last two decades and saying the risk is zero. There's a problem with this.

For example if you're 55 years old and look back over the last 20 years you could say that the risk of having a heart attack in the next 20 years is zero because you didn't have one in the last 20 years.

Is that reasonable?

Most of us would consider that not to be reasonable. Yet in real estate it's different. We lose are ability to think rationally.

It's the greed that gets you every time. Leaning that little bit too far out on the real estate carousel to grab the brass ring.

Introvert said...

We lose are ability to think rationally.

Our/are is a difficult distinction to master.

If you're stocks drop by 10 percent...

Apparently so is your/you're.

JJ, you're probably in your forties and you're clearly still struggling with stuff we all learned in elementary school.

It also makes us wonder what other basic concepts might be eluding you.

Just Jack said...

Dont worry about it Intorvert u dont undertand them anyweigh

Leo S said...

How is savings rate defined by stats canada anyway? If I spend 50% of my disposable income and put 50% into stocks is my savings rate 50% or 0% given none of the money is going into a "savings" account?

Marko said...

Denman gone at $725,100...wow.

dasmo said...

That sets a new standard for Fernwood. I guess the mayor living there gave the hood a boost. Thems Fairfeild prices!

patriotz said...

If I spend 50% of my disposable income and put 50% into stocks is my savings rate 50% or 0% given none of the money is going into a "savings" account?

It's 50%.

They use the standard economic definition for savings rate:

1 - (consumption/disposable income).

Marko said...

starting to see successful flips...

3524 Henderson purchased for $520,000 last year. Resold today for $765,000.

dasmo said...

Substantial renos or surface polish?

totoro victoria said...

Dasmo, it may be an advantage not putting all your eggs in one basket, but it still doesn't beat using leverage in a market that appreciates at an average of at least 4% per year historically if you hold long enough.

In addition, nothing stopping you from investing in your RRSP, TFSA and a mortgage.

totoro victoria said...

I pictured JJ as in his 50s.

Funny the mental pictures I get. Dasmo appears quite dapper. Leo, a bit curmudgeonly, Patriotz in his 60s and decidedly finicky.

totoro victoria said...

Anyone else as excited as I am that Red Barn Market is opening on Oak Bay Avenue in the fall?

I make that trek across town for their produce and deli on a regular basis and now it becomes a stroll away...

totoro victoria said...

Re. the investing. Nothing stopping you but disposable income I should say.

Leo S said...

but it still doesn't beat using leverage in a market that appreciates at an average of at least 4% per year historically if you hold long enough.

Appreciated. But if we're looking at investments that have returned well in the past there are millions better than real estate. It's just the most common.

Grezilda said...
This comment has been removed by the author.
dasmo said...

I like the sound of dapper but truth is I'm scruffy...

dasmo said...

You would have to do the math taking into account the fluctuating interest cost, tax, maintanence etc on the leveraged property. This is the number to compare against equity investment which costs nothing. Primary residence is not part of this debate FYI...

Leo S said...

Leo, a bit curmudgeonly

I am pretty curmudgeonly for 31. Get off my lawn!

Leo S said...

>> This is the number to compare against equity investment which costs nothing.

According to Totoro a house costs essentially no money to maintain and any work you do should be counted at a negative wage because... Can't remember why but some ingenious logic I'm sure.

dasmo said...

Costs nothing on top of your purchase with fee of course ;-)

totoro victoria said...

OMG we've had this debate so many times I'm loathe to engage again.

Of course there are costs to owning a home. Mine come to $500 a month on top of mortgage NOT counting renovations.

Totally curmudgeonly response. 31. Think what you'll be like when you reach JJ's age.

dasmo said...

Oh come on we can do it all again. My cell phone practically auto fills the entire thing now...

Introvert said...

OMG we've had this debate so many times I'm loathe to engage again.

There is no need to debate Leo, as he is always right.

Leo S said...

It's ok Introvert, at least you can always be right about grammar. That's something.

Leo S said...

They use the standard economic definition for savings rate:

Good. Last time savings rates came up there was some question about investments not being counted as savings, but I can't remember the details.

totoro victoria said...

It might be time for an annual redo of the recurring debates.

The only one we might be able to put to rest is the IMMINENT DOOM OF THE BIG CRASH. That front has certainly gone silent of late.

dasmo said...

It was in relation to boomers and that the CRA doesn't actually know the value of Canadians savings. Even with all the added details they are asking for this year its all about foreign content. It's silly because they might as we'll get it all then they would have a pretty accurate picture.

dasmo said...

Well... We haven't seen info's ascii graphs for a long time so that in itself is a sign...

SJ said...

IMMINENT DOOM

There are still soooo many doomers out there. Half of the ones I talk to are owners.
Blogwise there are maybe a few less. Patriotz is still thinking imminent from his prediction a month ago.

Teranet June 2015: 133
Teranet Dec 2015: 128

SJ said...

Toronto officially sailed through the million $ mark in Feb (and it's only bordered on 1 side by water, or ice ;)

I think Victoria's pretty much a shoe-in to be the 3rd city in Canada to eventually pass the million mark.
Dasmo, you best remove your halibut suit ;)

dasmo said...

We will see. It'll take the 1.99% fixed rate mortgages to kick in combined with some tech fueled wage increases for some serious price acceleration. I do think we will see the 1.99 this spring so maybe soon. Ceratainly there is enough for the RE agents to be stoking to fires full on now which has an affect for sure. "We are signing deals on the hoods of cars"....

Introvert said...

The only one we might be able to put to rest is the IMMINENT DOOM OF THE BIG CRASH. That front has certainly gone silent of late.

Remember info's ceaseless repetition of "temporary, unprecedented, emergency interest rates"?

And then the Bank of Canada dropped rates even more!

patriotz said...

Toronto officially sailed through the million $ mark in Feb (and it's only bordered on 1 side by water, or ice ;)

Well after all it is by far the largest metro in Canada, gets 1/2 of all immigrants to Canada, is the economic centre of Canada (and will become more so with the decline of Calgary), and has easy access to the US Northeast.

What has one of Canada's slowest growing medium sized metros (no not Windsor, I mean you Victoria) got in common with that?

Also I would not say that predicting the continuation of a trend that has been in place for most of the last 5 years is being a "doomer".

totoro victoria said...

Oh patriotz, you were such a crashy guy... until you bought.

totoro victoria said...

I miss the arguments about how house prices were so much cheaper in Florida so why would anyone ever buy here. And the weather (with no mention of hurricanes) was so much better too.

Patently obvious on these facts alone that the Victoria housing market was doomed.

Just Jack said...

Most of the chatter on several bloggs is centering around "bubbles" once more.

The price to rent ratio, price to income ratio are being dusted off and brought forward once more as undeniable proof of a bubble in real estate.

But these aren't the cause of a "bubble" they're just a measurement. And not very good ones either. What you should be measuring is the price to income ratio of those qualifying for a mortgage. Not the average income of the city. Since only a small percentage of the population are prospective purchasers actively engaged in buying real estate there income could be a lot higher than the city average. Their higher income is washed out by the 97 percent of people who are not prospective buyers.

If the economy is expanding then jobs are being created and those jobs have been mostly in the FIRE industries(Finance, Insurance and Real Estate). Including a retirees income who bought their home 40 years ago is meaningless.

When you read about banks like BMO write about affordability this is what they are referring too. Those that applying for a new mortgage meet the prescribed debt service ratios.

When those applying for a mortgage no longer meet the debt service ratios then affordability drops which causes prices to drop until the person making the application meets those ratios with the lower prices.

You can see that the vast majority of the time home prices are always affordable. When they are not, then prices correct and we are back to being affordable once again.

There are other considerations, but local economics is the dominant factor as to where prices are going. During economic expansions prices rise and during recessions prices drop.

It really is that simple.

dasmo said...

Except Victoria where prices rise and then they are flat ;-)

Just Jack said...

Having said all that, we haven't had a prolonged recession for a long, long time.

Without a recession prices will remain mostly stable and keep rising. But a prolonged recession is the economic equivalent of pressing the reset button on a meat grinding machine. Without any bread in the economy a lot of home owners might become ground meat.

Otherwise we're looking at seasonal fluctuations based on supply shortages. Like we are having now. Localized shortages in specific types of properties. Market factors eventually respond and those imbalances are returned to normal conditions and those that paid irrationally will suffer paper losses. Only when it comes time to sell will the impact of their irrational decision be felt in a smaller net profit or a much larger loss relative to other buyers that were not caught up in the frenzy.

Just Jack said...

Our local economy hasn't been expanding enough to raise prices. Toronto and Vancouver have a lot of construction happening. Victoria seems to be just treading water.

fizzy said...

Sold in June 2014 for $605K (per BC Assessment). Back on the market now listed $629K. A flip? But it won't even cover the realtor's fee! I went to the open house last year, and it was completely renovated, no room for improvement ... so I'm just very curious why back within a year. 2728 Blackwood.

Introvert said...

... It really is that simple.

And that brilliant analysis comes from a man who finds the you/you're choice challenging.

Introvert said...

Otherwise we're looking at seasonal fluctuations based on supply shortages. Like we are having now. Localized shortages in specific types of properties. Market factors eventually respond and those imbalances are returned to normal conditions and those that paid irrationally will suffer paper losses.

There will always be a shortage of Saanich homes in Langford.

n.y.k. said...

Introvert, Just Jack doesn't need to buy because he already lives rent-free inside your head.

Introvert said...

Good one!

totoro victoria said...

"But if we're looking at investments that have returned well in the past there are millions better than real estate. It's just the most common."

Oh dear... I guess we are repeating.

Take a $100,000. Invest it in the stock market in 1990 and stay invested until today.

Repeat, but instead use it to buy a very fancy $500,000 duplex in Oak Bay in 1990. Live in one side and rent out the other. (yes, they do exist)

Where are you 25 years later?

Average return if in the stock market and your $100,000 would have grown to $996,000 (taxable or tax deferred assuming reinvestment of all dividends).

Your OB fancy house would be paid off and worth approximately $1.8 million, half of which would be capital gains tax exempt.

You would also have lived for "free" based on the rental income for approximately 15 years, saving you another at least $500,000 in after tax dollars.

There are in no way "millions" of better investments available to your average person. Picking stocks is notoriously difficult unless you are Warren Buffet and lots of people do not want to run their own businesses.

I challenge you to name 10 other better investments.

Leo S said...

Invest it in the stock market in 1990 and stay invested until today. Repeat, but instead use it to buy a very fancy $500,000 duplex in Oak Bay

You could have stopped here. You're comparing one very specific investment (an Oak Bay duplex) to investing in the entire market. Obviously that is a flawed comparison.

If you want to do individual investments then compare Microsoft stock in the 90s and Apple stock in the 2000s. There's your real estate return beat handily.


The point is not that one is more likely to be picked than the other, but that there are way better returns to be had than real estate, and cherry picking historical returns is meaningless going forward.

Leo S said...

Nevermind there's a huge difference between actually owning 1.8M in income producing assets and owning a 1.8M home. Unless you sell you've only earned the rent you're avoiding.

dasmo said...

Since we are cherry picking.... I invested $5000 just over 15 years ago in AAPL. At one point when they quadrupled I took out my original investment (don't regret it because this gave me piece of mind to hold onto it all these years). I've also shaved some more out over the years but with what I have now I could buy a condo in the Era cash.... No costs or expenses along the way.... You could have done the same thing investing in Starbucks only ten years ago....

totoro victoria said...

What I would do with a home that has appreciated to 1.8 is take out a HELOC along the way and keep investing in apple and starbacks (of course at least 10 years ago) and rental properties.

No use leaving equity unleveraged or not properly invested.

I guess this is cherry picking - except this is househuntvictoria and we are investing in Victoria presumably.

This is what has occurred.

Going forward the returns over 25 years are, I'll wager, going to be 4-5% per year on the entire investment averaged over time.

Very few, if any, Victorians have beat the return created on a leveraged primary residence with rental income by investing in unleveraged stock purchases.

BTW the figure I used for my comparison for annual rate of return with stocks was 11.5% and that that is already better than average.

And I'll give you Starbucks. Had you invested $100,000 in 1992 it would have grown to approx. $10.5 million today.

Anybody here do that? My guess is no.

But I'll bet some of you did buy a house in 1990 with $100,000 in and are very thankful you did.

dasmo said...

I bought a house in 2003 for 192.5k. It's paid off but has cost me about 40k in reno / maintenance over the years and about $18k in taxes. 40k in interest. My guess is I could sell it right now for 420k. Using Marko that will be $6300 in fees. So in 12 years I made $93200 in actual money. I estimate rent over that same period for similar would be have cost 200k. so lets add that since it was a saved expense for a total of $293200. So 153% in 12 years. So as a primary residence I beat the market. But that was buying in 2003 not now. An investment property require a totally different equation....

Just Jack said...

FYI

If you look back to the first quarter of 1990 the median price for a home in the core districts was $170,000. There were 545 home sales at that time.

25 years later, the median is now $589,500 with only 265 homes trading.

totoro victoria said...

Yes, although my broken record is to buy a primary residence with suite. Best of both worlds and quite common in reality. Look at the interest in properties with suites!

Yours is to head into apple and starbucks chat as this is clearly what is taking up iPhone and headspace for you.

Leo's is to graph and be generally curmudgeonly.

Introvert's is to be a grammar pro... always.

JJ's is to repeat and invent anecdotes that make for interesting but questionable reading.

Marko's is to be an open book while quietly taking over the market.

I could go on.

Just Jack said...

And you do!

patriotz said...

Take a $100,000. Invest it in the stock market in 1990 and stay invested until today.

Repeat, but instead use it to buy a very fancy $500,000 duplex in Oak Bay in 1990.


Love to. Can I borrow your time machine?

dasmo said...

In not talking up apple or the other super stars but rather that equity investing is better, simpler and more flexible than RE investing. Even my most boring and safe investments, Scotiabank, is up 276% in ten years not including dividends.

dasmo said...

note my house has a basement suite. Never rented it and only considered it poverty insurance....

Leo S said...

For every person that bought a fancy Oak bay duplex in 1990 there are 10 people that bought a leaky condo instead.

It's just like the stock market. If you're able to hold on through the ups and down you'd be up about 10% a year historically. But most people don't get anywhere near this return whether it's through selling at the bottom or paying a lot of fees.
Real estate has some of the highest fees of all so on top of maintenance and property taxes if you're in the habit of upgrading every 5 years that really erodes your return.

Jerry Neudorf said...

It is opportune now to repeat Will Roger's investment advice which was first offered 80 years ago but has been validated time and time again:

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Marko said...

Sold in June 2014 for $605K (per BC Assessment). Back on the market now listed $629K. A flip? But it won't even cover the realtor's fee! I went to the open house last year, and it was completely renovated, no room for improvement ... so I'm just very curious why back within a year. 2728 Blackwood.

Sold for $635,000 today - irrelevant of how the seller made out, 30k more this year than last. Seeing a lot of this right now.

I just can't believe the heard mentality of buyers. Affordability was pretty close to what it is now mid 2013 when the market bottomed out but sales volumes were super low.

Market improves, prices go up, and everyone piles in. Interesting.

Numbers Hack said...

Old article but a good one:
http://www.russell.com/documents/institutional-investors/research/structuring-a-private-real-estate-portfolio.pdf

1/ RE supposedly reduces the BETA of a portfolio, where Beta = 1.0 is the risk of equity markets. Stocks/Bonds will have a Beta value also.

2/ Beta only measures the band of "ups and downs" of certain investment class. The lower the Beta, the theory is the lower the risk.

3/ RE in general has a Beta lower than 1.0 or less than equities because prices are perceived to be "sticky", e.g. they don't move up or down as fast.

The house you live in, your castle should never be looked at as an investment, but rather a necessity as the opportunity cost of not owning would be renting. That is in my opinion, a personal preference and the investment angle is but semantics for your personal preferences.

The emotional attachments to house is much different then the sell button on your computer. So with that said, it comes down to how much you can afford to service debt and whether you want to own or rent. There really is no right answer.

Leo S said...

I bought a house in 2003 for 192.5k. It's paid off now

Why did you decide to pay it off early?

Leo S said...

Market improves, prices go up, and everyone piles in. Interesting.

Maybe I was even too conservative in my sales estimate

dasmo said...


Why did you decide to pay it off early?

It was 2008ish, both my parents had passed away and I sold their house. That's where I put my half of that sale. Rates were @6.5%ish and I had not yet gotten back into the market actively. As you can imagine I wasn't feeling too great as my long term partner also just left me. My mind certainly wasn't into finances. My business was also younger so I liked the increase in monthly cash flow it gave me. When you first lose the safety net of living parents and are set adrift at a fairly young age, the security of no debt felt like the prudent thing to do. I think about extracting from the LOE to invest quite often but I guess I like that the one paid off house put's my Beta under 1 ;-) Plus that would mean putting everything I got into the stock market. I'm not that cavalier....
I have a good amount of debt on the fairfield house so that fulfils my need for cheap money. It's why I put a minimum amount into this house and why I don't put extra payments or anything on this mortgage.

SJ said...

Yeah, I'd like to up mine to 8000 sales ;)

B.C. bucks national trend for job quality
Province saw growth of higher-paid jobs, full-time employment in 2014

http://www.vancouversun.com/business/bucks+national+trend+quality/10865504/story.html

SJ said...

Film, TV industry booms in Victoria; 10 projects planned by April http://www.timescolonist.com/news/local/film-tv-industry-booms-in-victoria-10-projects-planned-by-april-1.1784037
“We have never seen numbers like this,” said Victoria film commissioner Kathleen Gilbert.

The tide turns quick around here ;)

dasmo said...

Turns out all you ETF lovers are going to prop up my Apple share even further "Apple to replace AT&T in Dow Industrials"

Leo S said...

Thanks dasmo for the explanation. Maybe I'll smarten up soon and stop paying extra on the mortgage.

dasmo said...

Yep at these rates better to build up your TFSA and do a lump sum payment at renewal time if rates are less favourable. I'm hoping to catch another stretch when renew a year from now. Maybe my TFSA will be able to pay the entire mortgage off then. If rates aren't even lower still....that would be hard to bet on though...

reasonfirst said...

Seeing as beta has been brought up - RE may have a low beta until it is levered. 75% leverage means you need to multiply the beta by 4 which could likely make it more risky than some stocks - not sure tho' without doing more resaerch. I have also made this point about buying stocks which are generally already levered and have a higher beta as a result.

http://www.investopedia.com/terms/u/unleveredbeta.asp

dasmo said...

Apple had zero debt for the longest time but they are using free money to borrow to buy back and pay dividends rather than pay tax on bringing their foreign cash home. But I do agree with you Reasonfirst. Leverage increases risk plane and simple. Get behind on those payments and the bank acts swift...

caveat emptor said...

One option is a 100% equity portfolio and instead of a fixed income portion of the portfolio you make extra payments on the mortgage.

Reducing your mortgage exposure has somewhat the same effect as increasing your bond exposure (though leaves you with less liquid assets)

Just Jack said...

If you find yourself in trouble because you can't pay the mortgage the foreclosure process can take between 6 to 12 months once its begun and can add $50,000 to $100,000 to your debt.

And if your home is not in show room condition and lacks a desirable hood the property will most likely sell at the lower end of the market value range.

And sometimes even under market value if there is only 1 bidder for your address. Leaving you with hundreds of thousands of dollars of unsecured debt payable on demand.

With bigger house prices comes bigger losses. Most people will try to save the house and end up getting financing from equity lenders. Borrowing money from their home to pay their mortgage and other debts.

A financially unwise cycle of borrowing to pay debts. All in the hopes that prices will rebound and they'll get themselves out of trouble.

Homebase said...

Just wondering if someone could check what 104-3815 Rowland Ave sold for? Thanks =)

totoro victoria said...

Anyone know if 697/687 St. Patrick Street was sold or taken off the market?

reasonfirst said...

The other point about levered RE and equities is that you can only go to zero with equities but you can go underwater with real estate.

totoro victoria said...

Anytime you use leverage you can go underwater. Including with equities. If you have no mortgage you can't go underwater either in RE.

If you buy a share it can drop to zero. Show me a home in Victoria where this has happened. Plus, you can't live in a share and you're going to have to pay for shelter anyway most likely.

Just Jack said...

Your home doesn't have to go to zero - only your equity has to.

totoro victoria said...

I don't quite get your point.

I stated that if you own your home outright you are not going to go underwater in Victoria.

Companies; however, go bankrupt and stocks do go to zero even though they are fully paid.

If you have a large mortgage we all know that if the market drops you can be in a position where you owe more than you would net from the sale.

If you leveraged to purchase stocks you would be in the same position. You would be "underwater" with no shelter benefit.



Death said...

Might want to google "options". You don't need a loan to do leveraged investing.

Just Jack said...

But that's an unrealistic comparison isn't Totoro meant to mislead someone into believing all equities have more risk than all houses.

Since you can divest yourself of part or all of your equities in minutes reducing your risk of a full loss.

Clearly some stocks are more riskier than others but would it be realistic to compare penny stocks to an Oak Bay duplex?

Some venture capital companies can go to zero but it isn't likely Microsoft is going to fail.

And some properties can go to zero and even deep into negative value. Which equities can't. Have an oil leak on your property or a leaky condo.

Leo S said...

One option is a 100% equity portfolio and instead of a fixed income portion of the portfolio you make extra payments on the mortgage.

That's been my thinking so far. The "bond" allocation returns a guaranteed 2.79% after tax, which might not be so bad for bonds going forward. However still need to shift my allocation.

Just Jack said...

And no you can not live in a share.

But you can certainly sell shares to rent a home.

People do buy earthquake insurance in Victoria and that means people do perceive a risk in losing their homes. And some high bank waterfront properties are subject to erosion and you can't get earthquake insurance for them.

So which is a greater risk. That we will be hit by a Tsunami in the next half hour or Microsoft goes out of business.

dasmo said...

"Might want to google "options". You don't need a loan to do leveraged investing."

Now we are talking gambling... This is a good way to lose money unless you area broker or have horseshoes and a the ability to consume a lot of news and get up early and always have your finger on the button.... I'd rather borrow to buy a condo....

totoro victoria said...

As you say, you can insure against earthquake risks. There is no such insurance for stocks that I'm aware of.

And as far as high bank waterfront subject to erosion, don't fricken buy it unless you've done the math and the engineering. These types of properties are not that common and some of them might have been worth the investment anyway given the higher rate of appreciation for waterfront.

You cannot live in a share and you cannot sell it and buy shelter if it devalues to zero. You can try to wait out the market if you believe it will rise.

You can live in a house if it devalues and wait out the market.

There are risks to any investments, but for the vast majority of people in Victoria buying a leveraged house with a suite is going to have far higher ROI than investing in the stock market will in the long term.

That doesn't mean there isn't value in investing in stocks, there is, particularly in a RRSP and TFSA.

reasonfirst said...

"but for the vast majority of people in Victoria..."

Is that hypothesis based on your opinion that Victorians are poor investors...

reasonfirst said...
This comment has been removed by the author.
reasonfirst said...

Nobody has mentioned yet that Victoria (Core and GV) SFH MLS HPI is down MoM. And I think YoY is much lower than teranet has been reporting - up 1.3% for the core according to MLS HPI.

Just Jack said...

The insurance is being able to hedge the market and spread the risk over several stocks being able to adapt quickly to changing conditions.

What you can't do is sell part of your house in the next 20 minutes.

Being able to spread risk over several stocks reduces risk. Rather than owning one house which would be the equivalent of owning 1 share. Worrying if the bank rate goes up next month or your tenant gives you notice to vacate or carpenter ants are found in your basement.

The ability to sell quickly also reduces risk.

Security of the capital invested and liquidity are two of the factors that make up risk.

If your property has devalued to zero, you won't be waiting for any market to rebound and you won't be living in it. Fukishima, Katrina Oil spills, toxic mold, asbestos contamination, fire.

-Behind door number one is a half million dollars in Microsoft shares.

-Behind door number two is a half million dollar Victoria home.

Which would most people choose? And which one would you choose Totoro.

totoro victoria said...

No, it is based on my analysis of average returns on unleveraged stock investments vs. average returns on leveraged house purchases in Victoria after calculating rent vs. interest/principal pay-down.

See above again, and at least annually set out here with examples` for the last, what, three years now?

For those of you who read MMM you know the safe rate of withdrawal from a stock portfolio is 4%. That is how much you can take out and not deplete capital based on historical data.

Four percent of an unleveraged portfolio means that you'd need $800,000 invested to safely withdraw $24,000 (pre-tax) per year which might just pay your rent on a decent upper suite in a house here.

You can buy a house with a suite for $600,000 with only 20% down and your shelter costs drop immediately to half of that after accounting for principal pay-down.

This means you only needed to invest $120,000 to get benefit that would have cost you $400,000 in invested capital in stocks using the safe withdrawal rate.

And the ratio gets better over time as rents rise and equity accumulates through principal pay-down and appreciation.

totoro victoria said...

If I had an extra half million I certainly would not be putting it all into Microsoft shares.

If I did not own a primary residence already and that was all the money I had I would:

1. Pay down any consumer debt. (Don't have any but that is an easy win for those that do)
2. Leverage $150,000 to buy a $600,000 home with a suite ($30,000 for property transfer tax and renos). Move in and reduce my $2000 rent to $900 a month.
3. Max my RRSPs using Canadian Couch Potato.
4. Max my TFSA using Canadian Couch Potato.
5. Max my kids' RESPs using self-directed funds.
6. Invest all but $50,000 in Canadian Couch Potato.
7. Invest last $50,000 in individual stocks.

Just Jack said...

Any reply I make will make me sound like Francis Underwood from "House of Cards"

https://www.youtube.com/watch?v=EDi7cRFcnnY

Leo S said...

There is no such insurance for stocks that I'm aware of.

Diversification, as JJ already pointed out. The market as a whole has never gone to zero (and if it does your house ain't safe).

Four percent of an unleveraged portfolio means that you'd need $800,000 invested to safely withdraw $24,000 (pre-tax)

You need a new calculator. 4% of $800,000 is $32,000.

You can buy a house with a suite for $600,000 with only 20% down and your shelter costs drop immediately to half of that after accounting for principal pay-down.

Sure or you can get a second job of any other type and add that to your investment returns.
Yeah I know you have never had to do any work managing a suite, but the fact remains it is a job. Not considering that makes it a meaningless comparison.



totoro victoria said...

Yep, you are right on that math. Sorry about tat.

As for the suite and work, there is some but it pales in comparison to any job - provided your places are well-maintained to start with.

I have lots of experience running a business and being a landlord. Being a landlord is a piece of cake relatively speaking.

Deja vu. Again and again.

totoro victoria said...

That.

Introvert said...

Yeah I know you have never had to do any work managing a suite, but the fact remains it is a job.

Leo's right: it is a job, a job where I have to do absolutely nothing for eight months in a row and then spend three hours replacing a leaky kitchen faucet.

It's just like working as a bank teller, a realtor, or a nurse.

LeoM said...

All the chatter on this blog lately about the stock market vs the real estate market is amusing.

Today in the news, the mere mention of interest rate increases sends stocks into a decline shock:
Bloomberg

But the majority of bloggers here are convinced that real estate will be nearly unaffected by rate increases.

Leo - my 2015 and 2016 predictions are simple; when interest rates go up, real estate will go down. I expect a gradual rate increase (unless we go into a deflation cycle)and a corresponding gradual decrease in real estate prices. But if rates suddenly spike anytime in the next two years by 2+% then I expect a sudden and significant decrease in real estate prices.

LeoM said...

Ooops, here is the correct link:

http://www.bloomberg.com/news/articles/2015-03-06/u-s-stock-index-futures-little-changed-before-employment-report

dasmo said...

Stocks don't go up in a smooth line. Gotta be able to take that... Next month they will go up more...

I think primary residence with a suite is going to be what most people go for. Can't blame em if a couple with or planning to have kids.

CS said...

when interest rates go up, real estate will go down.

For the national RE market, that seems certain. Question is, why would rates ever go up? Throughout most of North America and Europe unemployment has risen continually during recent years, while job quality has generally been in decline (i.e., more part-time jobs, more burger flipping, fewer high-wage jobs in manufacturing). Any substantial rate rise would, therefore, drive faltering Western economies into recession or depression.

No sharp rate increase is likely, therefore, unless due to some factor beyond US-EU control, i.e., an external shock — China dumping their US Treasuries, for example, an anti-Western coup in Saudi Arabia, the transformation of Cold War II into a new European hot war, etc. The way the US is poking Russia and seeking to suppress the military rise of China, makes some such event or events quite possible.

Leo S said...

It's just like working as a bank teller, a realtor, or a nurse.

Nice thing about being a bank teller is your boss doesn't sleep in the same house as you.

Marko said...

Just wondering if someone could check what 104-3815 Rowland Ave sold for? Thanks =)

Listing shows as cancelled? Maybe developer sold it off MLS in which case I wouldn't have the sold amount until registration with BC Land Title.

Marko said...

Anyone know if 697/687 St. Patrick Street was sold or taken off the market?

Looks like it is off market.

Marko said...

I am going to have to say that rental income is way way easier than working.

I always compare my rental property effort to doing one mere posting (I charge $799+GST for a mere posting).

Servicing one mere posting client consumes way more of my time than my rentals combined in an entire year.

Rental properties aside, on my principal residence can't see not having a suite until principal residence is paid off plus I have a few million sitting around.

Leo S said...

I just don't see the appeal of renting out part of my house to strangers. If I wanted a townhouse I'd buy a townhouse which is at least designed to be a multi-family dwelling.

Of course the work involved having the suite has to include the extra money that went into the house to build it. How much would you save on the house build by making it smaller by the size of the suite and not outfitting it? $100,000? Then the differential in property taxes yearly. All that money takes work to earn, and all that is part of your suite cost.

totoro victoria said...

Leo, don't you have a suite in your home?

If I recall correctly you have your MIL there and do receive compensation in some form (ie. childcare or purchase price or something - can't remember).

Point being, it does not have to be a stranger living in your suite to have real benefits.

As far as cost, on a new build I'm not sure how much extra it costs to put a suite in. On an existing family home that is suitable you could spend $30,000 or so.

On a legal suite there is, believe it or not, minimal property tax differential. Even if your property went up by $50,000 in assessed value you are only looking at an extra est. $200 per year. This amount increases where the property is duplexed/triplexed because a separate water/sewer charge is assessed for each unit.

If the rent for the suite is $1000 you recover your costs within 2.5 years or so. If you did a HELOC for the funds you are immediately $7-800 a month cash flow positive to put towards your mortgage.

When something gives you ROI it is an investment - it does not take additional work to earn the return other than managing the investment.

n.y.k. said...

The American dream is to own a nice house with a white picket fence.

The Canadian dream is to pay twice as
much for the same house but only use half of it because some dude off Craigslist is paying $32 a night to sleep in the basement.

Introvert said...

Nice thing about being a bank teller is your boss doesn't sleep in the same house as you.

That's a good line, but it doesn't refute the fact that being a landlord isn't a job.

totoro victoria said...

And a tenant is not "the boss".

I don't know if the Canadian dream is to have a tenant but I agree house prices are pretty high.

However, I don't need to have tenants, I prefer to. I like our tenants and I'd rather retire early than keep working to pay for a home.

Marko said...

I just don't see the appeal of renting out part of my house to strangers.

I don't see the appeal of dealing with my difficult clients (and many are very difficult) but I still have to do it to earn a living.

Of course the work involved having the suite has to include the extra money that went into the house to build it. How much would you save on the house build by making it smaller by the size of the suite and not outfitting it? $100,000? Then the differential in property taxes yearly. All that money takes work to earn, and all that is part of your suite cost.

On a brand new build the kitchen is really the only extra cost plus a bit of extra drywall/insulation. The fact that the home is bigger you recoup on re-sale anyway. I've also designed my suite with a linear kitchen and a free standing island so down the road the buyer can pull the kitchen island and turn the suite into a media room with a wet bar plus two spare bedrooms.

Suite are a no brainer to me, you don't have to rent them if you don't want to but the extra approximately $1,000 per month possibility is always there. For example, if I had a bad tenant I could just take a year off from renting.

Life style is important too. I work a lot, when I don't work I usually do something outside of the house, I don't garden, etc., so having someone at the house probably doesn't bother me as much as others. Also my vacations consist of going to Europe for 5-6 weeks and I rather have someone at home than have it sit completely vacant for that time period.

I also don't need the cash from the suite so it isn't as stressful; however, I definitely want the cash for discretionary investing, etc.

dasmo said...

No need to explain a suite in a new build. You'd be a fool not to build it in... At least a rough in of one....

Introvert said...

The Canadian dream is to pay twice as much for the same house but only use half of it because some dude off Craigslist is paying $32 a night to sleep in the basement.

The "Canadian dream" might be more of a "Victoria dream." I know that essentially nobody in Calgary has a suite. (All those unethical oil jobs do pay well.)

Just Jack said...

Last month exhibited a substantial increase in the number of condominiums which sold in the core municipalities. A 44% year over year increase in condo sales. That's drawn today's months of inventory down to nearly 5.

About one-quarter of the condo sales were in new projects. With no less than 75% of them bought by people from Victoria. Half of the buyers paid less than $310,000 which is the range most attributable to first time home owners and investors.

With the top ten most expensive condos selling to people
from Victoria, parts of Ontario and the least often Vancouver. At least one of the top ten sales was most probably for speculation as it hasn't been built yet.

No Alberta and no China in the top ten.


If the purpose of the Bank of Canada's interest rate drop had been to help clear the back log of condominiums it couldn't have been planned better. A drop in the interest rate when inventories are seasonally at their lowest point would be directly aimed to help new condo projects.

dasmo said...

I think it's more about tanking the dollar. This will help Bombardier in their final push, also help the oil and gas industry and other exports. They pay rent, wages, debt and taxes in CAN after all... Condo sales in Victoria were most likely not on the table. House values in general maybe since comparing to the U.S. we are now 25% lower without having to have a crash...

CuriousCat said...

Looks like I'm in the minority when it comes to the whole "suite or no suite" topic. I did the downtown condo, langford townhouse, saanich SFH route in the space of 4 years and when looking for a house in the $400-$525 range, half the homes we saw had suites. It didn't make sense to me back then to pay extra to lose half my square footage and my privacy. I'm from the Prairies and sharing my home with a stranger just feels foreign to me. I'm also a homebody, I garden, I don't travel much (we love to camp) and I work from home as well so I'm always home. What it came down to for us was a lifestyle decision. We bought the most house we could afford, close enough to my husband's work that he commutes by bike, a 5 minute car ride from our school of choice while allowing me to only work part-time. It has no suite. In fact it had a unfinished basement. Over the past 6 years we've made use of every square inch of it! My office is down there, a TV area, playroom, computer for my husband, laundry, storage, workshop. We are in the process of building out a spare bedroom for guests. After using the space all these years, I know I made the right choice. There's only 3 of us but 1000 sq ft would never have been enough. I have friends that have told me "why don't you put a suite in the basement? It would be so much easier to sell!" and my answer is "I didn't buy my house to sell it. I bought it to live in it, to enjoy it, to improve it. We are in the perfect location, I have exactly the square footage I need, nice neighbours, why would I ever sell anyways?"

Just Jack said...

A slightly different topic but in a way related to real estate and investments is buying a business.

The low interest rates have made some well located businesses with low educational barriers to entry more attractive.

You can re-finance your home and buy a coffee shop for $200,000 that earns $15,000 a month. That beats the hell out of any condominium or basement suite.

Don't buy your kid a condo - buy them a business.

Lost your government job and there isn't much call for a grammar checker then buy yourself a home brew store.

Just Jack said...

I agree Dasmo. Poloz wouldn't be concerned about condo sales in the western outpost of Victoria. Although all the cranes in Toronto may be of concern. If construction went belly up there, that could mean a lot of votes.

With the fall of Oil, the heart of the country is back to where it has historically belonged in the golden triangle of Central Canada.

Just Jack said...

If you're in the city of Victoria. That basement suite will add substantially to the cost of a home. A reason why Fernwood/Oaklands has skyrocketed in prices relative to Fairfield.

The extra hundred grand you're paying for the house negates most of the financial rewards including paying off the mortgage sooner. You could buy an investment condo but the prices and associated monthly and annual costs are so high that you would save as much by quitting smoking or not having a Starbucks coffee twice a day.

Sure people who already own a home with a suite or an investment condo brag of how great it is, but you don't have the luxury of a time machine. You have to buy in today's market.

What is important of any investment is knowing when to sell. You have to have an exit strategy. Holding on too long to an investment that is in limbo just adds to your costs without increasing your profits.

Knowing when to sell is more important than knowing when to buy. Being emotionally tied to an investment clouds your judgement.

dasmo said...

In VicWest the time to sell is after the bridge is done and the Roundhouse is finished... Not sure about the rest of vic.

Introvert said...

What I like about having a suite (and I am not insinuating that all people should want/have a suite) is that it provides flexibility: right now I don't need the extra space, so converting my lower level into monthly cash makes perfect sense. When I want more space, I'll just take it back. Poof! A bigger house without having to move to a bigger house.

I quite like the way my house is set up: it's basically two perfectly self-contained suites, each with its own private entrance. I can even convert the basement from a two-bedroom to a one-bedroom, which gives us an extra room but doesn't affect in any way the "self-containment" of the suite. Ingenious.

Marko said...

right now I don't need the extra space, so converting my lower level into monthly cash makes perfect sense. When I want more space, I'll just take it back.

Exactly my thought. Kitchen is really the only difference between a suite and non-suite basement. If you throw in a 12 foot linear kitchen it doesn't take up much space if you convert basement to something else down the road. Really to make it a bar you could pull the stove, add a 30'' wine storage vanity and keep the fridge/dishwasher/sink.

The cash is just to tempting for me. $1,200 a month, $14,400 a year and if we are there 20 years = $288,800 assuming no inflation and invest it at an easy 7% return by 50 I have an extra half a million or more.

Parents get old, throw them in the suite, kids can't afford to move out, throw them in the suite, I decide to expand my business, throw out tenant, and setup three offices (two bedrooms and living) and the two employees would have a lunch area (the existing linear kitchen). A suite can have a lot of useful purposes and if you aren't using it as a suite you are just sacrificing 40 square feet or so.

dasmo said...

I'm pretty sure renters require more than a kitchen. Usually a place to poo and clean is required. For a 1000 most will require flooring and painted drywall...

dasmo said...

The reality is suite will cost 50k. the income will be taxed at 35% you will need to account for vacancies and it will need repairs and maintenance. Live in privacy and just invest the 50k instead of building the suite and @7% you will have $202k in 20 years. Interest on the 50k is tax deductable, no maintenance, no bad tenants....

totoro victoria said...

Invest $50,000 (more than required) and gain $1000 per month. If you use a HELOC you are paying $300 a month and gaining at least $700 a month. First year ROI is $8400 per year after tax on $50,000 which will be paid off over time. That is tough to beat on the market.

If you don't want a suite that is just fine. Quality of life is an important factor. I'd prefer to have more free time myself but I realize some folks would prefer to work more and work longer to have additional privacy.

totoro victoria said...

All income is not taxed at 35%. You get to deduct expenses based on percentage of floor space. When starting out the income tax on rental income is minimal because the interest portion from the mortgage is large.

Introvert said...

All income is not taxed at 35%. You get to deduct expenses based on percentage of floor space. When starting out the income tax on rental income is minimal because the interest portion from the mortgage is large.

Bingo.

dasmo said...

But you simply don't have expenses with the money invested....

dasmo said...

Anyway, I'm not anti suite. Just couldn't help myself when "it's only the cost of a kitchen" was being batted around....

Marko said...

Anyway, I'm not anti suite. Just couldn't help myself when "it's only the cost of a kitchen" was being batted around....

But it is...if I am building a half decent house I am going to put in a full bathroom downstairs for the guest rooms/media room to use so I don't consider the bathroom a suite cost.

Basically my extra cost on my house for the suite has been kitchen cabinets, insulation, rezbar and double drywall, the venting for the kitchen and washer/dryer which my father and I installed outselves and the minimal plumbing for the washer/dryer (piece of cake on a new build). Appliances will maybe set me back around $4,000?

The remainder, drywall, exterior wall insulation, doors, flooring, finishing etc. I would have done anyway if there was no suite there. In fact where the kitchen is I would have put in a bar with a wine cooler.

I guess you could argue I could have cut the 1,000 sq/ft off the basement and had a 1,000 sq/ft of crawl space but than the value of the house would drop more than the cost to do the 1,000 sq/ft of basement.

CuriousCat said...

I thought RS1 zoning didn't allow you to run a business out of your house with employees. In Saanich you can't have anyone other than the homeowner and only one customer at a time (like a hairdresser) and even Langford limits the size of the business to a certain square footage of your house, etc. Just saying, I don't think you can just expand your business into your basement.

totoro victoria said...

You can run a business out of your home but you cannot have two employees working from offices in the basement.

The limitation is that it can only be you unless your home shares a boundary with a lot upon which retail is legally permitted, in which case you can have one other employee working from your home.

totoro victoria said...

In Victoria that is.

totoro victoria said...

In OB you can have one non-residential employee in the home and other family members who reside in the home can work for the business, but cannot receive customers.

In Victoria there is no limitation on the receipt of customers but you cannot sell goods to them on the premises.

totoro victoria said...

The question is not whether you have expenses with a suite or with any investment, the question is what the ROI is net of expenses.

Tell me your net and then we can talk, everything else is jibber jabber.

dasmo said...

Sure that's easy with my stock portfolio. It's 235% over 20 years.... What's yours?

Marko said...

I thought RS1 zoning didn't allow you to run a business out of your house with employees. In Saanich you can't have anyone other than the homeowner and only one customer at a time (like a hairdresser) and even Langford limits the size of the business to a certain square footage of your house, etc. Just saying, I don't think you can just expand your business into your basement.

Suites also aren't legal in Oak Bay...doesn't mean they don't exist.

Would I try running a business with two employees where customers come and go every hour in Oak Bay in a house on a 50'x120' lot with retired people flanking both sides and across the street, no.

Do I see owners in Saanich, for example, on a private property running businesses, yes. I've seen all kinds of setups in my travels; lawyer with convayncers, small software business, accounting, an online store, etc.

I am planning on buying commercial property downtown down the road similar to the work/live townhomes at 834 Johnson, but if that wasn't in the cards would definitely consider the basement.

dasmo said...

Plus I had the ultimate flexibility. I only started with a few thousand here and there.,I took a 6-7 year break as I started my business and bought my home. Really most of my investment activities is from 2009 on. I would be a multi millionaire if the bank would have loaned me 50k way back to invest. I needed to be a home owner before that type of credit was gifted me ;-)

Ryan M said...

I started with 6000 down on a 73000 shack in 1996 by assuming the mortgage. My next was a 4 plex. I kept buying properties until 2002 and started selling in 2006. It was lots of work in the beginning until I got systems in place. My largest was a 24 suite apartment. I assumed or used other peoples money as I never seemed to have any. After all expenses there was never as much positive cash as my calculations would suggest. My return on initial is 44900 percent and I have 3 remaining properties with one clear title. However in fairness the money I have had under fund management for 9 years, I only meet my broker once a year. Real estate is more work while the payoff can be much greater.

Marko said...

No doubt real estate rentals are more work than the 24k I just dumped into my rrsps but it is a lot easier than a real job....as I currently sit waiting in a living room of a house for my clients to show up for the viewing. rather be enjoying the weather doing something else. at least the house is really nice.

Leo S said...

I know that essentially nobody in Calgary has a suite.

Hence proving that in fact a suite is a job/hassle. If it wasn't they would have suites there as well. After all the only thing better than having a suite in an expensive house is having a suite in a cheap house. Free money right?

Anyway I'm not anti suite at all, I just think it's entertaining the confirmation bias of the hardcore suite converts trying to make it out like it's a pure joy that costs nothing and provides free income.

The extra space costs money above and beyond any actual suite finishings because you have to carry it. So if you're happy with your 1000sqft then you could buy a house with a suite for $550,000 or a house half the size for $450,000. So you're carrying about $80,000 in debt and giving up opportunity costs on $20,000. Add about $4000/year to your suite costs for that.
Plus differential in property tax every year + extra maintenance + value of your time + vacancies.

Of all the second jobs you could take I'm sure it's one of the ones with a good ROI if you don't place much value on the intangible negatives that come with it.

And yes we have a suite, but it's rented to family so I see that as a net positive regardless of any actual monetary gain.

patriotz said...

Invest $50,000 (more than required) and gain $1000 per month.

What you're really saying is that the norm has become for a SFH to be priced in anticipation of suite revenue whether it has a suite or not. Thus you get the suite revenue for comparatively little extra investment. On the other hand it's overpriced, if you don't want a suite.

Which means suites don't really make buying houses more affordable. I think someone has brought up the price differential between Broadmead, where the HOA aggressively prohibits suites, and elsewhere.

So if you want a decent deal on a house, and don't want a suite, you should look for houses that aren't suitable for suites. Which someone else has already said.

Butter09 said...

What did the place on Leslie Dr. Go for? I think it was 934 Leslie Dr?

totoro victoria said...

I don't think it is pricing in anticipation of suites.

I think people are putting in suites because prices are high and vacancy rates are low and it helps with affordability. Houses that cannot be suited in the core are still expensive relative to income.

Growing up I didn't know anyone with a secondary suite in their home. Now most of the people I know have one all the way across Canada to Montreal.

My friends in the maritimes are the only ones who generally don't and the prices are so low (although property taxes are extremely high) that they can afford a home without one.

As far as Broadmead goes, I didn't realize there was a big price differential - my impression is that it is full of fancy expensive houses - but if there is I would expect the fact that it is not in the core is the major reason.

And there are currently tens of thousands of illegal secondary suites in Calgary which has a vacancy rate of 1.4%.

http://calgarysecondarysuites.ca/



Marko said...

What did the place on Leslie Dr. Go for? I think it was 934 Leslie Dr?

Over asking at $538,500.

Marko said...

I find people rent out suites even if it is not connected to the affordability of the home. My parents paid off their mortgage a long time ago but they never let the suite go vacant. It is just the two of them and the 900 sq/ft upstairs is more than enough.

I had a young couple last year that looked for a home without a suite, found a home they liked that happened to have a suite and ended up renting it out a few months later as they didn't need the space.

When you have a suite and you don't need the space the temptation to rent it out for extra cash is definitely there.

Marko said...

,So if you're happy with your 1000sqft then you could buy a house with a suite for $550,000 or a house half the size for $450,000.

On a monthly cash flow basis wouldn't the $550,000 home be substantially better assuming the suite rents for $1,000/month?

Leo S said...

On a monthly cash flow basis wouldn't the $550,000 home be substantially better assuming the suite rents for $1,000/month?

Yes of course. I'm just advocating for a realistic look at the numbers instead of sweeping all the costs under the table. Suites are profitable that's why people are so keen on them in markets with high prices.

the high rate of suites also speaks against the idea that people with very high incomes are driving the market.

Marko said...

Monday, March 9, 2015 8:00am

MTD March
2015 2014
Net Unconditional Sales: 132 575
New Listings: 396 1,286
Active Listings: 3,562 4,050

Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year

patriotz said...

I find people rent out suites even if it is not connected to the affordability of the home. My parents paid off their mortgage a long time ago but they never let the suite go vacant.

Of course there are many such people. The point is that house prices are driven by the people who are buying now, not the people who have already bought.

I think people are putting in suites because prices are high and vacancy rates are low and it helps with affordability

That is what I meant by pricing in anticipation of suites. If suites could not be put in, prices would have to be lower because prices are determined by what people can afford to pay. You are talking as though prices were being set by some outside force.

You might note also suites are rare in Ottawa outside the inner core, and not common even there.

Just Jack said...

What about Sidney?

A nice retirement area close to the Ferries and not choked by traffic and secondary suites.

Today there are some 33 detached homes listed for sale from $375,000 to $1,740,000. That's a very wide spread for such a small community.

Last month, 8 homes crossed the finish line at an average price of $444,000 That would get you 1970's Bi-level style house with a basement suite that has had some remodeling.

A hundred grand cheaper than Oaklands means you'll be mortgage free that much sooner. And if you're an investor a much better ROI.

If you're a prospective purchaser the Sidney market is more in your favor than say Oaklands. Sidney with 4 months of inventory and new listings being added at a rate of 2.5 for every home that sells is still a sellers market but quickly moving towards equilibrium between buyers and sellers.

ROI's are not affected by location. If you want to compare the ROI's of a stock it doesn't matter where the stock or company is physically located. Neither should the ROI or capitalization rate consider location.

In contrast speculators are highly location orientated guessing what may happen in the future will create windfall profits. That makes speculators add a personal bias and emotional to any purchase or any sale. Essentially they are the cheerleaders using spin tactics to talk up the market. Rather than looking just at the bottom line.

That makes areas such as Oaklands with its short supply highly volatile areas to be buying in today. An investor would pull away from such a market as it is acting irrationally. A prospective home owner/occupier may be caught up in the hype create by the cheerleaders. And speculators have no problem devouring their own.

Butter09 said...

What did the place on Leslie Dr. Go for? I think it was 934 Leslie Dr?
Over asking at $538,500.


Wow...seems like that area just south of swan lake always sells quick. Maybe it's just good value? I am guessing Uptown helped the value in this area.

I heard 824 Darwin had lots of interest as well....

Just Jack said...

How quickly a property sells doesn't necessarily mean that the property is good value.

All that you can say about a property that sells in 7 days is...

the property sold in 7 days.

It doesn't mean the property undersold nor does it mean the property oversold.

If you look at the supply and demand within a half kilometer radius of the property on Leslie there are only a few homes for sale. Less than 2 months of inventory. Between 5 to 7 months is considered a normal balanced market between buyers and sellers with stable prices.

If you have under 2 MOI in an area that usually means you're in a market with multiple bids over asking prices on the most desirable homes in the hood. Some bidders may act irrationally and some will pay premium prices even above market value prices.

Premium prices that may not continue when the market moves back into equilibrium between buyers and sellers.

Any introductory course in Economics explains that a shortage will temporarily drive up prices but supply will increase as more home owners take advantage of these higher prices and list their homes for sale. Bringing the market back into equilibrium. Or the high prices will lead to prospective purchasers seeking out other less expensive areas and that would lower future demand for the area and lead to a balanced market as well.

A shortage of housing isn't necessarily good for home sellers as it leads to a shallow and dysfunctional marketplace. If prospective purchases can not find adequate housing at affordable prices they will simply stop buying. And if you are in a shallow market when buyers stop buying that would lead to a quick correction in prices.

Like the old saying goes...

The straw that broke the Camel's back

CuriousCat said...

I was doing my taxes and had the info on hand so I thought I would follow Leo's October post on what it cost to run my house.

Gorge, 1940s, ~1070 sqft up, another 750 heated down+garage. 2 adults 1 child upstairs.

HYDRO- TOTAL $1,246.44
Jan $347.33
Mar $230.67
May $168.91
Jul $155.53
Sep $151.56
Nov $192.44

WATER/SEWER/GARBAGE - TOTAL $632.26
Mar $150.25
Jul $273.40
Nov $208.61

INSURANCE - $1134
PROPERTY TAXES - $2143.70
Total $5,156.40
MORTGAGE INTEREST - $12,012.87

Heating is a heat pump with oil backup. Have not put any oil in the tank since 2008.

Forced maintenance: I had a water leak and had to replace my water line this winter. Cost was $720.30 to try and repair the initial leak (which failed 2 months later) and then $2084.25 to replace the line.

I have chosen to make other improvements to the property, though I'm not sure if that counts as maintenance because I didn't HAVE to make those.

Just Jack said...

When was the last time you had your home insurance reviewed?

The insurance costs for your house have to be more than just building a new home on a cleared lot. Because of the additional costs of removing the debris, cleaning your possessions and paying for accommodation while your home is being repaired or rebuilt.

Years ago, and it still might be the case with some banks. You may have been given a copy of the appraisal report which estimated a cost new to build your home. If you used that figure for your insurance - then you're under insured.

Just Jack said...
This comment has been removed by the author.
Just Jack said...

For those interested, the cities of Langford and Colwood with a population reaching 33,000 have 275 houses for sale compared to ALL of the core districts of Victoria, Esquimalt, Vic West, Oak Bay and Saanich with a population of some 250,000 has only 465 houses for sale.

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only."

Charles Dickens, A Tale of Two Cities

CuriousCat said...

Oh I question my insurance every year because every year it goes up! Personally I think I'm OVER-insured. I'll have to wait until I'm home to look at the policy as I don't want to spout off the wrong numbers. But in 2008 my house insurance was $800ish and now getting close to $1200 thanks to standard increases in replacement value of x% per year.

Leo S said...

Thanks CuriousCat, very interesting.

dasmo said...

And so it begins... I won't say I told you so yet since I would only count this as almost right...
https://www.cibc.com/m/rates/index.html

Curly Fry said...

I've enjoyed the suite-versus-stock-investing debate (even if it's a repeat!)

Also thanks for sharing Curious cat! I'm always wondering what the true monthly costs of a house are -to compare to condo fees.

In our 1000 sq ft condo, for 3 years the hydro each year is a consistent average of $54/month (lowest month was $34, highest was $90). Condo fees are $300/mo + property taxes $200/mo.

Obviously the places aren't comparable.

I'm assuming houses vary widely in hydro use.

Bianca Stieve said...

I’m in the process of renting my house and needs a reliable property manager because most of the time we are out of the island. I talked with fort myers real estate agent to help me and I thinks I can trust on them

JordanDorkin said...

Thanks for this interesting information specially for the hunt business.
Zombie Hunt

Emily Piper said...

Nice offers

calgary new condos for sale

Joshua Watters said...

That graph shows the hard work you've done. I can understand the frustration that you're facing here with all of this. This market sometimes does gets a little unpredictable and unwelcoming.
business in Torrance

Marven James said...
This comment has been removed by the author.
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