Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”

James writes [via e-mail to VREAA, 12 and 14 Mar 2013]:
“A couple of properties that I’ve been watching in my neighborhood with interest...

v982432_4
Unit #1 2482 W 8th Ave; 1132sqft; Ask $699K
Granted this is a garden suite (but a nice one at that), I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen since I’ve lived here (5 years) priced below the 700K mark in Kits. MLS blurb states: “NO HST & PRICED $146K BELOW ASSESSED VALUE!”

History:
Nov 2012 list price: $810K
Dec – price reduced: $799K
Today’s price: $699K -> -14% in 4 months! ouch!”

“Two other units in the same heritage-tear-down-and-subdivide Kits special..

v978640_2
Unit #2 2488 W 8th Ave; 1331 sqft; Ask $899K
This one is great because it’s a 2 bedroom and yet priced at a full $200K above the one above…but still “PRICED $106K BELOW ASSESSED VALUE & NO HST!”

Previous list price: $950K -> I wasn’t able to find a date on this…
Current list: $899K
Price Reduction: -5.4% in 4 months. Though I bet any money that the $950K price was an interim price drop given the obvious desperation on the other units.”

“Third still listed on one site but not Realtor.ca which means that some poor sucker paid too much money or they are in the process of relisting it:

kits row houses
Unit #3 2486 W 8th Ave; 1197sqft; Ask $950K
3 bedrooms but $250K more than the “garden suite”. “PRICED $79K BELOW ASSESSED VALUE & NO HST!”

La piece de resistance as they say.
Previous list price November: $1,050,000 (!)
Dec price reduction: $998,000
End of Feb price reduction: $950K
-9.5% haircut on a property that the city has deemed to be worth $1,030,000.
If it did sell, I would bet money it was NOT at $950K and therefore was probably -10% below assessed value at the time of sale. I’m sure all the other people on that street that are trying to sell , and there are a number of them, are not thrilled with this…”

“So, total $110K + $100K + $50K = $260K of assumed profit vaporized in 4 MONTHS.
Further, I managed to stumble across cached web pages with original purchase price of the property that was sold in May 2008 and subsequently torn down and replaced with the 3 “heritage style” Kits units above.
The original house looks like it was sold back in 2008 for $1.388M. Here it was then:

2486 w 8th 1.388M 2008

“I’m certainly not well versed in what it would cost to tear down to the foundations and then some, rebuild, subdivide and then flip a ~4K sq ft home like this, but an educated guess would be somewhere around ~$2-2.3M total for the 3 units once it’s all said and done including costs to sell each unit.
For the original list prices that WOULD have worked out to ~$500K profit. I didn’t consider cost of carrying the original mortgage since I’m not sure how these things work for developers, but 5 years of interest would be significant on a $1M+ mortgage.
Current list prices that profit drops to ~$200K.
And that’s with an assumed 1 out of 3 units sold and the nicest unit at that. No wonder they are getting desperate.”

Thanks to James for the above info and thoughts.
Anybody else got ideas on the math on a development such as this? -vreaa

30 responses to “Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”

  1. I’m confused. Is this an ad of the “blogutainment” variety ?

    • Good point, Loon. I should have pointed out: ‘James’ is not in the RE business in any way.. he is a Kits market watcher. (I had that exchange with him before posting, thinking that, in a strange way this post could look like remotely like an ‘ad’ to some.)

      • It could be that I’ve been hanging out quite a bit at Whisperer’s site so much so that everything looks like an ad at the moment.

  2. april fools…? um…

  3. Those prices really aren’t low when you consider that 10 years ago the same amount would have bought you a 2 story house on a 45′ lot in Douglas Park.

  4. I’m not sure they tore down the original house–the roofline is the same except for the addition of a dormer window. Still, an extensive reno in any case and a significant (and promising) price drop.

  5. Perhaps this is how the crash happens.

    No American-style fanfare. No hullabaloo. No outrage. The media deliberately misdirects with silence; the banks of course cannot scream “Fire” in a crowded theatre.

    Canada’s real estate crash will perhaps be described as the beginning to the quiet suffering on the part of millions of Canadian families who are now or about to b e without large fractions (anywhere from 1% to 1000%+) of their net worth.

    It will end only when the next bubble begins. A moment of silence, please.

    • [NoteToEd: Somehow, featuring an Aussie just worked.]

    • 1000%….why yes, that is a rather large fraction of an individual’s net worth.

      After the dust settles, we can all go grab a Timmy’s ,,,,and then transition straight into a Harpo-nian bailout plan….maybe call it “Canada’s Economic Resurrection Plan”….the possibilities are endless.

      Appropriate title for Passover, methinks……

      • There won’t be another bailout of the middle class. You can tell by smell of pablum in the media. If anything, I expect this decline could be unduly vicious because it has been announced to everyone that it is coming.

        The moneyed class was caught offside by the 2008 downturn. The government bounced the market, sucked in the middle class, allowed banks to make some obscene profits, and secured a majority.

        The next stage of the crisis is sovereign defaults. Countries will fail, not banks, and the government has silently announced “bail-in”. God help you if you are at the mercy of banks.

        The housing market is the last war, and the government basically got what it wanted – debt serfs who will pay.

    • pricedoutfornow

      I agree with this. Knowing someone who (yes in BC) just declared bankruptcy because her condo was assessed at $150k and she bought it north of $250k in 2005 or 2006 (presale). Tried to rent it out for the past few years but the rents kept drifting lower and lower, and the tenants stayed shorter and shorter terms (I think they moved on to better places, this is a city in BC where rents are down significantly since there was a boom-the boom is long over). She was losing more than $10,000 a year and just couldn’t get ahead. Time to hand the keys back to the bank and start over.
      I hear stories like this all the time. A friend’s dad in the same city bought a house during the boom “everyone wants to live here!”. Now his mortgage is $2500/month (blue collar worker) and he tries to rent out the basement suite for $1000 a month (no takers-though it worked during the boom). The house is worth about 30% less than what he paid for it (maybe less, not a lot of sales these days).
      All we have to do is look north a bit to see these stories.
      Quiet suffering. These stories don’t seem to make the news but they do exist.

  6. You’re right, they didn’t tear down the original house, they gutted it, raised it and moved it 7 feet (if I recall correctly) forward on the lot. They then added a coach house at the back.

    The lot immediately to the west was similarly raised and moved, and a coach house added, though they stopped work on that second home and finished the first, only recently resuming work on the second (I’m assuming it was the same people doing both, though one would think it would be far more cost effective to do them both together).

    Up and down 6th, 7th and 8th streets west of Vine you will see several similar conversions in varied states of completion.

  7. it’s no joke … pffft! … what is more surprising – that someone would do this? … or that someone would still do this now? … http://tinyurl.com/croq6z6

  8. Just spoke to someone in the neighbourhood, real estate came up and it came out he’s invested in real estate over the last 15 years, buying dumps and fixing them up and flipping them. Has done this multiple times I was thinking oh no, this is going to end badly, then he told me he’s now retired and I thought even worse… Then continued to say he’s sold all his properties except his current which is currently for sale and explained that the market’s currently in crash mode, worst then he’s ever seen. He talked about 2008 and thought we were in for something far worst this time. Talked about previous declines he’s seen and thought this is going to be worst. Doesn’t follow any of these blogs. He’s getting close to selling now for about a 40K loss, and thinks he’s close to sealing the deal, but I got the impression he’d be happy taking even more of a loss just to get out.

    He’s moving away from the lower mainland and buying farmland to retire on. Mentioned there are a couple others a few streets away that bought/reno’d/now trying to sell, thinks they’re already listed at breakeven and that they need to come down quite a bit more before selling.

    I was taken aback by this guy…Good for him.

    • Vancouver Hipster

      There are only two kinds of people..
      smart and sheeple..

    • Renoflipping is an honourable profession, at least they leave things in better shape than when they bought, with the usual caveats ;)

      • If they add value, and get paid well for doing so, great.
        But, as we all know, most in Vancouver over the last 10 years have also depended on baseline price increases. No longer, it seems.

      • My impression was he started doing it as a way to make ends meet and was in the right spot at the right time. He WAS adding value and doing a real job. When he took a look at where things were and how his fortunes had changed, he quit while he’s ahead. Think he had lost a lot of money in a prior career. He also mentioned doesn’t buy anything on credit, cash only. Has a very small mortgage on the current place. Other places he always put at least 20% or more down…..

        Not typical at all of the speculation that’s been going on. I was really happy for him.

      • When prices are dropping I agree it’s a tougher slog for the reno addicts. I’ve seen some beautiful rework, and there was definite value-add there; whether or not it can overcome price drop headwinds is another tale

      • Every time I see a little old lady’s house with a 1960′s kitchen, I give thanks to reno-flippers. I’ll never understand putting little signs all over the house that say “love” and “believe” though. Who goes for that shit?

  9. This was in South Surrey, I should add. Was a guy that seemed to have had some very good days in his life and has seen some very tough times…. Sounded like he was in the midst of a tough time job wise in his life in the late 90′s and is a pretty good handyman and kind of fell into the real estate thing, rode it up, and jumped off when he realized he had gained enough money to live out his life without worrying any further about money.

  10. Realtor behavior

    I believe $699K per unit will be around the break even price for now with interests factored in. Original price at $1.388M, 4-5% transaction cost, 20-25% at most for fixing and putting in another coach house (seriously, they can make it very cheap somehow if they have their own crew). So, the rest to be factored in is agency fee, and interests (around 5-6% yearly with renovation costs all taken in), totalled around another 15-25% if they can sell now.

  11. $699K is still crazy expensive – if I has confidence price will increase, I will take it.

    On a price stagnation, or deflation, this is crazy expensive for value.

    No need t scream at ugly bankers or greedy foreigners, it is us Vancouverites that sold out. A Faustian choice!

  12. Looks like Johnny Whoreton over at Real estate talks got day parole. Too bad, some good neighborhood specific data appeared there recently. I won’t have time to find it with him there.

    Sigh, time to move on I guess. :?

  13. Victoria House Blog shutting down

    Check out the Victoria house hunt blog: http://www.househuntvictoria.blogspot.ca/ Is it really shutting down tonight or is it an April Fools joke?

  14. Pingback: “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.” | Vancouver Real Estate Anecdote Archive

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