Category Archives: 02. Profiting from the Boom

Stories about folks who’ve made a killing, either by selling appreciated RE, or by accumulating enough RE to feel like land barons.

Mayor Robertson Selling His House

912 W 23rd

912 W 23rd Avenue, Vancouver
2,922 sqft SFH
Asking price $1,950,000
Assessed (reportedly) $1,600,000

- for the whole story, see ‘Guess who’s trying to cash out of the real estate market in Vancouver?’, at ‘Whispers from the Village on the Edge of the Rainforest’, 9 July 2013
[hat-tip Burnabonian]

“Nothing Wrong Here!”

Maple ridge, lougheed highway and 223rd aldus huxtable
Maple Ridge: Lougheed Highway and 223rd [image and post title care of Aldus Huxtable]

“I was really fortunate with how things worked out for me in real estate. I definitely took chances when I bought a few presale condos to flip back in 2004, but I was adamant at the time that there was room to grow for Vancouver.”

“I have moved on from residential and have been working in the commercial RE industry for over 8 years now. A lot less ups and downs and I get to deal more with businesses rather than individuals who tend to be less professional. Both sides of the industry have their pros and cons, but I love working with commercial brokers and tenants. I work for a large developer in town looking after their commercial portfolio in Western Canada.

A little about what has happened [to me]:

- Sold 2 of my condos that I bought pre-sale in 2004 in downtown Vancouver just by Rogers Arena. One sold in 2010 and the other in 2012. Both were 2 bedrooms that were purchased for $280K give or take and sold around $560K each. One I lived in with my family and rented out the other.
– Used the profits to upgrade to a spectacular 3-bedroom, 1600 square feet “new” condo in Fairview
– Have 2 lovely young kids
– Love condo living close to downtown with my family for the proximity to work downtown, restaurants everywhere and just the energy that the burbs don’t offer

I was really fortunate with how things worked out for me in real estate. I definitely took chances when I bought a few presale condos to flip back in 2004, but I was adamant at the time that there was room to grow for Vancouver. I still think it is one of the best places to live in the world and I am gladly paying for it by choosing to live close to downtown. I travel a lot internationally and every time my plane lands at YVR, I feel so blessed to be back home to such a beautiful place.

I took some chances, had some luck and stayed away from the extreme negative and positive views of posters on [RE Talks forum]. I would put myself in the Bull camp always, but that is only because I think you need to be ready to seek out deals – and this requires a pro-active mindset. One should never buy what they cannot afford (everyone agrees on this), but you should always be ready to buy a home when you need one (starting a new family, for example). Most of the original bears on [RE Talks] are gone, but I must say, it is funny to look back and see how wrong on the timing they were.”

- Property_Magnate at RET 24 Jun 2013 [cited by 'WhipMaster' (aka Johnny Horton, etc, etc) as an example of a story from a "winner" in Vancouver RE, VREAA 25 Jun 2013 7:14pm]

Nobody is disagreeing with the idea that one could have done well in Vancouver RE by buying in 2004.
And, please, nobody misinterpret the above anecdote as an endorsement for buying “a few” presale condos in Vancouver, least of all in 2013.
– vreaa

“I Wish Them Bad Luck.” – Jim Flaherty, on those who wish to profit from Canadian RE price drops

“I wish them bad luck.”
– Canadian Finance Minister Jim Flaherty, commenting on recent moves by some U.S.-based hedge funds and other big investors, who worry that the Canadian housing market is heading for a hard landing, and are looking to short, or bet against, Canadian investments.
[as quoted by the Wall Street Journal, 28 May 2013]

Other excerpts from the same article:
“Last year, Mr. Flaherty had voiced concern about the condo markets in Toronto and Vancouver.
“When I look at the housing market, I’m looking for the ‘doom and gloom’. I don’t see the ‘doom and gloom’. I see some moderation in demand. This is a good thing,” he said.

Flaherty’s wish for bad ‘luck’ for the ‘shorts’ is the equivalent of a hope for good ‘luck’ for the (immensely greater) ‘long’ position; a long position that he has, after all, attempted to shore up for many years. Flaherty cannot calculate the damage that the housing bubble has done, nor that which its resolution will end up doing. It’s natural for him to be simply trying to keep it going at this point.
Regarding those betting against price increases:
Any healthy market has to be able to tolerate the possibility of people speculating against price increases.
There are strong arguments that the ability for individuals to short a market improve that market’s strength. Shorts improve liquidity, make for more valid ‘price discovery’, and are around to buy when nobody else wants to (near bottoms).
There are no ways to directly short the Vancouver RE market (it would likely have benefited if that had been possible!).
Some are attempting to indirectly short, and hope to profit from price drops via their likely effects on the values of the shares of certain stocks or other instruments. For the record, vreaa is not trying to do anything like that. We’d simply like to see sane valuation of Vancouver housing.
– vreaa

“He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”

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

groundhog at VREAA 1 April 2013 at 4:10pm and 4:39pm

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized $185,000. Home equity loans and “helping” out the kids does take a toll.”
ex-kitsie at VREAA 30 Mar 2013 3:17pm

Even longstanding owners are speculating on future price strength.
– vreaa

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

More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”

mortgages-property
Allan and Karin Hoegg are pictured in their home in Vancouver, British Columbia on March 8, 2013 [image F.Post]

“In 1995, Allan and Karin Hoegg were mortgage-free. But no more: today their Vancouver home is a valuable source of income as they plan for full retirement.
Allan Hoegg says when their son and daughter-in-law wanted to buy a house, they took out a variable-rate mortgage so they could help them out. “We wanted to take advantage of the stability of the current rates.” To cover the mortgage payments, they rent out a suite in the home to students.
The couple also established a home line of credit that allows them to free up cash for investment purposes when they need it. “It gives you maximum flexibility and you can pay it any time you want without penalty,” he says. “It’s dead easy.”
Like many people planning their retirement, there’s a sentimental side to keeping their home, he says. But there are just as many practical reasons. In the Hoeggs’ case, selling to downsize would mean substantial commissions and moving costs. “Besides, real estate is a very good investment in Vancouver,” he says. “The longer we can stay here, the greater the possibility of no-tax capital gains.”

“For the most part, people want to stay in their homes, says Rob Regan-Pollock, senior mortgage consultant with Invis – Team Rob Regan-Pollock mortgage brokers in Vancouver. “The fact is they’re sitting on a big nest egg. So when they get near to retirement, they start asking how they can use that equity to help them in their retirement.”
There are plenty of options to consider, from applying for a line of credit or reverse mortgage to renting out your property to finance your monthly costs at another residence.
A line of credit is the most flexible option, Regan-Pollock says. “If for some reason you can’t meet your monthly expenses, a line of credit on your home can be a very good buffer. The interest rates are low — typically prime or prime plus one per cent, depending on the institution and your qualifications. It’s also quite sustainable, since your home will often appreciate in value more than the amount of debt being drawn down against it.”

- from ‘Home is where the retirement money is’, Denise Deveau, Financial Post, 13 Mar 2013

Comments from ‘Bo Xilai’ below the FP article, 27 Mar 2013:
“Denise, why didn’t you mention Allan Hoegg works for Invis – Team Rob Regan-Pollock mortgage brokers. Of course he’s going to use his house as an ATM… he’s just eating his own cooking. And at the same time you’re interviewing Rob Regan-Pollock as an “expert” in your piece. http://www.teamrrp.com/team/
More fake real estate stories using employees as plants.” …
“They used an employee of the “expert” interviewed without disclosure and, I would argue, in a deceitful manner to promote a strategy beneficial to the “expert’s” reputation and business interests.”

group
Allan Hoegg (top left) part of Team Rob Regan-Pollock mortgage brokers [image teamrrp.com]

[thanks to 'C', for sending news of the article and 'Bo Xilai's comments to vreaa via e-mail, 27 Mar 2013]

This article is interesting..
1. for the undisclosed insider publicized as client
2. for the journalist’s ineptitude or, alternatively, collaboration
3. for the retirees’ dependence on RE holdings for retirement funds
4. for the fact that such borrowings were used to purchase more RE
5. for the need for tenants in their ex-SFH to cover mortgage payments
6. for the assumption that Vancouver RE is “a very good investment”
7. for the assumption that prices will continue to rise.
– vreaa

For those readers unfamiliar with the recent high profile case of industry insiders masquerading as condo buyers, please see:
CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!, VREAA 13 Mar 2013

UPDATE:
This article also headlined and discussed by Whisperer here:
‘Another media scandal from the real estate industry? News article appears to be contrived shill piece from PR company.’, 28 Mar 2013

I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”

“Fortune does not always smile upon you twice but that is exactly what happened to me. I was not an investor when I bought my west side home in 1998. In 2009, like homeowners all over I watched my home value plummet and my paper wealth evaporate before my eyes. Because of my job situation, and other investments turned sour, I was in a pretty bad spot and considered selling my house, for fear of being completely wiped out. Fortunately, I did not sell and when prices in my neighborhood rebounded to their former highs and then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I listed and sold my place at what in hindsight was pretty much the top of the market for my area. I suffered a little during the following year, anxious that maybe I had made a huge mistake, but now two years later I can comfortably say it was the smartest decision I could have possibly made, and I can’t even begin to describe the feeling of calmness I have these days, as I watch from the sidelines as Vancouver’s RE market crumbles.
I may or may not buy back into my old hood in the future, but if I do it won’t be before prices have dropped at least 40% or more. I’ve even come to think of my action as my own personal way to “short” the Vancouver RE market. And if prices don’t revert to the mean no big deal as there are plenty of other BPOE’s to be discovered elsewhere in this big world. In the meantime I’m renting (wife and kids transitioned just fine), and sitting on a pile of cash until the time is right.
In short, my life is changed forever. Thanks to the unfortunate souls that bought my place; I’ve got big time cash in the bank and zero debt. I have extra money to invest (mostly just cash for now), money to help my kids through university (started), money to travel (done), money to take time off (done), and even money to buy a summer cabin on a lake to take the “edge” off renting (done). If all goes according to plan I should have enough to buy back something comparable to my old house in my old neighborhood, in about 24-30 months according to my best guess. If anybody can identify the downside in this scenario I’d love to hear it.
For the record I’m a regular guy that earns a slightly above average salary. While other homeowners were taking out LOC’s or spending all their monthly earnings in order to enjoy life to the max, I would apply my surplus savings at the end of each month to aggressively pay down my house mortgage and invest in equities. Life was still quite bearable and I didn’t really need all that extra stuff anyhow.
I’m only 50 and I could just about retire if I wanted to now, all because of a single simple decision. I used to think I was a bit of an oddball because I lived below my means. Now it turns out I’m a fucking genius compared to my neighbors. I’m pretty sure only a few will end up as lucky as I have.”

‘Good to be out’ at VREAA 24 Mar 2013 12:54am

1. Congratulations to ‘Good to be out’ for having the good sense to see the mania for what it is, and for having the capacity to act on that realization by selling.
2. Anybody who sells in even the very vague vicinity of the top will end up having done fine.
3. It is not normal, nor good for a society, that an individual should be able to retire at 50 simply via the act of selling his home.
– vreaa

Realtor Stories – “A close friend of our family has been a Westside realtor for nearly 20 years. A few weeks ago, he suddenly asked if we knew anyone who might be interested in his $2 million listing. Never before has he done this.”

“A close friend of our family has been a Westside realtor for nearly 20 years. A few weeks ago, while talking about a completely unrelated matter, he suddenly asked if we knew anyone who might be interested in his $2 million listing. Never before in 20 years has he tried to drum up business from us. We know a total of zero people with a spare $2 million, so this was completely ridiculous and seemed rather telling.”
Sheesh at VREAA 19 Feb 2013 11:16am

“A friend of mine 3 years ago quit a well paying full-time job to dabble in RE. When the slowdown started about a year ago, she was lucky to get her old job back.”
Real Estate Tsunami at VREAA 19 Feb 2013 9:25am

“My land-lady who is a very good friend of [a Vancouver realtor] tells me that there are no buyers coming – she says market is very bad… very obvious to anyone who actually uses their brain… but quite an admission from someone who has been a part of this giant scam.”
vancouverbubbleman at VREAA 14 Feb 2013 3:30pm

“Sitting at YVR waiting for my flight to Calgary tonight. Had a pleasant ride with a taxi to the Nanaimo airport with a driver who has sold real estate in the Nanaimo/Parksville area for 29 years. This is the 3rd downturn in his career and the first time he has had to find another income stream. “

“Sitting at YVR waiting for my flight to Calgary tonight. Had a pleasant ride with a taxi to the Nanaimo airport with a driver who tells me that he has sold real estate in the Nanaimo/Parksville area for 29 years.
He is driving cab to supplement his income. Says he had plans to retire and bought a house 5 years ago on one of the islands. Ready to retire and move in and he ends up with his granddaughter on his doorstep 4 years ago. She is now 14 with no sign of leaving until she graduates. Gotta take care of family, he says, but I miss my island property which he gets to once a month without his wife who hasn’t quite accepted their present personal financial state.
He says this is the 3rd downturn in his career and the first time he has had to find another income stream. Says he’s not sure when this slide will end….. here’s my card he says, just in case you decide to buy anytime in the future.”

Anonymous at whispersfromtheedgeoftherainforest.blogspot.ca at 2:34am [hat-tip Whisperer]

‘Vancouver Is Awesome’ “Community-Based Social-Venture” Blog Actually A Stealth Paid Promoter Of Olympic Village

vancouver2010olympics
Above from a 12 Feb 2013 post on the ‘Vancouver Is Awesome’ site

“Marketers of the in-receivership Olympic Village are paying the editor of well-known local culture webzine VancouverIsAwesome.com to blog about the joys of life in the village – but it does not say on the website that he is being paid to do so.
Rennie Marketing Systems awarded the deal after receiving a single pitch from VancouverIsAwesome.com editor Bob Kronbauer, who says feels like he won a contest to be paid to flog the Village in False Creek – much like the public contests held by Vancouver International Airport and Tourism Richmond to find paid bloggers to promote them.
“I was visiting the Village a lot as a resident of Mount Pleasant before we moved in and fell in love with it and wanted to share the stories of all the positive things that make it great,” Kronbauer said.
“Beyond the budget and all this stuff I really have no idea about as an average citizen, (I wanted) to sort of expose stories about what it’s like to actually live there.”
Kronbauer lives in a market rental unit at the $1.1 billion complex, marketed by Rennie Marketing Systems, but declined to disclose his rental rate. He began a $2,475 per-month, six-month contract in May 2012 that was renewed in November. The year-long gig is worth a total $29,700.
“Beyond this, beyond my contract to promote the Village, we’ll be staying there in our suite because we love it so much, that was the intention to move there,” Kronbauer said.”

– from ‘Life in the Village pays off for local webzine editor’, Bob Mackin, Business in Vancouver, 14 Feb 2013

Elsewhere in the same BIV edition, Glen Korstrom suggests this is part of a broader trend of media manipulation by the real estate industry:
“Such tactics seem to be part of a trend of real-estate marketers manipulating media perception to sell condos.
Business in Vancouver has learned that VancouverIsAwesome.com editor Bob Kronbauer is being paid by the in-receivership Village on False Creek, formerly the Olympic Village, to promote life in the village – even though nowhere on his website does it make it clear that he is being paid to do so.”

“Vancouver Is Awesome, and we are dedicated to everything that makes it that way.
A community-based social venture sharing positive stories of arts, culture, lifestyle, and everything awesome about Vancouver. No bad news.
If you want to read ugly, bad news about this beautiful city of ours, you’re going to have to look to traditional media and other blogs; V.I.A. promotes everything that makes our city awesome, from old to new and everything inbetween. We’re like the human interest piece on the news… only different.”

vancouverisawesome.com

We’ve previously tried reading the V.I.A. blog, but each time we break out in a terrible rash and can’t continue.
Advertising is irritating enough when it’s clearly advertising; when it’s in a stealth ‘product-placement’ form, far more so. And the ‘trend’ of media manipulation by the Vancouver RE industry is something that has been going on for years, it’s only coming to light now because the current state of the market makes people ‘ripe’ for the realization.
For the record, we ourselves aren’t paid anything, by anybody, for anything we archive, post, or say on this blog; it’s a labour of love and morbid fascination. We actually pay a small fee to wordpress each year to keep ads off the blog.
When news is “bad”, we call it “bad”; when something is “ugly”, we call it “ugly”; and that’s precisely how the RE market here looks to us right now – ugly.
A grand spectacle is playing out in our town, and we’re keeping notes.
– vreaa

If you are interested in developing your own ideas about the truth of the Vancouver RE market, and whether it is ugly or otherwise, read as broadly as you can about the market. If you don’t already do so, make sure you also consider the opinions expressed in posts and discussion on the following sites:
Vancouver Condo Info
Whispers From The Village On The Edge Of The Rain Forest
Vancouver Price Drop
Vancouver RE And Then Some
Housing Analysis
The Economic Analyst
and, of course,
Vancouver Real Estate Anecdote Archive

Update – Westside Old Favourite Sells For Same Price As In Feb 2011

Here’s an update on a Westside SFH we’ve featured here before:

4411 W 11th; 4,696 sqft SFH; 63×121 lot (7,623 sqft; 0.175 acres)
(Old Timer; Backs onto alleyway behind 10th Avenue stores.)
Listed 9 Oct 2010 $2,980,000
Price change 6 Dec 2010 $2,890,000
Sold 15 Feb 2011 $2,830,000

Listed August 2012 with $3,180,000 ask price
Remained on market for rest of 2012, unsold

Relisted 24 Jan 2013 with $2,998,00 ask price
Sold 24 Jan 2013 $2,850,000

Anybody care to calculate carrying and transaction costs over the last 2 years?
We can’t verify this, but we are told that nobody has lived there over this period.
Will this property now be utilized as a residence, knocked down for a new build, or is it being purchased to sell again later at a hoped-for higher price?
– vreaa


This house was first featured at VREAA 6 Dec 2010 when we noted that, at an “Ask Price of $2,890,000″, “10% downpayment ($289K); 4% rate; 25yr amortization” would result in “Monthly mortgage payments: $13,681.79″
In a later post, 5 Jan 2010, we cited it as the kind of house that would sell for less than $1M in the coming trough.
This house was also featured representing our fair city in ‘Unashamed House Porn: Seattle Vs Vancouver’, VREAA, 11 Aug 2011.

CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!

Village Whisperer, over at ‘Whispers from the Village on the Edge of the Rainforest’ has unearthed a remarkable story of RE-marketing shenanigans.

Lee sisters
Sisters Amanda (left) and Chris Lee (right) are scouting for condos before their parents visit from China to help them buy one. (CTV photo)

“The CTV-TV story [CTV 9 Feb 2013] featured two sisters who were looking to buy a condo at the Maddox condo development in downtown Vancouver: Chris and Amanda Lee.
Curiously MAC Marketing Solutions has an Administrative Assistant named Amanda Lee who not only works for MAC Marketing Solutions – but her current background says she’s attached to the Maddox Downtown condo development profiled in the CTV-TV story. ..
It wasn’t just CTV-BC that ran coverage of the MAC photo op. So did CBC-TV.”

– Whisperer, 13 Feb 2013

MAC Marketing Solutions, once caught out in this subterfuge, on Wednesday [13 Feb 2013] published an apology for the ‘misunderstanding’, in the form of a facebook page comment:

MAC semi-admission
– facebook screencapture, posted by Whisperer, 13 Feb 2013

Whisperer has followed up with a review of the entire incident:
‘MAC Marketing admits they mislead CBC-TV, BC-CTV and all their viewers/customers’
Whispers from the Village on the Edge of the Rainforest, 14 Feb 2013

Clearly this represents far more than a ‘misunderstanding’, but the exposure of this deceit will barely cause a ripple. We have, sadly, come to expect ridiculously poor standards from local media regarding the coverage of the local RE market.
Well done, ‘Whisperer’, many thanks for the uncovering.
The episode is very reminiscent of similar deceit that we ourselves spotted in April 2012, where a ‘sales representative’ selling condos for Cam Good’s ‘The Key’ was presented by Global TV news as a ‘White Rock Investor’ and apparently interested buyer.
– vreaa

UPDATE 14 Feb 2013:

“MAC president Cam McNeill later confirmed that both women filmed in the segment are in fact MAC employees – and aren’t even sisters.
“I don’t have a full explanation of how things went down, I deeply regret for the fact that it didn’t make it more clear to you that the two women in the story were MAC employees,” McNeill told CTV News.”

CTV News, 14 Feb 2013

Of course, as the two women in the story are MAC employees, and aren’t even sisters, the story itself doesn’t even exist!
– vreaa

UPDATE 15 Feb 2013:

The story of the deceit has now been covered by various ‘media outlets':

‘Vancouver real-estate firm admits faking investor for TV news’
Sam Cooper, The Province, 14 Feb 2013

‘Real estate marketing firm apologizes after employees posed as apartment shoppers from China’
Tracy Sherlock, The Vancouver Sun, 15 Feb 2013

‘MAC Marketing Solutions Exposed For Fake Vancouver Real Estate Investors’
The Huffington Post B.C., 14 Feb 2013

‘Real estate firm apologizes after employees pose as buyers in news stories’
Andrea Woo, The Globe and Mail, 14 Feb 2013
excerpt:
“This is the latest in a number of questionable marketing tactics to be exposed within Metro Vancouver’s real estate community. During a media blitz announcing the Groupon-style sale of units at a Surrey condo development last year, one woman identified to a television news crew as an eager local investor was in fact a sales manager for Key Marketing, the company behind the scheme.
That same company has also taken groups of Chinese buyers on helicopter tours of Metro Vancouver properties, and at least one of those trips was believed to be misleading. Garth Turner, a business journalist and former politician, reported the Chinese buyers on a Feburary, 2011, trip – on which several media outlets were invited – were in fact local real-estate agents and brokers and the trip was meant to promote a new condo development. Cam Good, president of The Key, which includes Key Marketing, was a partner at MAC Marketing Solutions from 2004 to 2009, according to his LinkedIn page.
According to 2011 data by the Landcor Data Corporation, 75 per cent of those who purchased Metro Vancouver condos as investment properties are from Metro Vancouver. About 3 per cent are from the U.S. and 2 per cent are from other countries.
The Real Estate Council of B.C will be investigating the matter.”

‘Condo marketing company admits it duped media’
CTV British Columbia, 14 Feb 2013
excerpt:
“We’re trying to understand how this happened right now, and so I’m just trying my best to be open with you and just say that I’m very sorry that it happened,” said MAC president Cam McNeill.
McNeill maintained that the theme of the story – that Lower Mainland condo sites saw a spike in Chinese buyers around Lunar New Year – was completely true.
“I think that the ladies probably fit the profile of the story,” he said. “At the moment I don’t know whose idea that was; I don’t even know if they took it upon themselves to make that up.”

fake buyers
– image from CTV News

‘Real estate marketer admits to deceiving Vancouver reporters’
CBC News, 14 Feb 2013
excerpt from News clip:
“The owner of a Vancouver real estate marketing company admits his employees misled media over the weekend, including the CBC. … MACs owner admitted the story was entirely false. Two MAC Marketing workers presented themselves as sisters from China in Vancouver looking to buy a condo over the Lunar New Year.” …
“Some say that irreparable damage has been done to the real estate marketing industry, that future claims of sold out success stories will be viewed with scepticism.”

click to enlarge
– Annotated image linked by Canadian Watchdog at greaterfool.ca 14 Feb 2013 10:32pm

Usual Suspects – “Nothing To See Here” – “When they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”

“January’s numbers are not a surprise. Some buyers may be sitting on the sideline waiting for a deflationary spiral to develop. When that doesn’t develop, when they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”
– Cameron Muir, chief economist for the B.C. Real Estate Association.

“January’s numbers suggest that there is a possibility the decline in sales should well flatten out.”
– Tsur Somerville, director of the centre for urban economics and real estate in the Sauder School of Business at the University of B.C.

“When a home seller isn’t receiving the kind of offers they want, there comes a point when they decide to either lower the price or remove the home from the market. Right now, it seems many home sellers are opting for the latter.”
– Eugen Klein, president of the Real Estate Board of Greater Vancouver

Above quotes from ‘Lower Mainland home sales continue downward trend’, Derrick Penner, Vancouver Sun, 5 Feb 2013

The tune doesn’t change, despite the substantial change in the backbeat.
Perhaps this is the first time that Muir has used the term ‘deflationary spiral’.
And, we’ll say it again: it’d be nice to see Sommerville at least sketch out a few alternative scenarios for the benefit of Vancouver citizens. The lack of critical analysis of this market from local academics remains one of our bubble’s most remarkable features.
– vreaa

SFH Developers Cutting Prices

v971425_1

2808 W 21st Ave, Vancouver Westside (V971425)
New build 2800sqft SFH on 33×123 corner lot
Offered now for $2,888,000

Hat-tip to Rob for this example of shrinking profit margins. He also writes: “Another good example of west side drop‏. This had been listed at 3.3 million for about the past 8 months…..now this week dropped to 2.88 million.”

It sounds like the plan was for two new builds on one old ‘double’ lot, a project where we’d imagine projected profit margins were quite generous. Even at $412K ‘off’, $2.888M still represents preposterously poor value for a buyer.
At what price levels does this deal become untenable for the developer?
– vreaa

A Journalist’s Richmond Tales; And His Caution – “It could be argued that the operators of these bear sites are hoping to trigger a “bubble collapse” simply by writing about it all the time, and offering opinion biased in that direction, even supported by stats. To what end? Perhaps they are renters, and want to jump back in post-collapse, and then reap financial rewards when prices go up.”

“I’ve been watching carefully, and reading religiously, the postings on this website.
As a journalist for nearly two decades, I enjoy the perspectives shared, especially about the biased nature of certain opinions from within the media, real estate organizations, and members of the public, as well as those who run this site.
I’ll wade into that later, but first, some real facts from Richmond, B.C., where much of the real estate craziness has been centred.
First, a little background.
My family first bought a split level house in 2002. A modest, 1,500 square foot, three bedroom, 1.5 bath, on a lot that measured about 8,000 square feet.
We bought for $320,000, and within six months, the prices in the area “soared”—I use quotes, because at that time, we thought this was the definition of “soared—by more than $100,000.
At that point, we’d already maxed out what we could borrow from the banks, and we thanked our lucky stars we got in when we did.
But our house wasn’t worth renovating, so when a home in the neighbourhood with better bones was listed in 2007, we jumped in.
We sold our place in a bidding war for $30,000 above our asking price, and landed this other home, a dozen doors away, for about $550,000, slightly more than we sold our old place for.
By then, my wife was back at work, my kids were in elementary school, and we could afford the larger mortgage.
We then renovated it, planning to live there for the next 25 years.
But alas, then the real craziness began, which redefined “soar” for us.
We were approached by a developer offering seven figures. Our jaws hit the floor. But we’d just renovated, and were emotionally invested.
Then we slapped each other in the face, and agreed to sell it for roughly DOUBLE what we’d bought it for. This was in 2011.
Turns out, the buyer also bought at least one other home a few doors down, and was planning to raze the structures.
Having received the offer, we were worried about the market continuing the insanity, and didn’t want to be priced out, so we sought out another home not too far away. It was priced $300,000 less than what we were about to sell our home for.
The deal closing period was the normal three months, and it was the spring of 2011. This was when the first hint of the frailty of the market appeared.
The buyer backed out of the deal, citing that financing wasn’t approved. (We’re convinced it was an excuse; banks were handing our mortgages like flyers)
We were shocked, and the deal to buy the other home died too.
Although it didn’t appear that way at the time, we were actually lucky the deal died.
We decided to list the property, and in early 2012, we sold it for $100,000 less than the previous year’s deal, to another developer. But we were still well ahead despite the six figure drop.
Our notary public was shocked to see the price we got. Nobody was getting that kind of money anymore in 2012, she said, for a tear-down.
Instead of buying again, we decided to rent, and that’s where we are today, as prices continue to fall.
By how much? Well, don’t let the Greater Vancouver Real Estate Board’s averages mislead you.
The devil is in the details.
Those median selling prices truly can fool you into thinking prices are “staying about the same”.
That’s not true. We’ve seen asking prices commonly drop by more than $50,000 for one $950,000 house we looked at. That other house we’d bought—before the original deal died—wouldn’t fetch within $150,000 of what we’d bought it for, and the neighbourhood is relatively ugly and certainly less desirable.
We almost bought another house from that original deal, bout were eked out in a bidding war for the house that sold for $950,000. Today, similar houses in the neighbourhood are listed for $120,000 less.
There are people out there, still wishing for their $1,000,000 pay day. But that’s not going to happen anytime soon, based on my close observations.
I’m convinced, based on conversations with my realtor and others, that much of the hype was generated by offshore buyers seeking new homes, and local developers scooping up tear downs to meet this foreign demand.
Today, in my old stomping grounds, there are close to two dozen brand new megahomes listed for $1.8 million or more.
They’ve been lingering on the market for more than a year, and in one case, closer to two. Those prices aren’t budging, but those developers will surely start feeling the pinch, as money from offshore (mainly China/Hong Kong) has dried up.
One house directly beside ours was bought for $720,000, a crazy price, only for the prices to further soar to $950,000 for our neighbour, in the span of just three months in the fall of 2011. A new house was built in its place, sold for $1.78 million to the parents of my son’s classmate, and is now back on the market for $1.9 million. Wishful thinking, no doubt, for someone wishing to be on the outside again as prices fall.
In the McNair area, I’ve seen houses drop in asking price by more than $150,000. Now, sure, you could say the owners were simply listing too high. But we’re not talking talking about one or two homes. We’re seeing many homes drop in prices by six figures.
When those home prices drop enough to attract a buyer, that will bring down the median selling house price, but only if the market for multi-million dollar homes remains quiet as well. If demand for pricey homes rises, those other price-drops would be masked.
I believe that prices have been propped up for a long time by higher-priced homes selling, hiding the street-level changes I’m now seeing.
This month, I’ve seen some evidence of change.
One house in the South Arm area listed for $720,000, and sold within a month. It was a modest rancher, on a corner lot of above-average size.
Other slightly larger homes on smaller lots, including one directly across the street, still are asking for $910,000+.
The bottom line: whether it’s a matter of the “bubble bursting”, I’m no expert.
But when prices drop 20 per cent, that’s nothing to sneeze at.
Now, back to the issue of biased reporting, readers should keep this in mind.
Journalists aren’t paid to share their opinions unless they are writing a column. They simply report results of research, observations, and the opinions of others, essentially.
When I read that a real estate association thinks this will be a good year, I’m reminded of one of my university classes.
I believe the term/phenomenon is “self-fulfilling prophecy”.
Real estate assocations/boards are understandably directed by their membership, which is realtors.
To say the sky is falling might just trigger said sky to fall, at least in terms of prices.
This should be self evident to readers.
It’s like asking a used car salesman if he likes used cars, or if the price of a particular used car is fair. If he says the price is inflated, you’ll offer less, and he’ll get less commission, thereby shooting himself in the foot, and earning the scorn of his bosses.
The same could be said for financial analysts. Those with enough of a following/clout could trigger cold feet among deep-pocketed investors, resulting in a cascading-like crash if they indeed predict one.
And finally, the same could be said of the analysis done by the operators of this site.
I once interviewed the frequently-quoted-on-this-website real estate expert from UBC, who referred to the Vancouver-based blogsites that have been predicting a crash for many years. (He claims there is no bubble, and therefore it can’t burst.)
It could be argued that the operators of these sites are hoping to trigger a “bubble collapse” simply by writing about it all the time, and offering opinion biased in that direction (even supported by stats; I’m reminded of the saying, there are lies, damn lies, and statistics, the latter of which can be conjured up to demonstrate almost anything). To what end? Perhaps they are renters, and want to jump back in post-collapse, and then reap financial rewards when/if prices go up.
Is this likely? Who knows.
But don’t believe everything you read.
Do your own homework, keep your ears open, take everything with a grain of salt.
And remember; when you hear an opinion, take into consideration who gives it.
Do they have a vested interest?
Almost everyone does, including me, as I’m hoping prices plummet so I can reduce my future mortgage as much as possible.”
– Martin comment at VREAA 31 Jan 2013, held up in the automatic moderation filter (likely because of length); also sent via e-mail; headlined rather than posted as comment.

Many thanks to Martin for the stories, and for sharing his thoughts about bias.

Anybody who downsized their RE holdings, or sold entirely, in the vague vicinity of the top, will do fine.
This will, however, end up representing only a very small percentage of owners.
Anybody who bought or ‘moved-up’ during the run-up, especially in its latter stages, was speculating on future price gains, even if they didn’t know it.
Those who purchased with leverage, with more than their entire net worth in RE, will be particularly fortunate if they end up lightening up at higher prices. In the vast majority of cases, this occurs by good fortune.
Martin used some skill in selling in so much as he was able to recognized the prices offered as being ludicrously high, and made the decision to take advantage of that, and he should be congratulated for doing so.

As to the discussion of bias of opinion, including that on this site:
Of course each and every argument has a source and, consequently, a perspective.
And it is wise to suggest that we all take careful note of the source of any opinion.
At the same time, I would suggest that it is far more important to consider the content of the argument than its source. This is one reason, in our opinion, that there is a place for anonymous commentary on the web: their are benefits to making content the focus of the discussion.

A waggish response to Martin’s fair objections concerning bias would be to make a quip something along the lines of “Yes, but my bias is the right one!”
The true word in that jest is that we do, indeed, believe that the evidence (the “statistics”, if you like) strongly supports the bear case. We genuinely can’t see how one can’t conclude that this is a market that’s very overextended and at high risk of a large price collapse. We accept that people arguing many other positions may see the market very differently, and may be just as sincere in their arguments as we are. And of course we are aware that some can make arguments in an insincere fashion, when they have other motives for putting out a certain message.

As for the argument that bears are trying to purposefully bring on a crash, I’d say that the thought greatly overestimates our influence. Remember, bears have been warning of the mania for many years and it has made absolutely no difference to the behaviour of the herd. A healthy and balanced market cannot be influenced by an opinion that it is not a healthy market; especially if that voice is heard by only a very small percentage of participants.
When a speculative mania collapses, reasons for the collapse are always sought. But manias end simply because they are manias; bubbles pop because they are bubbles. We have started a collection of
Erroneous Theories For Falling Prices(linked in the sidebar categories section) which already has 7 candidates. Number 3 is “Vancouver RE Bears Caused The Crash” - excerpt:
“It is common, as speculative manias implode, for ‘naysayers’ to be blamed for the shift in sentiment.
But those same bears went unheard when the market powered ahead. Suddenly, inexplicably, people start listening to bearish predictions? No, the market turns of it’s own accord, and the sentiment change reflects the turn, not the bears suddenly gaining attention.”

- vreaa

Spot The Speculator #96 – “In 2008, when I was 28 years old, I had saved $70,000, enough for a 20% down payment on a triplex in Toronto. I moved into one unit and the rent from the other two units paid for the mortgage and utilities.”

“I’ve always been very focused in my life. I was born a triplet and knew from an early age my parents wouldn’t be able to pay for many extras, or for postsecondary education for all of us. But I was determined to go to university and to buy a home of my own. So in high school I started working as a waitress for 20 hours a week. During the summers I took as many shifts as possible, often working seven days straight. I was a workaholic and should have cut back because my grades were suffering, but I persevered.”

“I earned enough to pay for tuition by living at home with my parents and commuting to York University. It wasn’t easy. I didn’t have a car so I used buses to make the two-hour journey to York and back each day. At one point I considered buying a car but was shocked when my dad showed me how expensive it was. I kept commuting every day for four years. Believe me, it was really depressing. I would get home every night and it was cold and dark, and I was tired. But I knew I was saving for my big goal of owning an investment property, which kept me going.”

“After graduating with an English degree in 2006, I had no student debt and $20,000 in savings from my waitressing job. Then I got a lucky break-I landed a job as an administrative assistant, paying $32,000 a year in downtown Toronto. In 2008, when I was 28 years old, I had saved $70,000, enough for a 20% down payment on a triplex in Little Italy. I moved into one unit and the rent from the other two units paid for the mortgage and utilities. Last year, I got married and my husband moved into the apartment with me. I’ve never doubted the triplex was one of the best financial decisions I’ve ever made.”

“The key for me was tracking my spending in a journal to see exactly where every penny was going so I knew where I could cut back and add to my savings. Most years I saved 70% of my earned income, which I used to pay for university and for the down payment on the triplex. By living at home a little longer than most people I was able to really beef up my down payment. That’s made me truly independent a lot more quickly than many of my friends who are still mired in debt.”

“Now my goal is to pay off the mortgage on the property as quickly as possible. I’ve done some renos over the years and I’m putting $500 a month extra on my mortgage to pay it off faster. The triplex’s value has also gone up. I bought it for $350,000 and it’s worth $450,000 today.”

- Angie Oliveira, 32, Toronto, as featured in ‘How to become a landlord’, Julie Cazzin, MoneySense 16 Jan 2013 [hat-tip proteus, who sent this link by e-mail and added "Saving 20k waitressing is a heroic accomplishment."]

Angie has an admirably proactive savings habit. Because of this ability, she will quite likely do fine in the long run, but we suspect this will end up occurring despite her RE investment, not because of it.
Yes, she is describing a ‘cash-flow positive’ property (something unavailable in our city in 2008), but we’d like to see more of the math before being sure about that. Also, there is downside risk of increased mortgage rates, downward pressure on rents (TO condo glut), and unexpected expenses.
She bought a few years prior to the peak of a multigenerational bubble in real estate. If property prices drop 33% from the peak, she’ll likely still be able to maintain her ownership, but she will, on paper, have lost her profits and her downpayment. This is something we’d imagine would be particularly painful for her, given the hard work it has taken for her to accumulate her savings gains.
In that regard, it is interesting to note that it took her many years of extreme saving to accumulate $70K, but her RE purchase then rose in value by $100K from 2008 to 2012. In fact, she ‘made’ more on paper in RE than she did in entire income those 4 years, when taxation is taken into account. This is a good example of how RE price rises through the speculative mania have perverted the way in which people consider the relative value of real estate, money, work and saving; and how homes have become financial instruments as much as places of shelter.
– vreaa

Spot The Speculators #94 – They’ve lowered their price to $950K already, but they’re “not going to lower it any more because they want to retire, and they really believe that’s what it’s worth because they built it themselves, and it’s one of a kind, yadda, yadda, yadda.”

“Talking to a colleague at the office this morning over coffee. Her relative is trying to sell their $950K house and acreage on the Sunshine Coast in BC, just a 45 minute ferry ride north of Vancouver. It was built it in 2000…..but they inherited the land for 10 years before that. So, a 50/50 “freebee” from a monetary perspective, but that’s only “IF” they didn’t take all of their equity out, that is……and we don’t know that they didn’t do this already.
I casually asked how long it had been listed, and I got the reply “since late 2008″. ROFL !!
Then I get told they’ve lowered their price already, but they’re “not going to do it any more because they want to retire, and they really believe that is what it is worth because they built it themselves, and it’s one of a kind, yadda, yadda, yadda”. So I go and search the town on realtor.ca and it looks like a really bad case of the measles have hit the Sunshine Coast. Not only is there literally a hundred red dots, but most of them have numbers like 12, 25, 43, 33, 17, 5, etc, overlaid on them, indicating multiple listings contained within that dot.”

Carioca Canuck at VREAA 28 Dec 2012 8:18am who added “Here’s another anecdote from the “willing to sit until I get my price crowd”.

We’re making the point here that any owners who have decided to sell, but then don’t steadily drop their ask price until they hit a bid, are delaying selling on the premise of future market strength.
This is also an example of long-term owners who have, it appears, become dependent on the presumed value of their RE for their future retirement security. We fear that there are many in their position who will have their plans hobbled in the downturn.
– vreaa

“We bought in 2005 for $698K, we sold in 2011 for $2.1M and were looking for the Punk’d cameras as we faxed the agreements back and forth. The new owner was adamant that he was tearing down the second we moved out, but still hasn’t done so.”

“We bought in 2005 for $698k (I was 33) we sold in 2011 for $2.1m and were looking for the Punk’d cameras as we faxed the agreements back and forth.  We rented back for 6 months (for 1$) so the kids could finish school with no disruptions. The new owner was adamant that he was tearing down the second we moved out. Had surveyors, architect dudes coming by to measure stuff, lot was marked out and trees surrounded as we were getting ready to leave. We moved out and a couple of months passed…. nothing. We went trick-or-treating in the old hood and low and behold he’s rented the house out to two students for a year. How fast things change.”
Double Down at VREAA 28 November 2012 at 9:58 am & 10:02 am

A $1.4M gift, care of somebody else’s debt commitment.
– vreaa

Vested Interests Meet Over Hors d’Oeuvres – “Only the best booze and culinary treats were good enough, to ensure another year of rubber stamping developments.”

“This may be a little off topic, but I found out that the Richmond Developers were wining and dining Richmond City brass last Friday.
Only the best booze and culinary treats were good enough, to ensure another year of rubber stamping developments.”

Real Estate Tsunami at VREAA 17 Dec 2012 10:36pm

Not off topic at all. A central thread to the whole speculative mania has been the confluence of the interests of all the different parties who benefited from the run up in prices.
Note that this is not to suggest any form of elaborate or sinister or illegal collaboration. It is simply to point out that many local entities together benefited from years of debt-fuelled RE spending: government and lenders; developers, realtors, owners; advertisers & media; retailers; all sorts of individuals & organizations that experienced short-term benefit from the immense amount of capital flow that resulted from buyers taking out large mortgages and spending the proceeds. It is completely natural that all of these parties would work together to perpetuate a situation from which they were all gaining short-term benefits. Humans are like that. This is why speculative manias burn so bright for a period; so many come together to fuel the flames of the same fire.
– vreaa

“His friend was squabbling over what to do with a house he and his brother inherited. Since neither of them wanted to be landlords, they decided to sell right away.”

“A long time friend told me his friend was squabbling over what to do with a house he and his brother inherited. Since neither of them wanted to be landlords, they decided to sell right away. I suspect they’ll be quite a bit of those in the years to come with our aging demographics. Perhaps adding more pressure on prices in the near future?”
Seeking knowledge… at VREAA 14 Dec 2012 5:24pm

“My wife and I bought our first home in Oshawa in 1989 for $178K. Seven years later, after many renovations, we could only sell it for $148K.”

“My wife and I bought our first home in Oshawa in 1989 for $178K. Seven years later, after many renovations, we could only sell in for $148K. Mind you, we then bought in the same down market in Toronto’s High Park area. The home we bought in Toronto, for $325K, had been listed at $580K just 18 months before we bought it. That gives you some sense of how the market corrected. We sold that same house this spring, for $975K, exactly three times what we paid for it 16 years ago. It obviously does depend on when you buy and when you sell, it always has. BUT, we are experiencing prolonged and historic low interest rates, and Mr. Flaherty’s creation of the 0 down/40 year amortization did create a subprime effect here in Canada. We have never seen a run-up in home prices like this before. The correction, one would think, will be greater than the ones we’ve seen in the past, given that so many people are so over-leveraged.”
– comment by ‘ReMaxed Out’, at The Globe and Mail, 11 Dec 2012 11:27am

“We have never seen a run-up in home prices like this before. The correction, one would think, will be greater than the ones we’ve seen in the past..”
That’s pretty much our opinion, too. Perhaps the Vancouver 1980’s bust will compare. – vreaa

43 years old; Owns 6 Rental houses; Goal is to buy 4 more and retire by 50.

facelift-1214rb1

“A hard-working entrepreneur who runs a restaurant and retail outlet, Jim hopes to retire while he is still relatively young and live off the income from his rental properties.
Jim and his partner Bethany live with their toddler in her home in small-town Alberta. He is 43, she is 38. Jim also has a 12-year-old child from a previous marriage.
Jim’s short-term goals include buying four more houses – the ones he has are in Alberta and British Columbia – paying off his mortgage debt and perhaps forming a holding company if it makes sense. Longer term, he wants to retire comfortably at age 50 and leave something for his children.
Jim is doing well, bringing in $10,000 a month before tax from his businesses. He estimates his share – he has partners – is worth $750,000. Bethany, who keeps her personal finances separate but contributes to joint food and housing costs, earns $75,000 a year before tax.
On paper, Jim is looking good. He has $3-million worth of investment real estate. Still, he is mindful of the other side of the balance sheet – the $1-million-plus of mortgage debt, which he hopes to have paid off by the time he is 55 or 60.”


“So can Jim retire at age 50?
Jim figures he will have his mortgage debt paid off by the time he is 55 or 60. His financial picture at age 50 is less clear. As well, Jim doesn’t have a firm handle on how much money he will need when he retires. In his application, he lists “spending money” of $2,500 a month or $30,000 a year after tax.”


“Jim is taking home $84,000 a year from his businesses now plus another $12,000 in net rental income, for a total of $96,000. If he sells his share of the businesses for $750,000 and invests the proceeds at 4 per cent a year, he will be making $30,000 a year before tax. When calculating how much Jim might need in retirement, the adviser uses a rule of thumb of 70 per cent of preretirement earnings, which in Jim’s case would be $67,200 before tax. Thus his revenue properties would have to generate at least $37,200 a year after operating expenses to make up the difference, substantially more than the $12,000 a year they are throwing off now.”

“Monthly net income: $8,000
Assets: Bank accounts $25,000; stocks $50,000; TFSA $25,000; RRSP $25,000; RESP $10,000; six rental houses $3-million. Total: $3,135,000
Monthly disbursements: Mortgage $900 (his share of $1,800); other housing costs $790; car lease $500; other vehicle costs $390; groceries $250 (his share of $500); child care $900; clothing $300; gifts, charitable, other $150; vacations, travel $200; dining out, entertainment $250; clubs, sports $150; grooming $50; doctors, dentists $250; drugstore $100; cellphone, Internet $200; RESP $200; TFSA $400. Total: $5,980
Liabilities: Mortgages $1,062,000; car loan $17,000. Total: $1,079,000″

– image and excerpted text from ‘An entrepreneur’s path to early retirement’, Dianne Maley, Globe and Mail, 14 Dec 2012 [Hat-tip Makaya at VCI]
—-

Jim and Bethany have accumulated a net-worth of over $2 Million ($2.75 Million if he were able to sell his share of his business), by the age of 43, on a household income of less than $200K before tax. This is remarkable. It is highly likely that a large portion (almost all?) of their gains are due to the increase in the paper value of the six rental houses that they own. This would also explain their desire to “buy four more houses” – this sector has treated them well and they expect it to continue to do so.
As others have pointed out in the G&M comment section, simply liquidating all of their assets and investing in conservative instruments would already possibly spin off enough income for them to be able to retire soon.
A disastrous outcome would be the use of their equity to buy even more RE at the very peak of a nation wide speculative mania in housing. Worse still if they are tempted to use leverage by increasing their mortgage debt. This is the way that many with impressive paper gains on RE holdings, at this point in the cycle, will give them back (and in some cases even be wiped out) in the coming market weakness.
As an aside, note the misallocation of resources that comes with the speculative mania: in this case we have a couple considering leaving the workforce in their 40’s.
– vreaa

“I took a big gamble and bought a house in the Oakridge area a few years ago for around 700K, on limited income. I sold it last year because I knew I got lucky and didn’t want to push my luck.”

“I took a big gamble when we bought a house in the Oakridge area a few years ago for around 700K on limited income and sold it last year because I knew I got lucky and didn’t want to push my luck. Now we’re renting a condo in Vancouver.”
Dashgall at VREAA 14 Dec 2012 10:45am

This is an example of speculative behaviour being bailed out by luck. Despite that, ‘Dashgall’ does deserve some respect, not for the initial bet (which was, indeed, a rash gamble), but (1) for having the insight to sell rather than “push (his/her) luck”, and (2) [special points for this one] for being able to admit that the profit was the result of luck, rather than attributing it to one’s own new-found investment genius (the commoner explanation used in this scenario).
Only a very small percentage of market participants will end up having sold in even the vague vicinity of the top. The majority will remain invested in the RE market one way or another, and ride their paper-gains down as the market collapses.
– vreaa

Speculators, Come Back! – “Those purchasing in a buyers’ market can reap huge rewards.”

click to enlarge
– front page article ‘Buy it, Fix it, Flip it could be smart strategy’, REW.ca, 14 Dec 2012 [hat-tip Jack, and Happy Cynic]
Those flippers look.. youngish. Summer jobs? -ed.

Excerpts:
“The BCREA notes a turnaround in housing sales next year could trigger speculators back into action. Those purchasing in a buyers’ market can reap huge rewards.”

“When the market is down, like now, is the time to be buying”, real estate consultant Ozzie Jurock said.

Cameron Muir, chief economist with the BCREA said he is confused by the “bubble hyperbole” in much of the media. “There are minimal risks ahead,” he said. … “I just don’t see any reason to fear a long term downturn in BC’s residential market”.

Flipping is the most obvious form of speculation, and not really the one that interests us the most (that remains the average buyer who overextends to buy on the premise of rising prices without even knowing they are speculating).
We are not yet in a market that is good for buyers, not by a long shot.
This could well be the very worst time in the history of the Vancouver RE market to attempt a flip.
– vreaa

“The 57-year-old bungalow that sat upon that land was simply a minor nuisance to the developer who replaced it with a huge and rather ugly Vancouver special which is currently for sale at an insanely higher price.”

“I sold my “land” for a stupidly high price in 2010. The 57-year-old bungalow that sat upon that land was simply a minor nuisance to the developer who replaced it with a huge and rather ugly Vancouver special which is currently for sale at an insanely higher price. That’s just how things are done around here.”
Mister Obvious at greater fool.ca 30 Nov 2012 1:44pm

Realtor Chat – “There is little actionable support out there. A best guess low may be early 2014. … Sadly, we don’t live in a perfect world.”

“There is little actionable support out there. The sense we Realtor types get from our coffee sessions is that everybody is waiting and digesting the mortgage rule changes. The scary part is nobody will really know when the bottom hits. By the time we get there and figure it out it will have passed.
The Vancouver real estate market is a box of chocolates. A best guess low may be early 2014. A better wish to come true would be a steady flat market for 5 to 10 years. Those markets are good for everybody. The reality is that some politician will screw the whole thing up and we’ll all wish we bought something “back then”.”

Larry Yatkowsky, local realtor, at his blog yattermatters.com, 1 Dec 2012 8:07pm

And sounding like testimony before a Senate committee:
“I readily acknowledge that I and my fellow Realtors are called a lot of things and yes we are known to say a lot of things that in many instances are on the edge of truth. By the same token, buyers and sellers tell us a lot of things that approach the same edge. It is neither right nor is it perfect. Each circumstance, individual and piece of information needs to be weighed, judged and acted upon its own merit. … Humans are prone to do what ever they feel is morally acceptable to them as a group or individually to get the upper hand over the other guy. In a perfect world equity for all would prevail. Sadly, we don’t live in one.”
– Larry Y, 2 Dec 2012 5:41pm, same thread as above

“I still have kids living in BC who refuse to believe that this is anything more than a hiccup in the Canadian market.”

“My family sold my mother’s old Vancouver West house in November 2011… a year ago. Thank god all three of us siblings agreed to sell at that time.
I still have kids living in BC who refuse to believe that this is anything more than a hiccup in the Canadian market! (I live in the US)”

JimH at greaterfool.ca 30 Nov 2012 8:48pm

Denser On The Inside – “A legal multi-family dwelling in the heart of First Shaughnessy, with 8 suites generating almost $150,000 per annum.”

multifamily
1926 Cedar Cres, Shaughnessy, Vancouver West-side
7,305 sqft 1912 SFH, on 121×149 lot
Sold 27 Nov 2012 for $4.49M
Taxes $18K pa

Realtor blurb: “Once in a lifetime opportunity to own this classic craftsman style home that is a legal multi-family dwelling in the heart of First Shaughnessy. With 8 suites generating almost $150,000 per annum this is the perfect holding property. The lot is 121×149 and the house is 7,305 SF. There are two “owner suites” that have been completely updated, each with their own laundry and parking.”

‘Almost’ $150K rental income, minus $18K tax, minus maintenance, minus property management cost, minus unexpected lost rent/lower rent — what’s the actual cap-rate on this?
The deal for the buyer is probably premised on rising property prices.
– vreaa

A Big ‘Thank-You’ To The Insanity Of The Vancouver RE Market – “I sold my loft in a seedy part of Gastown that I bought for $168K in 2005 for $520K in 2011. Paid $220K for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free, with $200K in the bank, at 26.”

“I recently moved to Halifax from Vancouver for grad school and its amazing how much more enjoyable life is when your debt free. I sold my loft in a seedy part of gastown that I bought for 168k in 2005 for 520k in 2011. Paid 220k for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free at 26. I’ve got 200k in cash in the bank too, how many 26 year olds can say that?! and I have all of this thanks to the insanity that is the vancouver real estate market! I feel for these people though, our generation really got the shaft when it comes to the economy and real estate. I’ve got plenty of friends who did everything they were supposed to do to succeed in life and are working temp jobs to pay off 100k in grad school debts. If I didn’t have supportive parents I don’t know where I’d be right now.”
jj at VREAA 27 Nov 2012 9:22am

Well done, jj. You were fortunate with the timing (because 2008 could just as easily have taken you back to pre-2005 prices), but that is now not material.
jj saw that $520K cash was of far, far higher value than a “loft in a seedy part of Gastown”. Anybody who cashes out in the vague vicinity of a top, by virtue of luck or skill, will do fine.
The point is that the person who overextended to allow jj to cash out, and all the thousands of other Vancouver buyers over the last 3, 4, 5 years who have done the same, are left holding the other side of the deal: A property that is worth far, far less than the future earnings that they have promised to pay to buy it.
– vreaa

North Van – “Our house at peak was about $1.3M, and now I expect we’d be lucky to get $1.1M, a minimum 15% drop. We’re staying cause we need a place to live with kids, but also cause we paid $600k, which is where it could go back to.”

“I live in Capilano area, bought in 05′. Our house at peak was about $1.3M, and now I expect we’d be lucky to get $1.1M – that’s a minimum 15% drop. We’re staying cause we need a place to live with kids etc. but also cause we paid $600k, which is where it could go back to.
Other houses up the street have lowered from $1.2 to $1.0M and are still not selling.”

NVD at VREAA 13 Nov 2012 5:07pm

This owner appears to fully comprehend the risks and benefits of ownership.
– vreaa

Developers Reluctant To Share Data; CMHC Abandons Study – “It’s very hard to assess risk in the market when you don’t have insight on the amount of properties being used for investment purposes.”

“An effort to get more information about the influence of some speculators in Toronto’s condo market has collapsed after developers refused to take part, leaving policy makers in the dark.
Urbanation Inc., a data-research firm, has pulled the plug on a survey that it had tried to conduct, with the support of Canada Mortgage and Housing Corp., to quantify how many “assignments” are taking place in the market. …
The study could have shed light on an aspect of the condo market that economists and policy makers have been worried about, as they have sought to get a handle on just how overheated the market might be and what risks it might pose to home buyers and the greater economy.” …
“There aren’t any good numbers on the amount of properties being used for investment purposes,” said Toronto-Dominion Bank chief economist Craig Alexander. “It’s very hard to assess risk in the market when you don’t have insight on that.” …
“Ben Myers, executive vice-president at Urbanation, said he sent the survey to more than 100 developers that had launched condo projects in the past five years, asking them for either the percentage of units or an exact number of units that had been assigned before the condo buildings were registered. “We wanted to know what’s happening with this shadow market; there’s no real way to track it,” he said. He said that one person he spoke to, outside of the developer community, speculated that “because some of the people assigning units are not paying capital gains taxes on that, developers may not want the government looking into that any further.”

– from ‘Data on condo speculators prove elusive’, Tara Perkins, G&M, 14 Nov 2012 [hat-tip bullwhip29]

Developers would not want to publicize data that brings into question the strength of real demand.
– vreaa

“The sale of my house closed last week. But it wasn’t easy. The hard part was convincing the wife that this is the right course of action. The hardest part may be yet to come. If house prices rise, it won’t be easy being me!”

“Frequent visitors to my site will recall a series of articles a few months back examining whether Vancouver, Canada is indeed in the midst of a real estate bubble. Those articles weren’t just for your benefit; they were primarily for mine! You see, as a Vancouver home owner, I wanted to know if I was sitting on an asset that might soon be worth a lot less than it is currently. My conclusion was that we are in a bubble, and so I took action!

The sale of my house closed last week! But it wasn’t easy. First, the hard part was convincing the wife (and other family) that this is the right course of action. The psychology of home ownership is so strong, in my opinion, that it’s very difficult to convince someone that they should sell their home, no matter how high real estate prices become. As prices have risen above normal for several years, the common expectation appears to be that they will continue to rise. Following this sale, if prices continue to soar, the in-laws (and other I-told-you-so’ers) will be all over me for the rest of time.

Once we agreed on the decision to sell though, our journey had just begun. Though average selling prices are still high, the number of sales has dropped substantially in the area. Several reasons are commonly cited for this:

1) China’s slowdown has hurt commodity prices, hurting BC’s economy
2) China’s slowdown has hurt Chinese buyers, who represent a significant portion of buyers of Vancouver real estate.
3) New government mortgage requirements have increased the annual cost of ownership (e.g. the mortgage amortization maximum has been brought down from 30 to 25 years)
4) Buyers are finally tapped out. Credit and home ownership in Canada are at all-time highs.

As a result, for a while we didn’t think we’d be able to sell. The house was listed for three months starting in February, and while we received a lot of visitors (over 95% of whom spoke a Chinese dialect as a first language, I would estimate) over that span, we received not a single offer. We took the house off the market, partly because I didn’t have the courage to push for a “price to sell” price.

But then our luck turned. Our next-door neighbour approached us, as his cousin was moving to Vancouver from Asia and was interested in our place. The prospective buyer spoke no English, and so would benefit from being able to locate his family right next to his cousin’s. His reasons for moving? He wanted a good education for his kids, and wanted to live in a society with free speech.

With no real estate agent fees to come between us (as the house was no longer listed by then), we quickly came to a deal that resulted in more money in our pocket than if we had managed to sell while our house was listed. The last few weeks have been hectic, as we’ve had to move out and find ourselves new digs to move into! Last week, we moved into our new place, so the hard part (physically) is now over. The hard part emotionally may be yet to come; if house prices rise, it won’t be easy being me!

Though almost every metric I encounter suggests housing supply is growing faster than demand and that price to income and price to rent ratios are way higher than their historical norms, there is one thing that worries me about my housing thesis. It seems that developers just aren’t building single-family detached homes. While condo-building more than makes up for the lack of new houses, I do worry that the lack of supply for actual houses could continue to force house prices upward.

On the other hand, however, condo and house prices are undoubtedly correlated, so if there’s a ridiculous oversupply of one, it probably affects the other pretty significantly.

Wish me luck!”

- Sal Karsan at barelkarsan.com, 5 Nov 2012
[Thanks to Sal for notifying us of his story. We think there is a high likelihood he's going to look wise in future years. -vreaa]

Thirty Two Westside Sales and Relists

3725 37th Ave W

2,650 sqft 1915 SFH on 50x130lot
Sold 15 Dec 2011 $2,100,000
“Gorgeous heritage B house with many original old charm features along with modern updates. 9′ ceilings, wainscoting, stained glass, pocket doors, fir floors, large modern kitchen… High undeveloped attic awaits your creative ideas. New roof and a beautifully landscaped yard.”
Above home knocked down, and this now under construction:

4,086 sqft 2013 SFH on 50×130 lot
Listed for sale 7 Aug 2012 Asking price $3,890,000
“..a modern and sustainable custom Henry + Glegg designed luxury home located on a south facing property in the West Dunbar neighbourhood. Features include 5 bedrooms, 6 bathrooms, automated heating, cooling and lighting controls, temp controlled wine cellar, media room, nanny suite with a walk out patio and a three car garage. This home is available now with an opportunity for interior design customization and occupancy Spring 2013.”

3771 11th Ave W
2,946 sqft SFH on 50×122 lot
31 May 2011 Sold $1,958,000
23 Aug 2012 Identical house relisted for sale for $2,680,000
“..guest accommodation down, rented for $1,500 per month.”

4540 13th Ave W
33×122 lot
3 Mar 2012 Sold $1,844,000
25 Sep 2012 2769 sqft New Build Listed for $2,892,000
“Situated on a pretty, tree lined street on a 33 x 122 ft lot.”

3672 15th Ave W
2,520 sqft SFH on 33×122 lot
1 May 2011 Sold $2,099,000
23 Apr 2012 Identical house relisted for sale for $2,538,000
“Renovated to the stud in 1990..”
Now listed as 2,637 sqft

4063 16th Ave W
1,907 sqft SFH on 33×122 lot
2 May 2011 Sold $1,375,000
Painted and relisted 23 Oct 2012, ask price $1,488,000

3528 17th Ave W
2,240 sqft SFH on 33×110 lot
Sold 22 Feb 2011 $1,200,000
Resold 3 Mar 2012 $1,300,000

3804 19th Ave W
1,469 SFH on 33×122 lot
Sold 14 Jun 2011 $1,598,00
Resold 26 Oct 2011 $1,662,000
“This house hasn’t been spoiled by successive renovations and is ready for an update or a rebuild.”

3741 23rd Ave W
2,440 SFH on 33×122 lot
Sold 26 Oct 2011 $1,550,000
Resold 31 Mar 2012 $1,685,000
“Ideal for builders due to the desirable 33×122 lot and the highly rentable 2400 square foot house for investment, but also for family living-in…”
[Good for everybody in fact; especially good for punters wanting to take a chance at flippin'. -ed]

3475 26th Ave W
2650 sqft 20043SFH on 33×130 lot
Sold 26 Jun 2011 $2,410,000
Relisted 12 Sep 2012 $2,448,000
Price change 5 Oct 2012 $2,348,000
Price change now $2,248,000
Failed flip.
“Showing better than new..”

3383 27th Ave W
1,700 sqft 1931 SFH on 33×130 lot
Sold 5 Jun 2011 $1,601,000
3005 sqft new build listed 24 Sep 2012 $2,798,000
“Air conditioned throughout.”

1575 29th Ave W
3,544 sqft SFH on 66×150 lot
Sold 11 Oct 2011 $3,560,000
Relisted 22 Jun 2012, ask price $4,480,000

3677 30th Ave W
1,437 sqft SFH on 33×130 lot
Sold 9 May 2011 $1,651,000
3005 soft new build listed 23 Oct 2012 $2,990,000
“Fully equipped 2 bdrm legal suite with separate entrance in basement can be a mortgage helper…”

3985 30th Ave W
3,200 sqft 1981 SFH on 42×130 lot
Sold 14 Jul 2011 $1,950,000
‘Upgraded’ and relisted 15 Jun 2012 ask price $2,560,000
“Better than brand new! TOTALLY upgraded with high-end finish in 2012.”

3288 32nd Ave W
2,784 sqft 1938 SFH on 48×130 lot
Sold 12 Mar 2012 $2,250,000
Lot divided in two, and redeveloped into two SFHs:
(1) 3288 32nd Ave W
1,778 sqft SFH on 24×130 lot
For sale $1,988,000
(2) 3292 32nd Ave W
1,819 sqft SFH on 24×130 lot
For sale $1,988,000
“A Brand New Home at an affordable price.”

2574 33rd Ave W
1,874 sqft SFH on 66×127 lot
Sold 5 Jun 2011 $1,710,000
Sold 4 Dec 2011 $1,850,000

2753 33rd Ave W
1,500 sqft SFH on 33×133 lot
Sold 4 Nov 2011 $1,250,000
Relisted 18 Oct 2012 Ask Price $1,375,000

3441 33rd Ave W
2,556 sqft 1936 SFH on 56×130 lot
Sold 30 Jan 2012 $1,958,000
Relisted 12 Jun 2012 Ask price $2,080,000
Sold 25 Sep 2012 $1,933,800
“Investor or Builder Alert!”

2606 34th Ave W
3,378 sqft 1912 Craftsman SFH on 60×130 lot
Sold 28 Apr 2012 $2,600,000
Relisted 20 Jul 2012 $2,798,000

3341 34th Ave W
3,470 sqft 1925 SFH on 60×140 lot
Sold 7 Jun 2011 $2,550,000
Relisted 12 Apr 2012 Ask price $2,799,000
Ask price drop to current $2,680,000
“Basement has 2-bedroom suite. Hold, renovate or build your dream home up to approximately 5,800 SqFt.”

2633 36th Ave W
4,808 sqft 1995 SFH on 60×134 lot
Sold 24 Jun 2011 $3,420,000
Relisted 23 Jul 2012 Ask price $3,660,000

3657 36th Ave W
2,200 sqft SFH on 50×130 lot
Sold 21 Nov 2011 $2,210,000
Relisted 25 Sep 2012, after apparent reno:
3,455 sqft SFH
Ask price $2,698,000
“Beautiful Dunbar Home! Completely restored to its original charm & elegance!”

3692 36th Ave W
2,393 sqft SFH on 50×130 lot
Sold (or ? taken off market) 30 Jul 2011 $2,200,000
Relisted 3 May 2012
Sold 19 My 2012 $2,165,000

3981 36th Ave W
4,123 sqft 1937 SFH on 66×130 lot
Sold 3 Aug 2011 $3,100,000
Relisted 14 May 2012 at $3,798,000
Price reduced $3,698,000
“The owner paid $400K to completely renovate the whole house with high quality material such as granite counter, real hardwood floor, stainless appliances. Better and more beautiful than new. Looking out from the master bedroom you can view the ocean, Gulf Island, trees and flowers. All other houses are below yours, south-facing bright home and hardly found big 66’x130′ lot make it more worth buying it, living in for a long time, enjoy the designer’s gorgeous work and it never loses the value. Decade trees circle the yard and makes it more private. Close to all famous schools, UBC, community centre, library, shopping and transit.”

3025 39th Ave W
2,830 sqft SFH on 50×130 lot
Listed 11 Jun 2012 Ask Price $2,180,000
Sold 30 Jul 2012 $1,800,000
Relisted 17 Sep 2012 Ask price $2,237,000
[Relisted with identical MLS blurb/copy, but different realtor. -ed.]

3175 39th Ave W
3,650 sqft 2005 SFH on 50×130 lot
Sold 12 Mar 2012 $2,528,000
Relisted 24 Sep 2012 Ask price $3,080,000
“Owner spent over $200k to upgrade outside & inside, with City Permit.”

2972 42nd Ave W
2,818 sqft 1993 on 35×135 lot
Sold 20 Dec 2011 $1,970,000
“This is not a drive-by.”
Relisted 29 Feb 2012 at ask price $1,980,000
Sold 14 Mar 2012 $1,850,000
“Great value! Move in anytime!”

2005 43rd Ave W
3,545 sqft 1898 SFH on 50×118 lot
Sold 12 Apr 2011 $2,205,000
Relisted 23 Jun 2012 Ask price $2,298,000

2828 43rd Ave W
5,449 sqft 1997 SFH on 66×120 lot
Sold 18 Oct 2011 $3,258,000
Relisted 30 Oct 2012 Ask price $3,598,000
“Beautifully renovated kitchen faces south out over a private landscaped yard.”

2540 45th Ave W
3,901 sqft 2004 SFH on 49×122 lot
Sold 1 Mar 2012 $3,100,000
Relisted 2 Oct 2012 Ask price $3,380,000

1139 46th Ave W
4,345 sqft 1994 SFH on 59×122 lot
Sold 9 Jul 2011 $3,680,000
Relisted 28 May 2012 Ask price $3,680,000

1307 46th Ave W
4,660 sqft SFH on 62×122 lot
Sold 28 Jun 2011 $2,968,888
Relisted 21 Aug 2012 Ask price $3,280,000
Reduced to current $3,180,000

1455 46th Ave W
3,899 sqft SFH on 59×122 lot
Sold 15 Jan 2012 $2,530,000
Relisted 29 Aug 2012
Current ask price $2,588,000

[many thanks to 'westsidefrank' for gathering the data -ed.]

‘Vancouver Sun’ Paywall Will Decrease Readership

“The paywalls increasingly installed by news sources (eg. Times, G&M, Vancouver Sun, etc) are going to limit conversation to only those people who chose to look at a specific source. No-one is going to pay $20/month for each source – they will just choose one.So for example, G&M comments are going to be limited to people who prefer to read the G&M. That means less diverse opinions. I think that’s a loss for all of us.”
kcash, comment at The Globe and Mail, 3:20 PM on October 27, 2012

I’d agree. Paywalls are a step backwards.
We are almost exclusively going to be headlining articles and anecdotes that are freely available on the web.
We’ll tend to avoid articles where access is limited.
(Are RE ad revenues falling?)
– vreaa

“The political strategist and lobbyist behind Gordon Campbell and Christy Clark’s rise to the premiership has slashed the price of his Shaughnessy mansion by $1.082 million.”

“British Columbia’s man of political intrigue is reaping the rewards at the racetrack, but not so much in the luxury housing market.
Patrick Kinsella was the leading co-owner at Hastings Racecourse for the 2012 meet that ended Sunday. The political strategist and lobbyist behind Gordon Campbell and Christy Clark’s rise to the premiership has slashed the price of his Shaughnessy mansion by $1.082 million.
The 100-year-old, four-storey, 6,441 square-foot house at 3839 Selkirk was listed in July 2011 by Rennie and Associates Realty for $7.28 million. There were no takers. Kinsella and his wife Brenda switched agents to Macdonald Realty BGW, which is now asking $6.198 million. The price has fallen 14.8 per cent since July 2011.
Kinsella is not alone. Real Estate Board of Greater Vancouver figures show there were 32.5 per cent fewer sales in September 2012 than a year earlier. The Vancouver West benchmark price fell 6.5 per cent to $2.09 million. It was the worst September in a decade.
University of B.C. associate professor Tsur Somerville said west side, West Vancouver and Richmond properties are under pressure. Immigrants and investors who were snapping up properties in 2010 and 2011 have “moved from getting a unit at any price to — if they are buying — buying for the best price they can,” he said.
“In any downturn, luxury homes tend to be more cyclical than starter homes. In the slowing market the luxury homes tend to get hit harder,” Somerville said.”

– from ‘Mansion Market Slide Hits Kinsella, Powerbroker to Campbell, Clark’, The Tyee, 15 Oct 2012 [hat-tip Terminalcitygirl; many thanks]

Sorry, now I’m confused…
Are Westside homes resistant to any downturn, or are they expected to “get hit harder”?
For the record, for new readers, we are on record as having asserted that, in the end, all property types and all property areas will get hit by about the same devastating percentage loss, peak to trough.
– vreaa

“I want my tenants to have some hope in the future so they can be motivated enough to get out of bed every morning to go to work to pay my mortgages.”

“I absolutely love the situation we are in right now. It is so damn hard to qualify for a mortgage, forcing the perpetual renters to be forever priced out in a big city like 416 or Vancouver. At the same time, people with existing mortgages can enjoy this low interest rate for a long time. By the time rates normalize, the tenants would have paid off their properties.
I wish you luck being liquid. I would rather pay the bank 2.15% to use your money (for which you probably get 1.05%) and invest it in providing shelter for you so i can take your rent check every month and build equity for myself.
I always tell my tenants that i think real estate will definitely crash by at least 90% when i stop by to pick up my rent check. I even refer them to this blog. After all, i want them to have some hope in the future so they can be motivated enough to get out of bed every morning to go to work to pay my mortgages. It’s going to be a nasty CRASH, renters, a nasty CRASH.”

Bryan at VREAA 15 Oct 2012 3:01pm

What’s the most remarkable thing about any market?
It’s that, regardless of conditions, for every trade there is both a seller and a buyer, each convinced that the other is doing the wrong thing.
– vreaa

“One of our best friends thought her house would sell at over $1.2M. She was really pissed when the realtor told her bluntly that it would not sell for over $999K, as nothing was moving over $1M, and that at under $1M it would take 6 months if she was lucky.”

“Interesting comments from one of our best friends today. They had a realtor “evaluate” their house for sale. Looks like my constant bubble talk is “perhaps” getting through? You guys may remember that they were featured in my post a while back [VREAA 8 May 2012], about the wine soaked Calgary dinner party I attended at their place a few months ago, where RE was the topic of discussion over cocktails.
She told my wife today that she thought her house would come in at over $1.2MM. She was really pissed when the realtor told her bluntly that it would not sell for over $999K, as nothing was moving over $1MM, and that at under $1MM it would take 6 months if she was lucky. Now she doesn’t want to list as the market “will come back” and RE only goes up. Well, they only owe about $200K. And in 5 years from now it will be paid for, but probably only worth $500K.
They are my dear friends and a hit of that magnitude would not dent their net worth by >10%. But still, “a fool and their money”…”.

Carioca Canuck, at VREAA, 12 Oct 2012 6:47pm

‘Wealth’ That Isn’t Really There – “We live in a world where people have increasingly lost the distinction between ‘making money’ and ‘producing wealth’. Most people out there would be perplexed by the notion that there is even a difference at all.”

Andreas Conrad: [background] “I can’t do anything … unless I’ve sold.”

Announcer: “Andreas Conrad knows the market pain all too well… he’s trying to downsize, but can’t sell his duplex, originally priced at just over $2M, now $300K cheaper…
It’s been on the market for five months and Conrad says, without a sale, he’ll be forced out of retirement.”

Conrad: “For me now it means I will definitely have to go back to work… at the, at the end of the summer.. ah.. if nothing moves.”

Announcer: “This homeowner is just hoping his duplex sells, and fast. If it does, he’ll be back in the market to buy a condo right away.”

- anecdote extracted from ‘Vancouver residential real estate plunges’, CTV.ca, 5 Sep 2012 12:47pm [hat-tip Jeff Murdock]

Many Vancouverites are overdependent on their RE holdings for their financial health, and for their retirement plans.
This gentleman appears to have retired early based on the paper ‘value’ of his RE holdings, and already his plans are awry.
It is noteworthy that this is occurring very early in the down-cycle. We anticipate that many more will find themselves in similar situations once price descents become significant.
– vreaa

Here follow comments posted regarding this CTV piece, from CTV and VCI:

“Am I suppose to feel sorry for a guy who has a home valued around $2 mill and can not sell it and have to return to work. I do not know the age of this man but he looked like he wanted to retire early off his home.”
– leo, at CTV.ca, 6 Sep 2012 2:42pm

“Yeah, Andreas…people elsewhere have to actually work to make money, cuz their dwelling-place doesn’t actually generate income so they can retire at 50…”
kabloona at VCI 5 Sep 2012 6:57pm

“I saw that guy on CTV news too. Crying that he’s going to have to get a job soon if he can’t flip his crack shack for 2 million. He didn’t look old enough to be retired to me. I said out loud to the TV, “Good, you should get a job.” Why would anyone feel entitled not to work for a living? Why would anyone go on the news and expect sympathy that they might have to get a job to earn an income?”
Joe_Blown_Away_By_High_Housing_Costs at VCI 5 Sep 2012 7:09pm

“I would like to be the first in line to order a latte from Andreas when he starts his new job.”
Best place on meth at VCI 5 Sep 2012 8:53

“Andreas seems like a perfectly nice guy to me; just having a hard time adjusting his expectations.”
Anonymous at VCI 5 Sep 2012 10:37pm

“We live in a world where people have increasingly lost the distinction between ‘making money’ and ‘producing wealth’. Most people out there would be perplexed by the notion that there is even a difference at all. There is no less admiration for someone who becomes a millionaire by picking the right stocks than someone who gets rich building a real business or producing a tangible service that creates real wealth.
In fact, given the choice, the overwhelming majority of people would rather get rich without working at all, which is a big part of why we currently have the most morbidly obese housing bubble in history.
Sadly, I don’t think people will wake up to the distinction even after the bubble bursts. Since so many people will be negatively affected (70% of home owning Canadians), expect to see a whole lot of resentment and bitterness at all the ‘lost wealth’ rather than a realization that it was never there in the first place.”

Yalie at VCI 5 Sep 2012 7:59pm

The CTV piece was also noteworthy for these two quotes:

Andrey Pavlov, SFU: “The time on the market has tripled since 2 months ago, so that’s a crash by any measure.” [We'd agree with the sentiment but disagree with the semantics. A crash will only be said to have occurred when prices plunge. -ed.]

Cameron Muir, RE Association: “It wasn’t too long ago that we had the greatest financial crisis since the great depression, followed by a global recession. If that wasn’t the tipping point or a trigger for a deflation of an asset bubble, I don’t know what is.” [In 2008 Vancouver RE was rescued by emergency low interest rates, which it sorely did not need. This delayed our hour of reckoning, but it seems now upon us. -ed.]

UPDATE, 1 Oct 2012:
Headlined property price has since been reduced to $1,599,000
[hat-tip Van guy].
Click on image to enlarge:

Handcrafted Spam


Yuck!

The following 18 comments all appeared on VREAA over a 4 hour period last night [26-27 Sep 2012], each on a different thread, and all from a commenter using the handle ‘Joe Manhas’. They all attempt to promote ‘bchomez.com’, a site that sells BC RE. Impressive work. The comments are distracting, particularly once one takes note of their motivation, and they have all been removed from the respective threads. But they are preserved here en masse as an example of what folks are doing to promote Vancouver RE related activity at this stage in the cycle. ‘Joe’ now joins ‘Fred’, up to now the only poster specifically cited on our spam filter. – vreaa

Submitted on 2012/09/26 at 10:19 pm
Sounds crazy, but Vancouver is one of the most livable cities in the world they say… http://bchomez.com

Submitted on 2012/09/26 at 10:23 pm
I understand that there are 5005 units coming downtown.. these developers wouldn’t be investing so much money into these projects unless they were confident that they could sell them… http://bchomez.com

Submitted on 2012/09/26 at 10:29 pm
What happen to the days when people lived within their means? Vancouver isn’t cheap however if you want a nice house, maybe you can spend a little less on the cars.. Tough to live a steak and champagne lifestyle on a beer – Mac N’ Chess budget.. http://bchomez.com

Submitted on 2012/09/26 at 10:32 pm
Make sense.. we all love things that are free.. http://bchomez.com

Submitted on 2012/09/26 at 11:37 pm
They say money don’t grow on trees… Not for these anymore.. http://bchomez.com

Submitted on 2012/09/27 at 12:30 am
The bubble is only bursting because the Government wants it to burst.. It’s not hard to slow down the machine when you got this wrench that that keeps tightening and tightening… Also when the government turns off the immigration tap, if only a trickle is getting through wouldn’t expect things to slow down? Once that wrench is gone and the tap is turned on full blast we’ll be back to a blazing hot market… Buy Now!! http://bchomez.com

Submitted on 2012/09/27 at 12:34 am
Sounds like the property was bought to high and sold to low… Next time be a little more aggressive negotiating a better deal and work the deal harder on the selling side.. http://bchomez.com

Submitted on 2012/09/27 at 12:41 am
Your poorer than you think? People in Vancouver have made huge money in real estate.. Do you think all those millionaires around Vancouver made it by working 9-5.. We’ve had an incredible run.. still big money to be made.. http://bchomez.com

Submitted on 2012/09/27 at 12:46 am
Your House Is A Big Fridge, a place to store stuff?? Its a place to live and a place to retired after it builds equity for 20 years… Houses go up in value over time, fridges depreciate.. http://bchomez.com

Submitted on 2012/09/27 at 12:48 am
Sugar Coat sorta… As they say what goes up must come down… the flip side is also true what goes down must come up.. Buy Now .. http://bchomez.com

Submitted on 2012/09/27 at 12:55 am
The sale of you own person home is one of the few tax free opportunities we have as Canadians, downsizing, upsizing or other, just remember not to do it too often as the government might see this as a business of re-selling property apposed to selling for personal reasons.. http://bchomez.com

Submitted on 2012/09/27 at 12:58 am
know the rules, play by the rules.. if your going to break them don’t get caught http://bchomez.com

Submitted on 2012/09/27 at 1:04 am
If don’t like “Honda” can you take a Toyota instead? http://bchomez.com

Submitted on 2012/09/27 at 1:10 am
I agree.. the government is intentanally killing the market.. what ever happen to the Adam Smith theory of letting the market take care of it’s self… Too much government interference .. http://bchomez.com

Submitted on 2012/09/27 at 1:17 am
I bet in the 3 house sales the profit was enough to take ten trips. http://bchomez.com

Submitted on 2012/09/27 at 1:24 am
In for the long haul… Real Estate in most places is for the long haul.. Vancouver real estate market has given the average investor (with money) to make huge gains in short periods of time. Huge money can be made on the down slide as well. By now http://bchomez.com

Submitted on 2012/09/27 at 1:29 am
Vancouver as a safe, long-term place to park some money when it comes to real estate. We owe a lot to those around the world that have help Vancouver residents become millionaires by buying holding and selling.. http://bchomez.com

Submitted on 2012/09/27 at 1:40 am
As rough as the stats might show, Vancouver will rebound.. this is the time to buy while real estate is cheap… http://bchomez.com

“Operators of the grow-op used the proceeds to purchase four other properties, including three west-side homes.”

“The B.C. government is seeking to forfeit five Vancouver properties having a total assessed value of more than $6.7 million and allegedly linked to a major marijuana grow-op.
A notice of civil claim filed in B.C. Supreme Court says that on April 19, Vancouver police raided a two-storey commercial building at 1201 East Pender St.
Police seized nearly 5,700 marijuana plants having an estimated street value of $2 million. Also seized were 154 high-intensity lamps used for the grow-op.
The lawsuit, filed by the director of civil forfeiture, claims that the lamps were being powered by electricity stolen from B.C. Hydro using an electrical meter bypass.
It claims that the operators of a garment factory at the Pender Street address were aware of the grow-op on the premises and used the proceeds from the grow-op to purchase four other properties, including three west-side homes.
The operators of the garment business — Soo Kim Louie and Cheuk Mak — also used the proceeds to make mortgage payments, pay property taxes and pay for property improvements and maintenance, it says.

THE FIVE PROPERTIES:
— A two-storey commercial building at 1201 East Pender, site of a police raid on a major marijuana grow-op, is valued at $1.3 million. The building is owned by a numbered company, 0880084 BC Ltd. Directors of the company include Soo Kim Louie and Cheuk Mak.
— A two-storey home at 788 West 64th Ave. assessed at $1.8 million,
— A home at 621 East 56th Ave. valued at $814,000, owned by Louie.
— A home at 5790 Granville valued at $1.4 million, owned by Louie.
— A home at 1383 West 64th Ave., valued at $1.4 million and owned by Mak.”

– from ‘B.C. government seeks forfeiture of five pricey Vancouver properties linked to grow-op’, The Province, 23 Sep 2012

Sometimes, the clichés are true.
– vreaa

Realtor/Speculator On ‘The National’ “Trying To Sugar Coat The Ugly Reality That Prices Are Tanking”

CHRIS BROWN: “At first glance Philip Chan’s property in popular Kitsilano would seem to support those who believe the crash is upon us. It’s a very nicely finished 1,700 square foot newly built unit in a triplex. Back in March it came on the market for $1.79 million, including sales tax. It’s now 1.57 million. That’s an almost 12 percent price drop.”

PHILIP CHAN: “I think the market actually during the last six months has adjusted downwards. I think everybody know about that. And it went up too fast and it’s just taking a little bit of an adjustment.”

CHRIS BROWN: “Describing a $200,000 price drop as an adjustment is just the kind of thing those who believe the market is unsustainable seize on. They argue it tries to sugar coat the ugly reality that prices are tanking. Chan, who built this home is a realtor who’s also trying to sell it, doesn’t believe that.”

PHILIP CHAN: “Unit like this, I think you can find no more than 10 on the market at this moment. How much can it drop?”

CHRIS BROWN: “At his Kitsilano property owner and realtor Philip Chan is sounding confident the market won’t slip much further from the 10 or 12 percent it already has.”

PHILIP CHAN: “Nobody can predict the future, so if you see that the market is healthy enough and you can afford to do it, do it. You can either sit by the ballpark and you watch the game or you can go down and play the game. You might get hurt or you might win.”

- excerpted from ‘Vancouver Housing: Bubble or Bust?’, The National, 20 Sep 2012. [Transcription generously provided by 'AP'.]

Noteworthy for the following:
1. Another realtor who is also a real estate speculator. (How many people in Vancouver have their livelihood and their investments all tied up in the RE sector?).
2. Strongly biased commentator being presented by the media as a potentially valid source of information about the market.
3. “It’s just taking a little bit of an adjustment.” = ‘It’s Only A Flesh Wound’. Price drops thus far are significant because, along with high inventory and dropping sales volumes, they herald far larger price drops to come.
4. “How much can it drop?”. Well, triplexes like this in Kits will perhaps sell for about 500K-600K in the trough, so the answer is “more than 66%”.
5. “Nobody can predict the future…” Faux market agnosticism, and weasly self-contradiction. He’s already predicted the future by saying “How much can it drop?”, now he says “Nobody can predict the future”. Thinly veiled CYA?
6. “…so if you see that the market is healthy enough and you can afford to do it, do it.” What does ‘afford’ mean? Afford the monthly payments? Or afford to watch your net worth drop by $1,000,000?
7. “You can either sit by the ballpark and you watch the game or you can go down and play the game.” Noteworthy for:
(i) the sporting metaphor (Vancouver RE is, after all, “a sport“), and
(ii) the kind of bravado that has been very common amongst the bulls all the way up. (Have you got what it takes to play the game?) It’s looked silly to those of us who saw what it was on the way up. It is now an appeal of last resort.
8. “You might get hurt or you might win.” Love the lottery innuendo (“Hey, You Never Know!”). Quite alright for a couple of bucks on a flight of fancy; less so for a $1.57M bet.
– vreaa

“Forget All This Silly Talk; Cuddle Up; Do The Sensible Frugal Thing; Buy A House; Become A Millionaire”

“The basic necessity of life is having a roof over your head, you own it to live in it for the long term and keep it, forget about all this investment cr_ap and appreciation business. My mom has a grade 4 education and bought a house back in 1980 in the middle of downtown Toronto for 50,000 dollars. It’s worth close to 700,000 dollars now. She had no clue houses could appreciate, in fact, she has no idea what appreciation was. Heck, she has no idea what a stock is and how to buy it. We rented out all 7 rooms to pay off the mortgage in 5 years time. What do you know, we still live here and my mom, who made only minimum wage all her life is a millionaire!!! She stopped working at age 49! All she does is watch tv and go out to restaurants. Simple frugal life.
Ignorance is bliss!!
Don’t buy and sell, buy and sell, you’ll only be losing money from all the cost. If you like your house and the location is great, you keep it for the long term. At an average rate of 2 percent compounded annually, you’ll eventually be a multi-millionaire.”

Motown Philly at National Post 14 Sep 2012

The making-a-million-bucks part of the equation is completely dependent on where in the cycle you buy.
– vreaa

Court Determines Realtor Has To Pay Income Tax Rates On RE Flip Profits – “The CRA discovered that Giusti had bought and sold seven condos in seven years.”

“When you sell a property that isn’t your principal residence and make a profit, half of the amount is taxable. This is the so-called capital gains tax and it’s pretty straight forward, but every situation is different. It all depends on how the Canada Revenue Agency views the transaction.
Real estate agent Romano Giusti bought a condo on Richards St. in Vancouver in November 2006 and re-sold it in June 2007 for a profit of $30,831. When he filed his tax return, he paid no tax on the profit, saying it was his personal residence.
The CRA re-assessed this return and discovered that Giusti had bought and sold seven condos in seven years. He argued that he intended to make the Richards St. condo his personal residence, but changed his mind because of the street noise, irresponsible renters and pets in the building. So, he moved.
Giusti appealed and lost. In a case heard on January 25, 2011, Judge G.A. Sheridan found that Giusti was flipping houses and so was not entitled to the principal residence exception. He also penalized Giusti.
For most people, if you make a $30,000 profit, you only would pay tax on $15,000. In this case, the court found that because Romano was in the business of buying and selling homes, he had to pay tax on the entire profit.”

– from ‘Selling a condo? Beware the taxman’, moneyville, 3 Aug 2012

We should all applaud the CRA for pursuing tax fraud. It is very important that citizens feel that we are all being taxed fairly.
From a Vancouver RE perspective, this story is perhaps more important in that it tells of a realtor buying and selling seven Vancouver condos in seven years. How much has this been happening? How many realtors in Vancouver own multiple properties? What implications does that have in the event of a downturn?
– vreaa

“We purchased the West End condo in 2006 for $640K and sold it in 2012 for $699K.”

“The sale of our condo closed yesterday afternoon. ..
Did we make out like bandits by buying into the Vancouver real estate game? …
Not so much. The actual result, after crunching the numbers, is decidedly underwhelming.

Real Estate purchase info is publicly available, so I’m not giving away anything particularly personal when I share that we purchased the condo in 2006 for $610,000 plus 5% GST ($640,500 total) and sold it in 2012 for $699,000. A gain of $58,500 over 6 years, or just over 9%. And if you want to get really silly, you could call it a gain of 45% on our original 20% down-payment. Not bad, right?

Not so fast. Take away from that the selling costs we paid of realtor fees, repairs (new paint & floor), staging, legal fees, and we barely made away with $20,000 profit. And of course that doesn’t take into account all the costs of holding that investment: property taxes, condo fees (including a couple special assessments), and mortgage interest.
Putting all those numbers in, we spent about $1750/month “rent” (those holding costs) for 55 months to make that $20,000.

What would renting for the same period have cost?
We know the mirror-image unit across the hall was charging just about $3000/month rent. They’ve got a few more square feet, and an amazing view of English Bay, so say ours would have rented for $2500/month. It would have cost us an extra $41,250 (plus the $20,000 we wouldn’t have made) to live in the same suite.

More realistically, we’d have stayed in our previous rental. Accounting for the maximum 4% annual rental increase, we would have averaged $1855/month in rent. At $100/month difference ($5500 over the 55 months we lived there) it’s almost enough to call it a wash.

So, the real question becomes, could we have done something different with our down payment of $130,540 to make $25,000 in 55 months? Maybe. The markets were absolute shit during those few years, so getting 5% a year wasn’t likely, but I think in the right investments it was probably possible.

So there you have it. Renting vs. Buying, in our particular situation, had no clear winner.

I did love our condo and really enjoyed both the space and the location. It was a great place for us to live, so I’m happy the numbers didn’t show it was a financially terrible idea to have done so.
But, considering renting isn’t bankrupting us either, I’m really enjoying the freedom and flexibility of non-ownership, and am in no hurry to buy property again any time soon.”

- from ‘Homeowners no more. Thank goodness!’, by Jen Watkiss, at her blog ‘WorldWideWaterCooler’, 27 July 2012

‘High-Volume Local Vancouver Realtor’ – “The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view of an anticipated market correction.”

“As you are no doubt aware there has been a huge slowing in the market and predictions are that there will be a correction of approximately 25% on detached properties and up to 30% on condos. The other prediction is that we will not see any sort of recovery for another 2 years. How much of the above is true only time will tell. One thing I do know is that The Federal government has not helped by a) cancelling nearly 300,000 investor applicants who were already 2 years into their application process and b) Making it much harder to get a mortgage without proof of income and increasing the ratio of income to borrowing. This has directly affected the numbers of people looking to buy from outside our borders.
The other problem I have personally experienced is purchasers that bought properties I had listed have hit HUGE problems getting a mortgage, as banks would not appraise the property at what they paid for it even though it was sold on the MLS and in some cases at multiple offers! The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view again of an anticipated market correction.
Good quality properties that are priced well are still selling and there have been some big sales, as you will see from my attached stats sheet. If you don’t have to sell then don’t, if you do then make sure you price it right, choose a Realtor who will promote it right and last but not least prepare now with photos, floor plans etc., so you can come to market as soon as there is a change – even if it is nominal.”

– this letter from a “high-volume local Vancouver realtor” posted by Simeon Garratt at his website allure.com 23 July 2012, in a post entitled ‘IS THE CANADIAN GOVERNMENT KILLING VANCOUVER REAL ESTATE?’.
Simeon Garratt himself adds:
“I think that the Federal Government is directly curbing the growth in the real estate sector. Canada -Vancouver specifically- has been on the ‘hot spot’ radar of people from all over the globe. We have been ranked the best place to live, the safest place to live and have an economy that is second to none. A huge amount of our economy’s growth is based on our need to grow as a population. Currently, Canada’s population is dwindling and without the support of a strong immigration system, it will get worse.
I believe that if we focus on creating good quality jobs and giving young people quality education, we will attract higher salaries, bigger companies and housing prices will become less of a factor. It is common in most metropolis cities around the world to commute an hour to work. For some reason, we think we are the exception.”

1. The appraisers are to be commended for their caution: it is currently very hard to reconcile ‘price’ and ‘value’ for local properties.
2. We do not foresee local economic strength so powerful and so sustained that it raises local incomes such that RE prices make sense by that fundamental measure. Incomes would have to double or more for that to happen. Can you imagine that happening without mortgage rates rising?
3. We don’t know what Simeon Garratt means when he says “(we) have an economy that is second to none”, or “a huge amount of our economy’s growth is based on our need to grow as a population.” We see lots of signs that our economy is over-dependent on: the RE industry, industries directly related to RE, and the other temporary knock-on wealth effects of a speculative mania in RE.
– vreaa

Run That Buy Me Again – “I’ve been in and out of three properties in Whistler since 2001 and that market has been very good to me, because I’m very bullish, in real estate in general.”

“While he is becoming more of a household name as one of the dragons on TV’s Dragon’s Den and has a venture capital firm helping smaller entrepreneurs, you might not necessarily think of Bruce Croxon as a real estate investor. And yet, while living in Whistler, BC in the late 1990s, Croxon took it upon himself to get into the real estate game after having realized the value real estate can bring.

“I’ve been in and out of three properties in Whistler since 2001 and that market has been very good to me, because I’m very bullish, in real estate in general, and more specifically on the resort real estate market,” he says.
Croxon is an avid skier and while living in Whistler for about two years he decided to educate himself about the real estate market there. “I learned the market well enough so I thought I could be safe in terms of buying a place to stay and so I added a couple of more places just as pure investment. It turned out to be right for a period of time.”
The first purchase was a personal residence. But with the growth in confidence of the local market, Croxon added on to his holdings with a so-called “ski-in, ski-out” condo. He rented that out to a business he owned in the area.
“The third was more for speculation but I ended up renting it out, and at the end of the day, when I was back in Toronto, I decided to sell that one as well – that was a single family residence on a very nice piece of land,” he recalls.
Croxon explains that the resort market is of interest to him because of the limited supply of land and development potential for areas that people are interested in visiting. For example, he says Canada, specifically Whistler, has some of the best skiing opportunities in the world. “I think there is limited supply and if you want that terrain you’ve got to go there and there is a limit on how much you can build. So it was the right combinations to have an asset grow.”

With all the asset classes that have made their way in and out of Croxon’s portfolio over the years, real estate has served an important niche, especially given his investment strategy.
Says Croxon: “I’m an operator and have not been an investor until recently. [Real estate] was a way to be passively involved in an investment I developed some confidence in. You really don’t have to work that asset too much,” he explains.
“It will either go up or down on its own. For me that’s the attractive part of it. In general, I just think real estate, over a long period of time, has performed quite well. People need a place to live and it seems to be one of those asset classes that survive,” he adds.

– from ‘Dragon’s Den star reveals why he’s still bullish on real estate’, Joel Kranc, Globe and Mail, 27 Jul 2012, an article reprinted “from Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment”.

This has to be the hand-waviest article we’ve seen on RE investing for quite some time.
There really is no substance to it at all.
The author tells us that a guy who made money trading Whistler properties over the last 10 years is kinda sure it’s possible to make money in RE.
Why RE? Land is limited. “People need a place to live”. RE “seems to be one of those asset classes that survive”.
There is perhaps nothing that any potential RE investor could take from this article that would be of any use to them whatsoever.
There is certainly no information about the current state of the Canadian market.
Should an investor be buying or selling RE? How has the RE market actually been doing, in Whistler, or anywhere else, for that matter?
Perhaps the one lesson gleaned could be that to make money in RE, you have to buy and sell.
And that fortunate timing is crucial for many participants.
– vreaa

“Finally in 1987 my parents afforded an old house built in 1916 for $87K. That’s all they could afford. Over the past 30 years the house value has gone up to over $700K and they haven’t even done anything to increase its value.”

“My family immigrated to Vancouver in 1981 from the Philippines with $200 and 4 suitcases. We rented basement suites from 1981-1987 when the housing market was so bad, and finally in 1987 my parents afforded an old 1916 house for $87K. That’s all they could afford given they were also sending my brother and I to private schools. I had a very modest upbringing to say the least. Over the past 30 years my parents’ house value has gone up to over $700K and they haven’t even done anything to increase the value of their house.
MANY Vancouverites are immigrants from developing countries even poorer than China. MANY Vancouverites are extremely hard workers who would like to continue living in a home they can call their own. We would also like to ensure our children and their children can do the same.”

val at The Thirties Grind 11 July 2012 7:07pm

“I sold the last of my 3 places recently. To be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away.”

“I sold the last of my 3 places recently and I’ve said how happy I was to be out of the market. That’s certainly true but to be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away. Well I’m happy to say it’s fantastic renting! All of the problems I used to have to spend all of my spare time fixing – the hundreds of trips to Home Depot, etc, not just on repairs but filling the house with things that perfectly outfitted it. At first I missed those trips but now I realize all the money I was spending. When renting we don’t have to worry about how the place looks because we might need to sell one day. And all the time and energy I’m saving allows me to be doing what I should really be doing – spending time with my young kids.”
No Noise at VCI 13 Jul 2012 6:09PM