“I have a friend in our office who is looking to rent for his family as he just moved here from BC, and he was commenting the other day how “fishy, desperate, and deceitful” most of the landlords of the numerous vacant properties he had spoken to seem to be. He didn’t trust any of them to be frank and he felt that he was getting set up as the renter “in situ” to increase the listing value and prospect of selling the property he was looking at moving into. As he asked my advise a few weeks ago about his concerns, I told him to try my experiment:
Tell your prospective landlord that you “will” sign a long term lease (12+ months) on one proviso that will be written into the contract.
If the property is listed, or the ownership changes hands for any reason, the lease becomes null and void and you can exit the property without penalty and after 30 days notice upon becoming aware of either the listing, or the transfer of ownership, and that they are legally obligated to advise you of same when it occurs.
No one agreed to it, a couple of them had the blood rush out of their faces after repeatedly telling him they were not going to list the place during his interviews (so why would this condition matter then…..right ?) and one confessed the place was getting listed as soon as she put someone in it. He has decided to rent a purpose built luxury condo rental from a national property managment company instead……someone that I used to rent from.”
- Carioca Canuck at VREAA 27 May 2012 9:54pm
“Talked to a friend tonight who just moved into a rental apartment at UBC. Building is two years old and floors are already sagging, so much that her closet doors keep opening by themselves, and drawers have a hard time staying closed…
Market value? $700,000, for a wood frame condo on leased land.”
- jumpin in at VCI 30 may 2012 10:48pm
“I have a co-worker who used to espouse the whole “buying with family”
strategy. She did exactly that about 2.5 years ago, buying a large (very nice) home in the suburbs with her sister and brother-in-law (co-worker herself is also married).
As a renter (natch) I used to get the whole bull spiel from her– you’re just paying someone else’s mortgage, there’s limited land, prices will only go up, up, up! Familiar refrains to many on this site.
But I’ve noticed a change in her attitude these past few months. Twice now she’s asked me what I pay in rent ($700, includes everything but laundry, and yup it’s a 2 bedroom basement suite in Surrey, so laugh away– I’m loving it). The second time I told her, she admitted “That’s really good”. Confessed to me shortly after that she’s tired of sharing space with another couple. Apparently the brother-in-law is lazy, doesn’t help out equally, and both sister and brother-in-law are very disorganized in paying their half of the bills. Count on her to do it all, with the promise to pay her back.
Guess she’s tired of playing mommy. Her husband apparently rarely leaves their bedroom, preferring the one room where they don’t have to share space. All of their initial plans– convert the basement to a suite, expand the deck, re-finish furnishings– have fallen by the wayside due to lack of help from the other half of the house. She’s just given up, and I suspect she’s just waiting for their 5 year term to be up to sell.
Here’s the kicker– in an attempt to make herself feel better and (I think) redeem her situation in my eyes, she proudly told me about a month ago that she and her husband paid off just under $8000 of their mortgage last year. They have minimal cash savings, so this $8000 is what their “savings” increased by in one year (in their minds, in any case). I didn’t have the heart to tell her that my partner and I had socked away over four times that amount in the same period of time. All made liquid more easily than equity.
I know what the raging bulls will say- “This is the internet. You can say whatever you want here, and nobody can verify it.” Fine. Believe that to your detriment. But I can’t be the only one sensing a shift in attitude. It’s oh-so-subtle, but it’s there. And it’s different than 2008, that’s for sure.”
- Rololo at VREAA 22 May 2012 9:12pm
Posted in 08. Overextended Buyers, 10. Demoralized Renters?, 11. Regrets about Investing in RE
Tagged Anecdotes, British Columbia, Bubble, Canada, Housing, Real Estate, Rent, Sentiment, Vancouver
“A little off-topic but I wondered what you guys would make of the rental market. We have been looking to rent for a few weeks now and have seen mostly tower and new condo units (1BR and 2BR) for $1100 to $1450. Most landlords seemed pretty eager, were willing to offer at least $100 off and almost hounded us when we didn’t call back.I can still see the same units on craigslist that were offered 3 weeks ago, indicating an oversupply of rental units (or a price mismatch). Is there an actual excess of housing in BC or do I just happen to look at an unattractive market slice? Do you guys think rents are going to go up (more and more people who assume the crash will happen are waiting to buy, therefore increasing demand for rentals) or down (since desperate investors need to rent out their units even at a loss)?”
- suspectum at VCI 22 May 2012 11:32am
“Currently we are having difficulty renting in one of our downtown Vancouver apt blocks.
Not to mention the surrey apt is not at full capacity either.
You may find that all your potential ‘dudes and dudettes in the basement forking over a g ‘ are rare…and getting rarer.
Good luck finding renters dawg.
We are pro’s at this and we are experiencing the aforementioned lack of renters right now.
Do you really want to have a battle for renters with a national company that has very deep pockets?
We can rent the apts very cheap indeed if we have to.
Give it some thought eh?”
- a post by commenter ‘bill’ on greater fool.ca, 19 May 2012, who appears to be a professional property manager.
“My girlfriend and I have been looking to rent in the tricities for a few weeks, looking at roughly 20 properties so far. The prospective landlords seemed pretty desperate. A lot of them called us back when we didn’t contact them after a showing, we were able to negotiate 10% discounts (on average) and short-term contracts. Most apartments were in the $1000 to $1200 range and seem to be hard to rent out. Most landlords seem to have bought as “investors”, one guy even using student loans. There definitely seems to be an oversupply of rentals (at the current price of $1100 for a 550 – 800 square foot, fairly new building with granite countertops etc landlords re-advertise for weeks on criagslist, indicating a difficult market for them). I see this as the first step of “reality kicking into gear”. Once these people can no longer pay their mortgages and fees (most places sell for about $300K, making a 25 year 0 down mortgage roughly $2000 a month plus $250 condo fees plus $250 tax, adding up to $2500, double what rent would generate) the foreclosures will begin. Of the $2500 a month, $800 are interest, making the “carrying cost” of taxes, int. and fees a total of $1300… they literally lose $200 every month if prices are stable. If they drop, they are even worse…”
- suspectum at VCI 1 may 2012 1:01pm [hat-tip jesse]
Posted in 10. Demoralized Renters?, 11. Regrets about Investing in RE, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Canada, Debt, Housing, Landlords, Real Estate, Rent, Vancouver
“I am currently looking for a house to rent for my family. We refuse to buy in this market. I always google the address of the place before I even call if I am interested. A lot of times it comes up as recently sold (this happens A LOT). It is a little scary when this comes up, because the house being bought more times than not is for speculative reasons.
This one was a whole different story. The house was a grow op… twice!
Be careful where you rent!”
- from ‘anonymous’ via e-mail 1 May 2012
The address is the same in the two documents.
“Some of you might remember my photo essay from a few weeks ago, re: the non-stop construction insanity in my South Surrey neighbourhood. Well, one of those 200-plus new homes just came on the market. 3000 sq ft and a decent sized yard (one of the few new homes around here that does). But I tells ya, it sure *seemed* like it was slapped together in a month. If it’s like everything else they’re puking up down here, it’ll be looking pretty rough within a year. And don’t get me started on the landscaping. Does “dirt” count as landscaping?
Anywho, the place is just seven or eight doors down from our $1600 rental on Zero Ave. In other words, we both face the US. Thing is, we face a forest. They face low-rent apartments (including the obligatory crappy looking exteriors, broken cars, etc, etc) in a lousy neighbourhood of Blaine. A neighbourhood that won’t be upgraded in any of our lifetimes. They’re also close enough to the Pacific Highway border crossing that they’ll awake to the sound of long-haul semis shuffling around night after night after night.
I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”
- Gord, at VREAA, 15 Apr 2012 5:25pm
For backstory, be sure to read:
‘Gord Goble – South Surrey Building Blitzkrieg; Thoughts and Images’
We share Gord’s fascination with the market.
Posted in 02. Profiting from the Boom, 05. Where do Buyers get the money?, 08. Overextended Buyers, 10. Demoralized Renters?, 12. Effects of Development, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Canada, Construction, Housing, Real Estate, Sentiment, Vancouver
“I’m renting a $1.5m house in Vancouver which was renovated to the tune of $180k just before we moved in. I had to peel the protective lining off the steel appliances and fittings in the 4 bathrooms.
“I have a 3 year lease for $2,900 per month. I don’t know how much the taxes are (surely more = better in the self gratifying eye of the locals) but the strata fee is $446, with a special levy of $43,000 (yes thousands) this year to refurb the outdoor and indoor pools and common facilities. It is in Shaugnessy where the cream is turned for its cream.
“So, here’s the punch line… At these killer low rates, AFTER a down payment of $600k (no 95% financing here) the carrying costs would be $1,374 per month MORE than renting and that’s not even adding in the $500ish strata, taxes and special levy! Why would I buy? Why?”
- Mark, as quoted at greaterfool.ca 8 Apr 2012
Why? Well, Mark, we agree you shouldn’t buy, but if you were a citizen who was buying, you’d be buying for two reasons:
1. if your net-worth was large enough that a 50% or more drop in the $1.75 Million home would be very easily tolerated; where such a drop would only make up an insignificant portion of your net-worth;
2. if you were consciously or unconsciously betting (speculating) that the price of this house will rise substantially year after year.
There really is no other reason to buy.
(BTW, are there any $1.7M ‘homes’ left in Shaugnessy? Don’t think so.)
Posted in 05. Where do Buyers get the money?, 08. Overextended Buyers, 10. Demoralized Renters?, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Canada, Housing, Real Estate, Rent, Sentiment, Vancouver
‘reality check’, in a comment on these pages, pointed us to the following letter in the Vancouver Courier, with the remark:
“There is a nice whiney letter in yesterday Courier, VREAA, stating how a poor family of 3 who deserves to live on the west side is looking at leaving the province. BOO HOO. I thought you’d enjoy reading it.”
Letter of the week
Vancouver Courier APRIL 6, 2012
“To the editor:
Re: “Vancouver realtors cater to wealthy offshore Chinese as middle class gets squeezed,” vancourier.com, April 3.
It’s about time that this major problem be discussed. My husband and I are increasingly frustrated with what is going on in the city and although my husband has an excellent job in finance with a great salary we continue to rent little bungalows on the West Side that sell for ridiculous prices ($2 million or more) to Chinese investor class citizens.
We watch our previous rentals get torn down so that another huge empty house can take its place. It’s heartbreaking and the fact that we have a daughter who is two years old makes the situation more frustrating because we can’t provide a stable situation-a small house, near a good school in a safe neighbourhood. We watch as our trust-fund friends buy on the East Side paying crazy prices to live in houses that need a lot of work in less than perfect neighbourhoods.
We are on our own financially, so sadly Vancouver has become our enemy rather than our friend. Every day we discuss leaving. Our job search in other parts of the nation continues because we are getting the message loud and clear- Vancouver doesn’t want us here.
Sad but true.
Rebecca Kovacs, Vancouver”
“My realtor called me a couple of days ago. He does not appreciate the extent of my knowledge about the market, finance, economics, global capital flows, credit markets, asset inflation, leverage, oh – – and the concepts of net present value. He also has probably never read a real estate blog. …
He basically went on at me for about 30 minutes about how he can’t stand to see me throwing my money away on rent and that my wife and I need to get ourselves into a little “fixer upper” in the north shore. There are so many you can get for under a million. He went on to give me all the realtor speak – – – But I do not argue because it’s not possible. Funny thing – he rents – thinks it’s great. Also said HAM not here any more – things are dead. Very difficult to move a house in Richmond right now and mid to high end not really selling. This must be a bad sign because he has never admitted such. Even 5 months ago things were as “busy as ever” even while stats would show otherwise.
This city is delusional and to use a partial quote from the recently departed Goldman exec . . “A visitor from Mars . . . . would wonder if we practice some type of voodoo economics in Vancouver and the entire city is brainwashed” .”
- zrh2yvr at VREAA 14 Mar 2012 7:13am
“Good little story about Kelowna. My buddy’s house has been on the market for a long time and out of the blue he got a bite. It sold for about 5% less than asking and when they were $4K apart he stood his ground and told his Realtor that if he wanted this to happen he and the the other Realtor would have to do something about their commission to make up the $4K because he wasn’t dropping anymore.
At first they said ok, then they said it couldn’t be done, then they said they needed an extra day and sure enough the two of them ate $2K each and the deal got done. Good for him for holding his ground as the realtors tried to wait him out and hoped he would cave.
Even better, he signed a 2 yr lease on a recently renovated 3 bedroom townhouse at the Lagoon’s on the lake for $2200 per month. He figures the place is worth $900K – $1 mil.”
- McLovin at VCI 24 Feb 2012 7:46pm
ZRH2YVR is a regular poster who recently revealed that they will be leaving Vancouver for a job to Switzerland. Their story was headlined 28 Jan 2012.
On that thread, ZRH2YVR added this useful analysis [VREAA 29 Jan 2012]:
“Here are the economics of my renting since arriving and how this would have compared to buying. You know real estate always go up so this renting thing must have been a real bust.
Property info – 1400 sq ft unobstructed 270% view of English Bay south down granville street and up and around to the mountains east approx to My. Seymour. New building 2007.
Rent paid from move in to June 2012: $196,000
This is a true consumption cost and was well within our means.
Value of property in 2007 on move-in – approx 1.4M.
Value today – estimated – 1.4-1.5M . Let’s say 1.5M just to be conservative.
Cost of ownership – Assume 100% leverage and ignore investment opportunity cost.
Interest rate – Let’s sat 5% even though in 2007, it may have been more.
Strata and property taxes amount to approx $1050-1100 per month.
So – Cost of ownership over this period is $395,000. But wait – the property went up in value right? !!! Well
Purchase cost would have been approx $1,430,000 with all up front costs.
Selling at 1.5M and subtracting costs would net say- $1,450,000 – so there is a gain of $20,000. Fantastic . . . Offset this against the cost of ownership of $395,000 – that gives you net $375,000 (ignore taxes). Compare this to cost of renting of $196,000 – we are up approx $200,000 – Believe me we notice this!!!
So – – For all you property virgins out there – the numbers above may be outside your normal range but divide this by 3 for a $500K property and you will be in about the same place – – up by $60,000 over 5 years. I would never buy in the current market.
Now the funny thing is that in order for us to have broken even, the purchase price would have been close to $600K initially -and that is over 50% fall from where we are. Good luck to all of you. A house is a place to live first – invest second and anyone who is investing right now is completely out of their mind. You would have much more fun going to Vegas for a month – and would probably be better off.”
Notice how often different methods of calculating the fundamental values of different properties come up with a “over 50%-off” conclusion.
Add bad sentiment on the downside and you can see one source of our 50%-66%-off estimate.
Posted in 10. Demoralized Renters?, 11. Regrets about Investing in RE, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Canada, Housing, Landlords, Real Estate, Rent, Vancouver
“We are all renters. That’s what I said to the nice bank lady when she gawked at my account balance. I explained, five years ago my buddy teamed with an investor to make the down payment and bought a house in Maple Ridge @ $335,000. The payment was $2000/m and he had a mortgage helper for $500/m. Since, he has reno’d the deck for $10000 and payed five years of tax totaling $10000. He also bought a water heater and paint for $1000. At the time, he bugged me to buy, but I rented and banked the difference between our two payments. I paid $700/m. and banked $800/m
Five years later, he wants out and intends to rent again. He can get $400,000 for the property. Principal owed is 310,000. The gross profit is $90,000
Deduct, 3% agent fee going in and out.
Deduct the interest portion of mortgage payments he covered
Deduct operating expense and property tax
Deduct 50% of the mortgage helper as taxable income
Pay back the downie investor principal plus 5%.
Gross profit on the house experiment $90,000
$29,000 for five years rent isn’t too shabby, I told him, however expenses ate up any additional savings. And if he does not buy another place in a year, deduct tax on the capital gains for this year. An accountant might dispute my calculations but I think it’s pretty close. I did not include credit card interest, though my friend has been cash poor throughout the experiment.
In the same five year time period, I banked $48,000 rather than pay mortgage interest, with no fear of capital gains tax and no operating expenses, which I also banked. I may not be a millionaire, but I am happy with my lifestyle and enjoy west coast amenities without worry.
I wanted to share this experience, because I have been reading the VREAA blog and comments rent-free for some time and felt the need to pony up. Thanks.”
- sage at VREAA 24 Jan 2012 5:01pm
Posted in 08. Overextended Buyers, 10. Demoralized Renters?, 11. Regrets about Investing in RE, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Canada, Housing, Real Estate, Rent, Vancouver
“Linda (a wealthy woman who rents) ran into her account manager. “He told me that the bank is forecasting stable prices and perhaps a small softening based on what’s happening in China. He then asked if we were getting ready to buy yet. I told him that we were happy renting especially since a home we desire in the neighbourhood we like would cost between $1.5 to $2 million. He then inquired if that was our budget. We could certainly ‘afford’ – whatever that means - a home in that price range. I told him however, that it wasn’t in the cards because we weren’t interested in a fat mortgage. He looked absolutely offended as if I’d launched a personal attack. Then, the nice lady at the bank, who had overheard this conversation told me that I really should be looking at a house as an investment since house prices always go up. And I replied, well until they go down. She looked at me as if were from another planet and said well, not in Vancouver. At that point I realized that I was from another planet – the one inhabited by sane people.”
- anecdote relayed by Garth Turner at greaterfool.ca 12 Jan 2012
“Just wanted to share an unfortunate renting anecdote involving a friend of mine, as a warning to others and to see if anyone out there knows the best way to deal with this.
My friend decided to move at the end of this month and found a place around the 20th December. Being right before Christmas the landlord and her agreed to do the paperwork around the 26th-27th. My friend called on those days but didn’t get an answer and finally got through on the 28th. The landlord then said that she had spoken with her daughter and decided that maybe it wasn’t the best idea for her to allow a cat in the house and told my friend that she can no longer rent the place. (The cat had been discussed before the initial showing and wasn’t at that prior point seen as an issue). Three days before the end of the month doesn’t leave much time to find a new place, so she will likely now have to move stuff to storage, sleep on a friend’s couch, and find a new place come the New Year.
Technically, no papers were signed, but it still seems really unfair to me that the landlord made a verbal agreement and then changed her mind at the last second. So, just a warning to everyone out there that the deal isn’t really done until all the paperwork is in place. And if anyone knows the best way to proceed about getting the landlord to perhaps pay moving costs or something (RTO, small claims court?) that would be much appreciated.”
- davers, by e-mail to vreaa, 30 Jan 2011
Nothing was signed, so we’d strongly suspect the prospective tenant has no legal recourse; others may think or know different.
Sometimes renting can be very inconvenient.
We hope your friend finds a good place, davers, and that you both have a good 2012 nonetheless.
Take a look at this very elegant Rent vs Own comparison spreadsheet/calculator.
Thanks to ‘Potato’ for telling us about the sheet and hinting to link it.
Potato also has a page of discussion regarding the calculator at their blog ‘Blessed by the Potato’. Wise-words excerpt-
“There are a lot of assumptions and estimates involved, a lot. The question is what should you do for your life? And importantly, what are the consequences of being wrong? Don’t use this tool with unrealistic estimates to try to justify a decision you want to make, but rather try to use it to help you come to the decision you should make — and to see what happens if you’re wrong.”
Posted in 08. Overextended Buyers, 10. Demoralized Renters?
Tagged Anecdotes, Banks, British Columbia, Bubble, buyers, Canada, CMHC, Housing, Ownership, Real Estate, Rent, Toronto, Vancouver
This from Vesta at VREAA, 9 Dec 2011 10:01pm-
“Two anecdotes from the last few days. (I know some of you don’t believe in anecdotal evidence. Being a writer, I believe in it more than I believe in statistics.) Warning: perhaps inappropriate humour below. As I mentioned in earlier posts, I had looked for rental housing here for 3 months this summer. Finally thought I’d found someplace decent. Well, in the last 5 weeks there have been two sewer backups that flooded the basement. Turns out that there were sewer backups last year here too (thank you for that info, previous tenants). Funny thing is, I’d specifically asked the property manager if the house had ever had “water problems.” She’d said no. Nothing much had been done about these backups until this latest one, upon which I called City Hall (#311) and didn’t try to use my “inside voice.” That actually got the City out here, and after at first blaming the problem on indolent plumbers, they had to admit that there’s a rotted City pipe that’s actually part of the problem. But the City said it’s not a priority to fix it because it hasn’t “collapsed” yet. So I guess I can look forward to greeting Mr. Floatie in my basement sometime again in the near future. (Those of you who don’t know who Mr. Floatie is, he’s a revered figure in the BC capital.)”
“Renter Anecdote #2 just from this evening: Responsible young couple arrives in Vancouver. Hears that Balfour Properties manages good buildings. They interview at a building near Broadway and Macdonald (West Side). They think it’ll be great. Then they happen to run into a tenant who tells them that two doors down there was a meth-lab explosion where somebody died. They decided to keep looking and they’ve landed in a building that’s badly managed and has — wait for it — water problems.”
“What I don’t get sometimes about Vancouver, on the continuum of human civilization, is how architects and builders here have still not figured out how to defeat the (world-class) precipitation.”
“Okay, enough silliness. My next post: I’ve heard back from Stephen Harper about my concerns about the Vancouver mania! Stay tuned for some hilarious advice.”
“Sold my house on Vancouver’s West Side in February this year. Cashed in on the Chinese New Year buying spree. Got 200k over asking, I still can’t quite believe it. Have been renting in the same area since then. Realtor friend said market has slowed completely in this area (Kitsilano). There are a few houses that sell, but the offers over asking are gone. Now most of the updates I get via email are “price reductions”. Another West Side realtor I know expects the area to drop 20% in 2012. Some of my friends are dismissing this as the seasonal “Christmas slowdown”. They think I’m nuts and real estate will come roaring back. I haven’t seen prices slide dramatically just yet but expect the reality check will really hit in February when the listings start popping up again.”
- West Side Survivor at greaterfool.ca 20 Nov 2011 7:58pm