Gambling On Vancouver Real Estate, To The Power Of Ten

This from gse36 on Real Estate Talks Thu Mar 27, 2008 1:31 pm

“Case in point. friend’s house (fully paid) went from 400->800k.
he took out LOC 600k (75% of value), and purchased some $3M of presales (8 of them) (only put 10-20% down) and it only cost him 500k or so of that LOC.
He pays interest on the 500k @ prime so around $2k/mo for hanging onto them.
Thats cheaper than buying 8 right now and renting them out (will bleed more than $2k/mo). And much cleaner (no tenants to have to deal with etc), and he can write off the interest.
He made some money already on the earlier purchases, but the later ones. i don’t know.
In either case, its quite risky. if prices slide, he risks losing the farm.”

[Will be archived under ‘Where Do They Get The Money?’.]

Leaving Vancouver For Different Reasons

This from Vansanity on Vancouver Condo Info 2008-03-21 08:11:25

“Anyway, had a talk with a friend this morning who’s talking about getting away from Van, he’s a plumbing trade. Talking about Fort McMurray for a bit and then buying in the interior or island. He knows a developer working on some land around Bear Mountain. He has a proposal for a new sub-division there and if it goes through he’ll build it and retire. I talked to him about being careful buying anything on historic highs, he listened but wasn’t concerned. Says that Bear Mountain has many foreign investors showing interest and he figures if he picks one up he will see some serious gains. His exact words were, I’ll do better than my RRSP’s. I know what you’re all thinking, believe me, I do. It’s not worth wasting my breath trying to dissuade him, his mind is already made up. The longer this goes the more people will get sucked in. I’m still going to wait it out for two more years, job is going good, but if I don’t see things change post-olympics or sooner, I’ll be packing up and going somewhere else, somewhere affordable and sunnier.”

And morefrom the same poster 2008-03-26 14:58:20 –

“Two people I know are leaving Vancouver. One is moving to New Mex and the other to LA. Both love the sunshine and the prices up here made their decisions much easier.”

Laying Bets On Vancouver Realty

This from jmb at ‘nobody important’, a local blog:

“Let’s consider this house below, currently for sale. I know this house very well, for I lived in the house two doors to the left of it for 14 years before moving to the larger house where I live now. The grey house you see to the right is owned by someone in my Thursday walking group.

The house itself is over 60 years old and very ordinary. A tiny 800 square feet stucco bungalow with two bedrooms and an unfinished basement. Not a family home, maybe for a couple, as lived there when we were neighbours. The lot is not bad, 53 by 130 foot. It’s been rented so probably not in great condition. It’s a nice location but a fair way from the bus and the shops. The school is very close but then you can’t have children in this house for it’s too small. In fact it is probably a knock down. Why they even suggest it. Build your dream house.

So the asking price is $1,700,000. Yes, ladies and gentlemen, one million seven hundred thousand dollars, for basically a standard block of land, about 9 km from downtown. Now how is that for a downside to this city? One of the most expensive cities in North America for real estate. In fact prices have almost doubled in the last five years.

$1,700,000.00

4035 W 37TH AV, Dunbar, Vancouver West,

Excellent location, steps to Pacific Spirit Park, close to UBC. Build your dream house on large 53 x 130 south facing lot. Needs 48 hours to show as tenanted. All sizes and ages are approx only, buyer to verify if important to buyer.

Finished Floor Area: 800.0 sq ft. Property Type: House, Lot Frontage: 53 ft. Basement: Unfinished, Lot Depth: 130 ft. Bedrooms: 2, Age: 66, Bathrooms: (Full:2, Half:0)

Update: Today I found out from my friend who lives in the grey house next door that the above house has just sold for $1.8 million dollars, $100,000 over the asking price. It will continue to be rented for two years when it will be demolished to make way for a new one.”

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vreaa comment:

This will now be a markedly cash-flow-negative property. One presumes that the new owner is very confident that house and land prices will be going up over the next two years. We also presume that the new owner plans to demolish and build in 2 years.

The property’s numbers look roughly like this: Purchase price $1.8 million, Rent (estimated) $1,800-$2,200 per month. Cost of $1.8 million mortgage, at 7.3%, 25 year amortization, 5% down: monthly payment >$13,000. Thus the property will be costing about net $11,000 per month to carry, or $254,000 for the 2 year period. To be more accurate, one would also have to add property taxes and maintenance costs to that.

This purchase is a bet on property price direction.

“I’ll never have to work another winter in my life”.

This from your moderator, vreaa on ‘3. Changed My Life’.

“A professional who was a longstanding resident of North Vancouver told me in the Summer of 2007 that he was selling his house and moving with his family to a city on the Canadian prairies. The market value of his house had reached a point where this move was irresistible to him.”
Quote: “I’ll never have to work another winter in my life”.