Empty Townhouse On Howe – Realtor/Owner Attempts $250K-Profit Flip; “Now looking at a significant loss.”

YLTNBoomerang at vancouvercondo.info 31 Aug 2010 10:15 am
“One of the areas I’ve been tracking for a few years now is townhouses in Coal Harbour and False Creek North (essentially waterfront townhouses). The thing that sets my data apart from MLS data is that I don’t reset my ‘days listed’ counter each time a property is re-listed with a new agent or MLS #. As a result, the [accurate] average number of days listed of all townhouses in this area is… 358!!! Talk about stagnant listings!!!!
Of the current 28 units in this segment only 9 are under a hundred days with the worst offender at 927 days (v829368;
1194sqft; 1439 Howe St; ‘Pomaria’; condo fees $611 per month). Check out the history of this unit that has never been lived in since being completed at the end of 2007:
Initially listed: February 11 2008: $989,000
Price reduced March 4 2009: $969,000
Price reduced April 17 2008: $899,000
Re-listed July 31 2008: $799,000
Re-listed July 21 2009: $699,000
Re-listed June 10 2010: $759,000 (I guess the owner figured the market recovered enough to warrant an increase)
Price reduced June 24 2010: $749,000
This guy has already paid $20K in maintenance fees alone with no rent! I think this place is worth no more than $400K.”

And this important information added by Anonymous at vancouvercondo.info 31 Aug 2010 1:32pm“Purchased Feb 4 2008 for $749,900 with big dreams of an easy quarter million dollar profit. Now looking at a significant loss. At least the owner will save on commissions…the listing agent is the owner.”

[Thanks for sharing the data, YLTNBoomerang & Anonymous. -vreaa]

9 responses to “Empty Townhouse On Howe – Realtor/Owner Attempts $250K-Profit Flip; “Now looking at a significant loss.”

  1. Terry de Monte

    One more example of built during the frenzy, and way over priced. The owner is getting killed. He will be lucky if he gets 359 for this. Terrible numbers are getting worse. Over 350 similar units in the catahchment? Come on, how many people are holding off…..let’s add those too.This blog has been a revelation. Well done, and balanced.
    Keep an eye on the basement suite scam that will sink people that phonied up income and won’t be able to rescue when refi time comes. OOOOOPS.
    Look folks we have full recourse here. You have to pay the loan, no matter what. This isn’t the States. CMHC is riding 800 BILLION on a float of 79 BILLION in hard assets. That is suicide and the game is up.
    Good idea to cash up and head for the hills, Jack.

  2. “Look folks we have full recourse here. You have to pay the loan, no matter what.”

    Wrong. If you’re 30% underwater and heading lower you declare bankruptcy. The CMHC is obligated to pay the difference to the lender. And I think you have their numbers wrong. Their “assets” are the current market value of the collateral, which I believe is inflated. If that drops they have about 10 billion of “equity” to absorb losses. They are leveraged to the hilt. Don’t forget to add “guarantees in force” under securitization.

    http://www.cmhc-schl.gc.ca/en/corp/about/anrecopl/upload/CMHC_AR2009_MDA-2005-2010-Highlights.pdf

    damage = assets * (% price drop) * (% default rate).

    It will take some pretty bad numbers to actually require a CMHC bailout, but to the extent that we have a bubble, price drops and defaults will be highly correlated and self-reinforcing.

    It will take much less to simply put their balance sheet underwater (assets < liabilities), to the point where they have to start charging higher premiums. I wonder what effect that would have 🙂

  3. Assuming 30 months without rent, $250k down, 3.5% interest rate, this person has also already paid around $40K in interest payments that he’ll never see, and probably another $4k in property tax.

  4. This one definitely takes the cake. With low monthly fees, convenient location next to the auto body shop, a front row view of transit buses rumbling by at 75 km/hr+ as they merge onto the Granville Br onramp and the soothing sounds of dumpster divers and shopping carts with broken wheels, what’s not to like?

    @rp1: you can’t (or wouldn’t) file for bankruptcy simply because you are underwater on a particular property. In this case, do you really think this buyer of a million $ condo has any legitimate grounds on which to pursue such a strategy? This is not a first time home buyer with little or no net worth. Practically all mortgages in Cda are full recourse meaning this guy better find a tenant soon. Why he hasn’t done this yet is beyond me.

  5. rp1, an interesting point that was raised is that, if prices start falling, CMHC may start getting significantly more applications of those who avoided MI with large DPs but need to get MI upon renewal due to a decrease in equity.

    I agree with you that CMHC’s balance sheet, as it stands today, isn’t as horrible as many make out but, if the market does tank, one must ask what CMHC will want to do with new applications — and what it will be forced to do by the government — if prices are falling. What MI premium do you charge on an asset that looks to be heading south? Normally premiums go up in this situation, as they should, but also they should be outright refusing some business or charging huge premiums at minimum.

    What does this portend for CMHC’s balance sheet going forward? I think there’s a real risk it could deteriorate significantly in the coming 5-10 years if prices fall, unless it refuses some new business or jacks premiums to the moon. I think the government may prevent them from doing this, scuttling the poor H.M.C.S. CMHC.

  6. According to the realtor this townhouse is back up to $759,900 and apparently was leased until recently. Also the condo fees on her site say its $425/mo and not $611/mo. http://www.paulinejones.net/properties.html

    • Only she doesn’t say how much it was leased for. If it wasn’t to friends/family, agents selling to investors tend to mention the monthly or yearly revenue. Given that the pics are obviously staged, skepticism gets the better of me here; although, granted, this could be some strategy she’s working.

  7. Practically all mortgages in Cda are full recourse meaning this guy better find a tenant soon. Why he hasn’t done this yet is beyond me.

    Because he probably wants the entire mortgage + condo fees + taxes from a renter. And for that he needs a really foolish idiot.

    I was very briefly in 2008 thinking of buying a Condo as an investment (read rental) property, only to realize after doing the math that the rental market is not paying enough to cover the cost, that was on a one bedroom, I can just imagine how much worse it must be for something like this.

  8. You cannot escape bad Mortgage debt by declaring Bankruptcy – only in Alberta and Quebec. Not in the rest of Canada. Read the rules dude.
    You will be followed to the ends of the earth to pay that loan.
    This isn’t the States.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s