Price to Monthly Rent Ratio, 1000 to 1

1562 West 440th Ave, MLS V872582
3,910 sqft old-timer, on large 93x100ft lot
Listed 25 Feb 2011; Ask Price $2,485,00
Price change 17 Mar 2011; Ask Price $2,350,000

From realtor blurb: “Tenants occupied, rental at $2,600/per month, on a month to month tenancy. Extremely well maintained. Great potential to build your dream home on this 93′ frontage.”

Okay, actually the ratio is 904. It was 956 with the original ask price. We just couldn’t resist the ‘1000 to 1’ headline. Is this a world record? Investors like ratios in the 150 to 175, perhaps 200, range, to put this into perspective.
And, yes, yes, we know that this is obviously a land value sale and thus you can argue that the ratio doesn’t ‘mean’ anything. (Aside: Another perfectly adequate functional building gets destroyed). The fact remains, however, that people are renting in this city for a very modest fraction of ownership costs.
If they understood and considered opportunity cost, wouldn’t almost all landlords sell, right now?
And, if they then added a consideration of market risk… hmmmm.
Stir in steadily falling prices… kaboooom!  (all speculators exit left) -vreaa

16 responses to “Price to Monthly Rent Ratio, 1000 to 1

  1. Wow, I would love to rent that for $2600/mo. Vancouver would be quite liveable if there were a huge supply of such nice rentals. In my opinion there are very few VanWest SFH of that quality and at that price.

  2. specialfx3000

    2600×12 = 31200 in rental income. Tax is 8,023. The owner doesn’t get much out of their $2M+ asset. (Not to mention insurance, repairs, and more)

  3. I see the Vanity Fair piece on Ireland Real Estate crush. Their ratio is about 1:1000 before the crash.

    The Greater fool game is over everywhere except Vancouver.

  4. Assuming the owner had this place for a long time, the rental income is probably a good yield on the original purchase price. As well since the owner is selling for a huge tax free capital gain, the rental income is probably just to cover the property taxes, repairs, etc rather than for income return. It’s only a pathetic investment if the buyer buys it for investment.

    As well, while this house is “functional”, unless it has been majorly updated, this house is likely not up to modern earthquake, electrical, water, and other building codes. So while something is functional doesn’t necessarily mean it shold be used as it is until it finally falls apart. Regular updating/renovation/rebuilding to latest technology/standards is not always a waste of resource.

    • Just a little note … even if that house is paid off the yield should not be based completely on the original purchase price. After all the owner/investor in this case should also take into account his/her opportunity cost of investing the current value of the house some place else.

      If the whole house is being rented right now, the owner won’t get a tax free capital gain.

  5. Re: Captial Gain
    Do you think the CRA care in Vancouver/Surry Office?

  6. What I love the most about this anecdote: the 1989 Toyota Tercel parked in the driveway.

    • I noticed the Tercel, too– seems to be an oddly modest car to have parked in front of a mansion…

    • LOL
      Sign of the times!!

    • If the owner follows the dictum of “The Millionaire Next Door”, then the car is appropriate.

      My neighbor earns $250k per year (salary is public information), lives in a 3500sqft house and drives a 1985 car.

      • Restaurant Unemployee

        smart man

        ever notice how we are constantly bombarded with ” are good with their money!” yet they seem to have no issue with dropping tens of thousands every year on the cost of a new vehicle. retarded.

    • But why an ’89 Tercel? They are close to the worst designed engine blocks Toyota has built. The guy’s probably putting in a quart of oil with every fill up and replacing the rear tail lights on a monthly basis.

    • But of course it’s the tenant’s car…

  7. Don’t be fooled by the “old timer” designation. Little known fact: Vancouver wasn’t incorporated as a city in the Tudorian era.

  8. Pingback: Canada Real Estate: Are Price-to-Rent Ratios Flashing Warning Signs? - Also sprach Analyst

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