“I had a chance encounter with a Vancouver RE agent who caters to Chinese investors. Turns out she is here in the Phoenix area looking for investment properties for her clients.”

“Had a chance encounter with a Vancouver RE agent (who caters to Chinese investors) this morning. Turns out she is here in the Phoenix area looking for investment properties for her clients.
As well, she already has a few of her own places she rents out as vacation properties.
Didn’t have a chance to ask her what she thought of the Vancouver market – but it was interesting to see her down here on behalf of her clients.
The going rate for a vacation rental Oct-Apr is about $ 2200-2500 a month, and about half that the rest of the year. This is for homes with less than $ 150K into them (if bought within the last year or so).”

Snowboid at greaterfool.ca 28 Dec 2011 12:01am

Wow, look at those fundamentals.
That’s roughly an average of $1860 p.m rent (less expenses) for $150K.
What would that cost you in Vancouver?
And the US hasn’t yet bottomed.
– vreaa

27 responses to ““I had a chance encounter with a Vancouver RE agent who caters to Chinese investors. Turns out she is here in the Phoenix area looking for investment properties for her clients.”

  1. Phoenix is likely near bottom. Caps over 8% are about right, I would be surprised if investors weren’t chasing yields down there. At those prices the incremental tax costs are worth it.

  2. Hey! Can we refer back to my recent anecdote where commenters were up in arms over the audacity of comparing Phoenix to Vancouver?

  3. you should have been blogging from phoenix long ago already!

  4. Tempting indeed. But it turns out that non-seasonal rentals can be had for less than $1,000 per month unfurnished. You would still be better off renting for 12 months and ‘snowbirding’ for 6. Don’t let those high rents for visitors fool you into investing in Arizona.

    • And I might add that health insurance costs, taxes, and particularly rising airfares will add costs and risk to the owner-snowbird lifestyle. The shorter remaining snowbird lifespan skews the math into unfavorable territory, too. Many newby snowbirds may find they are good for 5 or 10 years max enjoying this lifestyle due to these constraints.

      • It’s never been cheaper for Canadians! I’ve met at least 10 other families who’ve bought down there in the past two years. It’s also an easy (but long) drive once you’re set up.

  5. “Wow, look at those fundamentals. That’s roughly an average of $1860 p.m rent (less expenses) for $150K. ”

    Good luck getting 100% occupancy on your vacation rental.

    • Agreed. Vacancies would be included in the ‘expenses’. What would the average rent drop to? $1000 p.m?? Even factoring in that much of an expense margin, Phoenix still looks so much more attractive to an investor. Consider how much it costs to buy a property in Vancouver that rents for $1000 pm (after condo fees, etc).

      [BTW, we are not endorsing investing in Phoenix; we are simply showing that, for an investor, Vancouver seems to do very poorly by comparison.]

      • “Agreed. Vacancies would be included in the ‘expenses’. What would the average rent drop to? $1000 p.m??”

        Even less in my (not terribly informed) opinion. Phoenix isn’t exactly a popular destination for worldwide tourism. My guess is you’d get about 2-3 months of bookings in a good year.

  6. why look so far off as Phoenix? Vancouver does poorly compared to Kelowna for investment. Or Calgary, or Edmonton, or Seattle, or…
    What’s your point?

  7. formula1. The point is that low rental yields are not sustainable, because capital is mobile and, over time, will flow to more-attractive opportunities. This means that, unless rents rise substantially in Vancouver, prices must fall.

  8. Fist Full of Dollar$

    The RE Agent said she has “few” of her own places that she rents out as vacation properties. I wonder if she files the rental income with the IRS as Garth stated in his post? As it is, the IRS is chasing down expats in Canada for back taxes. The US govt is a desperate but powerful entity. A Canadian buying in the US just sounds like a whole lot pain at some sooner or later.

  9. Anyone that thinks ‘capital’ will flee Vancouver to chase yields in Arizona is missing the plot entirely.

    The yields are high for a reason and will be an even better deal when they are pushing 10% cap rates.

    How many international urban planners visit Scottsdale or Phoenix to research livable urban density?

    • You missed my point. The choice is not between Vancouver and Phoenix, it’s between owning and renting. Right now it’s way cheaper to rent, but it won’t be forever.

    • Isn’t this anecdote about capital choosing Arizona over Vancouver?

      • People choosing Phoenix over Vancouver may be the subject of this anecdote, but it’s not what will restore balance in Vancouver’s RE market.

  10. there weak correlation between yields and home prices. In fact, you’re probably better off investing in Cleveland than you are Vancouver if it’s pure investment you’re looking for

  11. detroit makes best ROI.

  12. Or is it simply that American RE is gaining traction because there’s far less light pollution down there these days…

    [NYT] – Darker Nights as Some Cities Turn Off the Lights

    “HIGHLAND PARK, Mich. — When the sun sets in this small city, its neighborhoods seem to vanish. In a deal to save money, two-thirds of the streetlights were yanked from the ground and hauled away this year, and the resulting darkness is a look that is familiar in the wide open cornfields of Iowa but not here, in a struggling community surrounded on nearly all sides by Detroit…. Highland Park’s circumstances are extreme; with financial woes so deep and long term, it has extinguished all but 500 streetlights in a city accustomed to 1,600, utility company officials say. But similar efforts have played out in dozens of towns and cities, like Myrtle Creek, Ore., Clintonville, Wis., Brainerd, Minn., Santa Rosa, Calif., and Rockford, Ill.”…

    http://tinyurl.com/7uwdxy5

    (NoteToDerp: hegemonic decline’s a b***h, ain’t she?)

  13. I know a guy who has bought quite a few Phoenix condos. He gets about 12% ROI net of everything including taxes, property manager and condo fees. He pays cash for the apartments.

    FYI as an experienced property manager I’d rather see investors buy a bunch of houses in Detroit that may make the guy money, then buy in Toronto or Vancouver and be guaranteed to lose money on the rent every month and subsidize someone else’s life.

    • i know someone who created private fund to buy up distress rental ppties in detroit area a couple years ago. at the time, rental yields were >20%. there were some initial renovations needed but houses renting around $800-$1000/mo were selling sub $50k. he had a relative who lived in the area and was involved in the ppty management.

  14. [TomDispatch] – Phoenix in the Climate Crosshairs: We Are Long Past Coal Mine Canaries – William deBuys

    …”If cities were stocks, you’d want to short Phoenix.

    Of course, it’s an easy city to pick on. The nation’s 13th largest metropolitan area (nudging out Detroit) crams 4.3 million people into a low bowl in a hot desert, where horrific heat waves and windstorms visit it regularly. It snuggles next to the nation’s largest nuclear plant and, having exhausted local sources, it depends on an improbable infrastructure to suck water from the distant (and dwindling) Colorado River.

    In Phoenix, you don’t ask: What could go wrong? You ask: What couldn’t?

    And that’s the point, really. Phoenix’s multiple vulnerabilities, which are plenty daunting taken one by one, have the capacity to magnify one another, like compounding illnesses.”….

    http://tinyurl.com/brzkt2s

    [NoteToEd: Ordinarily, one just doesn’t have the time to retrospectively append a relevant piece encountered long after the initial discussion to TheArchive… but this one was simply too good not to share – for the sake of anyone Ponderin’ a Pueblo ‘o their own. In 2009, I had the unexpected good fortune/pleasure to ‘Crash&Hang’ at a Tucson hydrologists’ conference… But, of course, we can’t all depend on SweetSerendipity to inform our choices. Hence the value of Archives/Scholarship.]

  15. “You Monster!”… You IncorrigiblyLaciviousLecher, you!”, cried HostageComment as she vainly struggled to thwart RoboRedaktor’s impertinent caresses…

    For his part, RoboRedaktor – momentarily relishing an atypically jocular diversion from his customary pursuits – could not help but wonder as to what, exactly, had encouraged HostageComment’s BoldForay into his – ahem – hitherto PrivateLibrary…

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