“We went to look at a townhouse to rent in East Van. I asked the landlord if she planned on selling. She eagerly asked “Why, do you want to buy it?” I guess it’s been for sale for awhile. I think this woman has multiple properties.”

“We went to look at a townhouse to rent in East Van. The woman told us the address, we googled it and found out it’s on MLS listed for sale. I hate living in places like that, you’re always wondering if you’ll be out the next month. Anyway, I went to check it out anyway (with no intention of really renting it), and asked her if she planned on selling. She eagerly asked “Why, do you want to buy it?” I guess it’s been for sale for awhile. I think this woman has multiple properties (somewhat recent immigrant, maybe within 10 years), I googled her number and came up with many different properties for rent. At the end of the meeting, I wished her good luck, she told me to call her if I changed my mind about buying the unit. I could smell her desperation.”
pricedoutfornow at VCI 27 Jun 2012 3:08pm

For the last 10 years in Vancouver, buying as many properties as you possibly could has been a recipe for success. When prices fall, owning multiple properties will be a recipe for personal financial disaster.
Momentum investors hate owning assets in a market that is falling.
When they buy, many set mental ‘stops’; price levels at which they’d want to bail out of their positions, such that they can minimize their losses.
There are many multiple property owners that will bring their properties to market in a falling price environment. Some don’t even know they’ll be doing this yet, but when faced with the unanticipated reality of leverage working the wrong way, they will act.
– vreaa

14 responses to ““We went to look at a townhouse to rent in East Van. I asked the landlord if she planned on selling. She eagerly asked “Why, do you want to buy it?” I guess it’s been for sale for awhile. I think this woman has multiple properties.”

  1. Lower Mainland resident here.

    Beside my kickass lowrise rental apartment (clean/bright/airy/quiet/spacious/nice neighbors/parking/10 min from work/$815 per month split by two people) someone plans to build a momumental phallus of a condo tower. (It actually glistens in the marketing material, and the tip is white.)

    If built, this tower will be >30 stories tall. For comparison, we can’t find a >22 storey building in the whole area. It will be an enormous, vertical-shafted, concrete filing cabinet, surrounded by 3-story lowrises from the 70’s. ~300 suites plus some townhouses have been presold for members of the unwashed public to destroy their financial futures with.

    The process began with the developer buying up the single-family houses next door to me and leaving them empty for a year to serve the local residents as crackhouses. From my balcony I watched the Bath Salts set have backyard exhibition matches, interact with local law enforcement professionals, park their legally-purchased quads, and of course go to work and pay their taxes for more than a year before the developer finally tore the houses down.

    Next came another year of overlooking a garbage dump. When I got bored of the view, someone would show up and heave more garbage over the fence — this included the developer’s contractors, who heaved the debris from the old signs into the lot for my viewing pleasure.

    Nature prevailed, however, and after two years of waiting my view has actually reverted to what could be compared to a meadow with scatterd trees and flowers — if you squint a bit. So no harm no foul.

    My question is whether the aforementioned >30-storey monument to manhood is ever going to get erected, so to speak.

    Here’s what I know so far:

    -all units are supposedly pre-sold, except the “penthouses and sub-penthouses”

    -supposedly the developer is applying to the city for increased density so that these “penthouses” can be converted to regular units (presumably because they didn’t sell)

    -completion is xxx, 2015, and they are “on track”

    Here are my assumptions:

    -Napkin math says that revenue from on all Units combined would be North of $100 million. The bulk of this will presumably come from mortgages.

    -Whomever is financing the developer must be aware that a large number of suckers (aka presale signatories) will no longer able to make good on their purchases when it’s time to actually put out

    Here are my questions:

    -How long does it take to build a 3x-story building? When is the developer going to convert my garbage-dump-cum-meadow into a mud field, then into a deep hole, then come and fill this hole with his big vertical tower?

    -Will the latest “new mortgage math” cause the developer themselves, or their financiers, to question the likelihood that the presales will actually be fulfilled in the back of the limo after the prom? Or will they go ahead and pay for dinner without ever expecting anything in return?

    -Will somebody somewhere suggest that the current buyers need to requalify, given that over the next 3 years their ability to qualify is not likely going to get any better (and will probably get much worse) than it is today?

    -if not, and I strongly suspect not, what is the likelihood that they will get the hole dug or the building half-built before they stop work?

    -and finally, who finances the big developers anyway? Are they self-financed, privately financed, bank financed, or does the CMHC just park limos full of cash and hookers in front of the principals’ places every second Tuesday? I think that the source of the money would be an important determinant of their understanding of the risk inherent in Canada’s stunning, stunning housing market.

    Insight would be appreciated.

    Crossposted to VCI and VREAA.

    • Apologies, Burnabonian; this comment was stuck in mod for most of today.
      Not sure why but the comment filters do that sometimes.
      Thanks for the post and the questions.

  2. I met few multiple property owners that are reluctant to sell their investment properties (not primary residence) because of the capital gain tax…What are the rules for that?

    • If you paid 500k and sold for 800k, u are taxed on the 300k. So basically you owe the tax man half of that.

      • Um, CGs are taxed at 50%. At worst you owe 25%, at best it’s probably 20%. They can always wait for lower prices to ease the tax burden.

  3. Huh…if you paid 500k and sold for 800k you will be taxed on 50% of the gain (300k) at your marginal tax rate. No tax if you lose money on an investment property, in fact you will be able to offset other capital gains.

  4. Move in to the investment property for a while, then it will become your primary residency.
    Problem solved.

  5. Chris – Not really. When you declare the propery as principal residence, you can choose to pay the capital gains at the time of the switch or you can pay the gains when you sell the property. CRA deems the property sold every time you change its use:

    http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/chngs/menu-eng.html

  6. Am I missing something here…isnt it most of the people commenting in this blog site are pro-renters and a lot of the news and comments are saying renting is better now than buying? So isnt what this (greedy) lady doing the right thing?

    • 4SlicesofCheese

      You mean bait and switching? No she is not doing the right thing.

    • She is trying to sell the same place she is trying to rent. Her tenants will get screwed if they move in – showings and possible sale followed by a move to another rental.

  7. Why is this guy bothering to look at a rental he knows he has no interest in renting and knows he would hate to live in? To savor the “smell of desperation”? Sounds like some sort of a neurosis to me.

    • Curiosity; Education. Yes, Neurosis, possibly.
      A speculative mania causes regular people to behave in unusual ways.
      This blog is another example of exactly that.

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