“Called a guy today about a house he has for rent. Turns out he’s only renting the upper half (for more than what the market will pay, I think, considering I’ve seen it advertised for awhile). Since we really don’t want to rent half a house and live in fear about who lives in the basement (and share laundry), we asked why he doesn’t just rent the whole house. He said he can’t, it wouldn’t cover his mortgage – he’ll get more to rent it out as two suites. These new landlords are hilarious, thinking that rent will cover their mortgage!
By running the numbers, it looks to me like he put $400k down (he told us how much his mortgage payment is). I also think it’s a failed flip – I’ve been watching it awhile and when I googled the address two weeks ago, it was for sale and there was an open house that weekend, though another google search tells me the Vancouver sun featured it in their real estate section as being bought in December 2012. This guy must be panicking….
I think our time has come, bears! Anyway, it’s a nice house, maybe we’ll be able to buy it for $400k one day (lol).”
– pricedoutfornow at VCI 26th May 2013 12:50pm
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- The Gentrification of the Mind
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Rent not covering the mortgage…never mind cost of capital, taxes, maintenance etc. Screwed.
Of course, he’d get more money if he rents it out as two suites.
But he’d also get twice the headaches.
i was talking with a guy who told me he just invested $10 000 in a financial product. he said its the riskiest thing hes ever done with him money. he recently bought a house in north van for 1 million. he asked me what i thought of his risky investent of 10k. i said……the riskiest investment that you have mad was buying your house in north van. for 1 million dollars 8 months ago. he looked at me like i was crazy. people really have no clue.
Demonstration of the denial of the death of the “single family dwelling”.
pffft! … http://tinyurl.com/q5v8yts
I confess I am just not getting the whole Accordian thing, sorry….
BTW, I would never rent “half-a-house”…..might end up with the Ford Brothers selling hash outta the basement suite. Not good….
I confess I don’t understand this anecdote. None of it really makes any sense to me and I am not in the mood to try and parse the guys writing style or logic.
http://vancouver.en.craigslist.ca/van/roo/3807868132.html
I dont even know….
That appears to be a jail cell….
Wow I wonder where the toilet is?
http://www.vancitybuzz.com/2013/05/vancouver-rentals-a-bed-in-the-bathroom-why-not/
CL post is gone but lives on here.
We’re all aware of the mortgage-vs-rent ratio’s in Canada being so famously high (eg http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home). Yet, in Van at least, I keep seeing rents that are clearly trying to cover a big chunk of their mortgage. Trying to cover your mortgage on a huge house with an illegal basement suite seems to be the Vancouver way.
Housing booming – rents go up. Housing crashes – rents go up (like in the US after 2008). Renters get screwed no matter what.
I doubt the US renter who didn’t buy in 2006 and bought in 2011 would agree he got “screwed”.
I’m talking about renting, not buying.
I was renting in the US at the time. Rents were already very high – higher than most mortgages of my friends and colleagues (and I had a below average rent). When the housing crash came, rents shot up dramatically. This was from an increase in the number of renters due to people who had been foreclosed on now renting or people who normally would have bought waiting for the bottom before buying.
The housing market is picking up where I was, rents have not gone back down. The people I know that rent say they’re still climbing.
So, like I said, housing booms – rents go up. Housing crashes – rents go up.
Yes, it’s worth consideration when calculating investment returns.
“Trying to cover your mortgage on a huge house with an illegal basement suite seems to be the Vancouver way.”
Why I tell people from Seattle or Portland what it’s like in the city just to the north of them, they just shake their heads.
W Tucker,
If you just use Craigslist, you won’t go very far.
The best deals are gone the minute they’re posted.
Gotta be more creative than that.
Example: truly beautiful $850k assessed home for rent for $1,200. Stayed up on CL for days. Reduced to $800 and disappeared within minutes. Comox Valley of course, not Vancouver.
That doesn’t sound like an 850K house to me. If all it can command is $850/month rent, only in bizarro world is it worth 850K.
AleX,
This is what happens in a market build on speculation rather than on fundamentals.
Everything goes.
I rent a house in Richmond, assessed at 1.2 mill for 1.5 k a month.
Gotta do your homework.
That’s a pretty damn good deal by Lower Mainland standards. Well done.
UBC,
Well it helps that we are a professional family with good references.
Also, I’m doing all the yardwork.
We just renewed for another year. The landlord actually offered us a four year lease for $ 1,550 a month, but we opted for a year only, because we believe the RE market will have softened substantially by spring next year. And then we probably will buy again.
Don’t get too excited bears. Friends just sold their place in Kits. 70 viewings in a single weekend with something like 12 offers, several without conditions and they sold for $1.2m and $25k OVER ask.
Buyer had no financing condition – Gen Y with help from parents. Maybe….Rennie…..is…..right. Gulp.
Receding,
More details please.
Address, MLS listing, parental contribution, etc.
Once you supply us with the details, we can get our fact checker on the case.
I just did a quick check of Realty Link for Kits. It looks like $1.2M is still entry level for a Kits SFH. So your friends’ house might qualify as ‘the cheapest house on a good street/in a good neighbourhood’, which is supposedly an astute purchase. And $25K over is only 2% over asking, which suggests that if there were 12 offers, most were at asking, or even under asking. Half-decent houses in desirable locations, or well-priced houses (relative to the current market) in desirable locations, will still sell. Houses are still selling in Grandview-Woodlands, parts of which are like Kits East these days. Back in the worst of the bidding wars days, say 2006, this same house might have sold for $100K or $150K over asking. Assuming the bubble is going to deflate, it won’t deflate uniformly in all areas, nor will it deflate uniformly over time.
OR “Receding Gains” is lying. Plain and simple
Maybe it’s old-fashioned, but the little voice in the back of my head says that, whether financed through banks, parents, or self, the return on capital is the same. At some point a little kid is going to raise her hand and ask the simple question nobody really thought to ask.
Nice — BTW what was the assessed, 1.5M?
I don’t want to share the details because these are friends and I want to respect their privacy. But this all happened in May. They live in heart of Kits. Their place was a semi-detached house with small garden area – and very very nice (the owners are successful professionals and decorate however they want etc. – the place shows well). Happily they’re the sort of people who buy because they like the place and are not speculators gambling or leveraging their way up.
There seems to be a little momentum in this market and buyers are returning. But if it were going to happen then this is the month for it. My gut feeling is that the market will fall off a cliff in October….but I’ve been saying that for a while.
The weird thing I observe is that there are similar places all over Cambie corridor area starting at $1.1m and Cambie is crap compared to Kits (I’m not referring to the higher density zoning spots on Cambie, I’m talking about places off Cambie outside the rezoning areas). Cambie Street itself is like a (gridlocked) highway despite the Canada Line opening, and the area simply doesn’t feel relaxing (if that makes any sense). Kits is waaaaaay nicer yet the two areas are priced at about the same level. It seems that Cambie was simply a flavour-of-the-year in 2011 for speculators and prices haven’t returned to earth yet. Cambie will collapse before most areas….probably sooner than everyone expects.
Please speak for yourself, I personally find the exact opposite of Cambie vs Kits and much prefer Cambie….
My friend bought a place March 2012, 1 block east of the Cambie Corridor. He paid $1.5 mil for an 80 yo 2,000 sqft bungalow that needed $150k in renovations to get it barely livable. A couple of months back there were exact replicas, move-in-ready, of his house a couple blocks away selling for $1.2 mil. That would be a decrease of about 25%. When I brought this up with him, he chuffed, “But look at MLS, there is only one house on the Cambie Corridor for under $1.5 mil.” I checked, he is right, seems that all the supply was bought in the frenzy. Frightening.
Any deflation of the bubble is likely to be an erratic affair: down, up, sideways, down again, but with an overall trajectory of down. Vancouver’s previous two bubbles took five years to deflate. The price escalation of the previous decade has been so massive, that you’d think there would have to be one or more periods of precipitous drops, but even that scenario doesn’t rule out bounces, brief periods of momentum, etc.
The thing that really leaps out at me here, however, is $1.2M for a half duplex! I’d assumed an entry-level SFH. Okay, it’s nice. It had better be for that price. And it’s in one of Vancouver’s most in-demand residential neighbourhoods. But does Vancouver’s economy, or do the incomes of enough Vancouverites, support $1.2M duplexes into perpetuity? I suspect they don’t.
The economy doesn’t support it, but the money from elsewhere does. As long as this is the best place on earth, the money will keep coming here and prices will remain unaffordable. This run has lasted about 13 years already.