Tag Archives: Ownership

“Her best financial move would be to move away from Vancouver.”

EastCoastWestCoast in the comments section at the G&M 10 Dec 2010 9:04pm, regarding financial advice to a prospective Vancouver buyer – “For starters, I suggest that her best financial move would be to move away from Vancouver. I lived there 14 years, owned a home and liken the experience to owning a boat – it’s an absolute money pit except with the addition of pig-headed governments who pick at whatever you have left. If she’s smart and ambitions then she’ll land on her feet just fine – land a resonable mortgage and grad opportunties, too – anywhere outside the Lower Mainland.”

Debtors Will Be The New Social Pariahs – “Anytime I see somebody who mentions they “just bought a house,” I’m automatically hesitant to contact them.”

Jayco49 at VREAA 10 December 2010 at 10:40 am“I’m involved in online dating. I don’t want to get involved with a women who is over leveraged because of some shoebox she purchased in the last couple of years. I’m looking for renters!! I don’t want to take on their financial mess when this whole thing heads in the other direction.”

ChrisG at VREAA 10 December 2010 at 12:23 pm“I’ve been on that same dating website and seen countless profiles where women say, “I own a house,” implying they are financially responsible (without giving any regard, it seems, to price paid). I think it’s a great anecdotal indicator of the irrational times we’re in.
I totally get Jayco49′s comment as well. Anytime I see somebody with “real estate” as a profession or who mentions they “just bought a house,” I’m automatically hesitant to contact them.”

Social Effects Of The Bubble – “I happened to go onto the dating site, Plenty of Fish, and saw a profile of a beautiful lady in which she stated very clearly that you must OWN not RENT to be someone she wants to date.”

LookingforaGoodName at vancouvercondo.info December 5th, 2010 at 11:04 pm“I happened to go onto the dating site, Plenty of Fish, and saw a profile of a beautiful lady in which she stated very clearly that you must OWN not RENT to be someone she wants to date. I couldn’t believe it. I looked for a place on the site to open a discussion on the issue, but I didn’t find any.”

[Probably Fabricated Market Timer Emotional Capitulation Anecdote] – “I sold my westside home for around $950K in 2004. Now I can’t afford to buy back. You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”

Yes, the markets can be a bitch. Yes, it is demoralizing to get the general picture right yet get the timing wrong. And, yes, to be down a lot on paper can be excruciating, moreso when you’re playing with your own accommodation and are vilified by your family and community for doing so.

Markets can go from ditzy to completely-bigtime-insane before they sober up.
This poster [** see postscript] was correct, the Vancouver market was already overvalued in 2004. It hit the insanity jets in 2006 and then the free-money magic-blow-off after-burners in 2009. It was going to roll over and die in 2008 but star-dust bailed it out. This poster was mentally short in a mother of a virtual-short squeeze. We say ‘mentally’ and ‘virtual’ because he wasn’t really short, but he felt like he was short.
This poster’s current mind-frame represents a form of mental capitulation, but it doesn’t show real capitulation. Real capitulation would involve action, it would involve this poster buying back into the market for $1M+; a far lesser house for far more money. Thus a bear would become the last of the bulls. Students of the markets all know what happens when the last bear who is going to capitulate does so.
We still estimate that it is highly probable that individuals in this poster’s situation will have the opportunity, in future, to buy back the 2004-$940K westside property, now selling at far more than $1.5M, for 2004 prices or less. We also suspect that many prior market participants will be so gun-shy that they will not step up to the plate, and that, once falling, prices will fall well below 2004 levels. Yes, this may seem crazy to many at this point. Insanity is a common ingredient in Vancouver RE market moves. -vreaa

‘Chinese renter’ at vancouvercondo.info December 1st, 2010 at 5:41 pm“I am Chinese Canadian, not recent immigrant, previous home owner, presently renting. Sold my westside home for around $950K in 2004 after it’s price had recovered from a drop in value in the late 90′s. I haven’t brought since. That same house is now worth minimum 1.5 million. Sure renting is not costing me as much than to buy right now but I loss an asset that is now worth 1.5 million by not re-buying back in 2004,2005 or even 2006.
I was influenced by bloggers like VHB and Garth [Turner] not to buy, thinking it was a bubble. I have lost all confidence Vancouver real estate is a bubble. Not on the westside where the Asians like to buy and the builders and flippers buy so they can resell to the Asians. My invested equity from sold house can no way keep up with price appreciation of Vancouver real estate, not with fixed income interest rates this low. Now just to buy back what I had I can’t afford. I can buy above 1 mil but not 1.5 and above.
The place I am renting now was just brought earlier this year as an investment by a Chinese family for 1.6 million. Sure my rent they receive doesn’t justify the cost per month to own on a monthly bases but it has appreciated $100K already. The landlord can easily sell and there will be a bidding war. Check out the dump V858532, 5069 Ash St, ask was 1.49 million. Sold in 7 day over asking 1.528 million. Why does the sold price have numbers 28 in it. One guess, you are right, Chinese buyers. it was open house Saturday Nov 18, multiple offers Monday, sold Wednesday Nov 22. The house is practically a tear down and that part of Ash St is awful, narrow and full of parked cars.
You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. Seriously they don’t mention to friends and relatives I am renting. Asians, Chinese have to buy, it is low class to rent.
To rent a nicer home on the westside may cost less than buying but eviction is real. Happened three times already to us, not because we are bad renters, we are great renters. But twice after one year lease, landlords claim place back for own use. Not fun having to look for new place and moving after only one year, just settled in. Not fun especially with young children and changing of schools. So I do eventually want to buy for stability, we want to live in a house, not a build for rent condo. At the rate of Vancouver price appreciation I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”

**postscript – We are fully aware that this poster may be a fabrication by a bull poster, an emotional sketch making a case against being bearish. The handle, the pat phrases, blaming the bear bloggers, etc.
Regardless, there are likely some individuals in this situation (although very few trade out of primary residences during a bubble expecting to buy back in cheaper later). And the numbers are in the right ballpark. So, we dealt with the anecdote as though it came from an actual individual. ‘Chinese renter’, if you’re reading this and you are an actual individual, apologies for the voiced whiff of doubt. Drop us an e-mail. And keep us informed of your future circumstances. -vreaa

“I met a friend’s friend who is a new immigrant. He bought two old houses, each at $700K – $800K, in Burnaby recently, and is going to tear them down, and build new. He asked me if I can help him to find one more.”

Thompson at RE Talks 28 Nov 2010 5:05pm“A few days ago I met a friend’s friend who is a new immigrant. He bought two old houses, each at $700K – $800K, in Burnaby recently, and going to tear them down, and build new. One will be a home for his family, and one is the vacation house for his friends (still in China). And he ask me if I can help him to find one more in Coquitlam West as his “holding property”. So, I gave him a realtor’s name who I know well. On the way home, I can’t help but wondering: “Oh Lord, is it the beginning for Burnaby and Coquitlam NOW? ”

CBC CPP Discussion – Panelist: “By the time somebody retires, they should have no debt”; Moderator: “But how realistic is that?”

From today’s panel discussion on CBC Radio’s The Current, regarding Canadian Pension Plan reform [23 Nov 2010] –
Panelist: “By the time somebody retires, they should have no debt”.
Moderator: “But how realistic is that?”

Terry Chen, Actor and RE Speculator – “I have flipped about three properties in the last ten years. I have another large loft space in downtown Vancouver. The goal for me now is to sit on the property I have for as long as I can and not sell.”

Terry Chen is a 35 year old actor with an impressive acting resume, not least of all for having a role in Cameron Crowe’s wonderful ‘Almost Famous’. Less impressive, he bases his future investment strategies on (1) having made money ‘flipping’ in a RE bull-come-bubble market, & (2) avoiding the stock-market after getting burned playing tips from friends. He also has a sense that renting means ‘impermanence’ and that owning means ‘not paying someone else’s mortgage’. Don’t quit your day job, Terry! – vreaa
[hat-tip to Ben at financialinsights.com]

Anecdote extracted from an interview at moneyville.ca [15 Nov 2010], by Emily Mathieu. –

“I moved around quite a bit when I was a kid growing up. My dad was a travelling salesman, I guess is the easiest way to put it. By the time I finished high school in Calgary I had attended about six or seven different schools from grade school all the way up. My father came to this country about 40 years ago with $100 in his pocket and was able to take care of his family and buy a few different properties while we moved. There was always a sense of impermanency. It never seemed like there was a base in terms of a home . . . which I guess later affected my need or my desire to buy property early on.

My first large purchase was a car when I was 19. I was able to afford that through an insurance claim because of a car accident, which was no fault of my own. But then I started working in nightclubs in Alberta when I was 17. I lied about my age to get my first bartending job. During that experience I met somebody who told me, very early on, when I was 18 or 19, not to pay anybody else’s mortgage.

That was the best financial advice I ever received. For some reason that advice stuck with me. The benefit in renting is you have flexibility, but in the long run if you are going to be paying rent you may as well be paying your own mortgage. I was fortunate enough to make some big chunks of money early-on, in my 20s. I bought my first property in Vancouver at the age of 25. It was a smart move and I definitely don’t take any credit for it. But thanks to advice of some good friends I was fortunate to get into the market at an early age.

I have purchased and flipped about three properties in about the last ten years. At this point I have another large loft space in downtown Vancouver. I think the idea or goal for me now is to sit on the property I have for as long as I can and not sell.

I have learned about the stockmarket the hard way. There have been certain times where I got a lead from a friend or source and tried to investigate it. Obviously the stock market, like real estate, is a gamble. I have lost tens of thousands in the stock market . . . I am less and less inclined to throw my money at (the market) these days.

Regarding retirement, I am relying on a lot of my property investments to help me out in the future as well. I would rather live in the moment and the present as much as I can and worry about those things as they come down the line later.”

“I am thick-skinned enough to deal with the social pariah status of being a mere renter. A lot of people here believe that responsible adulthood includes home ownership, so if you don’t own, you somehow don’t make the cut.”

A discussion regarding buying versus renting at vancouvercondo.info this week included interesting anecdotes and opinion, and we have archived many comments below. The stigma attached to renting persists. It’ll only change after prices plummet and enough people have been burnt to make renting look respectable and even wise again. See the ‘Renters’ sidebar for past discussion and links. -vreaa

Anonymous November 11th, 2010 at 11:25 am
“I started looking in 2007 and in the area I want to buy, prices haven’t moved much at all (not Vancouver or Richmond). Since 2007 I’ve saved over $150k. As long as price growth doesn’t outpace my rate of savings I’m doing well. If I had bought in 2007 it would have been with 5% down, as I was fresh out of school, so imo I’m better off having waited. I’m going to buy something soon, were just waiting for the exact house we want to hit the market; probably by spring. It’s tempting however to keep renting because if keep my current pace of savings, I’d have about $800K cash in 10 years, and there is no way I’d have $800k in equity after 10 years if I buy. My wife however, sees more value in family memories than a fat bank account and I agree.” and later adds “My situation probably isn’t very common. Yes we live cheap. I drive a $2,500 car; we don’t travel or eat out. We save about $4k per month on average, less currently but more when my wife is at work, so at 3% that works out to about $800K in 10yrs. We rent a home that our family owns so this helps a lot because our rent is very low, enough to cover taxes/services and maintenance. My mother in law lives 2 blocks away so she looks after the kids while we are at work, which is a huge savings.” [Arguably favourable situation, but ‘renting a home that my family owns’ makes this a non-representative example. -ed.]

Ted November 11th, 2010 at 11:33 am
“Here is my story: Bought in Calgary in early 2005, sold for an almost 100% gain 18 months later. Moved to Vancouver and held on to our now large down payment and rented. Passed up 1000 square foot units for around 500K which now go for about 650K.
Gave up and bought in early 2009 and now contracted to sell 100K higher (-35K of renos – low net but free accommodation at least!)
I don’t think I should buy right now but don’t have the conviction all of the bears seem to have. Who knew the interest rates would drop to nothing? Who knew amortizations would be extended? Who knew qualifying would become so easy? Who knew Canadians would lever themselves up to the levels they have? Could something else come out of left field to keep this game going? TD’s new mortgages? Maybe… There is no way investment real estate makes any sense right now but if you’re looking at a primary residence I’m not so sure.”

patriotz November 11th, 2010 at 1:29 pm
“I do not aspire to own in Vancouver again as I have no plans to live in the city long term. Elsewhere in BC perhaps, and as we know the bust is already well under way outside the Lower Mainland. If I did want to buy I would wait for price/rent of about 150x, that would be the figure for a house with suite income, a house without a suite would be higher as the potential suite income would have to be factored into the price. Any higher than that and you are throwing away money. I’ve found that having my name on a deed does not make life more enjoyable. I also think that Canada’s support for retirees will be stressed in the future and I think throwing away money at a stage in your life where you don’t have a great deal of time to earn it back is not very smart. I’d rather keep my money in the stocks and bonds where I can get a reliable 6% yield. As far as condos go, they have so many downsides that I can’t understand why anyone would pay more than 100x rent. If you rent one you do have the risk of having to move but so what – they’re all the same anyway.”

Lilypad November 11th, 2010 at 1:31 pm
“Prices would have to fall at least 50-70% for me to buy a house or condo in Vancouver. It is just too easy to rent a luxury condo for half the price of a mortgage, strata fees, taxes and other maintenance costs, even at these low mortgage rates. Plus I don’t need to deal with the costs and anticipation of building leaks, irritating strata councils and disrespectful neighbours. If I have any problems I just pick up and move. To me this lifestyle represents FREEDOM. I can always move with my nest egg to a nice place that is 1/7th the price of Vancouver if I ever feel the need to own a house and take on the headaches and added expenses associated with it.”

Absinthe November 11th, 2010 at 1:47 pm
“I’ve had, since 2005, a bigger place at a lower price in a better location than I could have had buying, with money left over for RRSP and RESP. I am more diversified than I would be if I owned my primary residence. I have more room, which with two small kids, is no small thing. I have a yard, which with two small kids, is no small thing. And, I don’t have to lose a second of sleep worrying I don’t have enough set aside for the roof, or the furnace, or whatever else might go. Seriously: I became a bear because owning would require an unholy amount of “lifestyle” and location sacrifice for the excitement of property taxes and strata meetings (because I wouldn’t have been able to afford a SFH) and there was simply no way it was worth it. I live in a bigger house a lot closer to work than those of my group that own.
If housing rises forever, then they’ll be house rich and I’ll have investments and be more liquid and live closer to work and deal with less stress. I will buy, if and when the lifestyle sacrifice required isn’t so heinous as to make my every day a sweet hell of 3 hour commutes (and the car/gas payments that go with), or conversely, 4 people in 750 square feet with no room for projects, etc.”

metalhead November 11th, 2010 at 1:48 pm
“I have a paid for house in Abbotsford and I’m 50 years old with a decent bit of cash put away. I’m looking at rec. property in the Okanagan area. Some specific deals are getting close for me. In general though I think the area has a ways to drop and it’s really just starting. We’ll see how it looks in Feb. or March? I should be able to buy something outright or maybe tap a small amount of HELOC to take care of the balance. I won’t need a mortgage.”

Renting November 11th, 2010 at 1:57 pm
“At what price point would I actually buy? When it is cheaper than renting when all costs are factored in. I think we need about a 50% reduction to make buying cheaper than renting if interest rates stay low. Is 60% to 70% realistic? Yes, you are caught in a bubble which clouds your vision. Look at the examples posted in this thread for Prime NYC at 80% off and Kelowna water front at 50% off. This is just the start of the decline in both places. A million dollar home in Vancouver is a piece of shit. At 60% to 70% off it will still be a POS and will still be priced higher than buying a POS anywhere else in the world. It would have to drop 85% to be priced at levels we see in Phoenix for example. So yes 60% to 70% is not just realistic but probable. 300k to 400K for a POS house in the less desirable part of Vancouver would still be expensive IMO but that is 60% to 70% off!”

cgh November 11th, 2010 at 1:01 pm
“My rent is $820 per month and I’ll gross around $120,000 this year (hard to say exactly yet, as I’m a contractor). If my girlfriend and I end up moving in together, I’ll save even more.
I have other friends in the same position. Unlike them though, I am not even thinking of buying anytime soon – why bother? The value just isn’t there, and I am thick-skinned enough to deal with the social pariah status of being a mere renter.”

paul November 11th, 2010 at 3:20 pm
“I’ve never experienced any negativity about renting yet I read about it all the time on forums like this. I think this is an Internet thing as in real life it would be very surprising to have someone criticise you to your face for choosing not to buy a house. I mean, your living arrangements are hardly likely to come up in conversation with someone you hardly know and why would the people you do know care whether or not you own your own home?”

cgh November 11th, 2010 at 3:53 pm
“Actually, I find living arrangements come up [in conversation] all the time. At dinners with friends, some of whom are acquaintances (particularly their spouses), talk often turns to real estate, what’s going on with whose house, etc., and when I eventually reveal I’m renting, it’s assumed by some (not all) that there’s “something wrong” in my life. Those were the words used by a very good friend’s spouse not long ago, in fact. She has basically classified me as someone who “needs to get their life together”.
I bought a vehicle over the summer, and the financial person at the dealership took my cheque (I paid cash) and said, “Bet that’s the biggest cheque you’ve written in a while – well, except for the down-payment on your house!” I said I’d never made a down-payment before, and it went from there.
Maybe it’s just our social circles, I don’t know. I think that once you’re 35+, a lot of people here believe that responsible adulthood includes home ownership, so if you don’t own, you somehow don’t make the cut.”

rp1 November 11th, 2010 at 5:57 pm
[Regarding whether one experiences “negativity about renting”.] “Try being 30 with a young family. If you haven’t got a million in cash or a million in debt (either way, as that’s what gets you a SFH) then you’re the worst parent ever.”

Anonymous November 11th, 2010 at 6:35 pm
“My wife mentioned to another mom at our kid’s preschool that we rent a house nearby and the other mother responded like my wife had cancer, with a tone of pity.”

McLovin November 11th, 2010 at 6:47 pm
“It feels different out there. I am meeting a lot of people who think the market is overpriced. Recently I met a person who sold his house made a huge amount and said “I won the lottery.. I am taking my money and renting maybe for the rest of my life.” This was refreshing to hear. I know the sales and prices don’t really back this up but it appears to me that the winds are changing.”

jesse November 11th, 2010 at 8:28 pm
“Overpaying will, in net, leave someone with less capital in the future. For whatever reason some people’s personal situations warrant them being willing to pay a premium for certain products at certain times. From a strict value investment point of view investing in property any time in the past decade — even at a small discount vis a vis the market trough in 2008-09 — was not a wise move. But in many specific situations it’s not always about maximizing future capital.”

Renting November 11th, 2010 at 9:34 pm
“Although I have seen people offer good intentioned advice to renters I have never seen someone get any type of pity or disrespect. If someone was to show my wife that disrespect I would simply give her some advice on how to reply. For example: Oh do you own? When did you buy? Oh geese right at the peak of the bubble. You must be worried? No. Well then your husband must have a really good high paying job. Oh that is all he does, so sorry to hear that. We will keep our fingers crossed for you that things work out. I mean I am sure what happened in the US will not happen here with the price collapse. And if interest rates do go up as everyone predicts you can get always get a second job on weekends. I can watch the kids for you. I don’t have to work.”

NO – LYMPICS November 12th, 2010 at 10:53 am
“A friend of mine lives near the 41st and Oak. For about 16 years he rented a nice 50 year old rancher from a Chinese landlord. The Landlord has now given him notice…wants to sell for approx. $1 million but no takers. Was paying about $1400 month.”

A Housing Crash Rescue Cannot Be Legislated

There is talk of possible government interventions aimed at preventing the housing market bubble from imploding.

“…if another rebound occurs, it will likely be triggered by Ottawa. The Harper government has repeatedly intervened to micro-manage the $2.8-trillion housing market.”  …. “Ottawa may loosen mortgage restrictions once again if the housing market craters.” – ‘Avoiding the crash’, macleans.ca, 4 Sept 2010

The recently much publicized Canadian Centre for Policy Alternatives report ‘Canada’s Housing Bubble: An Accident Waiting To Happen’ [David Macdonald, Aug 2010], acknowledged the existence of the bubble, but then called for attempts to orchestrate an ‘orderly’ unwinding, concluding:

“Government policy makers, the Bank of Canada, as well as rate setters at the big banks need to work together to steer the Canadian market towards a soft landing. The alternative is not acceptable.” – CCPA report

At the very most any policy intervention would only forestall the inevitable crash. To cause an ‘orderly unwinding’ of a bubble you require an orderly and never-ending supply of buyers willing to take on large amounts of (albeit cheap) debt to buy assets that are falling in value and still grossly overpriced. That isn’t going to happen.

Where would those buyers come from? The vast majority of Canadians anywhere near qualified to buy have already been sucked into the vortex that is this market, and a large minority own far more RE than is good for them in the form of more than one property, or by being financially overextended by their principle residence. Mortgage rates are already very low, and when they recently dropped even lower, no new wave of buyers stepped up to take advantage of them. The ranks of the responsible buyers have been exhausted.

Whatever bizarre huckster-saleman plan a government comes up with (free money; first time buyer grants; 0/40 mortgages; free closing costs; 1 year of mortgage payments ?) would essentially entail dragging individuals into the market who shouldn’t be there in the first place.

“Home ownership rates in Canada are about as high as they can possibly go. In fact the only way to drive them higher would be to further increase the rate of sub-prime lending to allow completely unqualified buyers into the market.” – Daniel Gibbons, commenter at Macleans.ca 5 Sept.2010

Policy change to prop up the market via new buyers would simply delay and magnify the bust, not resolve it. The pool of people facing certain future financial hardships would grow even larger. If a government attempted to engineer this, clear-headed citizens would (1) object to it happening and (2) make sure that any politicians responsible for such foolishness were held accountable for their actions. The vast majority of literate and politically involved citizens are real-estate owners, and there is therefore an inherent conflict in them being able to step up and speak truth about the bubble. Almost everybody with any influence has been co-opted by the bubble.  Therefore, unfortunately, we don’t expect to hear any loud public voices objecting to attempts to rescue the unrescuable. -vreaa

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 8: Renovation Nervosa Finale

Brace yourself. On first reading Froogle’s latest episode, I found myself on more than one occasion spontaneously exclaiming out loud, or grimacing & ducking, or writhing in vicariously experienced psychic pain.
Boy, these guys went through a lot.

First thought: The vast majority of people that I know, myself included, are completely incapable of doing what Froogle and his wife did here. Their industry is remarkable, to do so much themselves, to be so thoroughly involved in the whole process.
Most mortal Vancouverites: “I notice a photo is hanging skew, I rise from the sofa and straighten it.”
Froogle Scott: “I rent a large rotary hammer drill to drill one-inch diameter holes fourteen inches deep in the concrete foundation walls.”
The result, of course, is that Froogle has ended up with a house where his sweat is quite literally part of the foundations, and that in itself is a unique reward.

Second thought: Froogle’s story is of a very, very diligent, meticulous, and industrious couple riding shotgun on the renovation of their house. One is amazed by the number of serious deficiencies they discovered in doing so. It leads us to consider how many homes in Vancouver have substandard, shoddy, or even dangerous construction because they were built for clients who were not watching as closely. Is such construction the norm rather than the exception?

Third thought:  By their estimation, Froogle and his wife got their renos done at fair prices, in ‘Vancouver terms’. Yet the numbers are still eye-popping. The story makes one consider how the construction industry in this city has become a hyper-efficient machine for extracting money from the banks of homeowners. This process has worked superbly up until now because homeowners always ‘knew’ that the projected future value of their house merited the renovation expenses. And there was also the additional perception of this all being somehow prudent, of it representing an ‘investment’ in one’s house (and by extension, in oneself). What could be more sensible? Use the house’s increasing value as a tool to improve itself! It seems so symmetrical, so right. This all made spending on renos that much easier.
Froogle (e08): “I’m secretly horrified. I can’t believe the size of the cheques we’re writing against our home equity line of credit. I’ve never seen or written cheques this large, with this frequency, in my life.”
Contractor (e07): “That’s what things cost now. The cost of everything is through the roof. Skilled trades are through the roof. But look at what you’re sitting on. You’re sitting on a property that’s probably going to be a million dollars in a few years.”
As a result, Billions of borrowed dollars have been injected into our local economy over the last ten years. It looked fine from the outside while the process continued. Now the money has been spent, but the debt remains.

Regardless of how the whole boom plays out, we’ll all remain indebted to Froogle for sharing his remarkable story.
As I said, brace yourself… – vreaa

Froogle and Froogletta Scott

Part 8: Renovation Nervosa Finale


Late November 2007. After fifteen months, our renovation has evolved from a start-and-stop, homeowner-managed undertaking into a bigger, more complex, increasingly expensive project run by a general contractor. The initial negotiation with Nick Costa, the general contractor, was a month of back and forth, during which Nick was difficult to pin down on numbers. Our subsequent reference check was more cursory than it should have been. My wife and I have some misgivings about hiring Nick, but we’ve put ourselves in a difficult position. Or, to be more accurate, I’ve put us in a difficult position by underestimating the scope of the work, and by overestimating how much of it we can reasonably achieve or contract ourselves, while still adhering to my ambitious vision for the renovation — all of this during a construction boom that makes finding and hiring contractors and tradespeople unusually difficult. With winter now upon us, we’re without a furnace, without insulation in the gutted bottom half of the house, and without a laundry. We give Nick an initial deposit of $20,000 on a $100,000 contract. We’ve spent an additional $40,000 on work outside the contract with Nick, so it looks like our initial estimate of a $100,000 total price tag is out the window.

We may have had our first encounter with the underground economy, when two young, inexperienced workers remove the masonry flue in the center of the house. We’ve had our first deficiency, when Dylan, Nick’s lead carpenter on our job, somehow forgets to install a strip of sill gasket between the bottom of the new central supporting wall and the new concrete footing. We’ve experienced our first attempted gouging — or at least, what feels like gouging — when Nick presents us with an add-on quote of $11,000 to remove the old basement slab and excavate a foot of brown soil beneath it, a job that has to be completed before any other aspect of the renovation can proceed. Eventually, we’re able to do the job for $3400 when we succeed in hiring Delmore, a concrete demolition contractor who uses a remote-controlled micro excavator to do the work. We’ve had our first casualty, when Leonard, the handyman we’d initially hired to help with the project, quits in anger, feeling we’ve usurped his role by bringing in Nick.

We’re learning about renovation and construction the hard way, and even harder lessons are still to come.

A disagreement, and more research

I call up the company that redid the drain tile the previous year and have them lay some more drain tile either side of the central footing, where water is collecting in the trench, and tie in the new pipe to the existing system around the outside of the house. As part of his contract, Nick brings in a plumbing company to replace the bottom half of the sewer stack, and rough in all the plumbing drains that will run beneath the new basement slab. Once the black ABS drain pipe is in place on top of the brown soil, the concrete crew is free to start work on the new slab. They’ll begin by laying in six inches of drainage gravel, which will allow sub-surface water to rise and fall without becoming trapped in soil immediately beneath the slab — the issue with the old slab. Pink styrofoam insulating board (R-10) will go on top of the gravel, with a poly vapour barrier on top of the insulation. Rebar, wired together into a mesh, and elevated a couple of inches, will sit on top of the vapour barrier. Four inches of concrete will then be poured, encasing the rebar and forming the new basement slab.

(Additional drain tile: $1166)

Excavated basement with section of plumbing drain

Nick and I disagree about the value of the styrofoam insulation beneath the slab. He thinks it won’t do anything, that “the ground is a natural insulator,” and the additional $1500 to install the styrofoam is a waste of money. Marco, the lead on the concrete crew, is adamant that slab insulation does cut the chill that occupants feel under their feet, but leaves the decision up to us.

The discussion goes around in circles for a few days. I find plenty of personal opinion on the Web arguing in favour of the insulation from both a comfort and energy-savings standpoint, but given Nick’s strong opinion to the contrary, I feel I need something a bit more solid before making a recommendation to my wife. I get back to my familiar 5:00 a.m. routine of scouring the Web for information. I’m becoming a little sick of conflicting opinion, and the difficulty of getting a straight answer, and the need to do panicky research under the gun. It takes a few frustrating mornings to find what I’m looking for, but then I do: a CMHC research bulletin that reports on actual tests done with temperature sensors “aligned vertically to measure the thermal gradient from the top of the slab through the insulation and into the soil below.” In a house with no slab insulation, the temperature just below the surface of the slab is only slightly higher than the temperature of the soil, and several degrees cooler than the air temperature in the basement. In a house with two inches of styrofoam insulation beneath the slab, the slab temperature is almost identical to the air temperature, and significantly warmer than the soil temperature. I report my findings to my wife, and tell Marco we’ll be going ahead with the insulation. It’s only a couple of weeks later, during one of my increasingly frequent calls to the building inspector, that I discover the current building code actually requires a minimum of two feet of rigid insulation running either horizontally or vertically at the perimeter of the slab. “To provide a thermal break,” the inspector tells me.


We discuss with Marco the band of soil that Delmore left at the base of the foundation walls as a precaution. Because the walls have no footing — they just end, not even resting on hardpan, but on the brown soil above — Delmore was reluctant to remove the last of the soil sitting against the walls too far in advance of the new slab being installed. Now that the concrete crew is nearly ready to go, the soil has to come out. We’ve kept a roll-off container for this purpose, and on the first weekend of December my wife and I get out the shovels and the wheelbarrow and go to work excavating the last of the soil in “the hellhole,” as we’ve taken to calling the basement.

It just happens that, weather-wise, this weekend is one of the most miserable of the year. We’ve been living without a furnace since April, and over the last month surviving off space heaters. We eventually borrow a good quality, oil-filled radiator from one of my wife’s brothers, which improves the heat situation to the point of being somewhat tolerable, but that’s after the weekend in question.

We work our way slowly around the perimeter of the basement, loading the moist, dense soil into the wheelbarrow. When the wheelbarrow is two-thirds full I run it up a plank at the back door, and around the house to the street, where I run it up another plank and dump it over the edge of the container. As I do this, heavy, wet snow falls from a sky the colour of sludge. The snow glops down on my toque and wool jacket, melting almost immediately and progressively working its way through multiple layers of clothing. Over and over we repeat the routine of loading and dumping the wheelbarrow, the volume of soil in the narrow band at the wall greater than we anticipated. I realize what a disaster it would have been to have attempted excavating the entire basement by hand. As we tread back and forth across the exposed soil in the basement it becomes mucky, water from days of rain forced up by the weight of our boots. We both feel murderous.

Soil dumped in the container

We finish sometime in the pre-dark of late afternoon, and retreat upstairs to hot showers — our one remaining creature comfort. I’m completely sodden, my clothes grimy with mud. After showering, we sit on the couch, both of us wearing thick sweaters and toques and wrapped in blankets, the hockey game turned up over the noise from a space heater, while we drink red wine to try to stay warm.

My jeans, post-hellhole

Dodging one bullet, getting hit by another

A problem arises — a significant one. The building inspector comes for a look and discovers that the foundation walls lack a footing, and don’t even extend down to the hardpan. Even though we’ve got the new central footing, which now provides excellent structural support to the center of the house, the inspector is worried that the house could subside around the perimeter, especially now that we’ve excavated the soil away from the interior of the foundation walls. He speculates that we may have to underpin the foundation walls by installing proper footings beneath them.

Underpinning would be difficult and costly, and time-consuming, because excavating beneath the walls to make space for footings could only be done in short sections at a time, to avoid the danger of collapsing a wall. Even for a small house like ours, underpinning could easily add $30,000 or more, and six weeks, to the reno. It would also risk disturbing the new drain tile around the perimeter of the house. Marco says they could do the underpinning, but shakes his head, his demeanour dark. “It would be a nightmare.” For that much extra expense and effort, it would make more sense to just raise the house and completely replace the old foundation. I point out to the inspector that the house hasn’t budged in 60 years, and that the structural engineer, when I asked him, said the same thing and wasn’t worried about the walls. The inspector isn’t convinced. The structural engineering drawings contain no details related to the walls. He tells us that the structural engineer will have to provide a revision that specifically addresses the walls, and sign off on their adequateness, before he’s willing to let work proceed.

I give TK (Tony Kwan), the structural engineer, a call and explain the situation. A lot rides on TK’s willingness to put his professional seal on what he’d previously stated only informally. I’m careful to hide my trepidation. We’ve come to understand that TK likes to make money, and if he smells fear he’ll no doubt sense an opportunity to extort more from us. So instead of asking, I tell him in a friendly and neutral manner that he needs to provide a revision, while subtly suggesting there was an oversight on the original drawings. And we need the revision right away. I’m relieved that he seems more interested in dismissing the inspector’s objections than in asking any further questions.

“The house been there 60 years. Your house is light, it’s all 2×4.” Then he stops himself, and briefly switches to his slower, more probing manner. “You guys going to add a second storey?”

I already know the answer to this question. “No.”

“Okay.” Switching back to Napoleonic mode. “I can do a letter. But no second storey. That might be too much weight.” No mention of any additional fee.

“Okay,” I reply. No problem at all. The disappointment at losing the option of a second storey — something I had been thinking about as a future possibility — is more than offset by vanquishing the spectre of underpinning.

A few days later I give the inspector a copy of TK’s letter, which states that underpinning is not required if there is no additional loading on the foundation walls. The letter will be kept on file at City Hall. The inspector somewhat begrudgingly approves a continuation of the work. At Marco’s suggestion, we also decide that the ends of the rebar forming the mesh that will reinforce the slab should be doweled into the foundation walls, providing a strong connection between the slab and the walls, and giving the walls some additional support. Doweling involves drilling a hole horizontally into the wall for each length of rebar, and anchoring the end of the rebar in the hole with construction epoxy. There will be a piece of rebar doweled every 18 inches on all four walls, so the dowelling represents a considerable additional expense, mostly because of the labour.

TK isn’t done with us, however. The following week Marco and his crew lay in and compact the drainage gravel, install the layer of styrofoam insulation, lay down the vapour barrier, and begin dowelling the rebar and wiring it together into a mesh. I phone TK to arrange an inspection. Both TK and the building inspector have to sign off on all the preparatory work before the concrete can be poured. TK asks what stage the work is at. I tell him the crew is well into dowelling and wiring the rebar. He asks me how thick the rebar is.

“10M,” I reply. 10M is about half an inch in diameter.

“What! 10M? Nobody uses 10M.”

“What do you mean?” Slab rebar isn’t even specified on TK’s drawings, and my understanding has always been that it’s optional. A good idea, but optional.

“It has to be minimum 15M. I won’t approve 10M.” 15M is about five-eighths of an inch in diameter.

A hurried round of phone calls ensues. From work, I phone Marco at the house and give him the news.

“What! That’s crazy. We’re three-quarters done. He’s crazy! This slab is already so overbuilt it’s ridiculous.”

Marco phones TK, and then phones me back at work. “Well, I talked to him and he’s not budging, at least until he comes for a look. It’s ridiculous.” By ‘a look’, I’m assuming TK means a site visit, each of which costs $250. And he’s unwilling to come the same day, claiming to be booked solid, even though he’s at his office, and his office is a five-minute drive from the house. “We’re going to have to pull out,” Marco says. “And it’s too late in the day to go to another site, so unfortunately I’m going to have to charge you for the lost time.” There’s not much I can say. The lost time ends up as an extra $400 on Marco’s next invoice. That evening, when I relay the latest developments, my wife is furious. From growing up in the local Chinese community, there’s something she recognizes in TK, and it’s not something she likes.

The next day the crisis resolves itself with some soothing talk from Marco, and some extra lubrication from our spiraling line of credit. TK agrees to a doubling up of the 10M rebar — a length of rebar doweled into the walls every 9 inches instead of every 18. This of course doubles the cost of the rebar work, but it’s cheaper than ripping everything out and starting again with 15M bar. Marco considers the whole thing lunacy. And TK gets to bill for an additional site visit.

(Slab preparation work: $6400)

(Additional rebar work: $2700)

Completed slab preparation work

Slicing concrete

One final job must be completed before the pouring of the slab can go ahead. I bring in a concrete cutting and coring company to cut an access door in the side wall of the concrete stairs on the front of the house, and to make a few other minor cuts in the foundation at other locations. Nick has recommended that we modify the layout of the rental suite by locating the new furnace and the hot water tank in the space under the stairs, rather than use precious square footage in the suite for a mechanical room. We like the suggestion and agree to it. Currently there is no wall between the space under the stairs and the interior of the basement because the original sheathing and studs, exposed to the humid soil under the stairs in the inadequately ventilated space, rotted away. Once a new concrete floor is poured under the stairs, and the wall is rebuilt, we’ll need the exterior access door to get at the mechanicals.

A worker shows up with a specialized concrete saw that has a circular blade about three feet across. He attaches the saw to the side wall of the stairs. The saw uses a wet cutting system, which sprays water over the blade as it cuts. The blade goes through the concrete like butter, and leaves a horrendous, gooey grey mess in its wake.

(Concrete cutting: $835)

Promise and possibility

The concrete crew pours the new slab on January 2, 2008 — the first working day of the new year. In the half dark of early morning the bulk of a concrete truck and a pump truck fill the back lane behind the house. The workers run a hose from the hopper at the rear of the pump truck into the basement. Once everyone is in place, the driver starts pumping the concrete. The crew moves quickly, one worker holding the end of the hose as the grey mix shoots out, Marco and the others spreading the mix with wide concrete rakes and trowels.

Pouring the slab

A few days later, my wife and I stand on the new slab. We feel we’ve reached a major milestone. The hellhole is no more. We stand in one corner of the basement, a smooth and beautiful expanse of new concrete stretching out before us, almost like the new year itself, full of promise and possibility. It’s been a grinding, stressful, sometimes brutal sixteen months to get to this point, but now we’re here and I feel that the worst is behind us. We’ve got a new, solid, clean, dry foundation upon which to build.

In a normal world, with normal people, that could very well have been the case. But Vancouver in early 2008 is not a normal world. It’s one in which people like TK and Nick Costa can operate and thrive. We just don’t know that yet.

(Slab pour: $7450)

The new slab


What follows is six months of shit. As a one-word summary of the Nick Costa experience, a little crude perhaps, but the most fitting.

There’s so much to choose from, I’m going to be selective and present just the most egregious incidents.

Dylan’s split personality

The flush beam and the joists. The amount of woe surrounding this portion of the construction is almost laughable — if it weren’t the key structural support for the center of the house.

As part of the new central supporting wall, Dylan and an assistant have installed a flush beam to create a seven-foot-wide opening that will eventually serve as the entranceway into the living room and kitchen. The ends of the floor joists at the center of the house rest on top of the new supporting wall, except in the area of the flush beam, where they are attached to the side of the beam with joist hangers.

At several points in this episode I’m going to be referring to this beam, the joists connected to the beam, and the joist hangers, so to help with visualizing this construction detail, I’ve included the picture below which illustrates using a joist hanger to attach a joist to the side of a beam.

Joist hanger used to attach a joist to the side of a beam

On one side of the beam, a headroom problem reemerges. Nick wants to run a single main trunk for the new heating duct system down the center of the suite, rather than split the main trunk into two parallel trunks running along the ceiling at the outer walls. Regardless of where the main trunk or trunks are located, it will involve running bulky, rectangular duct immediately below the joists. The duct will then be boxed in with drywall, creating what is called ‘a drop’. Drops are the often unsightly boxy structures typical of low headroom basement suites. They cover the various structural and mechanical components like beams, heating ducts, and pipes that run overhead. In full height basements, all this infrastructure can be gracefully hidden above a dropped ceiling, but we don’t have enough headroom to do that. Done badly, drops look terrible, and scream basement suite. Nick’s rationale is that walking under a drop incorporating both the beam and the main heating trunk at the central location will be far less noticeable than walking into an open concept living room and kitchen and having your eye drawn to a boxy drop running the length of the outer wall. My wife and I agree.

Unfortunately, the minimum vertical dimension for the main heating trunk, as specified by the heating company, is five inches. Add another inch for the drywall below the trunk line, and a slight gap between the two, and we now have a structure that extends an inch and a half below the city’s specified minimum headroom of 6’6” over 80% of the suite area and all exit routes. Nick’s solution is to cut a long, shallow notch out of the underside of each joist on one side of the beam so that in this area the trunk line can be moved up enough to meet the city’s headroom requirements. Cutting notches out of joists is dicey, given that they’re the structural members supporting the floor above — especially joists that are only 2×8 to begin with, rather than the 2×10 or 2×12 used in modern residential construction. Nick consults TK, who says that if we double up the joists by adding a new joist to each of the existing joists in the affected area, he will authorize a notch two feet long by one-and-a-half inches deep, and no more, in each joist pair. Everyone agrees on this plan of action.

Dylan does the work. When I get home and go downstairs to inspect, I’m dumbfounded. Dylan has doubled up the joists correctly, pre-cutting the required notches in the new joists, but in the existing joists he’s made a one-and-a-half inch vertical cut, then attempted to split out the notches horizontally. The result is atrocious. The splits are not a straight horizontal line, but instead veer all over the place, resulting in much more than one-and-a-half inches of material being removed from each joist, seriously undermining their structural integrity. And he didn’t do it with just one joist, realize that method was a failure, and then revert to the more time-consuming but proper method of making the horizontal cuts with a circular saw, finishing with a handsaw or a reciprocating saw those areas that couldn’t be reached with a circular blade. No, he mangled each existing joist in the same utterly moronic manner. There’s no way TK or the city inspector is going to approve this. There’s no way I’m going to approve it.

Here’s a picture of the beam and the attached joists. You can see just how much additional material the splitting removed by comparing the split joists to the pre-cut joists installed beside them, and by looking at the thickness of the little blocks of wood Dylan had to insert in the bottom of the joist hangers to allow the split joists to rest on something.

Split joists paired with pre-cut joists

I’m displeased. I phone Nick. He comes over. He admits that Dylan’s work is “a bit rough,” but doesn’t seem overly concerned. I tell him that we’re going to need to get TK back to assess the situation. If I had the experience then that I have now, I would have thrown Nick and Dylan out on their asses that very day. TK comes for a look later in the week and pronounces. The joists in question will now have to be tripled up with the addition of a third, properly notched joist added to each existing joist pair.

Drip, drip, drip

At Nick’s suggestion, we’ve decided to locate the new furnace and the hot water tank in the space under the concrete front stairs. In these little East Vancouver houses, reclaiming some additional square footage is always welcome. We’ve had Marco and his crew install a vapour barrier and a new concrete floor in what will become the mechanical room.

As the concrete floor cures I notice drops of water suspended from the sloping underside of the stairs, and dark patches on the new concrete floor. I assume that the water vapour given off by the concrete during the curing process is rising up and condensing on the cold concrete surface above. Eventually everything dries out and the space looks good. Because we’re adding the space under the stairs to the usable square footage of the house, the inspector requires that we insulate it, either with standard frame walls and fiberglass batt insulation, or spray-on foam insulation.

I’m down in the basement a few days later and have another one of those nasty renovation surprises. Drops of water are again suspended from the underside of the stairs, and new dark patches have appeared on the floor, beneath the drops. I watch as a couple of drops fall and are absorbed into the dark patches. It’s been raining for the last couple of days. I surmise that the drops aren’t condensation from the curing concrete, but rather rainwater making its way through the old concrete of the stairs.

More frantic research. Guess what? Concrete is porous. Between the grains of sand and cement that form the basis of concrete are thousands of tiny capillaries that water just loves to flow along. In fact, a phenomenon called ‘capillary attraction’ means that concrete acts like a giant sponge. In our case, the sponge is probably becoming saturated after a couple of days of rain hitting the top side of the stairs, and is shedding the excess water into the space below.

The amount of water isn’t huge, so I’m still holding out a shred of hope that it might only be condensation. The sun returns, and the space dries up. I get out the garden hose, position it outside the front door, and point it over the lip of the top step. I turn on the water and watch as it cascades down the stairs to the front walkway. Satisfied that this amount of water approximates a Vancouver monsoon, I go back inside the basement and look into the space under the stairs. Bloody Niagara Falls. So many drops of water that they’re forming into sheets and spilling down on the floor. I go back outside, turn off the water, and do a fair bit of swearing.

The space beneath the stairs

Solution time again. There’s no way we can install a new, $10,000, high-efficiency gas furnace and the hot water tank in this space until we’ve made it waterproof. It occurs to me that Nick, as a general contractor selling construction expertise, should have foreseen this possibility. Why had it been left up to the homeowner to discover the problem?

Despite the setback, we decide to persevere with the plan to locate the mechanical room under the stairs. Reincorporating the mechanical room in the suite layout would mean sacrificing the one decent storage room we’ll have, or changing from a two bedroom to a one bedroom unit, which would significantly impact the amount of rent we’ll be able to charge.

Nick’s solution is to paint the stairs with waterproof paint. Won’t the paint progressively wear off in the traffic areas? I ask. Sure, Nick replies, but you can just repaint when that starts to happen. I tell him that I’m going to explore other solutions. The problem with the stairs completely messes up the heating company’s schedule. They had been on the verge of installing the new furnace and duct system. The custom ductwork is sitting in their warehouse, ready to go. Now they’re on hold until we find an acceptable solution. My wife and I, looking forward to the resumption of heat, continue to freeze and huddle around space heaters.

One option is to get Delmore back, demolish the concrete stairs, and rebuild them with frame construction and plywood sheathing, including a waterproof, torch-on membrane immediately below the treads and risers of the stairs. We’d probably be able to save the new concrete floor, but the new drain tile, which runs around the perimeter of the stairs, would likely get disrupted as part of pouring new footings for the wood frame walls. It all sounds expensive and time consuming.

What we try first is a cementitious waterproofing compound that when applied grows microcrystals within the tiny capillaries of the concrete, progressively blocking them — or so the marketing literature states. The more water seeping through the untreated concrete, the better, because the crystals are water activated. A contractor shows up and applies the compound to the underside of the stairs — roof and walls. After a few days, the amount of water working its way through the stairs is significantly reduced, but not halted completely. I phone the contractor and tell him we still have a small, wet area on the underside of the stairs. He returns, applies more of the compound, which improves the situation further, but still a small amount of water is seeping through. And anything less than an absolute seal is no good. When I mention to TK the approach we’re taking he dismisses it. “That stuff’s no good for old concrete. It only works on new concrete.” I ask his advice and he suggests torch-on, or some other kind of waterproof membrane, beneath a protective cladding like tiles.

(Concrete waterproofing compound: $1000)

The stairs have now become a project within a project. With the addition of the concrete floor, the cutting of the access door, and the application of the waterproofing compound, we’ve dumped in enough money to this one piece of infrastructure that changing course and demolishing the stairs would be painful. We decide to persevere and my wife takes on the responsibility of finding a decent tiling company.

Short people

Dylan is tall, definitely over six feet, but he comes perilously close to joining Randy Newman’s ranks of short people (“Short people got no reason / To live. / They got little hands / Little eyes…”).

The joists in one corner of the basement need to be doubled up. This corner is where the stairs between the two levels of the house used to be located before they were removed, probably by the Portuguese brothers when they converted the bottom half of the house to a rental suite. When they closed up the opening between the two floors, they used joists that weren’t quite long enough to span the distance from the top of the outer wall to the top of the old central beam. The joists were probably scavenged from somewhere, and they got them cheap, or for free. Unfortunately, they were about six inches too short for their required purpose. To make them work, they had to run a horizontal 2×4 ledger under the joists at either end. One ledger was nailed to the side of the old central beam, and the other was nailed to the side of the double top plate — the stacked 2x4s — on the outer wall. The joist ends rested on top of these two ledger boards — an adequate solution from a structural standpoint, but an unsightly one because at the ceiling line the 2×4 ledgers stuck out from the wall and the beam. When Dylan replaced the central beam with the new central supporting wall he reattached the ledger as a temporary measure until the short joists could be paired with new, longer joists that would run from the top of the outer wall to the top of the central wall. Removing and reattaching the ledger at the central location had not been a problem because the temporary supporting walls were in place at the time, taking the weight of the joists overhead and the floor above.

The ledger at the outside wall is a different matter. Directly above it, in a storage room on the main level of the house, are two large, old-style, green metal file cabinets fully loaded with papers. A combined weight of probably a thousand pounds.

While discussing this portion of the framing with Nick I tell him about the file cabinets and offer to unload them and move them to another location upstairs. He tells me not to worry about it. They’ll install some temporary supports below the joists when the time comes to do this portion of the job. When that day draws close I remind Nick about the file cabinets and he again says not to worry. The day before Dylan is going to do the work, I tell him directly about the file cabinets and how heavy they are.

When I get home at the end of the day, the new joists are in place, paired with the short joists. But on the phone with Nick later that evening he reveals there had been a little mishap. (Why he tells me, I have no idea.) Somehow Dylan and Nick, who was there at the time, forgot about the file cabinets, or worse, are beginning to reveal intellectual challenges around subjects such as gravity, and physical properties like weight, and the load-bearing capacity of unsupported horizontal framing members. According to Nick, the instant that Dylan, standing directly beneath perhaps half a ton of loaded file cabinets, pried the ledger board from the outer wall all the joist ends in the area, with a horrendous noise, collapsed straight down about six inches, which would have put them close to the top of Dylan’s head. Nick grabbed a 2×4 stud and rushed over, and between the two of them they were just able to wedge the stud beneath one of the joists, and then quickly do the same with the other joists, preventing what might have been a total collapse, two smashed file cabinets sitting in the basement, a cracked basement slab, and a destroyed storage room floor. As it is, the storage room floor still isn’t quite right, feeling spongy and creaky underfoot, probably from the plywood subfloor being deflected and perhaps partially splintered when it was bent down by the weight of the file cabinets.

No doubt many of you have heard of the Darwin Awards. From the Darwin Awards web site: “In honor of Charles Darwin, the Darwin Awards commemorate those who improve our gene pool by (accidentally) removing themselves from it. The Award is generally bestowed posthumously.”

I’d say Dylan, aided and abetted by Nick, narrowly avoided becoming a recipient.

Once again, why?

In the previous episode, in reference to our eventual decision to hire Nick, I asked the question Why? I ask the question again, now in reference to continuing the relationship, as some of you are probably wondering why we allowed this circus to go on as long as we did. (Although, as a reminder, I have focused on the most egregious incidents, which has the effect of amplifying the horror.)

The short answer to Why? is that we don’t allow it to go on for very long. Although we hired Nick at the end of October, with the exception of the central supporting wall, his company doesn’t begin to do much work until early January 2008. On the last day of February, just eight weeks later, I phone Nick and tell him we don’t want to continue with the contract. Which is a polite way of saying, “You’re fired.” To which Nick casually responds, “Okay.”

The slightly longer answer is that we are quickly unhappy with Nick once work starts in earnest, and confront him on several occasions about the sources of our unhappiness. Workers absent for days with no prior warning, and lame subsequent excuses from Nick. Multiple blown appointments when Nick is “coming over in an hour,” then fails to show. Multiple breaches of the building code, including a single top plate rather than the required double top plate on the central supporting wall, and the attempt, which I quickly stop, to put vapour barrier directly against the concrete foundation wall, creating the perfect conditions for mould, rather than on the warm side of the new framing. Overall poor quality of framing. Nick’s demand for an early second draw — another $20,000 well in advance of the contractually-agreed-upon milestone, which is completion of the framing and the plumbing and electrical rough-ins.

Because of the overall slow pace, and the worker absences, we aren’t even close to reaching the milestone. I tell Nick flatly, “We aren’t giving you any more money. You need to reach the milestone, and the work has to be passed by the structural engineer and the various city inspectors before we’ll release any more money.” The real reason for the worker absences, I find out from Dylan and the other carpenter, is greed. Nick has eight different jobs of various sizes on the go, and five workers. This from a guy who solemnly stated he would never max himself out. Workers are continually being yanked off one job and sent to another — probably to whichever client is currently complaining the loudest — and as a result spend half their day driving around town.

There’s more, but that’s probably enough. However — in this slightly longer answer to Why? — through it all, Nick never stops being responsive. He’s a master at appearing at the precise moment my wife and I agree we’ve finally had it. Of somehow diminishing our grievances to minor hiccups, of displaying just enough construction expertise to make us think twice about giving him the bum’s rush. He has the con man’s silver tongue. But that’s not quite right. I google “con man’s silver tongue” to check my use of “silver tongue” in the context of con men, and discover The Ten Commandments of Con Artists, a list of con artist best practices attributed to a renowned, early-twentieth-century con man, Victor Lustig. Commandment #1 leaps out at me: “Be a good listener — the myth of the fast talking, silver tongued con man should be ignored.” In the previous episode, weeks before reading Lustig’s commandments, here are the first two sentences I wrote describing Nick: The following week I meet Nick Costa, the general contractor, for the first time. My initial impression is that he’s a good listener.

A shoelace snaps

A specific incident leads to firing Nick. It’s a relatively minor incident, but indicative of the core problem — and also the last straw.

As another way of conserving as much space as possible in the suite, we’ve decided that instead of swing doors, we’ll use pocket doors throughout. Pocket doors slide back and forth on an overhead track that runs above the doorway and inside the adjacent wall, thus requiring no additional space to open the door, unlike the common swing door which requires swing space into a room.

As part of framing the new suite, Dylan and another carpenter install a number of pocket door frames — prefabricated units that include a door frame and an adjoining section of wall frame that houses the pocket door when it’s open. In the master bedroom they do a sloppy job of aligning the unit with the 2×4 stud wall. Instead of the door frame and integrated wall section being directly in line with the stud wall, they veer out at a noticeable angle. A deficiency, which if left uncorrected will cause problems when it comes time to install drywall, and will cause the door to slide back and forth at a funny angle to the bedroom wall.

I have other deficiencies to discuss with Nick as well, and I phone him and ask him to meet me at the house. Together, we examine the misaligned pocket door frame and he agrees it’s misaligned and needs to be made straight. Luckily, the wall section of the unit hasn’t yet been glued to the slab, so correcting the problem should be easy. Nick assures me he’ll have Dylan and the other carpenter properly align the door frame.

When I inspect the results the next day I’m stunned. The unit is still misaligned, but now glued to the floor. Charles Bukowski: “…it’s not the large things that / send a man to the / madhouse…./ but a shoelace that snaps…” I’m in a cold fury. At the same time, in another, still rational part of my brain, I assemble these possible explanations for this latest piece of idiocy:  a) Nick forgot to tell Dylan and the other carpenter to properly align the door frame,  b) Nick lied to me and had no intention of telling them because he didn’t consider the misaligned frame a significant problem,  c) Nick did tell them, and they forgot, or  d) Nick told them and they ignored him, because they don’t respect him. The actual explanation for the misaligned door frame, and for the two dozen other things that have gone wrong, ultimately doesn’t matter. Only the results matter. And the results are shit.

This is the moment at which I fully accept what’s been a growing realization. The problem isn’t Nick’s overextended, second-rate workers. The problem is Nick’s third-rate management of his second-rate workers. The following morning I make the call and discontinue our relationship — or so I thought.


March and April 2008. We’ve gotten rid of Nick, but we still have no furnace, no laundry, and an uninsulated, gutted basement generating no revenue. We must keep moving forward, but we aren’t sure whether to revert to our initial approach of managing the renovation ourselves, or to go looking for a new general contractor. In the immediate aftermath of the Nick experience we don’t have much appetite to begin a search for a new general contractor, so although we know we’ll probably have to go that route eventually, for a while we try to move the renovation forward ourselves.

Our first attempt at making some progress is to contact the electrician and the plumbing company who performed the initial rough-in work in the basement. This work seems fine, and the electrical inspector has told us the electrician is reliable and does good work. My wife leaves a voicemail for the electrician explaining that we’ve parted company with Nick, but we’d like to keep him working on the job. The electrician doesn’t return the call. Months later, the electrical inspector tells us the electrician was conflicted about what to do, and felt bad, but ultimately came down on the side of Nick, because that was where future work was likely to be.

The owner of the plumbing company does return my wife’s call, and tells her he’s willing to complete our job, as long as it can be done on the quiet. He doesn’t want Nick finding out, which could jeopardize his business relationship. He says he’ll get back to us with some dates, but we never hear from him, and decide not to pursue it. It’s becoming obvious that we need to make a clean break from anyone associated with Nick.

We contact our builder friend, who’s working on the high-end renovation in West Vancouver, and ask his advice. He comes to the house to assess the situation. He considers the framing done by Dylan and the other carpenter “rookie stuff,” and the splitting out of the joist notches a farce. He and his crews have always prided themselves on the quality of their framing, but he admits they sometimes wonder why they go to the extra effort when so many builders get away with slapping together the frame of a house, and then quickly hiding all the deficiencies behind drywall. Our friend offers to give us the contact information for the framer and the drywaller on his current job, both of whom he considers excellent. As he’s leaving he looks up at the beam spanning the opening in the central supporting wall and notices something. He grabs a nearby stepladder and climbs up so he can eyeball down the length of the beam. “This beam’s sagging,” he tells us. I climb up and clearly see the slight sag. The beam has been in place only four months, so with time it could very well sag a lot more. Our friend asks if this is the size of beam specified by the structural engineer. I tell him that originally it wasn’t, a taller, narrower beam was specified, but Nick wanted space above the beam to run plumbing and electrical back and forth, so he negotiated a different shape with TK — less tall, but wider to compensate.

“Beams don’t work like that,” our friend tells us. “They get a disproportionate amount of their strength from their height, not their width. Did the structural engineer revise his drawings and sign off on it?”

“No,” I tell him. “My understanding is it was all done over the phone.” And TK’s English is hard to understand over the phone, and it’s quite possible that Nick didn’t communicate his intentions very well.

“Then this beam isn’t to spec. It’s going to have to be replaced with a proper sized beam.”

It’s starting

During this period, there are some other developments. At the end of March, I resign from the company where I’ve been working for the past three years to take a similar job with a different company. A co-worker at the first company made an identical move a year previous, and encourages me to join him at the new place. I’m initially reluctant, feeling some loyalty to the first company, but I’m worried about the company’s long-term viability. I’ve come to feel the company is badly mismanaged, and future bankruptcy is possible. The company has already been shrinking to survive, laying off a quarter of the staff the previous October — a stressful, unnerving event for a small, tightly knit company with a number of longstanding employees. I feel my position is relatively safe, however if the company does go belly up in a year’s time, I don’t want to be job hunting in the middle of a recession. I’ve been following the US economic news to some extent, not closely, but paying enough attention to know that things are not good south of the border. In fact, the US, in the first quarter of 2008, officially slips into recession. As I recall, there’s soothing talk around this time from some Canadian economists and politicians who would have us believe that a mysterious economic delinkage has occurred between Canada and the United States. The US economy might crash and burn, but somehow Canada will avoid being dragged down this time, perhaps by selling resources to the Chinese. This line of reasoning sounds like bunk to me. I discuss with my wife the various factors at play and she encourages me to make the strategic move from a shaky, small company, to a medium-sized company with sounder finances. I feel pretty good about my decision to change employers as the global financial crisis accelerates throughout 2008, and it becomes apparent that ‘global’ does include Canada, and that a five-alarm fire at your next door neighbour’s house can make your own living room a little warm.

It isn’t only mainstream media news stories about the US and Canadian economy that underpin my sentiments. For at least a year and a half, and perhaps longer, I’ve been soaking up opinions, claims, explanations, statistics, and dark predictions from the Vancouver real estate blogosphere. I don’t remember the exact circumstances, but I probably stumbled on my first Vancouver real estate blog some time in 2006, and it was probably the blog run by VHB, the Vancouver Housing Blogger. What I do know is that VHB and other local bloggers helped me think more critically and analytically about Vancouver real estate and about money. From the time we’d bought the house in September of 2003, I’d been telling myself, in a somewhat vague, uncritical way, that Vancouver house prices couldn’t keep going up forever, and yet every year, in startling fashion, they had continued to go up. Now I’d found an online community that was providing very specific and reasoned arguments why Vancouver real estate couldn’t keep going up forever, and in fact, was very likely to come crashing down. When I wasn’t frantically searching for construction information, my early mornings were no longer spent comparing houses and prices on RealtyLink to our own house. I was now a habitué of the ‘bear blogs’, or the ‘bubble blogs’ — “doom blogs,” as my wife called them. And in April of 2008, while we’re trying to keep our renovation moving ahead, come the first inklings that the doom bloggers’ predictions are starting to come true. There’s a sense that the bloggers smell blood. Through March, April, and May, Vancouver house prices stop rising, but perhaps more importantly, during what should be the prime selling season, year-over-year sales numbers plummet, and the inventory of unsold houses quickly swells, a reliable precursor to falling prices. The April 12th post on the blog Housing Analysis is ominously titled “It’s Starting.” The April 29th post is titled “Vancouver’s Next — Watch Out!” At the very moment that we’re drawing down significant amounts from a line of credit based on the unrealized equity in our house, there’s a good chance house prices could tank and that equity shrivel.

Seismic upgrading

Perhaps appropriately, the one portion of the renovation I do manage to move forward during March and April is the seismic upgrading — making the house more resistant to the forces of an actual earthquake, while pondering the possible results of a financial one. With the wood frame and the concrete foundation of the house fully exposed on the lower level, I take advantage of the opportunity to bolt the frame to the foundation, and install steel structural connectors in other locations, without having to rip off drywall and tear out insulation to do it. I also triple the studs at the corners of the house, in preparation for creating sections of shear wall — half-inch structural plywood nailed to the studs, and the top and bottom plates, of the cripple walls. In certain house designs, cripple walls are the short, exterior walls of the house that run from the top of the concrete foundation walls to the underside of the joists supporting the main floor. In Vancouver, where the mild climate doesn’t necessitate deep basements to protect against frost heave, the typical house of a certain age is basically a box from the main floor up, which sits on stilts or dominos — the short studs of the cripple walls — which themselves sit on shallow foundation walls. This design works well enough when bearing the vertical load of a house subject to gravity, but it’s inherently weak when it encounters the side-to-side shaking or shearing forces of an earthquake. Cripple wall failure is the most common residential structural failure in an earthquake. The ‘box’ portion of the house moves laterally as a single unit, collapsing the stilt-like studs of the cripple wall beneath it, and slumping to the ground. Not a pleasant thing to have happen to your house, and especially not a pleasant thing if there are tenants living in the space beneath the ‘box’ portion of the house — which will be the case with our suite, and is the case with the vast majority of basement suites in Vancouver. Attaching plywood to the cripple walls strengthens them enormously, allowing them to resist shearing forces much more effectively.

Seismic upgrading was another aspect of the renovation that Nick and I disagreed about. He maintained that unless you could establish a continuous load path — reinforcing every key connection point between framing members from the foundation to the roof — there was no point doing anything, because the earthquake forces would act upon the weakest link. He did agree with bolting the frame to the foundation. It’s true that establishing a continuous load path is the ideal situation, but Residential Guide to Earthquake Resistance, and various other sources I find on the Web, explicitly state that if homeowners do nothing else, bolting the frame to the foundation, and reinforcing cripple walls, can save a house, and its occupants.

Drilling hole for anchor bolt

The return of Nick

How does this happen? I don’t know… but it does.

Although we’ve broken off the contract, we have to settle on a final amount of money that Nick claims is owed in excess of the original $20,000 deposit. There are also some loose ends that need to be wrapped up. There are tools and supplies to pick up, and a portable toilet that has to be removed from the site. Not surprisingly, Nick doesn’t attend to these things particularly promptly. I phone him on several occasions to prod him into action. During one of these calls, I mention that the beam in the central supporting wall has sagged and will need to be replaced.

At some point, Nick phones us and asks for a meeting. He tells us that he wants to make things right, to deal with all the deficiencies, including the beam, at no cost to us. This last part is a bit of a laugher, given that we’ve already paid to have the work done properly. In fact, Nick’s own contract states that all work will be done in accordance with good quality standards, and in compliance with the applicable building code and related inspections, and “other authorities” (i.e., TK). You can’t charge clients to fix your own mistakes.

We agree to the meeting, but nothing more. Nick pitches his new line: he’s going to put his top guys on our job (thereby implying that we didn’t have his top guys before — in fact, as we’ll later find out, he’s fired Dylan). He’ll pay for a new beam and its installation, the tripling of the joists that TK has specified to account for the split joists, and the materials and labour required to fix a number of other more minor deficiencies. After the work is complete, we can decide if we want to continue with the contract or settle up and call an end. We tell Nick we’ll give him an answer in the morning.

After Nick leaves, my wife and I discuss his offer. We agree that it’s unlikely the leopard can so thoroughly change his spots, but there doesn’t appear to be much downside. I phone Nick the next day and tell him he can come back under the terms discussed once we get a revised beam specification from TK. I also tell him that every aspect of the operation — his “top guys,” the results of their work, and Nick’s management of the work — will be under a microscope.

Given his performance to date, Nick’s sudden eagerness to make things right is a bit puzzling. Perhaps he’s worried about his professional reputation. In hindsight, I wonder if the rapidly deteriorating economy in the spring of 2008, and in particular the rapidly deteriorating circumstances for real estate and construction, was causing his business to dry up, and that he saw our job as salvageable.

Shit 2

I ask TK for a revision of the structural engineering drawings, one with a new beam specification and detailed seismic upgrading information. We can’t simply revert to the original beam specification, I discover, because changes we made to the suite layout along the way mean the opening in the central supporting wall is two feet wider than indicated on the original drawings — something Nick either failed to take into account, or failed to communicate effectively to TK, and another likely reason that the installed beam sagged. We want to keep the wider opening, so we need a revised beam specification.

TK is very slow in getting to the revision. A couple of weeks go by, and we’re still waiting for what is probably 15 minutes of work for TK, and an hour for one of his assistants to modify and reprint the drawings. I begin hounding TK daily, and I suspect that at times he’s screening out my calls. I start phoning from different locations around my work place, and whenever I phone from a new number, he answers. My wife eventually loses all patience, and in a rage flies down to TK’s office, blowing in like a tornado and terrorizing TK’s dopey staff. Tellingly, they’re able to produce the revised drawings in about ten minutes. A cowed TK slinks into his office during this showdown. No questions, during this second meeting with my wife, about why we haven’t started a family.

(Revised drawings: $900)

I phone Nick with the details of the new beam, and around the end of May, his top guys start the work. Within a couple of days, the new beam is in place and the joists are tripled and attached to the side of the beam with joist hangers. The results seem better. However, when TK comes to inspect, he immediately sees something he doesn’t like. On the third joist added to each joist pair, the two cuts forming the notch extend slightly past each other where they meet — the result of cutting the notches entirely with a circular saw, rather than cutting them mostly with a circular saw and then finishing the cuts with the straight blade of a handsaw or reciprocating saw. The slight overcutting doesn’t seem that critical to me, but TK announces that before he’s willing to sign off on the work, four-foot-long plywood gussets — plywood cut to the shape of the notched end of the joists — must be attached to either side of each triple joist as an additional strengthening measure. He’ll need to do another drawing. I don’t know whether this latest pronouncement is a scam to further inflate his fees, or a legitimate requirement from a structural standpoint. Either way, we don’t have much choice but to comply if we want him to sign off.

After TK leaves, I discover something of my own that I don’t like. The joist hangers are triple-width, 2×8 joist hangers cut down in size to approximate a triple 2×6 hanger, necessary to fit the notched end of the joists. In preparation for doing more seismic upgrading work, I’ve been reading the literature from the structural connector company, and they repeatedly warn against making any manual alteration of their connectors. Each type of connector is specifically engineered for its particular purpose, with nail holes positioned in precise spots. Chopping bits off connectors, especially bits that contain nail holes, as is the case with the altered 2×8 hangers, can significantly reduce their load-bearing capacity, and is definitely bad practice.

I tell Nick about TK’s latest pronouncement. He thinks the gussets are complete overkill, but agrees there isn’t much choice but to comply with TK’s wishes. I also bring up the issue of the cut-down joist hangers and he agrees to swap them for properly sized triple 2×6 hangers.

TK produces the required drawing much more quickly this time — perhaps wanting to avoid any further encounters with my wife — and includes it in the price for the just-completed site inspection, which is covered under Nick’s contract. I phone Nick and tell him that I have the drawing and will leave a copy on the work table in the suite, which I do as soon as I get off the phone. I also remind Nick about swapping in the correctly sized joist hangers. “Don’t worry, I’ll take care of it,” he responds.

The following morning I discover another potential problem. Nick’s guys have used 1-1/2 inch long hanger nails in the ‘shear nailing’ locations on the joist hangers. 1-1/2 inch hanger nails — nails that are thicker and stronger for their given length than regular nails — are the correct fasteners to use for the nails that go straight into the beam (step 4 in the joist hanger diagram above). However, I’m almost certain that I’ve read longer nails are required for the shear nailing locations, where nails are driven in diagonally at a 45 degree angle, thus requiring greater length to properly penetrate the beam (steps 5 and 6 in the diagram). When trimming the joist ends to make room for the flush beam, Dylan had done a sloppy job, overcutting some of the joist ends by as much as an inch. There is very little wood inside the hangers on these joists. The combination of the short nail and the lack of wood allows me to reach up to a shear nailing location on one of the joists, and with almost no effort pull a hanger nail free. The nail isn’t biting into anything. It’s just there for show. At work later that day, I go to the manufacturer’s web site and confirm what I thought I’d previously read. In numerous locations in their literature they expressly state that hanger nails must not be used for shear nailing. Shear nails must be at least 3-1/2 inches long.

Sloppy trimming of joist ends


I get home and go downstairs to check the progress. I have another one of those moments when I’m stunned by what I see. The plywood gussets have all been cut incorrectly. Instead of the sideways L-shape required to match the notched end of the joists, they’re straight strips. Several of them have been installed, with nails spaced every two inches as TK required — a crapload of nails over a four foot length — but doing absolutely zero from a structural standpoint, because they run above the notch instead of wrapping around it. The uninstalled gussets — now useless pieces of wood — are stacked on the work table, about six inches away from TK’s drawing.

The remainder of the joist hangers have also been installed — not the properly sized triple 2×6 hangers that Nick promised he’d take care of, but more triple 2×8 hangers with bits cut off.

I tear out of the basement and pound up the deck stairs to the phone above. For a fleeting moment, cresting the top step and crossing the deck, I have a strange, floating sensation, definitely out of control, but more, an almost out-of-body sensation, the sense that I’m not quite sure what’s going to happen next, that anything could happen. Thinking back, it’s perhaps not unreasonable to describe the momentary impulse as homicidal. If someone had been there to capture the instant with a camera, what would my face have looked like?

I get Nick on the phone. Six months of deficiency after deficiency, of ignorance of the building code, of ignorance of construction techniques in general, of garbage work, of repeatedly absent workers, of being manipulated, of being lied to, of worthless promises, of non-existent oversight, of having our hopes raised only to have them dashed, of moronic decisions, of babysitting incompetence, six months of rage, come pouring out like a volcano. Inside my chest a huge pressure accompanies the river of profanity I bellow down the phone. “DO YOU WANNA BE FUCKING FIRED?” Nick tries to calm me down, says he’ll come over right away. “YOU’RE GODDAMN FUCKING RIGHT YOU’LL GET OVER HERE RIGHT AWAY!” I rage on for about a minute, then slam down the phone as if trying to smash it right through the coffee table.

On the other side of the French door, in the kitchen, I see my wife’s alarmed face. Later, she tells me she’s never seen me that angry. Ever. Even though the doors and windows were closed, she tells me that the whole block heard.

I go into the backyard and take a number of deep, even breaths, feel the mild evening air flowing in and out of my lungs, slowly lowering my blood pressure. I go into the basement to await Nick’s arrival. By the time Nick shows up, about ten minutes later, I’m mostly back to normal. Through the front window I watch as he, and another guy, get out of Nick’s car. I don’t recognize the other guy, but I assume it’s one of his workers. Although it seems strange that one of his workers would still be around at this hour of the evening. As the two of them come up the walkway toward the house I can see the worker is really burly, with the body shape you get from thousands of hours spent pumping iron in a gym. I have to work hard to keep myself from laughing when I realize Nick, a deathly serious look on his face, has brought along a bodyguard.

Everything is weirdly cordial after the eruption. I shake hands when introduced to Nick’s worker. Nick makes some excuse for the screw-up with the gussets and the joist hangers and says they’ll be fixed. I then tell him about the problem with the short shear nails, and pull a couple free to demonstrate.

“Those are hanger nails,” he protests.

“Yeah, I know. But the company’s literature explicitly states you don’t use hanger nails in the diagonal nailing locations. They specify a 3-1/2 inch nail.”

Nick isn’t convinced, but tells me he’ll phone the company in the morning to verify what sort of nail should be used. Then he and his worker leave.

Shoelace 2

…it’s not the large things that send a man to the madhouse….

Nick’s mild protestation that “those are hanger nails” is what finally does him in. He’s completely sincere in that particular statement because at that moment that’s what he absolutely believes. And there are probably houses around Vancouver with the wrong sized shear nails in their joist hangers because Nick was the general contractor. Will those houses suffer structural failure? Probably not. But it doesn’t matter. I’ve finally realized that it makes absolutely no sense to be paying someone thousands of dollars to provide a service in which you have absolutely no faith. To feel that you have to double- and triple-check every decision you’re paying someone to make. To live with the constant anxiety that every additional piece of work someone does on your house could be damaging it even further.

In the morning Nick phones and tells me he’s spoken to the company and that I’m right about the shear nails. “I know,” I say. And then I tell him it’s over.

What happens the rest of the way

With the final departure of Nick, the high drama ends. Lawyers get involved, and on the advice of our lawyer, we eventually settle with Nick for an additional $5000.

(Nick’s settlement: $5000)

I keep plugging away on the seismic upgrading, and we hire a tile company to install a waterproof membrane and slate tile on the front stairs. The stairs end up looking really good, although ironically, appearance wasn’t the reason we undertook the work.

(Seismic upgrading, tool rentals and materials: $1360)

(Waterproof membrane and tiling: $4150)

Toward the end of summer, we have a bit of luck. While talking with a co-worker, my wife’s sister relates our renovation saga. The co-worker suggests getting in touch with her husband, a general contractor and custom home builder. She says her husband has spent an entire career in the industry, and is very focused on quality, and detail, to the extent that he sometimes drives his tradespeople crazy. This sounds worth following up. I check out the husband’s company web site, and I’m impressed, although I feel he may be out of our league.

Over the next month we have several meetings with Ray, and end up hiring him mid-September, 2008. His company is busy, finishing up a large project, and he won’t have a crew available until some time in the new year. But he’s willing to come in himself before then and do the work necessary to move forward with the installation of the new furnace and heating duct system, and to bring in his plumber to run the lines for the upstairs laundry. I assist with swapping in properly sized joist hangers, and with removing the incorrectly sized plywood gussets and reinstalling proper ones. One morning in early October my wife and I are standing with Ray in the basement when one of the heating technicians fires up the new furnace for the first time. The warmth wafting down from the newly installed heating registers overhead is intoxicating. Eighteen months without a furnace, and almost a year of humping bags of dirty clothes to the laundromat, have come to an end.

(New furnace and heating duct system: $15,000)

From this point forward, the renovation runs pretty smoothly. Because of last-minute add-ons to the big job they’re wrapping up, the crew doesn’t become available until the middle of March, 2009. I use the intervening time to complete all the seismic upgrading work in the suite, with the exception of attaching the plywood panels to the cripple walls, which the crew will do. In order to install pieces of seismic hardware known as a holddowns at the inside corners of the house, I rent a large rotary hammer drill to drill one-inch diameter holes fourteen inches deep in the concrete foundation walls. This job is sort of fun, but a bit stressful. After consulting with Ray, I also rip out those portions of the framing done by Dylan that are substandard — about two-thirds of it. Once the crew does start, progress is quick and the results are very good. Ray proves to be everything his wife, and his references, described: detail oriented, knowledgeable, responsible, and calm. In a word, professional. We discuss in advance various options for particular aspects of the renovation, agree on an approach, and then that’s what happens. Workers arrive at 8:00 am, work all day, and when I inspect the results at the end of the day, there’s significant progress and I don’t find anything remiss. And by this point I’ve developed a pretty good eye. I eventually stop checking if things are plumb, level, and square, because they always are.

The crew works steadily on our job for about ten weeks, and then more sporadically throughout the summer as they wait for my wife and I to do the insulation, including installing insulation in the ceiling for better soundproofing, and then later to paint the entire suite — portions of the renovation we do ourselves to try to save some money. In retrospect, the $1500 we save doing the painting, which takes five or six prime summer weekends, is a poor tradeoff.

Here’s a list of what the renovation includes, in the order that the work is done:

•    Removal of the old stucco siding and the old soffit under the eaves
•    Installation of new windows for the entire house (purchased from a company recommended by Ray, rather than the initial company we’d been dealing with)
•    Installation of a rainscreen
•    New soffit all around
•    Demolition of the rear deck superstructure, replacement of the old decking
•    Re-siding of the entire house with cedar
•    Suite framing, including plywood shear walls
•    Demolition of the upstairs bathroom
•    Replumbing of the entire house
•    Rewiring of the bottom half of the house, and installation of separate electrical panels downstairs and upstairs
•    Installation of new exterior doors for the entire house
•    Lighting throughout the suite
•    Insulating and installing vapour barrier in the suite and upstairs bathroom
•    Drywalling the suite and upstairs bathroom
•    Tile flooring in the suite, and tile flooring and shower surrounds in both bathrooms
•    Cabinet, counter, and cupboard installation in the suite kitchen and both bathrooms
•    Interior doors in the suite
•    Interior window and door trim for the entire house
•    Exterior concrete work
•    Suite appliances
•    New deck railings and stairs
•    Interior painting of the suite and upstairs bathroom
•    Exterior painting of the entire house
•    Hardwood flooring in the suite
•    Baseboards in the suite
•    Closet shelving and rods in the suite
•    Attic insulation increased to R50

Re-siding the house wasn’t part of our original plan. But once we gutted the basement we discovered that the building envelope — basically a couple of layers of building paper under the stucco — was beginning to fail and in places water was seeping through the shiplap sheathing boards. A new bathroom upstairs wasn’t part of the plan either, but we decide to include it once Ray explains that it’s much more cost effective, and less disruptive, to replumb both the downstairs and the upstairs bathrooms at the same time, rather than return to do the upstairs one at a later date. Besides which, both my wife and I really hate our old upstairs bathroom.

By our estimation, we rebuild about 50% of the house over the course of the entire renovation. We decide to leave the interior renovation of the top half of the house, with the exception of the bathroom and the windows and doors, until later. We could have moved into the rental suite for a period of time, and had Ray and his crew renovate the top half as well, but we’re physically and psychologically exhausted, and we’ve maxed out our line of credit. We need a break, and we need to restart the stream of rental income.

At the beginning of September, 2009, tenants move into the new suite, three years and one month after the previous tenants moved out of the old suite.

The final reckoning — sort of

After Ray takes over the renovation, the drama that does exist involves money, and the players are my wife, me, and our line of credit.

Ray and his crew are not cheap. The contract with Ray is straightforward. Rather than a set price, he charges the hourly rate that he pays his own workers, the invoice amount submitted by the subtrades such as the plumber and the electrician, the contractor price for materials (typically somewhat cheaper, and sometimes significantly cheaper, than the retail price), and then adds 15% of everything for his fee. This arrangement is spelled out in advance, written down on a single sheet of paper, and Ray never deviates from it for the entire duration of the renovation.

Ray’s two senior workers on the job, skilled and experienced guys, one of whom used to run his own construction company, are $65 an hour each. A more junior worker is $37.50 an hour, and a labourer $20 an hour. The senior workers also negotiate an hour of paid travel time a day, each, because they live in distant suburbs and could easily find work much closer to home. We’re not that thrilled about the travel time, and Ray understands and gives us a choice of using different workers who wouldn’t be paid travel time, but he feels that the two workers he’s recommending would have the best mix of skills for our job. So we agree. Although it’s September 2008, and the global financial crisis is in full throttle, with shocking news coming out of the US almost daily, it seems the market in Vancouver, at least for builders with good reputations, still bears a lot.

Earlier in the year, we meet and become friends with a neighbouring couple who live in their mostly renovated 1920s builder’s special about a block away. They’ve done a great job on their place, working at it on and off for the past decade, often by themselves, but during one phase, that included raising the house and pouring a new foundation, hiring a construction company. They tell us that when a construction crew is going gangbusters on your place, to expect invoices equaling about $10,000 a week. We’re shocked, but that turns out to be exactly what Ray and his crew cost us. During the initial, intense, ten-week period of work, Ray presents an invoice every two weeks, and the average amount is almost exactly $20,000. To begin with, I’m secretly horrified. I can’t believe the size of the cheques we’re writing against our home equity line of credit. I’ve never seen or written cheques this large, with this frequency, in my life. When we renewed our mortgage in October 2006, we had an outstanding balance of $193,000, and a home equity plan that allows us to borrow up to $375,000, including the mortgage balance. So initially we have up to $182,000 available to borrow for the renovation, which in 2006 seemed like a huge sum. Now, in 2008 and 2009, I’m worried it won’t be enough. And if it hadn’t been for our aggressive lump sum payments against the mortgage and the renovation costs throughout the 2006 to 2009 period, it wouldn’t have been. In fact, toward the end of the project, we had to use a smaller, personal line of credit to pay three of Ray’s invoices. By 2009, the bank probably would have given us an increased limit on our home equity line of credit, but that wasn’t something we were interested in, and the interest rates on the two lines of credit were comparable.

By the end of 2008 I’m worried enough about the economic crisis and the ultimate effect it may have on Vancouver house prices, which at this point have been crashing for six months, and credit availability based on home equity, that I seriously consider calling off the renovation, or postponing it indefinitely. We have heat, we have a laundry. Without too much additional expense and effort we could insulate the basement ourselves, and bunker down to weather the economic storm, focusing strictly on debt reduction. We wouldn’t have a rental suite generating income, just an unfinished basement beneath us, but we also wouldn’t be racking up tens of thousands of dollars of additional debt. I float the idea of putting the reno on hold with my wife. She understands the increased risk we’re now facing, but doesn’t want to lose Ray. We’ve been lucky to find him, and have already spent almost four months waiting for his crew to become available, not to mention the previous two years of grief, so letting him go now, without having the benefit of his services, would be painful.

We decide to stay the course. I do a little mental calculation that helps calm my nerves. My conservative estimate of the market value of our house before prices begin falling in 2008 is $700,000. Based on my reading of the doom blogs, a worst case scenario real estate crash in Vancouver might chop prices in half, which would leave us with a market value of $350,000 — which is almost exactly what we paid for the house in 2003, a year into the real estate boom. As long as our overall debt level doesn’t climb much beyond $350K, the possibility of falling into negative equity, and perhaps having trouble when it comes time to renew the mortgage in 2011, is pretty remote.

So, on the financial side, that was the line we drew in the sand. Very belatedly, we had a budget. Not a proper budget, with broken-down line items, and maximum expenditures for different components of the reno — we never had that — but at least a ceiling. And I think having that ceiling did put the brakes on when it came to contemplating renovating the entire house at one go. We decided to phase the renovation because of renovation exhaustion, but also because of growing financial prudence.

We didn’t keep a running total of the cost of the renovation as it was ongoing — although we should have. I had a rough idea, just by looking at the balances on the two lines of credit. But those balances were somewhat lower than the actual amount we spent because of all the lump sum payments we made along the way. I did realize at a certain point that our initial estimate of a maximum $100,000 price tag was laughably naïve. I only put together an actual accounting of all the money we spent on the renovation as a necessary companion to writing this series.

Here’s the breakdown of the costs after Ray took over, the per-episode totals, and the grand total:

Ray and crew: $161,000 (14 invoices)
TK final inspections: $525
New windows (materials only): $4800
Cabinets, counters, cupboards for kitchen and two bathrooms (materials and installation): $8445
Attic insulation: $1000
Tile (materials only): $585
Hardwood flooring (materials only): $2670
Blinds (suite only, materials and installation): $686
Suite appliances: $3000
Miscellaneous (tools, building materials, paint, hazmat analysis, mirrors, small bathroom fixtures, etc.): $3394
Episode 8 total: $232,066
Episode 7 total: $32,449
Episode 6 total: $32,572
Renovation grand total: $297,087

When I first tallied all the reno costs, I was somewhat dumbfounded by that grand total. I knew we’d gone well over $200K, had maybe spent $250K, but I certainly didn’t think we’d spent almost $300K. I’d moved a long way from that person in his 20s and 30s scrutinizing and researching every hundred-dollar purchase, grubbing around flea markets and the Sally Ann, to someone who could lose track of $50,000.

I began to worry we’d overpaid. And in a certain sense, like everyone else recently buying or renovating a house in the city with the most expensive real estate in Canada, and probably among the highest construction costs, of course we overpaid. But had we overpaid in relation to other Vancouverites? Our friends with the renovated builder’s special kindly shared their renovation numbers with us: $380K spent on renos over thirteen years, “and that doesn’t count the massive amount of sweat equity.” Other friends, less than half a block away, are just a few weeks into a complete top floor renovation, from the studs out, of their 1950s bungalow, a house about 25% larger than ours. Their estimated cost is $200K. And they’re not replacing the drainage, the basement slab, the furnace and heating ducts, the windows, or the siding — big-ticket items for us. So no, we probably didn’t overpay in Vancouver terms. But the question remains, just what are ‘Vancouver terms’?

The house looks great. We’re very happy with the results, if not the painful journey to get there. I just wish it hadn’t cost us $350K to buy, and another $300K to renovate, with another $60K to $100K we might spend renovating the upstairs kitchen and the remainder of the upstairs, depending on how ambitious we get with altering the layout. I’ll go even further, and say that it shouldn’t have cost us that much money to purchase and renovate, but that’s something I’ll discuss in an upcoming episode. Admittedly, we wouldn’t have spent as much money if we weren’t putting in a rental suite, with all the additional infrastructure required to created a completely self-contained second living unit. And even though that portion of the renovation is something of an investment, or a business undertaking, it’s an investment that’s going to take a long time to pay itself off. The $1300 a month rent we’re now charging is only an additional $700 a month on top of the $600 we used to charge, and in the process of rebuilding the suite, we had a 37-month interruption in the revenue stream. At $700 additional rent a month, it will take us 32 more months — until April 2012 — just to make back the lost revenue. If, at the outset, we’d had a more realistic idea of what the numbers were going to be, it’s perhaps not a venture we would have embarked upon.

I’d include before and after pictures of the outside of the house if I wasn’t trying to preserve a certain amount of anonymity. The anonymity has more to do with protecting the identities of the various bad actors I’ve described, than my own identity. If my identity is generally known, that’s one less degree of separation. What I can share is a before and after of the suite kitchen

Kitchen before

Kitchen after

Next episode

Part 9: “So You Want to Buy a House and Fix It Up? Ten Suggestions for Survival”

My wife and I learned a lot of things the hard way during the renovation of our house. If you’re planning to buy a house and fix it up, or if you already own a classic dump and you’re itching to start smashing out walls, here’s a list of ten suggestions that might save you some grief…

Financial details

From 2004 onward, all mortgage and LOC balances are as of 31 December of the year in question.

Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage (at purchase, Sep 2003): $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250

Mortgage principal: $247,330
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2005 Property Assessment (estimate of market value on July 1, 2004): $420,000
Equity based on assessment: $172,670

Mortgage principal: $201,829
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2006 Property Assessment (estimate of market value on July 1, 2005): $461,000
Equity based on assessment: $259,171

Mortgage principal: $191,884
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $4,291
HELOC interest rate: variable, at Prime.
2007 Property Assessment (estimate of market value on July 1, 2006): $570,000
Equity based on assessment: $373,825

Mortgage principal: $183,063
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $49,410
HELOC interest rate: variable, at Prime.
2008 Property Assessment (estimate of market value on July 1, 2007): $639,000
Equity based on assessment: $406,527

Mortgage principal: $173,171
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $61,161
HELOC interest rate: variable, at Prime.
2009 Property Assessment (estimate of market value on July 1, 2008): $672,700
Equity based on assessment: $438,368

Mortgage principal: $160,929
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
Second mortgage principal (HELOC converted): 184,000
Terms: 5 year variable at Prime minus .20%, 13.5 year amortization, bi-weekly payments
HELOC Visa: $18,544
HELOC Visa interest rate: variable, at Prime plus 1.00%.
Personal LOC: $5,763
Personal LOC interest rate: 2.25% (promotional rate), 4.75% starting in April 2010
2010 Property Assessment (estimate of market value on July 1, 2009): $662,700
Equity based on assessment: $293,464

2010 (to 31 July)
Mortgage principal: $153,960
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
Second mortgage principal (HELOC converted): $176,565
Terms: 5 year variable at Prime minus .20%, 13.5 year amortization, bi-weekly payments
HELOC Visa: $23,319
HELOC Visa interest rate: variable, at Prime plus 1.00%.
Personal LOC: zero
Personal LOC interest rate: 2.25% (promotional rate), 4.75% starting in April 2010
My estimate of 2011 Property Assessment (estimate of market value on July 1, 2010): $723,000
(using REBGV’s July 2010 figure of +9.2% YOY for Vancouver East detached)
Total debt: $353,844
Equity based on assessment: $369,156

“For too long, home design has been hijacked by the allure of resale value. Maybe now we can begin again to think of our houses not as investments but as homes.”

Thanks to edinacloud for pointing out a very good article in the NYTimes, ‘Home for Life’ by Allison Arieff [5 Aug 2010], that discusses the perversion of housing design that occurred during the US housing bubble. The author has the advantage of having seen their bubble come and go; in Vancouver we’re still living the horror (but likely not for much longer). -vreaa

“For too long, home design has been hijacked by the allure of resale value. Maybe now we can begin again to think of our houses not as investments but as homes.”

Read the article HERE.

Also, see the comment section; extracts here:

Cynthia L., PA – “Our next home will be decorated by me. When I turned 60 I had an epiphany (of sorts) and decided that henceforth I will be the arbiter of my own taste.”

Mary, KC – “Remodeling our kitchen last year prompted someone to ask if we were moving.”

RH, Tennessee – “What that developer should have asked us to rethink was not the way houses are sold but how they are designed.” – This statement stopped me in my tracks. It seems like a real ‘duh’ moment. The realization far, far down the road that a designer, artist, architect, torch-bearer of the better aspirations of what it means to be human, should always have been doing what they should have been doing, being true to the higher order of their professions and all that, and not what seemed expedient at the time for a buck.

S Stefan, FLA – “A 20% tax on real estate transactions would solve most of this, and community would grow in place.”

FG, Chicago – “My parents sold their summer house during the bust and their agent told them “don’t bother” when they asked whether they should make any improvements. … A lot of this has been driven by tv decorating shows, the shelter magazine industry and home builders and appliance retailers… “

“I have often wondered how many of the locals are genuinely well-off and how many are just indebted to their eyeballs.”

Agreed. Debt is invisible. And knowing the actual numbers would be fascinating. As it is, the best we can do is patiently wait, and see what happens when the tide goes out. -vreaa

Jon B at greaterfool.ca 11 July 2010 11:28 pm

“Cruising the streets of Ambleside and Dundarave in West Van I have often wondered how many of the locals are genuinely well-off and how many are just indebted to their eyeballs. It would be very interesting if one could identify the true ratio.”

First Time Buyer – “It’s so scary, you just never feel like you know you can do it.”

‘Getting in’ is actually the easier part. Being in, while prices drop, is going to be the tough part. -vreaa

From ‘Getting into a tough market’, burnabynewsleader.com 21 May 2010

“For most of her life, 56-year-old Royal City resident Jackie Olds thought owning a home was nothing more than a pipe dream. The market in the Lower Mainland was spinning out of control. There was no way she could ever afford to own, she couldn’t pay for those tricky, hidden costs. Or, so she thought.

“During my last experience trying to rent a place it was just a nightmare,” she said. “Everything was overpriced and filthy. I went to this one apartment and lifted up the bread board and it was covered in bugs. I left in tears.”

Once the tears dried up, Olds decided to sit down and take a long look at her budget and see if she could manage the daunting jump into home ownership. “It’s so scary, you just never feel like you know you can do it,” laughed Olds, now the owner of a condo in New Westminster’s Brow of the Hill neighbourhood. “But, if you do your homework and you don’t rush in, it’s amazing.”

“I got sucked in to an argument on RE. God, I’m so sick of even talking about it. This new homeowner was telling me that it never goes down, it’s never a bad time to buy etc…etc… He sounded like he was reading from a script.”

Vansanity at vancouvercondo.info 6 Jul 2010 7:10 am

“I got sucked in to an argument on RE. God, I’m so sick of even talking about it. This dude was telling me that it never goes down, it’s never a bad time to buy etc…etc… He sounded like he was reading from a script. I’m not even making up the fact he said “everyone wants to live here”. There were more too. When I talked about interest rates and how they affect prices he said I was thinking too far ahead… WTF??? Unbelievable. It was okay to think 5 years down the road as long as I’m also factoring that prices will be higher, much higher, but not okay to think 5 years ahead about where interest rates are. It was mind boggling. Here’s what I discovered upon some reflection. This dude, a new homeowner, wanted me to buy a place so badly it was a bit disturbing. If I’m wasting my money renting, why does it concern him? It’s my money. The only reason I can think of is that he’s insecure about his new purchase.”

Bingo! – “I’m sick of the jizzbags who enjoy the benefits of renting instead of buying. I own a place: I’m a quarter-million dollars in the hole; I pay $250 a month to my strata; if I move, it’ll cost me thousands of dollars in realty/transfer/mortgage fees. Renters avoid all of this by living in someone else’s property and letting the landlord assume all the risks that come with ownership.”

As the market turns and then implodes, we expect all players to become acutely aware of the disadvantages of owning and the benefits of renting.  It is somewhat ironic that the Westender titled the following letter ‘You rent, you risk’.  -vreaa

From ‘Frank’ in this week’s edition of the local ‘Westender’ newspaper [24-30 Jun 2010], as quoted by bridgeman at vancouvercondo.info 28 Jun 2010 10:20 am

“I’m sick of the jizzbags who enjoy the benefits of renting instead of buying a place and then won’t accept the downside- that is, they might have to move out if their landlord needs to renovate the place. I own a place: I’m a quarter-million dollars in the hole; I pay $250 a month to my strata; and if I want to move, it’ll cost me thousands of dollars in realty/transfer/mortgage fees. Renters avoid all of this by living in someone else’s property and letting the landlord assume all the risks that come with ownership. When the tide turns and it’s time to go, they can bitch and moan and call the CBC “Go Public” hotline, or they can do what I did: accept the unpredictability of renting, take their two months’ notice… and buy a place. Or keep renting and stop complaining.”

“We are not bitter that the sacrifices of home ownership in Vancouver are greater than we wanted to make. For us, the benefits of flexibility outweighed the pride of homeownership. We are moving to a larger rental space in the building we’ve lived in for seven years. We are now the second couple in our circle that have negotiated a similar arrangement.”

A couple diligently does the math and decides to continue renting. -vreaa

generation y at vancouvercondo.info 19 Jun 2010 12:31 am

“After diligently working to eliminate nearly $70K in student loans, my wife and I are beginning our third debt free year. Demographically we both hold graduate degrees and our household income fluctuates between $140 – 170K per year. We live below our means:

– rent a car when we need one
– remained in a one-bedroom apartment after our daughter was born
– brown bag lunch most days
– follow a simple, cash-only budget
– brew our own coffee in the morning

In the time since eliminating debt, we’ve saved almost $150K. We began looking to buy real estate. We wanted to maintain our faux bohemian lifestyle, and Vancouver West seemed the best option. We began looking, and our finding was that a ready-to-live-in single family home in Vancouver West (North of 16th) began around $1.1M. We looked and crunched and after three months decided that we didn’t want to make the sacrifices required to own a home, including:

– becoming landlords
– sacrificing professional mobility
– staying home during vacation
– paying consumption taxes

We are not bitter that the sacrifices of home ownership in Vancouver are greater than we wanted to make. For us, the benefits of flexibility outweighed the pride of homeownership.

We are moving to a larger rental space in the building we’ve lived in for seven years. It is a professionally managed rental tower downtown. We have a positive relationship with the supers. In negotiating the move, we wanted a number of updates made to the suite. Ownership didn’t want to expend the capital. As such, we offered to pay for the renovations for a reduction in rent. Ownership agreed. The break even works out to ~42 months, and we’ve picked out the styles we wanted.

I write this because we are now the second couple in our circle that have negotiated a similar arrangement. As a business person, I know when dealing with another business (read, not an individual), I am working with known strategies that dictate margin, capital and cash flow. Thus, I was able to negotiate a mutually beneficial arrangement that distributed the risk such that I (the tenant) and the owner were happy. On July 1, we will move into an updated 1050 sq ft, 2 bed, 2 bath, 2 balcony apartment on the 22nd floor with unobstructed views of English Bay. Rent = $1700. I’ve taken a few stabs at comparing the rent to the hypothetical cost if we were to buy. My amateur numbers validate we made a good decision for us.

What I often don’t understand is the venom with which homebuyers / marketers are often attacked on this blog. [vancouvercondo.info] From my perspective, they are making the best decision for them. I realize many of the comments speak out against the onslaught of homeownership messaging. Yet, I heard the messaging, searched and decided that renting was the best option for us. However, the numbers were less of a factor than the soft benefits. I believe the soft benefits trumping the numbers will become more pronounced as more first-time buyers begin choosing what they need over what they can afford.”

“I’m a mortgage broker and I can tell you that almost nobody who owns goes back to renting. Most people perceive that as a total regression.”

Only a very, very small percentage of owners will anticipate a large fall in RE prices, sell their primary residences, and rent. If a larger percentage attempted to do this, the market would collapse by virtue of that supply. Thus, the vast majority of owners will ride paper profits up and down. -vreaa

Dwide_Schrude at theglobeandmail.com 18 Jun 2010 8:33 am

“I’m a mortgage broker and I can tell you that almost nobody who owns goes back to renting. Most people perceive that as a total regression. My parents have lived in a 2800 SF house for 30 years. Do you honestly think they’re going to rent an apartment because of what a few people think about interest rates? Most people who own a house figure out a way to pay the mortgage somehow. Almost nobody defaults in Canada. There’s a reason CMHC made just under a billion dollars last year.”

Rental Agent – “People are selling $3-million homes and opting to rent.”

From ‘Homeowners sell, start renting instead’, by Steve Ladurantaye, theglobeandmail.com 18 Jun 2010

“Diana Mander of Royal LePage Northshore has worked in Vancouver’s rental market since 1989, and said this summer has been among her busiest. Things are usually slowing down this time of year, but a flood of local inquiries has caught her off guard. She’s more accustomed to dealing with families who are moving to Vancouver from other cities, not Vancouverites who are looking for high-end rental homes because they sold their own properties. “The strength of the local market is really quite a surprise,” she said. “People are literally selling $3-million homes and opting to rent. It’s definitely putting pressure on supply.”

“My best friend is a realtor on Vancouver’s Westside. He recently sold all 3 of his houses and moved his family into his parents’ basement.”

ibew-213 at theglobeandmail.com 18 Jun 2010 10:31 am

“My best friend is a realtor on Vancouver’s westside. He recently sold all 3 of his houses and moved his family into his parents’ basement. 90% of his business comes from rich Chinese investors who mainly buy vancouver real estate just to park their money. And these clients are disappearing fast. So fast in fact he told me to “sell now or be priced out forever.” Those are scary words to hear from a realtor… “

“I just about lost it on her about the “responsible” part since I am a senior executive that rents, and putting 5% down is not “responsible” at all.”

Grumpy Exec at vancouvercondo.info 3 Jun 2010 8:40 am

“A new mid-20s colleague of mine was talking about her and her husband’s recent condo purchase in the summer in the “New Yaletown” in Surrey (not sure where that is). She is on a temporary contract when she bought, and proudly announced in the logbook that she was off to sign her first mortgage payments. She continuously says that being a homeowner is the “responsible thing to do” and “nothing like being an adult” because you are a homeowners.

She was talking about her condo life, and looking to buy a house in Surrey as well, and maybe keep the condo as an investment because it had gone up 30k. She was looking, in part, to buy a house because condo life is not exactly what they were thinking it was going to be. They have 3am fire alarms being pulled, and a lot of units are “rented” which is undesirable in her mind. Her husband sits on the strata council and they have a tough time trying to approve repairs. Apparently a lot of absentee landowners.

My other colleague, who agrees that prices are unsustainable, questioned her as to how she was liking her condo and how the house hunting was going. He noted that the market was slowly changing and that with the large number of absentee landowners, making repairs is only going to get worse. The best was when he said that when prices drop a lot of them will leave. Then her 5% downpayment would be gone (don’t know if that is all she put down though). She promptly left the room.

This was the day when the FV stats came out and said highest inventory since 1995. I just about lost it on her about the “responsible” part since I am a senior executive that rents, and putting 5% down is not “responsible” at all. But my colleague put her in her place inadvertently by making fun of the fact that a 5% price decline means her 5% would be gone…”

“A professional couple looking at a $1.8M house on the West-side of Vancouver were told by the realtor that it was a “nice starter home.”

This via e-mail to VREAA – “A professional couple looking at a $1.8M house on the West-side of Vancouver were told by the realtor that it was a “nice starter home.”

“I have a teammate who recently bought a $350K 500sqft 1 bdrm downtown. I didn’t bother giving her my opinion. I’ve sold my house now and am content to watch people make mistakes and crash this market.”

taylor192 at vancouvercondo.info 26 May 2010 8:55 am

“I have a teammate who recently bought.
She bought a $350K 500sqft 1 bdrm downtown.
She claims prices will continue to go up.
She was unaware that prices from 1994 to 2002 were flat.
She’s young, and all she has ever known is prices going up.
She was unaware of the excess inventory downtown.
She felt lucky to have bought a place that was affordable.
She is stretched into it, having a silent partner help her purchase.
She thinks even if the market goes down, she’s at least paying down equity (sorta true, yet she’s paying a premium to save).
She has a plan B to rent it if she has to hold it for years. Rent would be $1500, yet her mortgage/taxes/fees would be > $1500.
I didn’t bother giving her my opinion. I’ve sold my house now and am content to watch people make mistakes and crash this market. The more mistakes, the merrier.”

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 7: Renovation Nervosa Continued

Brace your floorboards and tighten your joists, because here’s the next episode of Froogle Scott’s story of the renovation of his Vancouver home. For those of you who want to catch up on earlier episodes, see here. We hope you enjoy Froogle’s ongoing account as much as we do. -vreaa

Part 7: Renovation Nervosa Continued

By September of 2007 the renovation of our house has been ongoing for a year, although it’s been more stop than start. We’ve replaced the drainage, gutted the bottom level of the house, engaged a structural engineer, and been issued the necessary development and building permits. We’ve already spent $30,000, close to a third of what we’re speculating might be a total budget of $100,000. A friend and I have made a good old mess of the basement slab by breaking a three-foot-wide strip of concrete the length of the house, and excavating a long trench, in preparation for a new concrete footing beneath a new weight-bearing wall. My wife and I have been managing and contracting the renovation work ourselves, often spending large amounts of time, and meeting with considerable frustration, in our attempts to hire contractors during Vancouver’s construction and real estate boom. I’ve now realized that my plan of doing substantial amounts of the work myself is unrealistic. It’s hard to do a full-time day job while also trying in the evenings and on weekends to advance a renovation project — especially one that appears to be evolving in scope from moderate to major. Fatigue is a definite factor. By choice, we don’t have a vehicle, which makes certain things more difficult. When I rent a wheelbarrow, demolition hammer, and fan for the concrete breaking, I use the wheelbarrow to transport the other tools from the building supply store — a fifteen-minute walk. When the first demolition hammer malfunctions, my wife has to jump in a cab to get a replacement. We’re losing rent every month the rental suite is out of commission. And there’s the small matter, with winter approaching, of no longer having a furnace to heat the house. I’m becoming more open to the idea of bringing someone in to help.
Our first move in this direction is to hire Leonard, a handyman recommended by friends — the friend who helped me with the concrete demo, and his partner. Leonard is a lone wolf, mostly working unassisted, although he does have an electrician he brings in when required. My friend’s partner describes Leonard as “an unreconstructed alpha male.” Although I have some alpha traits myself, her description doesn’t immediately set off alarm bells.
….The plan now is that Leonard will frame and plumb the new suite, and the electrician will do the wiring. I still have some idea that we might handle the drywalling ourselves. We’re already in discussions with an energy retrofit company about new windows and doors. I show Leonard the suite layout, which has now become part of the engineering drawings and the city’s permits. He doesn’t spend much time with it, preferring instead to pace off the dimensions of the two new bedrooms, the orientation of their doorways, a central hallway, walking through different versions of an imagined suite. My wife and I had done something similar ourselves, the final placement of interior partition walls isn’t carved in stone, it’s a relatively straightforward space to lay out, and I appreciate that builders with experience get good at visualizing the end results. Even so, I’m made a little nervous by the thought of a possible altered layout existing in Leonard’s head, rather than committed to paper.
Slab decision
Before Leonard can begin, however, the foundation work has to be completed. In addition to the central footing, we’ve decided to replace the substandard basement slab. The demolition work for the footing has revealed the slab is only 2-1/2 inches thick, and was poured directly on top of brown soil, with no intervening moisture barrier or drainage rock between the concrete and the soil — typical of older houses that were never intended to have people living on the bottom level. The brown soil is damp, even at the end of summer after weeks of sunny weather, and in one spot a slender tree root has burrowed beneath the slab, all the way to the center point where we dig the trench for the footing. When we removed the old subfloor, the underlying 2×4 sleepers had numerous sections of rot where they’d been in direct contact with the slab. We could put in a new subfloor with various moisture-blocking attributes, but this approach is second-best because it doesn’t address the fundamental problem of too much moisture immediately below the slab. And reinstalling a subfloor would sacrifice the valuable inches of headroom we’ve gained by taking out the old one. The writing is already on the wall, or the floor, when we get a couple of days of rain, and I discover three inches of water in the bottom of the trench, indicating that the level of the water table during rainy periods is only a couple of feet below the surface. A new basement slab, with a moisture barrier and a good layer of drainage rock beneath, now seems imperative — at least to me.
….We’ve also made a decision about the chimney.
Animal show
We go back and forth several times about whether or not to remove the chimney, or more correctly, the masonry flue, which runs from the slab to the roof at the exact center point of the house. The flue’s sole purpose has been to provide venting for the gas furnace and the gas hot water tank — the house doesn’t have a fireplace. But we no longer need the flue. The new, high efficiency gas furnace will vent through a pipe out the side of the house, and we’ve already switched to a new and bigger electric hot water tank that doesn’t require venting. And the furnace and the tank will no longer be located in the center of the suite, which was a terrible place for them from a layout standpoint. The flue also creates layout headaches, sitting right in the spot where we’d like to have a wide entranceway into an open-concept living room and kitchen. We’d love to have the flue gone, but it’s money we can spend on some other aspect of the renovation. My wife nixes the idea of me doing the demolition myself, and although I’ve been on the roof a couple of times, I’m not overly keen on clambering around up there with bricks. Taking the flue out also means bringing the renovation upstairs to some extent, and regardless of how well we seal up, probably creating a god-awful mess in our living area, which we’d hoped to avoid until later in the project.
(Hot water tank: $580)
….Finally, encouraged by several different people who stress the long-term benefit, and the wasted space represented by an abandoned flue, we decide to accept the short-term pain and start phoning chimney companies. The familiar merry-go-round ensues, with contractors too busy, not interested in a small job, or not returning voicemail messages. We eventually hire a contractor who can’t be there to oversee the work himself, because he’s taking his first vacation in three years, but he’s confident that one of his lead workers can handle what is a straightforward job. I arrange to take a day off work so I can oversee the job.
….In the middle of September, the day for the chimney removal arrives. I’ve already done some preparatory work. In the office, on the main floor of the house, I’ve removed the drywall from two sides of the framing that boxes in the flue, pausing every few minutes to obsessively vacuum up the resulting dust with a HEPA vacuum, convinced that the dust is loaded with asbestos. Cutting the large rectangles of drywall requires going over and over the cuts with a stout Olfa knife, a time-consuming and tiring process. My biceps and shoulders are burning by the time I get each piece out. A saw would be much quicker, but create about ten times the dust. I’ve laid down cardboard to protect the wood floors, and along a runway to the front door. I’ve covered our desks and computers, and a bookcase, with poly, and also sealed off all the nearby doors. I’ve rented a Hilti chipper for breaking the mortar between the bricks, and a fan to vent all the crap that will no doubt be filling the air.
….The doorbell rings and two young guys are on the front porch, raring to go. The lead worker identifies himself, and after a brief consultation and a survey of the job, they get to work. The lead worker has an interesting way of tossing his ladder against the edge of the house roof and running up it almost simultaneously. Then running back down facing forward. A kind of Cirque du Soleil act. I notice his partner — who doesn’t share the lead worker’s lithe physique — is much more deliberate in setting the ladder and mounting it cautiously. They’re both cheerful enough guys, with lots of energy, and talkers. It emerges that the lead worker recruited his partner only a few nights previous, at the Cambie Hotel, a somewhat riotous drinking establishment on the periphery of the Downtown Eastside, with an outdoor patio popular with backpackers and young people traveling on a budget. When his partner is out of earshot, the lead worker tells me his partner was really shaking and gripping the ladder rails hard his first day on the job, both of them three storeys up, in a bit of a breeze, and hungover. “I could see sweat on his forehead! I don’t think he’s used to heights.” The lead worker is from the States, and his partner is from England. The English guy has been in Canada only three weeks, and makes some offhand remark about still needing to get his “hospital insurance” sorted out. They’re already smashing apart the flue, one guy on the roof, the other directly beneath him in the attic, being handed bricks, when it hits me that these two are probably working under the table, probably don’t have the necessary work permits, and if that’s the case, certainly aren’t covered by Workers’ Compensation, which could leave us liable if they have an accident. I’m not sure what to do, but they’re now both in the attic, hammering away with the Hilti chipper and a small sledge, lowering buckets of bricks through the attic hatch, the fan in the office below roaring, doing a reasonable job of venting the grey crud that’s sifting down from above. The thought of calling a halt, based only on suspicion, and setting the reno back a month while lining up another company, is extremely unappealing. Only one of the guys is wearing a mask, and it’s the cheapest and most ineffective type of white dust mask available, virtually useless even if worn properly, and he keeps pulling it aside to talk. I’m wearing a half-mask respirator, and I tell them that I have extra respirators if they want to use them. They initially decline, but after another ten minutes of eating dust from old mortar, which has a strange, slightly sweet, slightly rancid smell, in addition to the grit between the teeth, they take me up on my offer.
….I want these guys off the property as quickly as possible, so I decide to pitch in. My role is to run the wheelbarrow with bricks from the bottom of the front stairs, where they dump their buckets, to the roll-off container at the side of the street — and to check in to the office periodically to make sure they haven’t killed themselves.
….By mid-afternoon the last bricks are knocked apart in the basement and the flue is gone. The two guys have worked hard. Despite the fan, the office is under a layer of powdery mortar dust, like ash. I tell them not to worry about the clean-up, because I know the dust will have gone everywhere and I want it cleaned to my standards, which will probably take just as long as removing the flue.
….As previously arranged with the contractor, I give the lead worker a sealed envelope containing a cheque for the full amount for the job, which the lead worker will deliver to a member of the contractor’s family. The contractor was very specific about sealing the envelope — I’m assuming because he doesn’t want the two workers finding out what a small percentage of the take is theirs. I overhear the lead worker on his cell phone as he arranges to meet the family member, and asks if he and his partner can be given their most recent wages in cash at the meeting.
….We say our goodbyes. After their initial reluctance, the lead worker and his partner found the respirators quite to their liking, so I tell them to keep them. I also tell the English guy that he might want to get that health insurance stuff sorted out sooner rather than later, that if he breaks a leg on the job he could have a problem. They’re both in a good mood, already plotting the evening’s entertainment.
(Chimney removal: $2300)
(Tool rental: $100)
Leonard gets to work
Throughout September, Leonard knocks off some small jobs in advance of the foundation work being completed. He moves the hot water tank from the basement to a shed beneath the back deck. The tank won’t be able to stay in the basement if we’re going to demolish the old slab. At my request, he gets some additional jack posts to strengthen the support either side of the central beam and posts, which will be coming out as part of the structural redesign to satisfy the city’s headroom requirements. He installs a Whirlybird turbine vent in the hole where the masonry flue exited the roof. And together, the two of us go to the building supply store to pick up various materials, including ducting and a vent for our range hood in the main floor kitchen. The range hood had vented into the masonry flue, but with the flue gone we need to install a new vent to get rid of cooking smells.
(Whirlybird, range hood vent supplies: $175)
“This industry’s a nightmare”
The sales rep from the energy retrofit company is meeting with us the same Saturday morning that Leonard is installing the Whirlybird. I’m giving Leonard a hand, and running back and forth between the job outside and the meeting at the kitchen table. With the sales rep, we’re discussing replacing all the junky single-pane aluminum windows in the house with energy-efficient, double-glazed vinyl windows, and also getting new exterior doors, and increasing the attic insulation. My wife and I are not that enamoured of vinyl, but wood windows are three times the cost. And good quality vinyl windows aren’t cheap. The contract price for windows, doors, and insulation is $14,000, and most of that is the windows.
….We’ve had two or three meetings with the sales rep by this point, and our conversations have begun to range more generally over the whole business of renovation, construction, and the Vancouver real estate market. We’ve related our problems over the past year with trying to find and hire contractors, the difficulties of running the project ourselves, the increasing scope of the work. The sales rep relates some tales of woe from his perspective: the difficulty of finding and retaining good people, suppliers not delivering on time, customers changing their minds multiple times, the pressure that the boom is putting on everyone. “This industry’s a nightmare,” he says. It’s mostly my wife having this conversation, as I pop in and out. At one point, the sales rep suggests we should think about hiring a general contractor to manage the entire reno.
….Leonard and I head off to the building supply store. When we get to the ventilation section, Leonard begins loading the cart with duct and fittings that are four inches in diameter. During my research, I think I’ve read that vents for range hoods are supposed to use ducts that are six inches in diameter. I ask Leonard if this is the case. He smiles and looks down, shaking his head, while continuing to pull four-inch duct from the shelf. My alpha traits suddenly reawaken. Implying that I’m a dimwitted homeowner is not a particularly good client relations strategy. However, I’m not certain about the duct sizing, so I let it go. Although I do wonder why the store has so much six-inch duct and fittings sitting on the shelves.
….When I get back to the house my wife is still talking with the sales rep. She announces that we have a possibility for a general contractor. The sales rep has recommended someone, and while I’ve been at the store he offered to phone him and check his availability. My wife agreed and as it turns out, the general contractor is available. I’m not completely comfortable with the way things have transpired, but by this point I’ve accepted that the reno is a much larger project than I’d initially understood. It needs to be managed by someone who can bring the necessary skills, experience, and resources to bear — a general contractor with a crew, and access to the appropriate subtrades. So I’m willing to at least talk to this general contractor.
First meeting
The following week I meet Nick Costa, the general contractor, for the first time. My initial impression is that he’s a good listener. We spend some time looking over the job, and I explain that we already have a contract in place for the foundation work, the energy retrofit work, and a new heating system. I explain the issue with the beam and the required headroom, and the proposed solution. And I tell him we have structural engineering drawings, and the necessary development and building permits. We discuss some of the specific details, and he seems to know his stuff. I also mention that we have a handyman working on the job and that we’d like any general contractor we hire to include him in the plans. Nick says Leonard could “maybe work on deficiencies.” This is the first time I’ve encountered the term ‘deficiencies’ in a construction context.
….When my wife gets home she asks what I thought of Nick. I reply that he seemed pretty good. That we could perhaps ask him for a quote on the remainder of the job. I also want to contact the builder who did a renovation for friends of ours a few years previous. Our friends speak highly of this particular builder, and specifically mentioned that he was honest. You could trust him.
….The one thing we can’t do is do nothing. The days are getting chillier. We need to get the foundation work completed and the furnace installed.
….(Nick Costa is not the general contractor’s real name. For reasons that will become apparent, I’m protecting his identity, and disguising or omitting details that don’t affect the essence of the story. All costs and renovation details are real.)
Take this job and shove it
Now that we’re leaning toward hiring a general contractor, we need to think about how Leonard might be integrated into the ongoing work. At various points I’ve hinted to Leonard that we might bring in someone to manage the process. I’ve realized that Leonard’s one-man operation and working style are probably not a good fit for the size and scope of our reno, but more critically, they’re not a good fit with me. Based on the work Leonard has already done, I know there are going to be conflicts. Leonard will probably consider me picky, if he doesn’t already, and I already consider him too much of a cowboy: casual about the building code and permits, and not sharing my mania for detail. However, we like Leonard, and we admire him for not jacking up his rates to take advantage of desperate homeowners during the boom. He dislikes the gouging he’s seeing, and has chosen not to participate, although he easily could. Perhaps, if a general contractor were to oversee Leonard’s work, everyone could get what they want. But I was forgetting about the power of that alpha male thing.
….The final Saturday in September Leonard calls about something related to the job. I take the opportunity to tell him there’s a strong likelihood we’re going to hire a general contractor, and that we’re currently in discussions with one. I suggest that all of us could meet. Leonard doesn’t say much, his manner non-committal. It’s obvious he’s not happy. My wife winces at me when I get off the phone.
….A couple of hours later my wife is out, and I’m sitting in the house alone, at the computer, when the doorbell rings. I know immediately that it’s Leonard. I open the door and he’s standing on the porch, his face beneath his ballcap stony. He hands me an envelope. “Here’s my invoice.” He hands me the spare keys. “And here’s your keys.” And then he holds a business card in my face — “And here’s my business card that tells you I’m a general contractor too” — before whipping it away and stuffing it in a breast pocket.
….“It’s not right. I turned down other work so I could do your job and now you’re taking it away.”
….“We’re not taking it away. We’re just bringing in someone to manage the process. You don’t have to quit.”
….“You hired me. You didn’t hire me to work for someone else.”
….“Well, think about it. If you change your mind we’re still happy to have you work on the project.”
.“I don’t need to think about it. It’s not right.” Leonard turns his back and walks down the stairs.
….I close the door, a shitty feeling in my stomach. Leonard’s words sting. Although I also know it’s for the best. Leonard and I would have killed each other. My wife is quite upset when I tell her the news, and still feels bad two and a half years later.
….I am who I am. And Leonard is who he is. And my wife is who she is. People are who they are. And much of life is a continuous struggle, overt and covert, among warring personalities.
(Leonard’s invoice: $900)
Quote and contract
Throughout October there is a protracted back and forth with Nick. We ask for a formal quote and are somewhat taken aback by the total price: $122,000. The quote includes the following work required to build the new rental suite: framing, plumbing, gas fitting, wiring, insulating, drywalling, finish carpentry, interior doors, hardwood and tile floors, lighting, new kitchen, bathroom, and laundry (cabinets, tile work, fixtures, and appliances), closet organizers, painting, a stone mantle for a gas fireplace, and blinds throughout the entire house. The quote does not include the foundation work, the new furnace and heating ducts, and the windows and exterior doors, which are contracts we’ve arranged separately. With the exception of the blinds, and extending the plumbing upstairs for a second laundry, the quote doesn’t apply to anything in the upper half of the house, or to anything on the exterior. $122,000, plus GST, for a new rental suite.
….I also speak with the builder who did our friends’ renovation. I tell him how we got his name, and he responds enthusiastically, recounting how much he and his crew enjoyed working for our friends. He’s apologetic when he tells me that he simply can’t take on any more work. He’s completely maxed out. And booking things a year in advance isn’t something he’s comfortable doing. He’s also moving away from basement renos, which aren’t his favourite. From this last piece of information I infer that in this current market builders with good reputations can pick and choose their jobs.
….My wife and I agree that $122,000 is more than we’re willing to spend, and we need to find ways of reducing the cost. The quote doesn’t provide individual item prices, however, making it difficult to know which items to target for cost reduction. As well, nowhere in the quote does it make clear how Nick is calculating his contractor’s fee. We get back to Nick and ask him to break out all item costs individually and indicate how his fee is calculated.
….A few days later Nick drops off a revised quote. He’s shaved off $5,000 from the total price, and provided individual item prices, but there’s still no explicit indication of how his fee is calculated. Is it a percentage? If so, is it applied to just labour, or to both materials and labour? I add up all the individual items in the quote and get a total of $103,000. The revised total price is $117,000, so we assume that the difference, $14,000, which works out to about 13.5% on everything — materials and labour — is the general contracting fee.
….We’re still having a hard time getting our heads around the total price. The individual item costs seem really high, especially the plumbing and the electrical work, at $8,000 and $12,000 respectively. And we’re uncomfortable about the lack of transparency regarding the contracting fee. My wife suggests we contact our builder friend who’s working on the million-dollar renovation in West Vancouver, and ask his opinion. I spend twenty minutes on the phone with him going over the various items in the quote. He agrees that the electrical is on the high side, but he considers the rest of the item prices fairly typical. New construction and renovation have just become very expensive with the real estate and building boom, and with the shortage of skilled labour in the lead-up to the Olympics. He also confirms that a typical general contracting fee is 15% to 17% on everything, labour and materials.
….We go to work on the quote, removing things we can do without (a built-in vacuum, an intercom), can do or purchase ourselves (window and door trim, closet organizers, painting, blinds, bathroom mirror, appliances, final cleaning), or handle under one of the other contracts (gas fitting). We email the revisions to Nick and tell him that we don’t want to spend more than $100,000. A week later he sends back a revised quote and a proposed contract. The total price is now $95,000 plus GST, which we’re more comfortable with, if still not exactly thrilled. However, he’s removed all the individual item prices, and there’s still no indication of how his contracting fee is calculated. I experience a tiny flare-up of anger.
….We tell Nick that the quote, now formalized as part of the contact, must have an individual price breakdown if we’re going to move forward. We also ask for three references. Nick tells us that for a fixed-price contract he doesn’t usually provide a breakdown, but he’s willing to do it. Another week elapses before the next revision of the contract arrives, the individual prices reinstated.
….In the interim, I’ve done some of my semi-frantic early morning research, and learned about ‘holdbacks’. Under British Columbia’s Builders Lien Act, property owners are required to hold back 10% of each progress payment to a general contractor as a pool of contingency money. In the event that the general contractor doesn’t pay one or more of the subcontractors or suppliers on a project, the subcontractors or suppliers can be paid from the holdback fund. If no problems arise, the holdback money is released to the general contractor 55 days after the contract is completed. I’ve also learned about the suggested scheduling of payments, known as ‘draws’, over the course of a project. Most of the sources I find state that an initial deposit paid to a contractor before work commences should be no more than 10% of the total project cost — a figure also corroborated by our builder friend. Nick’s payment schedule calls for a 30% deposit up front ($30,000), 30% after the drywall is completed, 30% upon delivery of the kitchen cabinets, and the final 10% upon completion of the project and passing of the final inspection.
….I don’t like the way the payments are structured, and I especially don’t like the honking big deposit. It all feels too skewed in Nick’s favour. I phone Nick and tell him that the most we’re willing to give him up front is 20%, and that the draws must be smaller and more frequent. And that the final draw must be 20%, not 10%. I ask how he feels about holdbacks and he says that none of his clients has ever required a holdback. Even though I’d like to use holdbacks, I let it go. My feeling is that the 20% final draw provides us with pretty good leverage should the work not be completed to our satisfaction. The contract and quote go back and forth a final time, and version #5 redistributes the payments into five equal amounts of 20% each. Nick also explains that his fee is built in to the individual contract items, and varies somewhat depending on the item, but averages out at around 15%.
While Nick is responsive during the contract negotiation, he is less forthcoming with references. We have to prod him a couple of times before finally getting some names about ten days after we initially ask. One of his references is currently out of the country, although we’re welcome to contact him long-distance. Another owns a high-rise condo on False Creek that Nick’s company has recently renovated, and we can arrange to look at the work. And the third are a couple on the North Shore with a house where Nick’s crew is just wrapping up a medium-sized reno.
….I speak to the husband at the North Shore house. He’s pleased with the overall quality of the work, and praises the carpenter who would also be working on our place. However, he was upset on more than one occasion when the crew went missing in action for days at a time, with no advanced warning, and Nick wasn’t very prompt in returning his phone calls or providing an explanation. He eventually challenged Nick, complained about a lack of professionalism, and the situation improved. Enough so, that he would consider hiring him again. “But you need to keep tabs on him.”
….On the final Saturday in October we go to see the high-rise condo on False Creek. We’d expected to meet the owner, but Nick tells us on our way over that she’s out. We take the elevator to one of the upper floors and Nick takes us in. The place is very nice, the view spectacular. I spend a good amount of time looking closely at the joints in the woodwork, get down and inspect the grout in the kitchen floor tile, look at the finished edges of the drywall around the two-way gas fireplace between the living room and the master bedroom, and scrutinize a number of other small details where sloppy workmanship can become apparent. Everything looks good.
Fateful decision
There’s still the third reference we could contact, but he’s in Europe, and the hassle of the time change, and calling long distance, isn’t that appealing. After leaving the condo, we’re walking with Nick through Home Depot. He’s offered to show us the style of vent he’s recommending for the range hood duct — which I’ve since confirmed is required by code to be six inches in diameter. Four-inch duct is for bathroom vents. “So, what do you think?” he asks, as we cruise the aisles. My wife and I, following behind, look briefly at each other, sort of nod, sort of wobble our heads a bit, sort of shrug a bit, the little micro-manifestations of weighing things, some of which are concrete, and some of which are intangible. The two of us are like the pans either side of old-fashioned scales, dipping back and forth before reaching equilibrium. “Yeah,” I respond. “We’re probably ready to sign.”
….Nick comes to the house the next day and we sit at the kitchen table and sign the contract. We also give him a cheque, written on our home equity line of credit, for the first draw. Before signing the contract, I ask him directly if he’s in danger of maxing himself out by taking on too much work. From my own days working for builders and tradesmen, I know they have to constantly overlap jobs, and have several things on the go, and several more in the pipeline, in order to ensure a steady flow of work and income for their crews and themselves. And the reference I spoke with has indicated this could be a problem area. “No, I’m careful not to take on more than I can handle.” I tell Nick that we understand there may be absences from time to time, but that the important thing is to communicate them in advance, to which he agrees. We talk about the cost, and he agrees that it’s expensive. “That’s what things cost now. The cost of everything is through the roof. Skilled trades are through the roof. But look at what you’re sitting on. You’re sitting on a property that’s probably going to be a million dollars in a few years. That’s the reality of Vancouver now, and the reality of construction and real estate. If you can’t make eighty to a hundred a year in Vancouver right now you’re a loser.” I’m assuming he means eighty to a hundred a year in construction or real estate. Neither my wife nor I make eighty thousand a year, so if he’s speaking more generally, he either assumes we make more money than we do, or the remark is just indiscreet.
(Nick’s first draw: $20,000)
So after a month of negotiation and indecision we sign the contract. Neither of us feels quite right about the decision, but not wrong either. In hindsight, we can see that we rationalized away the feeling in our guts. We put our thumb on one side of the scale. There were a number of warning signs. The general contractor who is available almost immediately in the midst of a huge building boom. The contract numbers that appear and disappear and reappear. The mystery surrounding the contractor’s fee. The attempt to secure a large deposit up front. The long wait for questionable references — one out of the country, one not home (did she even know we were there?), and one with a decidedly mixed report. The focus on money (“eighty to a hundred a year”). But at the time we were less experienced as homeowners, and under pressure to make some kind of a decision. Nick was a convincing talker with confident, reasonable-sounding answers and solutions — suggesting the kind of expertise that we now felt was required. He was affable and easygoing, responsive to our demands, and we were in a bind — no furnace, no insulation in the bottom half of the house, the washer and dryer soon to be disconnected and stored in the garage, the scope of the project spiraling beyond what we could handle ourselves, and contractors of any sort very hard to come by. And in the fall of 2007, after four years of riding the real estate rocket, we’d accumulated $400,000 in equity. Nick’s talk of eventually sitting on a million-dollar property didn’t seem so farfetched. And both figures made the $100,000 price tag for the suite look modest in comparison — or at least manageable. Although as real estate bears will point out, those would be 100,000 real dollars, $100,000 in real debt, as opposed to 400,000 possible future dollars.
Central footing
In early November the concrete contractor is finally available to do the central footing work. In preparation, Dylan, the lead carpenter Nick assigns to our project, and one of Nick’s labourers, remove the posts and the central supporting beam, the floor joists above now held up solely by the two rows of jack posts either side of the trench. The concrete crew brings in a pneumatic jackhammer to break apart the concrete pad that had supported the masonry flue, and excavates the small amount of remaining brown soil to complete the trench. Marco, the lead on the concrete crew, is a little leery of the jack posts, and recommends that we replace them with a couple of temporary 2×4 supporting walls. The additional expense is relatively minor, and somewhat offset by the rent we’ll no longer be paying on the jack posts. Because of the delays in moving the renovation forward, the jack posts have been in place for two months, costing us money. I’d thought we might need them for only a couple of weeks. I realize that using jack posts, instead of building temporary walls at the outset, was a mistake.
(Jack post rental: $500)
The concrete crew builds the temporary walls, then removes the jack posts. They build the form for the footing, and place metal reinforcing bar in accordance with the structural engineering specifications. A couple of days later a concrete truck arrives first thing in the morning and the crew pours the footing. The work goes smoothly and when the forms are stripped we are left with a solid T-footing for a central supporting wall.
(Central footing: $2800)

New footing for central supporting wall, with temporary walls either side
Our first deficiency
Dylan and the labourer return and build the permanent 2×6 supporting wall on top of the new footing, and remove the two temporary supporting walls. The permanent supporting wall includes a ‘flush beam’ to create a seven-foot-wide opening that will eventually serve as the entranceway into the living room and kitchen. The ends of the floor joists at the center of the house now rest on top of the new supporting wall, where formerly they had rested on top of the old beam, or they are attached to the side of the flush beam with joist hangers. The wall looks good when I inspect it after work. The center of the house is now much better supported, and headroom is no longer an issue. Then I see an unpleasant sight: a roll of six-inch-wide sill gasket that Nick dropped off a couple of days previous, sitting in a corner, unused. Sill gasket is a thin, moisture-resistant foam strip required by the building code as a protective membrane between concrete and wood — in this case, between the horizontal bottom plate of the central supporting wall and the top of the footing. The sill gasket prevents any moisture that wicks up through the concrete from entering and eventually rotting the wood. Concrete and wood (unless it’s chemically treated) cannot be allowed to touch. It’s one of the basics of modern wood-frame construction — as I’ve recently learned from my reading. I get down on hands and knees and look closely at the point where the bottom plate meets the footing, working my way along a portion of the new wall, and confirm that indeed there’s no sill gasket between the two. Definitely an Ah, fuck! moment. The temporary walls will have to be rebuilt, and the central supporting wall at least partially disassembled, and the bottom plate lifted, so the sill gasket can be inserted. I phone Nick to give him the bad news. He comes over for a look and is obviously displeased. “They’ll be fixing that on their own time,” he says. Dylan shows up on Saturday and spends half a day making the fix. Our first ‘deficiency’. Not a good start.
Between a rock and a hard place
We now hit a snag. We need to demolish the remainder of the basement slab, and excavate about a foot of soil, to make way for the drainage rock and the new slab. No other work can proceed until the old slab is out and the new slab is in place. For a month I’ve been trying to line up Delmore, the concrete demolition contractor my friend told me about — the one who uses a remote-controlled micro excavator to do the work. Delmore is willing to do the job, has come to the house for a look, and thinks it will take two or three days and cost about $3000. Unfortunately, he’s bogged down on his current job, which keeps growing in scope, and has been complicated by running into a hard, compacted clay layer. Every week I phone him to try to arrange a start date, and every week he tells me that it’s going to be at least another week. I’ve just about given up. Marco and his company aren’t keen to use their precious resources on excavation, although they say they will if they absolutely have to, while at the same time warning us that it might not be the most cost-effective approach. I also talk to the junk removal guy who took away the debris from the demolished sub-floor. He and his sons are willing to demolish and remove the concrete for $4.00 a square foot, but they plan to use sledgehammers. I’ve already tested that method, and I know how slow and labour-intensive it is.
….I discuss the predicament with Nick and he offers to give us a quote for his company to do the work. This job would be an add-on to the existing contract. He tells us that he can probably do it for significantly less than Marco’s company. Nick’s suggestion looks like a solution to a frustrating hold-up, so we tell him to go ahead and put together a quote. A couple of evenings later he comes by the house with the quote. When he drops it on the table we’re both stunned. $11,000. Payable in full upon acceptance, as stipulated by the contract. The remaining floor area to be demolished is about 700 square feet. Removing a foot of soil beneath means an additional 700 cubic feet. I’ve already calculated that it will probably require three 10-yard roll-off containers, a yard being 27 cubic feet. Nick has specified six containers in his quote. He justifies the six loads by telling us that excavated soil tends to fluff up. It does, but not to that extent, or so I feel. Although the excavation is more work than we want to tackle ourselves, it’s not a big job as excavations go. We tell Nick we’ll consider his quote, but that we’ll keep pursuing other options for a few days. There’s no way we’re giving him an additional eleven grand.
….I decide to give Delmore one last try. He tells me his current job is getting close to wrapping up, and he has a window of two or three days the following week in which he could fit our job. However, he’ll need me to assist — specifically, to run the gas-powered track dumper, or “buggy” as he calls it, from the basement to the container while he operates the micro excavator. “No problem,” I tell him, and arrange to take the time off work.
Delmore to the rescue
The following week Delmore rolls up in his flatbed truck and trailer and unloads his machines — the buggy, and the remote-controlled Brokk demolition machine, which runs off electricity from a diesel generator. The Brokk looks like a tiny version of a backhoe, on two rubber tracks. It can be fitted with either a large, pointed breaker, for punching through and breaking apart concrete, or a bucket with teeth for lifting and excavating. Delmore manoeuvres both machines into the basement — the Brokk clearing the doorway by an inch — and we get to work. He tries the bucket first. He thinks the concrete may be thin enough that he can just crack it by bringing the teeth of the bucket down hard, and then lift the concrete in sections, working his way across the slab. Sure enough, this method works perfectly, the concrete coming up like pieces of ice on a pond.

Remote-controlled demolition machine lifting sections of the basement slab
As Delmore predicted, the breaking apart of the concrete goes quickly. What takes time is loading the broken sections of concrete into the buggy, and running the buggy out the door of the basement, around the corner of the house, and down the walkway to the flatbed truck. It takes me a while to get the feel for the buggy, which has two knobbed handles for individually controlling the tracks, a handle for the throttle, and another two smaller handles for raising, lowering, and dumping the load. Once I get comfortable with the buggy, we establish a good work rhythm with Delmore breaking apart the slab, the two of us loading the buggy, and me running the chunks of concrete out to the truck and dumping them. By mid-afternoon the slab is completely broken apart and the truck is fully loaded. There’s more concrete in the slab than the truck can manage in one load, so Delmore calls a halt for the day, and leaves for the concrete recycler with the first load.

The buggy

Getting instructions from Delmore
The next day we load the remainder of the concrete on to the truck and begin excavating the brown soil. The routine is much the same, although I now use a flat shovel to clean up behind the excavating bucket, and instead of dumping chunks of concrete on to the flatbed, I dump loads of brown soil into a roll-off container. This part of the job is a lot more time consuming than the concrete demolition, because of the volume of material requiring excavation, and the capacity of the buggy — the equivalent of three regular wheelbarrows. Moving three wheelbarrows of soil at a time is much better than moving one, but it’s still a lot of trips back and forth. We also have to coordinate with the disposal company to make sure a fresh container arrives at about the time the previous container is getting full.
By the end of the third day we’ve excavated all the soil, with the exception of a narrow band of soil we leave around the shallow perimeter walls as a precaution. The job is complete. We even have some nice-sized boulders for the garden — “dinosaur eggs” that Delmore digs out with the excavator. When Delmore gives us his invoice we’re pleasantly surprised. $2300. The disposal company he uses is also more reasonably priced than the bigger outfit we’d used during the trench and chimney jobs. Nick doesn’t say much when he drops by to look at the results, but I can tell he’s a little taken aback by how quickly we got it done. And perhaps feels a little sheepish when I tell him the price. Delmore is definitely one of the heroes of our renovation saga. And in his own way, Leonard is probably one too.
(Concrete demolition and excavation: $2300)
(Three roll-off containers: $1100)

Delmore’s dinosaur eggs

Episode 7 total: $32,449. Episode 6 total: $32,572. Running total: $65,021. Includes a number of smaller, miscellaneous expenses not listed individually in the episodes – mostly tools, small amounts of materials, and safety supplies.

Next episode
Part 8: “Renovation Nervosa Finale”
Things get much worse before they finally get better.
Financial details

From 2004 onward, all mortgage and LOC balances are as of 31 December of the year in question.
Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage (at purchase, Sep 2003): $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250
Mortgage principal: $247,330
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2005 Property Assessment (estimate of market value on July 1, 2004): $420,000
Equity based on assessment: $172,670
Mortgage principal: $201,829
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2006 Property Assessment (estimate of market value on July 1, 2005): $461,000
Equity based on assessment: $259,171
Mortgage principal: $191,884
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $4,291
HELOC interest rate: variable, at Prime.
2007 Property Assessment (estimate of market value on July 1, 2006): $570,000
Equity based on assessment: $373,825
Mortgage principal: $183,063
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $49,410
HELOC interest rate: variable, at Prime.
2008 Property Assessment (estimate of market value on July 1, 2007): $639,000
Equity based on assessment: $406,527

“My pay has probably risen 5% a year for the last decade but I can’t keep up with this market, and according to the NYT I’m “upper middle class”. Where is all of the fu%&king money coming from?”

It’s borrowed money. Prices will reconcile with incomes. -vreaa

ceejay at robchipman.net 14 May 2010 4:49 am“My pay has probably risen 5% a year for the last decade but I can’t keep up with this market, and according to the NYT I’m “upper middle class”…using Orwellian classification, more like upper-upper middle class….but not in this place. And I am not alone. Or am I , and is it that people value RE possession so much they are readilly willing to impoverish their everyday lives? Where is all of the fu%&king money coming from? We need some kind of ethnographic analysis of buyers to figure this out but that kind of data is simply not being gathered. Statscan, where are you when we need you?”

“We rented, and I learned (again) that rental houses require less of my energy than the house we “owned” and which had taken over my life.”

Dan in Calgary at vancouvercondo.info 4 May 2010 7:40 am

“After we sold in Cloverdale (at a loss) and moved to Vancouver, we didn’t have the money to buy a new house because of the price differential. We had a sick child who required constant care from a live-in caregiver (whom we paid generously, btw). So we couldn’t afford to buy. Oh well, life’s just like that. We rented, and I learned (again) that rental houses require less of my energy than the house we “owned” and which had taken over my life.”

Profile of a Recent First Time Buyer – “About a month ago I became a first time homebuyer in Vancouver. I have been living here for about 15 years, and seeing prices triple, or quadruple in some instances, and I just thought “Wow, I need to get on this wealth train”.

This anecdote is extracted from a telephone interview between CBC Cross Country Checkup host Rex Murphy, and a caller from Vancouver named Steve Zimbalatti, 25 Apr 2010, during a program on debt called ‘Living Beyong Our Means’. The segment occurs at the start of the second hour of the show. The whole segment is transcribed here. Thanks to AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm for first alerting us to this story. –

“About a month ago I became a first time homebuyer in Vancouver. I had been a renter and I had money in the bank and quite a bit of freedom actually. It was very liberating the way I was living and a lot of my friends, I think, were perhaps envious of the fact that I wasn’t tied down by debt. I sort of got into that situation by learning my lessons the hard way. As a student in college I got one of those credit cards that you are allowed to sign up for in the foyer and I thought “Wow, this is great. I’m a grown up now, I can take on some debt.” But I just couldn’t manage it. I maxed it out almost right away. I couldn’t really manage the debt, and it gave me a poor credit rating. I did not pay the bills on time and I just thought “Well this is enough of this, I am never taking on debt again”.

So, from that point forward, I was just living pay cheque to pay cheque, able to squirrel a little bit away every time and build up a little nest egg but I was thinking, here in Vancouver, I am watching all this wealth go by in this housing market. I have been living here for about 15 years now and just seeing prices triple or quadruple in some instances, in that time, and I just thought “Wow, I need to get on this wealth train”. So my partner and I decided that it was time to buy and, you know, if we are going to be here in Vancouver, working here in Vancouver, we might as well own something.

So, we bought last month [March 2010]. We just thought it was an astronomical amount of money that we are paying for this little box in a building in the sky and we just thought “Wow, this is crazy because, we’re grown up, we watched our parents pay $12,000, maybe $20,000, for a house and all of a sudden we are paying $350,000 for a tiny box in the sky. And to get anything in the City of Vancouver at that price, you have to compromise. You might not be able to live in the part of town that you want to live in. But we are very, very happy, actually, with what we’ve got, and we think it was, you know, a spot where we can make a good home.

[Rex Murphy: So do you feel now any less free than you did before?]
Absolutely. We find it very confining. You know, we never used to sort of care about the goings on in government or the world of finance or anything now we’re watching the news every day to see what going to happen to the interest rate, or “do we lock in now?”. You know, we got almost free money in a way. When we tell people that we’re got a mortgage rate of 1.95% interest, my parents’ jaws drop. They used to pay 18% or 20% to service their mortgage, and now it is just like its unbelievable to them. You know I think wealth in a lot of ways these days has been transferred sort of to real estate and it seems to be, you know, by design if you ask me. If you look at say wealth, and where most of the money was 25-30 years ago, most of it was in the stock and bond market. Now for Canadian wealth it is in real estate.

Regarding our debt situation, it is not a worry in the sense that we don’t have it under control but we do find it, you know, I don’t want to say “crushing” because, like I say we are quite happy where we are but we do find it is less liberating, we might not be able to take the vacations we want which was great in the past. Yeah it is just, you know, it is a whole new ball of wax.”

“CBC’s cross country check up were talking about debt and some guy called up who said he just bought a “box in the sky” in Vancouver for $350k. He conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN!”

AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm

“I just heard a bit of CBC’s cross country check up. They were talking about debt and some guy called up who said he just bought a “box in the sky” (his words) in Vancouver for $350k. And he conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN! And they can now join in on what he called the “wealth creation train of real estate” in Vancouver. Oh ya, and his interest rate is 1.95%. I think, WHAT wealth creation train, you just took on (probably) $300k of debt, you moron (excuse my nasty tone), you don’t even get to live where you want, and you’ve just committed yourself to staying at home and eating Kraft dinner for the next 35 years. And when rates go up?? God, I am SO sick of this RE market. It’s just a bloody place to live, not a goshdarn money tree!”

Vancouver in Free Verse – “Downtown living, la la la…”

Most of us cannot explain things in rhyme, but ‘Anonymous’ can and has. Very nice. From Anonymous at vancouvercondo.info 22 Apr 2010 11:37 am. The author deserves to be named. -vreaa

“Downtown lifestyle, la la la…

Let’s wake up in a shoebox and check out the fabulous view.
Oh, I see all my neighbours.
I guess they can see me, too.

Time to go to work, gotta pay off my huge mortgage.
Oh I forgot I am mostly paying the interest.
Who cares at least I am a owner baby, not some poor souls who rent.
Grande skinny latte no foam, please.
Look at me, I am walking with a giant paper cup with a corporate logo on my way to my tiny cubicle.
Trying not to spill on my nylon pants.
Isn’t that cool?

At a watercooler, yack about my fabulous condo and nearby restaurants
Just don’t ask me how often I go, cuz I can’t really afford it

Break time, let’s go to a “café” and have a fabulous cappuccino in a paper cup

Time to go home
How lucky am I to be in downtown. The whole world is here.
Hang out with my cool friends to do cool things.
Look at all the numbers on my iPhone.

Ring ring
What do you wanna do? I dunno.
How about you? I dunno it’s raining…
Why don’t we go for dinner? (My kitchen is too small anyway)
Earls, Cactus club, Milestones, Moxies?
How cool are we!

Come home and got my mails.
Bills, bills, bills.
Another 10 days till the payday.
Just pay the minimum. Should be ok.
My condo is going up and up, nothing to worry about.

Time for bed.
I hear my next door neighbours.
They must be gettin’ busy.
Wish these walls weren’t so paper thin.
But it’s ok, I am a condo owner.

Downtown living, la la la…”

“They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000.”

White Payer at vancouvercondo.info 22 Apr 2010 9:52 am

“I saw a news bit on CBC couple of days ago (Monday [19 Apr 2010], when the new rules started) and they were showing a young couple in Vancouver (she was pregnant with their first child) who just made it getting “into the market” before the new mortgage kicked in. They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000. These people were genuinely happy and excited. They think they managed to “beat the system” or something.”

“The whole theory of renting being better is flawed. If I can’t just live my life because I am waiting for a crash so I can buy in order to have a dog or family, then I am more trapped than the people that spend everything on a mortgage.”

The bubble ends up inconveniencing almost everybody, some on the way up, others on the way down. -vreaa

Peepers at vancouvercondo.info 21 Apr 2010 9:01 pm

“Yes, rents are coming down, but it has been tough, VERY tough for people to find places to live in Vancouver. Sensible friends of mine bought because it was cheaper than renting (long term, not a good idea). I agree with so many of the posts on here [vancouvercondo.info], but I feel like on this issue, there are so many people out of touch. Just because something is listed on craigslist doesn’t make it real. Go out and actively look for something decent to live in. It wasn’t pretty, and if you throw a pet or a baby in the mix, you are hooped. I have been told here before that “well of course you are going to get dinged for having a dog”. Uh, what? So then the whole theory of renting being better is flawed. If I can’t just live my life because I am waiting for a crash so I can buy in order to have a dog or family, then I am more trapped than the people that spend everything on a mortgage. Dunno, that’s just my thoughts. I tapped out on all of it and went coop though.”

Absinthe at vancouvercondo.info 21 Apr 2010 9:49 pm

“I’ve got a friend who’s been moved along twice in this bubble due to the home being sold/reno’ed; I’ve been moved once; and my mom has been moved once and had to give up her cat to find a new place she could afford. And each time, there’s been a lot more work to find a place than when I first came and found apartments with a walk ’round the neighbourhood I wanted to live in.”

“While I KNOW this house is extremely expensive and likely at the top of the market, we bought it. Wish us luck, we may need it!”

This bubble has inconvenienced many, and here is an example of an individual who, despite (perhaps because of?) sound insight into the market, made the decision to not let the bubble inconvenience them any longer. Essentially they are saying that they are wealthy enough (inheritance ‘backstop’) to be able to take the risk of their new house dropping greatly in market value.  That risk is, by their calculations, less significant than the inconvenience of not moving into their current ideal accommodation.  -vreaa

The Greatest Fool? at robchipman.net 15 Apr 2010 1:02 pm

“My wife and I currently own a very nice high end condo and are at a stage of life where condo life isn’t necessarily appealing anymore.  So, we locked in a stupid low rate and “kept our eyes out” for a place.  Well, within a month, we found a great house in a great area (our prime target area), and while I KNOW this place is extremely expensive and likely at the top of the market, we bought it.

Why would someone, like me, do this, when my instincts tell me that we’re at the top of the market, with the lowest interest rates on record, affordability a major issue, and nowhere to go but down?

Frankly, because of what I mentioned – we are at the stage of life where we don’t want to live in condo anymore.  I’ve looked at house rental listings, and none were as nice as this place.  Plus, my extensive (believe me, extensive) economic analysis showed me that for every 1% rise in interest rates (which has already occurred), at this approximate price point, we would require a an approximate 10% reduction in the market in order to have the same payment (remember, we are long in the market with our current place, so the market decline hurts us on the sell side too).    I think a 1.7% rate rise (not unreasonable, at all) to ~ 5.4% would mean we’d have to see a 20% market reduction.

My dad passed away last year, my mom’s in a big house by herself on the island – she’s making noises about downsizing etc. or even moving.  So, she’s offered to “advance” us some of my inheritance (only child) to help out.  That helped us make this difficult decision as well, as we have a bit of a backstop there.

At the end of the day, we can afford the payments on this place, although, it will be a bit of an adjustment for us.  We have some economic backstop.  I think the market could easily correct up to 20%, but maybe not by much more than that.  To not buy now, we would have to bank on a 20% or greater drop in the market.

I am somewhat bearish on the market, but not in the same way as a lot of people here are.  I do think that a 20%-30% correction is a very real possibility (or even a probability), but I also think that anything greater than this, on a long-term protacted basis, is unlikely.  There is something that none of us have been able to figure out or quantify that keeps the market buoyant.   I personally think it’s a combination of foreign ownership and generational wealth transfer (baby boomers are relatively affluent and like to help their kids – akin to my situation).  I also think that the bottom fell out, you’ll see other governmental “stimuli” (such as playing with bank rates) to readjust the markets.

So – anyway – that’s what we decided to go, for good or for bad.  I’ve considered the impact that an interest rate of 9% would have in 5 years time, in which case, we’ll likely be selling.  But the way I see it, I’ll cross that bridge when I come to it.  There are lots of other variables at play, that are difficult or impossible to predict – general economic conditions, personal job situation, a further “inheritance”, higher inflation or hyperinflation, a catastrophic illness such as cancer, a global nuclear winter if some quack dictator does something unpredictable, etc.  So, we’ll roll with the punches.

I hope you all take this as it’s intended to be posted – not as a “you are all wrong” sort of thing – more of an explanation from someone who, quite frankly, agrees with you, but given the time and place that we are in, decided that we’d still buy in this market.  Am I greater (greatest) fool?  A number of you will say yes.  But, at least I’m an informed “fool”.

Wish us luck, we may need it!”

and at 1:40 pm

“Maybe I achieve full bonus at my work each of the next 5 years and reduce the mortgage significantly during that time.  Maybe my options net me $500K.  Maybe I get promoted at work into a significant raise.  All of these scenarios are just as likely as an interest rate rise to 9%.  If so, no, we won’t be selling, and we’ll continue to be extremely happy in the house.  Also, it’s my principal residence, not an investment – if I’m under water, I don’t really care as long as I can still afford the payments.

One thing I think “us” bears (remember I am a bear) forget is that if rates rise significantly, the economy is going to be humming.  Majorly humming.  In which case, I can guarantee that my profession will afford me a much higher income, esp. with 5 years more experience.”

“He readily admits they will be just scraping by in order to make the mortgage payments, with a mortgage-helper suite in the basement. The suite is currently unfinished, and they exhausted all of their savings on the down payment.”

oneangryslav2 at vancouvercondo.info 16 Apr 2010 1:49 pm

“I can afford to buy very much, thank you. I have chosen not to because renting provides much better value for my money. And it’s not even close.

I have two colleagues–let’s call them Mr. Bull and Mr. Bear.

Mr. Bear has about $200,000 that he could put toward a down payment on a house in Vancouver. He has chosen not to because he also understands economic fundamentals.

Mr. Bull, on the other hand, about two months ago was able to come up with a 5% down payment on an admittedly nice place in east Vancouver. He readily admits that he and his wife will be just scraping by in order to make the mortgage payments, with a mortgage-helper suite in the basement. The suite is currently unfinished, and they exhausted all of their savings on the down payment. They are recent arrivals from the United States–Washington, DC area–and had hoped to fund the completion\renovation of the basement suite via the differential in the exchange rate between the US and Canadian dollar as the funds. Big mistake; the loonie and the greenback are now at par. So, they’re now scrambling to get a second mortgage. They take possession on May 1st.

But I guess they’re now home owners, and Mr. Bear and I–who are lowly renters–are just losers. I can afford to wait until prices make sense. If they don’t, then I’ll never purchase real estate in Vancouver. Big deal.”

Buyer Panic – “It was pandemonium! A friend of my mother’s listed her small 3 bedroom rancher in Richmond last Thursday for $799K. The open house was Sunday, people lined up to get in. There were 12 offers and it went for $910K. One guy even offered the agent $25K “extra” in her pocket if she’d sell to him.”

McLovin at robchipman.net 12 Apr 2010 4:33 pm

“Can someone say the market is stupid hot? If you ever need a speculative blow off top example here it is:
This story is absolutely true (no, I do not have the MLS number). It was a friend of my mother’s house. She listed it in Richmond Thursday for $799K for a 3 bedroom rancher (small).
The open house was Sunday they had people lined up to get in. There were 12 offers and it went for $910K. One guy even offered the agent $25K “extra” in her pocket if she’d sell to him. It was pandemonium there!
I must admit, even as a long term investor in real estate, I am stunned by this. This is going to end even worse than I thought. I wonder how the person who “won” the bidding war is going to feel in a year? Do people believe this sort of behaviour is normal? I can’t wait for the days like in the late 80’s where I was the only person who had made an offer since it was put on the market 103 days ago.”

“In that moment, the money didn’t matter. Only the condo mattered. Now, all the money I have, goes towards paying the loan. I live for the loan.”

Elize Robinson gazes around her condo with a sad smile on her face, wondering what might have been. As the sun streams in through the large skylights in the sloping roof, it is easy to see why she fell in love with the unit. But things did not work out the way she planned. She bought the condo for $380,000 in Mar 2010 with the aid of a huge bank loan. She realizes now that she made a mistake in buying at the top of the market.

“I lost my common sense in that period,” she says. “I was not thinking about the money. It was really a lot of money, I now understand, but in that moment, the money didn’t matter. Only the condo mattered.” It soon became apparent that she was going to struggle with the loan repayments. So instead of moving into her dream condo herself, she rented it out.

At the same time, Vancouver’s housing market collapsed in spectacular fashion. Prices have fallen by more than 45% in just under three years, well and truly bursting the bubble. Now Elize’s apartment is worth less than half of what she bought it for and the rent she receives does not even cover half of the loan repayments.

She blames herself, but is also angry at the banks who made credit so easily available. “They had analysts and economists in their staff. They should more carefully analyze the situation and the people to whom they are giving the loans.”

British Columbia law does not allow Elize to walk away from the loan. Now out of work and expecting her first child, she is worried about the future.

“All the money I have got goes towards paying the loan. I live for the loan,” she says. “Even the social benefits I get I have to give away to pay the loan.” Elize’s is a familiar story, echoed around the country.

Bob Dubonsky, assistant professor at the Sauder school of business, says that Vancouver’s property market was more over-inflated than those elsewhere. “The bubble was so huge. There was so much money pouring in,” he explains. “People borrowed a lot of money to buy a lot of real estate – – 2007-2010 were crazy years.”

Whether or not another boom follows this bust, one thing is for sure. Many people like Elize Robinson fear they will be living with the consequences of the “crazy years” of 2007-2010 for years to come.

The above anecdote from Vancouver’s future was produced by barely tweaking the article ‘Living with Latvia’s burst bubble’, by Shanaz Musafer, BBC News, 12 Apr 2010. One tweak: Latvia’s market fell 60% in 3 years, we anticipate Vancouver’s bust will initially be less severe. For those who don’t believe it will happen here, note that the first halves of such future anecdotes are already being written in Vancouver. -vreaa

[UPDATE 27 Jul 2012: The photo originally illustrating this post has been removed, at the e-mail request of the lady in the photo. – ed.]

“On both occasions these homeowners have replied that they think there will be more than a 20% drop. Bizarrely though, one of them is currently looking to sell and move up.”

Ann Ong at vancouvercondo.info 5 Apr 2010 10:19 am

“In the last couple of weeks I’ve talked to two different Vancouver homeowners who asked me when we are going to buy a place of our own in Vancouver. My starting position in these conversations is “We don’t want to buy in a bidding frenzy so we are waiting for things to calm down a bit”. If this doesn’t generate a major argument I punt a “And there could be a drop of, oh, .. 20%” across the bows. There has been a definite change in response compared to previous conversations with others. On both occasions these homeowners have replied that they think there will be more than a 20% drop. Bizarrely though, one of these homeowners is currently looking to sell and move up. Go figure!”

Vancouver Buyers #2 – “This couple’s equity gain is someone else’s reduced savings.”

jesse at vancouvercondo.info 4 Apr 2010 2:20 pm

“I know a couple almost exactly like that in ulsterman’s story, with about the same incomes [$80K each], but they are buying an SFH in the centre part of Vancouver for about $900K. Both bought condos a few years ago before they married. They sold one in ‘07 and are selling the other this year, using the proceeds to purchase an SFH at 6X their gross annual income (assuming they rent the basement). Their purchase is by no means “crazy” — since they have made significant money on their condos and interest rates are low, they can comfortably afford the higher price. This couple’s equity gain is someone else’s reduced savings. Chances are this will become abundantly clear in the years ahead.”

jesse UPDATED this anecdote at VREAA 9 Apr 2010

“The couple who were going to buy $900K property in Vancouver reneged on subjects and decided not to buy. I think it was a case of cold feet; luckily it didn’t turn into remorse! They said the property was owned by a local who lives on the west side. It is completely furnished (either from before or for staging) but, according to neighbours, hasn’t been lived in for years. I have seen 1 or 2 such properties in my travels, where owners are either abroad or are simply sitting on an empty property without bothering to rent it out.”

“I just spent a weekend consoling my better half because I didn’t want to buy a foreclosed monster home on Musqueam land.”

ulsterman at vancouvercondo.info 3 Apr 2010 8:27 am

“I just spent a weekend consoling my better half because I didn’t want to buy a foreclosed monster home on Musqueam land. Her best friend lives 2 minutes from the house and they are also on Musqueam land, hence the sudden desire to relocate – plus she hates renting.
The house was 268k and sold for 238k – abandoned.
I never actually visited the property. Lease about 12k and taxes 9k according to realtor site. It was 5700sqft with swimming pool etc. The lease, tax & mortgage was about $2600, same as I pay in rent. This was my partner’s argument – it’s the same as rent etc etc and we would have our “own place”, “build equity” etc etc.
Repair-wise it would have been a Froogle Scott on steriods -she has a father and step-father who are handymen so she had visions of them “doing the work for us.”
Obviously I dodged this bullet, but what do people think about the concept of buying on lease land if as my partner says, “we will never be able to afford our own house to live in otherwise and ALL my friends now own (please add in much wailing and gnashing of teeth that we are poor renters!).”

“Being chewed out by my family: I missed the boat; I should buy a dump here quickly before it’s too late.”

other ted at vancouvercondo.info 2 Apr 2010 4:44 pm

“Back in Vancouver. All I hear is how Vancouver real estate is the greatest investment ever. It never goes down. I missed the boat and will continue to miss the boat as it will continue to go up. Being chewed out like this from my family, and the rain, is starting to make me irrationally exhuberant. I should buy a dump here quickly before it’s too late. Even though I could buy a little piece of paradise elsewhere for less, I must truly be missing out.”

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 6: Renovation Nervosa

“His clothes are dirty, but his hands are clean.” Sweat pays you more than the dollars saved. You spend hours of your own time and effort, but what you get back is a sense of actually being part of your home. Doing imbues meaning. In this episode, our protagonist takes us on a tour of his home’s innards, and of the challenges facing those who try to do renos themselves, or even with the help of subcontractors. For those of us who enjoy sitting back in comfort and vicariously having the sense of being a good person doing sincere and honest work, could there be a better read than this on a rainy Easter weekend? Here’s a real treat from Froogle Scott. -vreaa

Part 6: Renovation Nervosa

I don’t always walk the blocks of our Vancouver neighbourhood purely in the spirit of unscientific inquiry, as I do in February of 2010, when I count all the renovations and new houses. In our first years in the neighbourhood, as it starts to transform, I often feel not exactly envy, but anxiety that other people are getting on with things and we aren’t. When our second set of tenants moves out at the end of July 2006, the time has come to start doing something.
.When we bought the house it was our intention to fix it up. A 1940s workers’ bungalow, stuccoed-over and given an amateurish renovation in the late 1970s, and 1980s, by the time we move in, everything is worn, tired, and like the vinyl peel-and-stick tiles on the kitchen floor, and the cheap, dark-stained kitchen cupboards and cabinets, not that inspiring even when new. The original wood windows were removed and replaced with those nasty, single-pane aluminum windows that were all the rage in the 1970s, when heating a house, because oil and gas were relatively cheap, just meant cranking up the thermostat. The wood windows were repurposed, cannibalized and installed above horizontal sheets of plywood as a way of boxing in a small back deck. The resulting structure, stuck on the back of the house and clearly visible from a side street, resembles a funky, second-storey, homemade greenhouse.
….The deck is painted white, chocolate brown, and ‘bleen’. My wife and her sisters, as girls in the 1970s, came up with the name ‘bleen’ to describe a particularly noxious colour that pervades East Vancouver at the time, and can still be found if you cruise back alleys in 2010. A kind of unnatural green that suggests turquoise without actually being turquoise — not unlike the colour of public swimming pools, or the Crest mint toothpaste of the era. Bleen is a portmanteau word — blue plus green — but somehow bleen evokes and connotes so much more. Spleen, bleach, blech (for those of you who used to read MAD Magazine), chlorine, clean, it sounds like something that if drunk would cause violent vomiting. Bleen is more a state of mind than a colour. It stands in for ‘crap’. I painted my deck/house/fence this crappy colour because I’m not rich, because life is crap, because I’ll never be able to afford anything other than third-rate crap, so I’m going to revel in my crapdom, and force you to swallow it as well as you walk down the street past my house. Perhaps bleen is like East Vancouver’s visual equivalent of fado, a type of Portuguese folk music, which a friend, who’s traveled quite a bit in Portugal, explains is a kind of Portuguese blues. I’m Portuguese, so this is my fate.
….Strangely, in a certain light, a number of Vancouver’s new glass condo towers look bleen.
….I’m a little uncertain now what my original goals were for the renovation. I have a somewhat queasy sense that they were probably a lot more modest, and definitely a lot less expensive, than what they ended up being. To begin with, I thought I was going to do large portions of the work myself (utter madness, I now realize). I’m reasonably good with my hands, and in my early 20s I worked on two house-building crews, so I understand framing and how houses are put together. I’ve done lots of painting, and some carpentry, and drywalling, and roofing, and a fair bit of demolition. So I was all set, right? What I didn’t have is much of a plan (translation: no plan). Without consulting with my wife, I rip out the skanky wall-to-wall carpeting in the rental suite the day the tenants move out, and reveal a rotten patch in the subfloor. This act is akin to pulling the thread.
….My wife’s goal is clearer. She grew up a dozen blocks away, near Trout Lake, in an early Vancouver Special built in the 1960s, painted entirely bleen. Riding the #7 bus up and down Nanaimo Street and imagining the house she might one day live in, she used to look down the small slope into our current neighbourhood and think that her future house could be anywhere but on those dreary and depressing blocks. Cast back by fate and the realities of the Vancouver real estate market to those very blocks, for my wife, the renovation is simply about getting rid of the bleen.

Bleen deck
Pulling the thread
Shiplap — 1×8 boards — nailed to long 2×4 sleepers that lie flat on the concrete slab is what forms the subfloor in the rental suite. In the living room, it’s this subfloor that has rotted in a roughly circular patch about a foot across, allowing me to easily break away rotten bits of wood and place my hand flat against the cool concrete beneath. Everything is dry now, but obviously significant amounts of moisture have been trapped in this area at some point, allowing the rot to occur. A few feet inside the door to the suite is another soft spot beneath the vinyl tiles. I peel away the putty coloured vinyl baseboard in the living room and reveal black dots of mould. When we bought, the home inspector got some elevated moisture readings, and here’s the physical evidence that his readings were accurate. So now we have a decision to make. We can ignore the telltale signs of moisture intrusion — on balance, they aren’t that drastic — patch the subfloor where necessary, and get on with an overhaul of the suite. Or, based on the web research I do, we can address the moisture problem in a more fundamental way, probably by installing new drain tile around the perimeter of the house.
….Outside, I dig a hole a couple of feet deep and confirm that the house does have existing drain tile — old style, orangey-brown clay pipe laid in short sections, with small gaps between sections to allow ground water to seep in. By shining a flashlight into a gap I can see a silt buildup inside the pipe, the weakness of this old design. Over time the pipe clogs up, and ground water no longer flows down the pipe and away from the house. Instead, depending on how much natural drainage a lot may have — our lot is perfectly flat — the water sits in the soil surrounding the house and seeps into the foundation, because concrete is porous. When heavy rains saturate the soil, moisture migrates through the concrete foundation walls and the concrete floor slab. If a basement is unfinished, this moisture evaporates from the bare concrete interior surfaces. But if a subfloor, or carpet, or tiles, or drywall, or paneling have been installed over these surfaces, the moisture becomes trapped, providing ideal conditions for mould and rot. If you live in Nevada or Arizona, this process may not be an issue, but in Vancouver, a city built on the site of a cleared rainforest, it’s a significant concern. Modern drain tile minimizes the infiltration of the surrounding soil, and the risk of clogging, by using joined lengths of perforated PVC pipe, with the perforations — a series of round holes — oriented down, and the pipe laid in a gravel bed.

Clay drain tile, once manufactured nearby in Port Haney

….In 1987, the City of Vancouver changed its building code to prohibit the common past practice of connecting the downspouts from roof gutters to the drain tile system. The problem with this approach is that during a heavy downpour roof water can overwhelm the drain tile and reverse the normal flow, forcing water out the perforations and into the surrounding soil, making the saturation worse, and potentially causing moisture problems for neighbouring properties, or even flooding. Changes to the residential built environment can disrupt old patterns of drainage. Infill houses are often bigger than the houses they replace, with greater roof area to collect water. New houses may be closer together, maximizing their square footage by swelling up to fill the lot. And increasingly, broad walkways, patios, decks, large garages, and parking pads are covering a greater percentage of the typical residential lot, making more of the land impermeable. As the built environment becomes denser, rainwater has fewer options for soaking into the ground, and must be more actively managed. As one way of addressing this increasing need to manage drainage, new construction now requires a two-pipe system: drain tile for foundation drainage, and solid pipe for roof drainage, both pipes emptying into a sump, which then feeds the city’s storm sewer.
Renovation 101
This is all stuff I learn from my research. Over the next three years, as the renovation costs mount, and my faith in some of the people we hire evaporates, my early mornings will increasingly be spent scouring the Internet for information and guidance. Research, often last minute and panicky, aimed at making the most appropriate choice among an oppressive number of options, or aimed at spending money as wisely as possible, or in the case of bad hires, aimed at preventing the next rip-off or screw-up. Going into the renovation, I may have known a lot more about construction than the average person, but as I find out, there is a hell of a lot I don’t know, and trying to backfill that knowledge on the fly is at times acutely stressful.
Drainage Blitzkrieg
I tell my wife that installing a new suite over a damp basement slab and foundation walls makes no sense. Mould will breed. Expensive new finishings will progressively rot. She agrees and we get quotes from drainage contractors. One guy smells of stale booze, and doesn’t get back to us for three weeks. Another offers to make the GST magically disappear — probably along with his company if there are any problems with the installation down the road. The contractor we end up hiring is at first reluctant even to price the job. He says that giving quotes in East Van is usually a waste of his time because people on the East Side don’t want to pay his prices. And they don’t want to pay for a permit. He won’t do any work without a permit. I assure him that we want everything done properly. Interestingly, his price isn’t that much higher than the no-GST boy — although neither quote is cheap. We opt for a two-pipe system, even though the building code exempts replacement drain tile systems from the two-pipe requirement. Once the trenches are dug, putting in a second pipe doesn’t cost that much more.
….The drainage crew comes in with a jackhammer, diamond saw, and wheelbarrows and removes the old concrete walkways around the house in preparation for digging. The next day the contractor brings in his mini excavator, which can just squeeze down the four-foot side yard between the house and the fence, and digs the necessary trenches around the house, digging out the old drain tile in the process. He also digs a deep trench through the front yard toward the sidewalk to uncover the sewer pipe and tells us they’ll replace the original cast iron pipe with a new ABS one “so we don’t have to come back in a year and dig up your yard again.” The contractor has already surmised that the cast iron toilet drains and main DWV stack (drain-waste-vent stack) inside the house will be on the renovation hit list, and eventually having new pipe all the way from the roof to the street is preferable to connecting new to old.
….We arrive home from work to find our house surrounded by trenches, berms, and piles of earth. Our lot looks like a World War One battlefield, although the onslaught feels more like a World War Two Blitzkrieg. The crew has forewarned us, and we’ve relocated most of the shrubs and plants from the front of the house to the back yard. The place is a mess, but it’s all over in about a week: gravel beds, pipes, sump installed, trenches backfilled and tamped. We’re left with a mangled front lawn, denuded topsoil, and no walkways, but a well-drained property.
(Drainage: $10,700)
Finding contractors
Hiring contractors is proving difficult. Finding a drainage contractor wasn’t easy, and none of the concrete outfits we phone is interested in installing new walkways. One guy tells me that if I can build the forms myself he’ll place and finish the concrete, but otherwise forget it, he just can’t justify taking the time away from his bigger jobs. Olympic and associated infrastructure projects, concrete condo towers, and high levels of new housing starts are putting big demands on the local concrete industry. We eventually find an old-time Italian contractor who rolls up in his dilapidated pickup and tells us he can do the job.
(Concrete walkways: $2,000)
….The contractor who does our drainage job goes from feeling East Van is a waste of time to telling me that our job led directly to three others in the vicinity — people living in the neighbourhood who saw our project ongoing and approached him, begged him in a couple of cases, to look at the drainage situation with their properties. Whether it’s the changing demographics of the neighbourhood, or boom-related desperation, apparently getting his price on the East Side is now less of an issue.
….We’re well satisfied with the first step in the reno, although writing the cheque is a bit painful. When record rainfalls deluge Vancouver two months later in November, and a violent windstorm fells thousands of huge trees in Stanley Park a month after that, we feel we’ve dodged a bullet. A woman I work with tries desperately to hire someone to redo her property’s drainage so she can sell the house in the aftermath of a marital breakdown. I give her the name of the contractor who did our job, but like everyone else she phones, he takes days to call back. When he does finally return her repeated calls it’s only to confirm he’s insanely busy and can’t possibly do her job.
Lead and asbestos
My reading and research is causing me increasing worry about lead and asbestos. Most renovation web sites and books warn do-it-yourselfers against merrily ripping into walls and ceilings and old woodwork with demolition tools, especially in older houses. The danger is that you disturb old building materials and contaminate your home with lead dust from old paint, or worse, asbestos from any number of old building materials.
….Until the 1960s, it was common for paint to contain large amounts of lead, and it wasn’t until 1976 that the Canadian federal government limited the amount of lead allowed in interior paint to 0.5% by weight.
….Asbestos was originally thought of as a wonder material because of its heat- and sound-resistive properties, and structural strength. Until the early 1980s, it was used in thousands of building materials including floor tiles and tile adhesive, pipe insulation and duct tape, house siding, roofing felt and shingles, acoustical ceiling tiles, ceiling texture, and drywall mud. Perhaps most notoriously, until the mid to late 1980s asbestos-containing vermiculite pellets under the brand name Zonolite were used for attic insulation. The vermiculite came from Libby, Montana, but was processed in plants all over North America, including one right here in Vancouver on Industrial Avenue. Reading down a very long list of building materials that once contained asbestos, I conclude that with the right combination of timing and bad luck, one’s whole house could be made of asbestos.
….I contact a company that does hazardous materials testing and in January of 2007 a technician takes a variety of samples from all over the house — the white, plaster-like duct tape sealing the joints between sections of heating duct, drywall mud from the walls in the rental suite, floor tiles, ceiling texture, exterior stucco, and three colours of old paint, including the glossy, chocolate brown interior doors upstairs, and the linen closet shelves, which are bleen. The results aren’t terrible. Only the duct tape and the drywall mud contain asbestos. The duct tape is 60 to 80% asbestos, but that isn’t a surprise. More of a problem is the drywall mud, which contains up to 10% asbestos, because it’s spread throughout the entire suite. Undisturbed behind paint, it’s not an issue. But we want to tear out the walls. As for the old paint, the brown has a 3.49% lead content, and the bleen 8.26% — crappy and toxic — however both are upstairs and not part of the first phase of the renovation.
….The situation with the drywall mud puts an end to my weekend warrior aspirations regarding demolition of the old suite. A disappointment, but, safety first. We start looking for an asbestos abatement company that can do the demolition using the approved procedures.
(Hazmat testing: $1,100)
Learning the hard way
2007 is the year I go from thinking we can manage the renovation ourselves, and do a significant amount of the work ourselves, to accepting that we need help. My wife recognizes this reality much sooner than I do. However, I’ve never met a brick wall that I didn’t enjoy bashing my head against.
….In March, I arrange for what City Hall calls “a special inspection”. We want to make the unauthorized suite legal, and according to the city’s Secondary Suite Program the first step is to invite in a phalanx of inspectors — building, electrical, and plumbing — for a look. They itemize all the things that are required to make the suite legal, and the results are packaged up in a letter sent to the homeowner by the city.
(Special inspection: $132)
….When we get our letter it lists 41 code violations, 30 of which are electrical. The entire suite is on perhaps two electrical circuits, which may have been adequate for an unfinished basement in the 1940s in which no one lived, but is woefully inadequate for a self-contained, two-bedroom living unit with multiple appliances. When the tenants are still with us, the electrical outlet they use for a space heater in winter, and the outlet my wife uses upstairs for a blow dryer, are on the same circuit, as are half our lights upstairs — but no lights downstairs. Not surprisingly, this circuit frequently trips, knocking out our lights, and a couple of clocks that will once again flash 12:00 and have to be reset. Because there are no longer internal stairs connecting the two levels of the house, I have the peculiar joy, about once a week, of stepping out into the dark and the freezing early morning cold in my housecoat and rubber boots, feeling my way down the frosty and slippery back stairs, and fumbling in the dark with the key to the outer door of the lower level, so I can stare groggily at the unlabeled breakers on the electrical panel, trying to figure out which one has tripped — because they don’t give much of a clue from their appearance. Nothing other than the heater is affected downstairs, so the tenants have no inkling of this oft-repeated little ritual. I vow once again to label all the breakers, and once again, when the weekend rolls around with various other house-related tasks, I forget. I climb the back stairs cursing the Portuguese brothers who put in the suite, wondering if fado is also extending its tentacles around me, my affection for the East Van do-it-yourself ethos wearing progressively thinner.
No going back
According to our special inspection letter, even if we change our minds about legalizing the suite, or about even having a suite, most of the items in violation must still be rectified because “they do not comply with the minimum safety standards prescribed under the applicable By-laws and Regulations.” So there’s no going back. The City now has us on their books.
….I’m not one of those people who automatically adopt an adversarial or crafty stance toward city inspectors. Building codes have developed over a period of many years based on often-unfortunate community experience. I want to make use of the inspectors’ knowledge. That said, when I look at the long list of requirements in the letter, and contemplate the dollar cost associated with each one, I understand why many homeowners with rental suites want to remain off the books. According to a City of Vancouver report, of an estimated 25,000 secondary suites in the city, only 20% are legal. It’s about money. If the homeowners were to spend the often thousands of dollars required to legalize their suites, they’d lose a significant portion of their mortgage-helping potential. We’re going legal because it makes sense as part of a more general, large-scale renovation — although this may be revisionist thinking on my part. Building a new basement suite would include rewiring it to modern standards, which would wipe out all 30 electrical code violations in the process. We’re also going legal because I am who I am (more on this later).
….One of the city’s requirements is that we deal with the ceiling height issue. We need to provide a minimum headroom of 6’6” over 80% of the suite area and all exit routes. Like many houses of its era, our house has floor joists that run from the outer walls to a central beam supported by posts. In the basement, the underside of this beam is only 6’2” from the floor. Even though I don’t actually need to, I automatically duck my head whenever I walk under the beam. I have quite a bit of back and forth with the building inspector about this beam. The nightmare scenario sketched out by the inspector is that a tall tenant is woken up by fire in the middle of the night, attempts to run out of the suite but smacks into the beam and is knocked out, and dies in a fire that would otherwise be survivable. Promising that we’ll only rent our suite to short people doesn’t get us very far. The solution is to create a section of “flush beam” by cutting the beam where it crosses an exit point, by cutting back the joist ends in the same area, by moving the beam up into the joist space, and by attaching the joists to the side of the beam with U-shaped steel connectors called joist hangers. The inspector suggests we may want to consult a structural engineer.

Central beam in gutted suite causing low headroom in front of doorway

The men in white suits
In April, the men in white suits arrive — not for me, although I suspect my wife is already starting to question the sanity of our undertaking. The white suits are the hooded disposable coveralls the crew from the environmental contracting company wear, along with full-face respirators. The crew seal up the entire ground floor, and install a large fan to create negative pressure by blowing air from the suite out an open window. The open window is fitted with a large sausage made of poly to catch dust and air-borne particles, with a small hole on top to allow relatively clean air to escape. We rent space heaters for upstairs because we can’t use the furnace during the demolition.
(Space heater rental: $145)
The crew spends a week gutting the suite — the kitchen cabinets and sink, the bathroom fixtures and full-length, funhouse mirrors, the bars on the windows, the garish, crime-scene carpet in the bedrooms, the junky woodwork, the wall and ceiling drywall, the fiberglass batt insulation in the outer walls, much of it black with mould at the bottom where moisture has collected, and all the heating ducts. This final item prompts some discussion. Once the ducts are gone we won’t have any heat. Although the joints are wrapped in asbestos-laden duct tape, the tape is fairly inert and doesn’t pose a huge hazard if not damaged or disturbed. The ducts could be removed at a later date without much risk. We’ve already selected a heating contractor to replace the 50-year-old furnace, a new duct system is part of the work, and the weather’s quite mild — summer is on the way — so I give the go-ahead to remove the ducts.
….Once the gutting is complete and the suite is down to bare studs, the crew vacuums every crevice with an industrial-quality HEPA vacuum. A few items remain: the laundry facilities, the disconnected furnace, the hot water tank, the tenant fridge, and the subfloor and interior stud walls, which I plan to take apart myself so I can stockpile and reuse the wood. The demolition also reveals a nasty surprise. Where the concrete front stairs join the house, the exterior wall sheathing is heavily rotted. I can shine a flashlight right through gaps in the rotten wall to the space under the stairs. The space is full of black, rotted wood falling to the damp earth floor — the entombed formwork from when the concrete stairs were poured — and dozens of white spider egg sacs.
….With the back and forth of the demolition over, we get the front yard, still a mess from the drainage work, leveled and reconditioned with new topsoil, and re-sodded.
(Demolition: $7,800)
(Landscaping: $1,700)

Rotted exterior wall sheathing where house meets space under concrete front stairs
“TK” is Tony Kwan, who becomes the structural engineer of record for our project. When he arrives at the house for the first meeting, I’m in the suite and he sees me through the curtainless living room window. He’s accompanied by a young woman. I watch as he marches up the walkway, around the side of the house, and in the door at the rear. He gives a nod and a grunt and starts looking around. No handshake or introduction. He spends about a minute strutting back and forth like a little Napoleon, staring up into the joists, looking at the support beam and posts, occasionally saying Mmnnn. I’m uncertain what role the young woman is performing. My wife comes down from upstairs and I introduce her to TK. I explain to TK the issue with the central support beam and the headroom and he tells me we should replace the posts and beam with a weight-bearing wall, with a flush beam over exit points. The weight-bearing wall will require a concrete footing be poured the entire length of the house, which will necessitate removing a three-foot-wide strip of the concrete basement slab and digging a trench down to the hardpan — the solid material a couple of feet below the surface soil. I mention that I have my doubts about the condition of the subfloor, and the quality of the old basement slab. With a dismissive wave of his arm TK says, “Take it all out.”
….“Take out the entire slab?” I ask.
….“That’s what I say. These old slabs are no good. If this is my house, I would take it all out.”
….TK tells us that if we want him to do the job we need to give him a $500 deposit. My wife reports later that when I go upstairs to write the cheque, TK immediately switches from directives about the house to questions of a personal nature. “Do we have any children?” “No.” “Why not? You should have a family.” We assume that because my wife is Chinese-Canadian, TK feels at liberty to make pronouncements about such matters. He quickly figures out that my wife doesn’t speak Chinese, at which point he and his assistant wander a few feet away and begin a hushed conversation in Chinese, interspersed with giggles, as they look around the gutted basement.
….TK is not our first choice. A friend of ours is a builder, who at the time is working on a million-dollar renovation in West Vancouver. He gives us the name of the structural engineer on that project, someone he highly recommends. I phone this engineer and explain the connection. He’s apologetic when telling me that he’s currently working seven days a week, as are most structural engineers in Vancouver at the moment, and he simply can’t take on any more work. He gives me the name of a former classmate who he’d recommend. I phone the classmate. Same story — way too busy to consider more work. I ask the classmate if he has a recommendation. He pauses for a moment, and then suggests I could try TK. Thinking back, there may be some hesitancy there that I miss because I’m feeling pressure — trying to manage the renovation from my work place, yet again running into brick walls trying to find and hire people during a frenzied real estate and construction boom, the clock ticking on a house with no heat.
….After one or two more disagreeable interactions with TK, my wife and I, by unspoken agreement, begin referring to him solely by his initials.
(Structural engineering deposit: $500)
Do-it-yourselfers hit a wall
Over the spring and summer my fantasy of managing the renovation and doing a significant amount of the work ourselves persists. TK delivers the engineering drawings, which aren’t much more than the new suite layout I gave him, with some added technical specs for the weight-bearing wall and the footing, and his Professional Engineer seal. I’d asked for seismic upgrading information, because with everything open on the lower level of the house we have the opportunity to improve the earthquake resistance of the structure. One thing we discover once the drywall and insulation are gone is that there are no anchor bolts connecting the house frame to the foundation walls. The only thing holding the house on the foundation is gravity. Even a moderate earthquake could cause the house to vibrate off the foundation. The drawings do include some seismic information, but based on my close reading in the interim of Residential Guide to Earthquake Resistance, the information seems inadequate. However, time’s passing and the drawings are what I need to get the required development and building permits from the city — which I do get in June, but not before being initially rebuffed.
(Structural engineering drawings: $1,600)
….Our proposed new layout includes moving and altering the size of two windows on one side of the house. A stern gatekeeper at City Hall’s Development Services informs me that this alteration is prohibited in houses with side yards of four feet or less, because windows provide a pathway for fire to spread to adjacent houses, so there’s no point even submitting the plans. Existing windows are grandfathered — even massive windows in front of sawdust-burning furnaces, I speculate — but altering a window constitutes a new window governed by the current building code. The only way we’d be allowed to make the alteration we’re proposing is if we also install sprinklers throughout the house, a retrofit that typically costs about $25,000, the gatekeeper tells me.
….We’re forced to junk the beautiful layout we sweated over, and do a quick revision that involves some design compromises we aren’t overly happy with.
(Development and building permits: $922)
….Drawings and permits in place, I persevere over the summer months with what now feels like an official plan — or at least more of a plan than initially existed. I disassemble all the interior stud walls and neatly stack the lumber, orangey-brown Douglas fir, some of it free of knots. I remove the pink bathtub. I take apart the raised bathroom floor, constructed of 2x8s, and yank out the flexible bathtub drain pipe that snakes in the space beneath. I put on a half-mask respirator, goggles, and gloves, check my intestinal fortitude, and spend a day cleaning out all the rotten wood and spider eggs from the space beneath the stairs.
….Next is the subfloor. I use a flat shovel to pry up the sheets of 1/4-inch plywood the floor tiles are attached to, before going to work on the shiplap and 2×4 sleepers beneath. The pace really slows down here. The sleepers are spaced about a foot apart, and at every point where the shiplap crosses a sleeper it’s attached with two nails. Hundreds of connection points across the entire subfloor. The shiplap is springy when I try to lever it up between sleepers, and it tends to splinter at the first nail when I shove the pry bar directly into the connection point between shiplap and sleeper. I eventually give up on this method and begin using a circular saw to buzz through the shiplap at the mid point between two sleepers, walking the saw from one end of the house to the other. I can then stomp the short sections of shiplap, or come down on them with a long, straight wrecking bar, and they seesaw up on the underlying sleeper and pop loose. At this point, at my wife’s urging, I bring in a friend to help — the one who told me about fado. Together, we make short work of the subfloor, pile the cut-up shiplap on the patio outside, toss the long 2×4 sleepers to one side of the basement floor, and then relax with beers in the sunshine, feeling pretty good about ourselves. But it’s August 12th. Isn’t there some fable about the ant and the grasshopper and oncoming winter?
….I turn my attention to the now-exposed concrete slab. There’s also a brick chimney to consider, in the center of the house, running from the slab to the roof. After weeks of persistent phone calls, we’ve just signed a contract with a concrete contractor to do the central footing work, and perhaps install a new slab depending on what we decide, and paid a deposit, but we’re on a waiting list. The contractor isn’t that interested in doing the concrete demolition and excavation for the footing. He’d rather use his crew on the more skilled work of building forms, and placing and finishing concrete. I decide to tackle the demolition and excavation myself. I begin by installing two rows of jack posts to take the load off the central beam. Excavating the trench for the footing will require digging around the base of the posts supporting the beam, and likely destabilizing them. The beam and posts will be coming out, but I’m not prepared to handle that job myself. I order a large roll-off container, which a truck drops in front of the house, and rent a Hilti demolition hammer, a big fan, and an extra wheelbarrow. This time I need less urging from my wife to call upon my friend, and I’m also paying him because the work will be heavy and take a significant amount of time.
(Concrete deposit: $2,850)
(Roll-off container: $990)
(Tool rental: $180)
….Along the way, I’ve been taking samples of newly uncovered materials to the hazardous materials lab, and nothing in these new samples is of concern, although concrete demolition does produce silica dust, which is hazardous to the lungs if you don’t wear a respirator. But finally here’s something I can bash the hell out of without turning the house into a toxic waste dump. I make a couple of test passes with a sledgehammer and the concrete breaks easily enough — it’s only 2-1/2 inches thick, poured directly on top of brown soil — but it breaks into small chunks and shrapnel rather than nice pieces you can just lift into a wheelbarrow.
(Additional hazmat testing: $297)
My friend arrives on a Saturday morning early in September and we put on our protective gear and go to work. The plan is to break the concrete in a three-foot-wide strip the length of the slab, wheelbarrow the debris to the container, and then excavate as much of the brown soil as required to get to the hard ground. I’ve dug a test hole, and the hardpan is about two feet down.
….We work all weekend. Breaking the concrete is very slow going. The problem is that the pointed chisel on the demolition hammer tends to poke through the concrete rather than break it along a line. We soon figure out that we have to work an edge, and break away the concrete a little at a time. I now realize we probably had the wrong shape of chisel. Rather than a point, a flat, wide shape would probably have been more effective. Oh well — next time. If there ever is a next time. By the end of the day we’re wiped, but we have the concrete broken.

My friend with the demolition hammer
Sunday is just grunt labour. First loading heavy shovelfuls of concrete debris into the wheelbarrows and walking it out to the container, and then digging, digging, digging. Load after load of the damp brown soil. Finally we start seeing the yellowy-grey hardpan. We leave a safe amount of soil beneath the post footings, and the larger concrete pad supporting the chimney. We don’t get the entire trench excavated by the end of the weekend, but we’re about 85% done. Near the end of the day, my friend makes a worrisome discovery at one end of the trench where it meets the concrete foundation wall. The foundation wall extends only 18 inches below the surface of the soil, it stops 6 inches short of the hardpan, and it has no footing — a horizontal portion of concrete — beneath it. Just an 8-inch-wide concrete wall that ends. From a structural standpoint, this is not good news.
….As we’re packing up for the day my friend says, “You’ve got yourself a big project here.” We both laugh, sort of. He’s already suggested hiring the handyman he and his partner have used for several jobs. And during a break in our work he tells me about a recent basement slab demolition he heard about in the neighbourhood. Apparently the owner hired a contractor who used a remote-controlled micro excavator to do the work — a demolition robot. The entire slab was out in a few hours.
….I’m starting to feel I need serious help — interpret that as you see fit.

Concrete broken for central trench
Drainage problems, electrical problems, plumbing problems — the upstairs shower slows to a trickle if the washing machine is running — ceiling height and other building code requirements, asbestos and lead issues, foundation issues, rot, mould, seismic concerns, competing with all the other equity-swollen homeowners during a boom for contractors and construction industry professionals — these are the tarpits we aren’t aware of as first-time buyers taking an anxious 10-minute twirl around a 60-year-old house during a real estate boom, one of the few places we can afford in our target area that doesn’t look like total crap. Typically, these problems affect the things hidden from view, the various systems we rely upon to make a house function as a house, systems that are only vaguely understood, or not understood at all, by the average person. These are the unsexy but expensive things far removed from dreamy notions of granite countertops, stainless steel appliances, hardwood floors, and tasteful colour schemes that coordinate walls, window coverings, and upholstery. They’re the guts of a house, the organs, rather than the skin. And when they go wrong, the whole organism can go wrong. Most first time buyers really don’t understand the implications of those fateful words, uttered so blithely: we can fix it up.

Episode 6 total: $32,572. Includes a number of smaller, miscellaneous expenses not listed individually in the episode – mostly tools, small amounts of materials, and safety supplies.

Next episode
Part 7: “Renovation Nervosa Continued”
Animal show. Hellhole. No heat. Nightmare contractor. Bleeding money. And so on.

Financial details

From 2004 onward, all mortgage and LOC balances are as of 31 December of the year in question.
Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage (at purchase, Sep 2003): $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250
Mortgage principal: $247,330
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2005 Property Assessment (estimate of market value on July 1, 2004): $420,000
Equity based on assessment: $172,670
Mortgage principal: $201,829
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2006 Property Assessment (estimate of market value on July 1, 2005): $461,000
Equity based on assessment: $259,171
Mortgage principal: $191,884
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $4,291
HELOC interest rate: variable, at Prime.
2007 Property Assessment (estimate of market value on July 1, 2006): $570,000
Equity based on assessment: $373,825
Mortgage principal: $183,063
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $49,410
HELOC interest rate: variable, at Prime.
2008 Property Assessment (estimate of market value on July 1, 2007): $639,000
Equity based on assessment: $406,527

Fear and Ignorance in Vancouver – 34yr Old FTB Overpays For Condo; Inadvertently Becomes A Landlord – “It’s a learning process that’s so scary. No one can ever tell you what it’s going to be like. At least I’m in the market and I’m learning.”

Fear and ignorance can only drive a market for a finite amount of time. Over the next 5 years there will be a whole lotta learnin’ going on. -vreaa

This anecdote extracted from a Canadian Press story, ‘Homebuyers’ pain, mortgage brokers’ gain as tighter rules come into place’, by Derek Scott, 2 Apr 2010

“Buyer Leslie Urquhart said buying her first home was a horrifying ordeal. Urquhart, 34, began her six-month home shopping odyssey with one goal – to get into the market. But she quickly realized that was easier said than done. Increasing budgets, pressure from her realtor to commit to a place and finding a mortgage made her wonder what she had got herself into. Urquhart’s realtor urged her to use a broker, saying a broker could find a better interest rate than her bank. The broker did find a cheaper rate, but it was still too high for her to manage. Urquart was left somewhat cold by the experience with her broker. She said she was left in the uncomfortable position of putting her trust in someone she had only spoken with over the phone. “I never met with him, it was very impersonal,” she said. Although she eventually found a condo for $60,000 more than her original budget, she advised other first-timers to do their homework and prepare themselves for changes. “It’s a learning process that’s so scary,” she said. “No one can ever tell you what it’s going to be like.” In the end, Urquhart accomplished her goal of getting into the housing market, but she won’t be living in her new place as she had hoped. Instead, she will become a landlord, renting the place out while living in a basement suite at her parent’s house where rent is cheap. “At least I’m in the market and I’m learning,” she said.”

Vancouver Couple – $1.2M house; $700K mortgage; Husband laid off last month; Wife “unsure if her job is going to be there next month.”

Vancouver RE bulls ask why any homeowner would think of selling in a falling market. In this couple’s case, we can think of (1,200,000 minus 700,000) reasons. -vreaa

Ronaldo at greaterfool.ca 1 Apr 2010 11:45 am

“I know of one couple in Vancouver who bought a couple years ago and are sitting on a S700,000 mortgage, They are saying that their realtor is telling them that they can get $1.2 million for the house, which is an old 1920’s style, needing a complete renovation. I suggested that they sell and rent and wait a year. She says they are afraid to, as they would not be able to qualify to buy again, as husband got laid off and doing part time work, and herself unsure if her job is going to be there next month.”

An Ex-Pat Comes Home – “I’ve been frustrated talking to friends and family in Canada about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.”

CalgaryLurker at greaterfool.ca 27 Mar 2010 7:55 pm

“I want to share my experiences as a former expat coming back home. I lived in San Francisco/Bay Area for most of the last 11 years and recently chose to move back to Canada for family.  Since being back, I’ve been somewhat frustrated talking to friends and family about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.
I think what frustrates me the most though is knowing what it was like to live through the years after that peak, and the possibility of reliving them yet AGAIN here in Canada. The truth is I very much would like to own a home, I just am unwilling to sell my financial future to do it, which is what the last decade has asked of home ownership.
I am in my late 30s and have never owned a home, but instead chosen to rent. Financially I am certainly capable of buying, and came close on several occasions, but for various reasons ultimately decided it didn’t make sense for me. Our culture’s recent obsession that views homes as investments is an aberration in my view, and over the years I have chosen to put my money to work elsewhere. I suppose I developed this thinking during the 80s as I watched my father tried to sell our family homes during recessions in Alberta, usually at a loss. It certainly coloured his thinking.
After I moved to San Francisco in my late 20s, I watched the dot com bubble inflate and pop, lived through power brownouts, 911, antiwar protests, two terms of Bush, and saw the California real estate bubble inflate and pop, and the budget crisis that followed. What stayed with me is that nothing moves in a straight line for very long. It’s never different this time. People will always move en masse to find the next good thing (or avoid the next terrible thing) whether looking for a job or an investment. It has made somewhat cautious when dealing with my money and big social events like bubbles. Animal spirits be damned!
I do understand what the ride up feels like. It is exciting and it feels GOOD. I had to line up with 30-40 people just to see an apartment to rent, and usually had to overbid! In my industry, everyone was trying to figure out how to get an investment property or three. HELOCs were providing family trips to Hawaii and brand new cars. Every lunchroom conversation was about home reno projects. Etc..etc.. I chose not to buy back then even though a dozen of my friends and co-workers did because the numbers just seemed silly to me (perhaps being the son of an CPA something rubbed off). In retrospect I am very glad I didn’t cave to the pressure I was feeling at the time (though I went to open houses and talked to realtors, so it was close). Today many of my friends in California are underwater on their homes but making payments, some have lost their vacation and rental properties, and some are under threat of foreclosure. Many have had to scale back their lives. One even used to live in Stockton, the ground zero for the central valley collapse, where entire streets were gutted before he moved to Seattle. He lost about 200k of equity and considers himself lucky.
And these are not poor or dumb people by most standards. All of them work in software making 6 figure combined incomes, but they ‘caught the bug’ and started to believe the narrative. It is infectious. And, as you know from Garth’s site, the mortgages that have been issued over the past few years are stretched for perfection. If prices drop more than a few percent, or rates go up a little, or a few bad apples default, it starts a cascade. And although San Francisco proper was more shielded than further out communities from the declines, they eventually felt it too. This in the city that was’ jewel of the west coast’, and where ‘they are making no more land’, like so many arguments I hear now about Vancouver.
So, I recognise now I will likely have to rent until 2014-15 before the crash has played itself out here. Hopefully it will go quicker since the government has relatively fewer schemes left in its pocket to keep the prices high. I will be moving to Vancouver shortly (for business) and it is astonishing to me that prices are now HIGHER than San Francisco’s were, even at its peak. And I used to tell Americans friends about the sensibility of Canadians….
One side effect of the crash in California I noticed was the exodus of people. Either because they were broke, or lost their jobs, or didn’t like what was happening to the social programs, etc. Many people I know are now in Austin, Portland, and Seattle, cities which didn’t crash as mightily, but where housing is cheaper to begin with. (Actually look up the luxury 6000 sqft places with huge lot that you can get in Texas for the price of a Calgary condo. And that is simply what they cost, not crash pricing. Reminds you what housing SHOULD be.) These cities economies where buffered by the influx of people and I think are doing relatively better. The same might happen to Calgary and Edmonton when Vancouver starts to dip, but then again the American cities I mentioned have more diverse economies than in Alberta. If oil isnt high, the entire western provinces start to look like all of California.”

Many struggle to afford their homes – “The Conference Board defined housing costs as unaffordable if they exceeded 30 per cent of pretax income.”

What percentage of buyers of primary residences in Vancouver in recent years are spending more than 30% of their pretax income on their housing costs? What percentage of those having to eat less nutritious meals because of housing costs are ‘owners’? -vreaa.

The Conference Board of Canada released a report “Building From the Ground Up: Enhancing Affordable Housing in Canada” which is discussed in an article, ‘Many struggle to afford their homes’ in the G&M 30 Mar 2010. Excerpts:

“Many Canadians can only keep a roof over their heads by cutting costs in ways that could harm their health – such as buying less nutritious food.”

“About 75 per cent of Canadians are currently living in homes they can afford, the Conference Board said, adding a further 5 per cent have their housing costs subsidized by the government. That leaves 20 per cent of Canadians struggling to keep up with the cost of their homes, the report said. The Conference Board defined housing costs as unaffordable if they exceeded 30 per cent of pretax income.”

“My friends were trying to recover most of the costs linked to their one year of West Coast home ownership (almost 100K).”

From Vankouver at greaterfool.ca 26 Mar 2010 1:04 pm

“Two weeks ago I stood in the West Coast rain creating curb appeal with a garden full of pansies (tough flowers despite their name) on a cute but way overvalued piece of BC RE (I don’t garden). My other 5 friends (all professionals) scrubbed algae off a large deck, cleaned, and painted for 12 hours all in the name of helping friends get their house “into shape” and staged to sell. They were trying to recover most of the costs linked to their one year of West Coast home ownership (almost 100K). The experience was full frontal XXX BC RE. I’ve done the math and estimated that at the group’s average hourly professional rate the cost of fixing up the house to get it ‘market ready’ was somewhere in the ‘hood of about 12-14K…. the pizza and beer was great! They couldn’t afford to hire people to help them because it was too expensive even being in the highest income bracket – all the signs of the silly costs of owning a home. The good news is that foolish buyers were frothing at the mouth. The designer house was sold in less than a week at asking price, with multiple offers. Hate to say it but, the RE agent was quite useless.”

“Our discussions are not about when we are buying homes here, they are about when we will move back east. We were raised in large homes with lots of disposable income. We cannot imagine starting a family in a closet with little cash to spare.”

taylor192 at vancouvercondo.info 23 Mar 4:22 pm

“I’m 31 years old and new to Vancouver (since 2008) from Ottawa. Most of the friends I’ve made are in a similar spot:
– ~30years old
– have above average jobs
– want to settle down and start families soon
– moved here because of the lifestyle and Olympics
– moved from places where housing was 1/2 the price, yet salaries about the same (or higher)

Our discussions are not about when we are buying homes here. They are about when we will move back east. We were raised in large homes with lots of disposable income. We cannot imagine starting a family in a closet with little cash to spare. The catch-22 is that if the housing market collapses here, our above average jobs may go with it.”

Renters with $110K annual income; Bought Port Moody townhouse; Low interest rates the major driving force behind their decision

jesse, the blogger who provides data regarding the Vancouver RE market at his invaluable blog, ‘Housing Analysis’, presented 4 anecdotes in a comment at VREAA 23 Mar 2010. They will each be headlined. As he says, they have in common low interest rates. -vreaa

“Young couple with 1 year old baby were renting a townhouse but found same sized place in Port Moody for less than the cost of renting in terms of current mortgage rates. They wanted to own and they felt their jobs (legal aid and unionized union office worker) were secure enough to get into the market. They are likely around $110K gross income. Low interest rates were the major driving force for them to decide to buy. They elected for a 5 year fixed rate.”

Married couple; Combined Income 110K; Bought new condo in Surrey 2009; Cancel dinner with friend; Visa maxed out; Cable bill used last of their cash.

From T at VREAA 22 Mar 2010 10:31pm

“I have a friend who just got married last year. He and his wife are both employed by Coast Mountain Bus Co…so well paid by average standards…combined income of over 110k per year.
After they got married they bought a new condo in Surrey and furnished it. I was suposed to go for dinner with them tonight, but they had to cancel because they can’t afford it due to the cable bill taking the last of their cash out of their account and all their visa’s being maxed out. Boy am I a happy renter.”

“Friends with $100K income bought a $900K house. In order to be approved, they planned on renting their basement. This week they obtained a quote for the renovations of the basement: $50,000. They don’t have the money, and the basement cannot be rented unfinished. They are in big trouble.”

painted turtle at vancouvercondo.info 18 Mar 2010 9:29 pm and 19 Mar 2010 5:54 pm

“My friends bought a $900,000 house a month ago. Their family income is $100,000 (they have 2 kids). I do not know how they got a mortgage, but anyway, this is just the average house price/income ratio in Vancouver. Two weeks before moving in, the husband said: “I can feel torture has started and it will last for 35 years.” Charming. In order to be approved, they planned on renting their basement. But this week they obtained a quote for the renovations of the basement: $50,000. Of course they don’t have the money, and the basement cannot be rented unfinished. They are in big trouble.”…”I do not know exactly how their relatives are involved, but they are backing up the mortgage in some ways. However, it is clear they are giving a signature but not a single dollar.”

“I know another family (3 kids) who heavily borrowed from their relatives to buy a 2 bedroom, “for a few years, until we can buy a bigger place.” It has been 5 years. They cannot buy a bigger place, they cannot give the money back to their relatives, and the elder kid (teenager) is not very happy sharing a bedroom with two smaller kids.”

“We rent a Vancouver basement suite for $1175/mo. My landlord, a lovely man in his early 70’s, let us in on the fact that he will want to retire sometime soon. He expects to be selling for $800-900k. He thinks we can afford to buy the house off him!”

This story headlined by Garth Turner at his blog greaterfool.ca, 19 Mar 2010

“I am 26, getting married in the summer, live in Vancouver basement suite rental ($1175/mo), use public transit (no car and no other large monthly expenses), and have a good job. Our monthly household income is around $4500 with the prospect of an increase to around $5000 plus or minus by the end of the year. Between my hubby-to-be and I we have been managing to save $800 a month for just under a year. This is being added to a generous gift from his grandfather who wants to see us get into a house/home/homeowner situation. We have about $22000 saved so far. We have always said we want to buy smart – not fast.  So here comes the silly question…   My landlord is a lovely man in his early 70’s. He recently let us in on the fact that he will want to retire sometime soon. He expects to be selling for between 800-900k. There are two other suites in our house which currently take in $3325 combined. My landlord thinks we can afford to buy our house off him! Thoughts? (Yup – that’s the silly question.) I can always tell when people DON’T read your blog and want to discuss Vancouver real estate… (Oh yes – he did use the phrase “There’s cheap money out there right now.”) Okay. One more question to add to this: Can you see any amount of money from some type of scenario (investment from family, joint purchase with my brother and his wife from Seattle who own a house that was purchased there for 380k four years ago, some type of wind-fall like my hubby getting a film contract) allowing us to purchase a HOUSE like the one we live in now by the time our landlord would be looking to sell in several months?”

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Raise or Raze Update

Inventory of new houses and major renovations


Raise or Raze Update

The next couple of episodes of The Froogle Scott Chronicles will cover our major renovation. The renovation was a big, three-year chunk of our lives during which a lot happened — both good and bad — so wrestling that amount of material into shape is taking a bit of time. In the interim I thought I’d give readers a quick update about some interesting things I’ve noticed recently in our neighbourhood.
The first thing that caught my attention was that within days of completing my mid-February inventory of major renovations and new houses in the pocket of Grandview we live in, the inventory was already out of date. A couple of weeks ago, I heard the now-familiar bashing and crashing sounds of a demolition underway. A small one, a half block from our house, an old deck being ripped off the back of a 1920s or 1930s house to make way for a new addition, by the looks of it. A block farther on, the same story — another rear addition on a house of the same vintage. And a block in another direction, a huge, house-altering reno has just begun, judging by the two-storey-high scaffolding surrounding the entire house. I guess when you go to the effort of enumerating and categorizing things, you kind of assume they’ll stay still for a while. Well, I guess not.
However, the other thing of note is what’s going on with a cluster of four houses I mentioned in the previous episode:
I pass through a two-and-a-half block stretch where one house is being raised, another across the street is demolished and a new house is being built, and around the corner two houses are being totally transformed by the addition of second storeys.
All of these projects were underway at the same time, and at various points you could say they were at roughly similar stages of completion. Two of the projects have been complete for a couple of months now, and the houses are occupied. But the other two appear to be stopped dead, within 80% or more of completion. The houses — one new, and one a major reno including a second-storey addition — have windows and doors in place, stucco and exterior trim applied, and with the exception of an exterior paint job, appear complete on the outside. Looking through the curtainless windows, I can see the interiors have all the drywall in place. But there has been no significant new work for weeks. It’s not a case of the finish carpenters, and flooring and tile and kitchen and bathroom trades, going in and out. These places appear stalled, and locked up. I might not have noticed so soon if not for the fact that one of these houses was definitely stalled for months during the economic collapse of 2008, and into 2009. It got to the point of being sheathed with plywood and covered with black building paper, and then nothing. It sat through an entire winter, and longer, while the rain and wind tore at the paper, stripping portions of it and exposing the bare plywood. When work recommenced, the first job for the crew was re-doing the building paper.
There could be any number of explanations for what’s going on with these two projects, but the one that springs most immediately to mind is that the owners have cash flow problems. I don’t think most people would voluntarily choose to leave a nearly complete single family dwelling in a central Vancouver neighbourhood just sitting empty. How much money are the owners losing, daily, by doing this? Carrying charges on a construction loan or line of credit, rent to live elsewhere. It doesn’t make sense. If their finances are like the finances of most people living in this neighbourhood, they have some money, but not money to burn.
I know the shocking speed at which our renovation ate through what we thought was a fairly good pile of credit. About ten grand a week for a three-man crew and materials, with various trades popping in and out to do their piece. And both of these projects are quite a bit more extensive than ours. It’ll be interesting to see what happens with these two places — I’ll keep readers of VREAA informed.
Vancouver real estate appears to be giving mixed signals at the moment, at least in our little patch of paradise.