ARV in edmonton

DustinT

New Forum Member
Registered
Sep 17, 2017
16
6
3
40
#1
Hey guys, looking to buy my first property. Want to try and follow the brrrr strategy. I'm looking to try and get an accurate ARV to calculate for when I get a mortgage. Two issues, one, in some cases there are very few comps so if I go further back (instead of 0-6 months, up to two years back) how can I account for the change in the market in that time period? Is that data available somewhere?

Two, I've read a few different things on how to value the difference between the subject property and the comps, X for an extra bedroom, X for 100 sq ft, X for extra bathroom, etc. Anyone know of a good resource for those types of figures to help one do comps? I know it might be different for different markets and/or different types of properties.
 

Matt Crowley

Senior Forum Member
Registered
Dec 14, 2013
873
379
63
Calgary
#2
Hi Dustin,

If you want to go forward with a brrrr strategy (Buy, Rehab, Rent, Refinance, Repeat), then you want to be in a market where there is some real absorption. If the market is too thin to absorb what you are selling that is a problem. The banks will probably have trouble getting their heads around a valuation where there is nothing to point at.

It is hard to substitute asset-level knowledge with set formulas. At some level you should know your $PSF for different level of renos. The light-touch, lipstick on a pig approach works fine in booming markets. Stronger businesses are built on actually improving assets. As a starting point, know every single sale in the market for the last two years and visit every home for sale on the market (sounds like you are looking at a relatively small market). Then get a Realtor to hook you up with getting the sale comps when they close.

The core challenge with the BRRRR strategy is there are relatively few Canadian markets where this will be effective (from a single family home perspective), and I'd argue no major markets. A better strategy is probably buy, fix, sell based on the price to rent ratios. With refinancing comes a higher debt load. Keep in mind the taxes you will owe on the assets when you pull out the tax-free refinancing proceeds as well. Tax due at final sale.

Teranet provides a broad market indication of where price inflation is using same-sales methodology. It is the best in Canada I know of.
 
Likes: ThomasBeyer

Michel Lafleur

Frequent Forum Member
REIN Member
Apr 30, 2015
133
136
43
#3
Hi Dustin. I work as a Realtor in the Edmonton area and can help you out with some ideas around rough ARV.
What neighborhood are you looking in? What size of property is it, and is that above or below average size for your chosen neighborhood & property style? Does it have a garage or not? Is the property in a quiet location, or along a busy road? Anything unique/special about the property, or is it a pretty standard property?
What sort of renovations are you planning to do? Paint and trim? Full renovation as a single family home? Full renovation and creating a legal secondary suite?
If you are doing a BRRR and planning to keep it, the re-sale ability (and the fact that its a buyer's market here) doesn't matter as much.
Pending which neighborhood and product you are working with, it may be tough to find good sold comparables from within the past 6 months (which is what most appraisers look for.) Finding sold comparables can be a challenge in low inventory locations, or when you are creating a secondary suite in a neighborhood that isn't known for secondary suites (alot of neighborhoods have them, but they were all purpose built to keep, and never hit MLS.) If this is the case, I'd suggest looking on the City of Edmonton Website on the "map of legal suites", and finding a few local comparables (they wont show as sold, but you can likely use their assessment values, or try connecting with the owners to get a sense of approximate market value.)
 

kir

Inspired Forum Member
Registered
Oct 4, 2007
188
2
18
#5
Hi Dustin. I work as a Realtor in the Edmonton area and can help you out with some ideas around rough ARV.
What neighborhood are you looking in? What size of property is it, and is that above or below average size for your chosen neighborhood & property style? Does it have a garage or not? Is the property in a quiet location, or along a busy road? Anything unique/special about the property, or is it a pretty standard property?
What sort of renovations are you planning to do? Paint and trim? Full renovation as a single family home? Full renovation and creating a legal secondary suite?
If you are doing a BRRR and planning to keep it, the re-sale ability (and the fact that its a buyer's market here) doesn't matter as much.
Pending which neighborhood and product you are working with, it may be tough to find good sold comparables from within the past 6 months (which is what most appraisers look for.) Finding sold comparables can be a challenge in low inventory locations, or when you are creating a secondary suite in a neighborhood that isn't known for secondary suites (alot of neighborhoods have them, but they were all purpose built to keep, and never hit MLS.) If this is the case, I'd suggest looking on the City of Edmonton Website on the "map of legal suites", and finding a few local comparables (they wont show as sold, but you can likely use their assessment values, or try connecting with the owners to get a sense of approximate market value.)

How exactly can you access the "map of legal suites" in Edmonton? I went to the assessment page and see what themes are available in the legend and can't exactly find it. Does anybody have the URL? When looking at the assessment value for my houses with legal suites, it seems the City does put a premium on value since my houses with legal suites are 5K to 10K higher than the area assessed homes. Maybe I should appeal. But it would be nice to get a map of legal suite locations...
 

Matt Crowley

Senior Forum Member
Registered
Dec 14, 2013
873
379
63
Calgary
#7
@Michel Lafleur just a word of caution with BRRR and secondary suites. The core problem is that there is no premium for developing secondary suites. Secondary suites, taking a finished one-furnace basement to a legal suite, costs in the neighbourhood of $30k and reaching about $50k is not that unusual. The market price for selling a home is ~$10k-$15k for secondary suites from conversations I've had with Realtors. So the exit value and strategy hugely matters because putting the suite in does not create value...that is before factoring in the renovation time without rent and carrying costs.

As a general comment, you should always think of the exit strategies for any asset you buy. If the asset is worth less than the cost of those renovations, that is a problem. The BRRR is not going to work like you think it will.

In Edmonton / Calgary right now, my advice is to buy legal suites and do not renovate yourself. There are remaining suites that you can buy from the last boom where investors got smoked. You will not get your money out of developing a secondary suite from what I have seen!
 
Likes: Mitch 6711

DustinT

New Forum Member
Registered
Sep 17, 2017
16
6
3
40
#8
What I need to know is if there is a two bedroom subject and a three bedroom comp, if all other things are equal what would the price difference be, or if theres 100 sq. ft. more, an extra bathroom, etc. etc. I know it's not going to be often youre comparing exact apples to apples but if I'm able to come up with reasonable monetary value assumptions on several things that can be compared apples to apples and by doing each of those I will have something decent to go off of.
 

ThomasBeyer

Senior Forum Member
REIN Member
#9
What I need to know is if there is a two bedroom subject and a three bedroom comp, if all other things are equal what would the price difference be, or if theres 100 sq. ft. more, an extra bathroom, etc. etc. I know it's not going to be often youre comparing exact apples to apples but if I'm able to come up with reasonable monetary value assumptions on several things that can be compared apples to apples and by doing each of those I will have something decent to go off of.
If you don’t know these basic facts you’re not ready to do a buy-upgrade-flip- or -rent project. You will likely get burned and lose tens of thousands of $s.

Start with a basic house first, learn the ropes, then advance to more senior projects.

How many properties do you own and have managed successfully ?


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
Likes: Matt Crowley

DustinT

New Forum Member
Registered
Sep 17, 2017
16
6
3
40
#11
If you don’t know these basic facts you’re not ready to do a buy-upgrade-flip- or -rent project. You will likely get burned and lose tens of thousands of $s.

Start with a basic house first, learn the ropes, then advance to more senior projects.

How many properties do you own and have managed successfully ?


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
Like you said I have to start somewhere. I'm just trying to make sure I have the most information possible before I pull the trigger. I don't know what a "basic house" is. If you mean, just buy and hold, I'm not sure why I would do something that doesn't fit with my investment strategy, I want to tie up as little of my own capital in each project as possible. I am starting with properties that are not expensive, relative. And I am doing hours of research, analysis, looking at comps, etc. every night. Plus I grew up on a reserve, so I'm good with taking risks.

I thought that these were "basin facts" as well, and yet I can't seem to get someone with knowledge of the market to help me out. I'm sure with experience as you suggest I will be able to refine the process and be much more accurate and avoid mistakes, but how would I get there if not by gathering information and putting into practice?

Anyway, I'll pay someone here to answer some questions for me. Send me a private message if interested. Experience with single family homes in Edmonton required.
 

kfort

Senior Forum Member
REIN Member
Sep 1, 2010
1,496
276
83
#12
Don’t pay anyone for that info!

Do some more reading here, lots more. You’re in the right spot and asking good questions, they’re just mostly early questions that will be found in archived threads here or in books like Don Campbell’s


Sent from my iPhone using myREINspace
 
Likes: DustinT