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Calgary condos undervalued

Developer

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Normally I would agree with you Martin and would avoid buying condos however I have a friend who just bought a 2 bed, 1 bath condo with an underground parking stall in the Beltline of Calgary in a high-rise concrete older building that I would classify as B class for $160,000. Spent $15,000 on renos and has it rented out for June 1st occupancy at $1450/month. Cash flow positive with 20% down. All in it sounds like a pretty decent investment and a better deal then what apartment buildings are selling at.
 

Martin1968

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Normally I would agree with you Martin and would avoid buying condos however I have a friend who just bought a 2 bed, 1 bath condo with an underground parking stall in the Beltline of Calgary in a high-rise concrete older building that I would classify as B class for $160,000. Spent $15,000 on renos and has it rented out for June 1st occupancy at $1450/month. Cash flow positive with 20% down. All in it sounds like a pretty decent investment and a better deal then what apartment buildings are selling at.


Sure, there could be the odd exception, however I should clarify that my opinion on apartments buildings (bottom B class, C or bad neighbourhoods) is exactly the same, hardly any cashflow. But then again, there is a way of making money on those by upgrading and increasing and refi and so on. Different way of making money.

It would depend tho on what you find acceptable cashflow. Quick calculation on the acquired condo is a minimum monthly cost of 1200 for mtg 600/insurance 100 /prop tax 100 and condo fees at appr 400.00
That does not include maintenance, vacancy and other unexpected cost.
So, yah it wouldn’t get me excited. But, there is always the mortgage pay down and that always counts for something to.
 

Thomas Beyer

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Why condos at all? I remain convinced that all condos, older walk ups and new builds are bad income generating properties. Many folks bought these 'cheap' converted condos in Edmonton in 2008 when the market cratered, and even today heavily regret it. My own PM in saskatoon is boasting at how 'cheap' condos are and is loading up on them.

My two cents, cheap = crap. A much better Calgary play would be to buy multiple SF units and sell them off to owners a few years from now.. Commercial assets are even better and a decent apartment block is still a much better investment than a substantially discounted condo.

To add to that, these cheap condo’s that are being talked about in Calgary (Edmonton same situation) aren’t even in B class buildings. More like bottom C buildings or below.
They are bad for several reasons, re sale in the future, and any appreciation will be minimal, and looking at monthly condo fees in those older buildings you would be anywhere from $300.00 to $550.00 per month.
Cashflow non-existing. You would also need extra cash to update the outdated units.
Now try to update your tenant profile in a tired looking building.

Frankly, to me you purchase real estate much alike a modular on a trailer park. You will attract similar type tenants as well. Money down the drain.
Bad idea if you ask me.

Well said

Buy a quality condo, or better a TH, half duplex or house OR the whole building or the whole mobile park !!


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 

Developer

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This deal wouldn't get me too excited either and we aren't looking to buy in Calgary at this time, however it is easier to find good deals when there is an abundance of supply and low demand so if you have a bullish outlook on Calgary looking at the condo market may be a good idea. I'm not that optimistic on the Calgary market in general and would be surprised to see much capital appreciation in the next couple of years but I do believe the rental market won't get much worse. We've seen things slightly improve in the last two years with slight rental price growth and lower vacancy so hopefully things continue to move in the right direction
 
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