Does Strathcona area Edmonton still have appreciation?

[LJS]

We are looking at a 2bdr, 2nd floor condo conversion in a 1963 building in Strathcona area, Edmonton
Listed at 219,900 partially reno`d ie. kitchen not finished, bathroom partially finished, rest painted with new carpet
Storage locker, common laundry, with option to install insuite laundry
Developer will complete kitchen, bath for list $230,000
Rents aprox 1200-1250 for this area

Does Strathcona still have upside appreciation when the market comes back? Is this worth pursing?

Any thoughts, advice would be appreciated.

Thanks,
LJS

 

[Thomas Beyer]

QUOTE (LJS @ Apr 25 2009, 11:00 PM) ..

Does Strathcona still have upside appreciation when the market comes back? Is this worth pursing?

..
It is one of the best areas in Edmonton: close to UofA, close to White Ave, close to River Valley .. it will always be desirable !

Real estate appreciates through time, more or less with inflation. Are you honestly asking: will there not be any inflation anymore EVER ? As I can guarantee you that this condo will be worth more in 2050 !!

Now what you probably wonder is: will it go up in a year or 2 .. and the answer is: maybe .. maybe not !

Is it overpriced in such an old building ? It depends .. on: comparables, reserve fund, immediate neighborhood, noise, condition of this building vs. other buildings, interest rates ..

I did some research myself in the area for my 2 kids who are attending UofA ... and $230K is on the very low end of 2BRs in that area .. so expect the worst properties to be priced in the low 200`s .. as any decent and newer 2BR will be around 300K and up ..

So, to answer your question: Will there be upside .. of course there will be .. the question is: how long will it take and can you get there if you rent it for $1200 ..

 

[brentdavies]

Strathcona continues to be a tready area to live in. Values tend to hold and go up first in tready areas. Oliver was the tready area in the 1980`s and continues to hold value. Eastwood is not tready, and is a poor investment neighborhood.

Older condominiums are a tricky investment. You are buying an asset that is over 1\2 of life span over. Wood frame buildings have a life span of about 75 years in Alberta.

Reserve funds are usually too small and many older condos have planned or are planning a special assessment of $3000 to $10,000 per unit. 2 complexes I own condos, ( 1979, 1982) have in the past year have issued special assessments of $3200 and $5000.00 respectively. I have seen other complexes with assessments up to $15,000.00 per unit.

Older condominiums corporations may have kept with the reserve fund requirements and may be okay.

Recent conversions such as the one you are looking at is a prime candidate for future large condo fees increases. The developer underfunds the reserve fund, and the monthly fees are low. The new board gets in and a major expenditure comes up and the special assessment goes out. The developer is now ready to strangle me because I said this. But it happens all the time.

Have a company such as CAP look at the complex. Review the reserve fund study and the Board`s reserve fund plan.

Sometimes the good deal is not such a good deal.

 

[lyndsy]

QUOTE (brentdavies @ Apr 26 2009, 04:50 PM) Recent conversions such as the one you are looking at is a prime candidate for future large condo fees increases. The developer underfunds the reserve fund, and the monthly fees are low. The new board gets in and a major expenditure comes up and the special assessment goes out. The developer is now ready to strangle me because I said this. But it happens all the time.

Have a company such as CAP look at the complex. Review the reserve fund study and the Board`s reserve fund plan.

Sometimes the good deal is not such a good deal.Thank you for this valuable advice.

 

[LJS]

QUOTE (brentdavies @ Apr 26 2009, 04:50 PM) Strathcona continues to be a tready area to live in. Values tend to hold and go up first in tready areas. Oliver was the tready area in the 1980`s and continues to hold value. Eastwood is not tready, and is a poor investment neighborhood.

Older condominiums are a tricky investment. You are buying an asset that is over 1\2 of life span over. Wood frame buildings have a life span of about 75 years in Alberta.

Reserve funds are usually too small and many older condos have planned or are planning a special assessment of $3000 to $10,000 per unit. 2 complexes I own condos, ( 1979, 1982) have in the past year have issued special assessments of $3200 and $5000.00 respectively. I have seen other complexes with assessments up to $15,000.00 per unit.

Older condominiums corporations may have kept with the reserve fund requirements and may be okay.

Recent conversions such as the one you are looking at is a prime candidate for future large condo fees increases. The developer underfunds the reserve fund, and the monthly fees are low. The new board gets in and a major expenditure comes up and the special assessment goes out. The developer is now ready to strangle me because I said this. But it happens all the time.

Have a company such as CAP look at the complex. Review the reserve fund study and the Board`s reserve fund plan.

Sometimes the good deal is not such a good deal.
Extremely valuable advice. I am looking at the reserve fund study and with seed capital of $60,000 it is still deficient. Condo fees are $177/month at present.
What are the obligations of the developer when they say they will be "upgrading common area" and "new roof" within a specified time period. If these items are listed in the contract to purchase to be completed at the cost to the developer what protection does this offer?

Thanks,
Lori

 

[brentdavies]

quick check on a couple of buildings in Strathcona, taken from random mls listings in strathcona

9904-90 ave, $185 condo fee
10125-83 ave $247
9904-90av $275
10555-83 av $318

Condo fees usually includes heat and water, and some older buildings power also, in addition to the usually insurance, mgt fees, cleaning, snow removal, garbage, and reserve fund. Fees are dependant on the number of unit factors of the unit. So more detailed information is required to compare. But it quite the range. $300 for a walkup building is still realistic.

Just make sure to allow for an increase in fees.

I just got another notice of a special assessment, for another condo complex.

 

[LJS]

QUOTE (brentdavies @ Apr 28 2009, 12:21 PM) quick check on a couple of buildings in Strathcona, taken from random mls listings in strathcona

9904-90 ave, $185 condo fee
10125-83 ave $247
9904-90av $275
10555-83 av $318

Condo fees usually includes heat and water, and some older buildings power also, in addition to the usually insurance, mgt fees, cleaning, snow removal, garbage, and reserve fund. Fees are dependant on the number of unit factors of the unit. So more detailed information is required to compare. But it quite the range. $300 for a walkup building is still realistic.

Just make sure to allow for an increase in fees.

I just got another notice of a special assessment, for another condo complex.


thanks for the info. This building is in Garneau, but on the border 104th st. The reserve fund study looks weak, with $60,000 in seed money from the developer. Developer to replace roof, common area, landscaping in 2009. I think I could get $1200/mo rent for 2 bdroom but if the condo fee jumps to more than $250 it would be at minimal cash flow unless there is more rent upside. If the roof is replaced at cost to developer and the windows are new, what type of special assessment could pop up? This is a 27unit low-rise, 1963 building.

 

[brentdavies]

I like these types of buildings when you can buy all of the units, as a rental building. I don`t care for conversations as an investment for me. So my answers are somewhat cloudy.
In a 18 suite building I own,( 1968) I had to replace 1 entry door and frame due to age, Intercom system due to age, and the storm sewer has issues, but on the city side. Balconies decks are under a program to rebuild a couple every year. Insurance company is now asking for electrical upgrades from the 60 amp panels with ground faults in kitchen and interuption devices in bedrooms. Still under consideration.

Things that need to be replaced in a 40 year old walkup apartment in Edmonton.

entry doors
intercom
balconies
parking lot overlay
sewer issues ( are the current ones ok?)
electrical service to the property and suites, are they 60 amp to each suite or less.
Mailbox at front entry or inside out of sight
Fire alarm upgrades, fire doors, etc. were probably done at the time of purchase by the developer
emergency lights
Boiler system
Heating piping to suites including zone value and thermostats
Structural issues such as settlement in the property. (Most walkups were built over old housing sites, usually over 2-3 houses which can have poorly filled in basements)

Read through the reserve study again to answer these questions. If the answer is there, great.

Strathcona\Garneau still command the best resell prices and rents for walkup apartments in Edmonton. Oliver is good second. Make sure you are rented by September 1 every year. The annual influx of students for the U of A help drive up prices in July/August, and demand falls right off in September. Vacancies are highest in January and May-June.
Some additional competition from the new condos coming onto the market.

 

[Thomas Beyer]

QUOTE (LJS @ Apr 28 2009, 12:44 PM) Extremely valuable advice. I am looking at the reserve fund study and with seed capital of $60,000 it is still deficient. Condo fees are $177/month at present.
What are the obligations of the developer when they say they will be "upgrading common area" and "new roof" within a specified time period. If these items are listed in the contract to purchase to be completed at the cost to the developer what protection does this offer?
these are legal obligations by a firm that may have no assets .. so don`t buy into a conversion with work NOT done yet !

EXTREMELY RISKY ..

$179 condo fee for a 2BR is a joke !!

It must be at least 280-300 for an older property ..

hence: likely a cash call coming in a year or 2 !!

you coudl write an offer and leave money (say 20-30K) with your lawyer until the common area work has been done ..