Investing in the Macauley neighborhood of East Edmonton

[ZanderRobertson]

Hi all,

I would greatly appreciate any insight anyone has regarding the McCauley neighborhood in East Edmonton.

Some points to facilitate discussion:

-The most important question obviously; is it an area of transition, or is it a false start?
- What does anyone know about city plans? I`m looking for the area re-development plan right now (help navigating the city website to find it?)
- Personal experiences that seem to indicate it is somewhat close to a breaking point regarding being an "area of transition"?
-Local rents and tenant profiles (are grant mckewan/Nait students attracted to the area?

-anything else that anyone can think about

Thanks,
Zander

 

[Thomas Beyer]

QUOTE (ZanderRobertson @ Nov 15 2008, 02:47 PM)
Hi all,



I would greatly appreciate any insight anyone has regarding the McCauley neighborhood in East Edmonton.



Some points to facilitate discussion:



-The most important question obviously; is it an area of transition, or is it a false start?

- What does anyone know about city plans? I'm looking for the area re-development plan right now (help navigating the city website to find it?)

- Personal experiences that seem to indicate it is somewhat close to a breaking point regarding being an "area of transition"?

-Local rents and tenant profiles (are grant mckewan/Nait students attracted to the area?



-anything else that anyone can think about



Thanks,

Zander




yes, extremely risky .. unless: bought at low low prices (lot value, house must be free !!) and managed impeccably with tough love principles .. it will be many years, a decade or 2 most likely until this area will turn around !!!



Walk there at night .. is this comfortable ? Would you want to live here ? Your daughter ?



Also read this here on Edmonton's "Black Triangle": http://myreinspace.com/public_forums/Real_Estate_Discussion/62-5912-East_Edmontons_Black_Trangle.html

 

[ZanderRobertson]

It's certainly rough, I've done some walking around there and there is definitely a high concentration of rough characters. However, what I found very interesting was that there were entire streets of new homes. On other streets there is a mix of older homes with brand new ones.



I would certainly never buy one of the older, more dilapidated homes. Having lived in a house built in 1956 I can attest that it is the source of enough headaches, I couldn't imagine a house built in the WW1 era which most of the old ones in that neighborhood were.



I found a brand new 3 bedroom half-duplex with a list price of 200k direct from the builder with warranty etc. That's what piqued my interest in this area, and seeing the streets that are brand new with pride of ownership etc. made me wonder if there were enough signs to indicate it's a bona fide area of transition. What ratio of "desirables" to "undesirables" would it take to truly indicate it's an area of transition?



Thanks for the response.



Zander






QUOTE (thomasbeyer2000 @ Nov 15 2008, 11:23 PM)
yes, extremely risky .. unless: bought at low low prices (lot value, house must be free !!) and managed impeccably with tough love principles .. it will be many years, a decade or 2 most likely until this area will turn around !!!



Walk there at night .. is this comfortable ? Would you want to live here ? Your daughter ?



Also read this here on Edmonton's "Black Triangle": http://myreinspace.com/public_forums/Real_Estate_Discussion/62-5912-East_Edmontons_Black_Trangle.html

 

[Thomas Beyer]

QUOTE (ZanderRobertson @ Nov 16 2008, 10:31 AM) ...What ratio of "desirables" to "undesirables" would it take to truly indicate it`s an area of transition?
Any area is an area of transition .. it depends on your time horizon ! 2 years ? 5 years ? 15 years ? 25 years ? 200 years ?

The question is: will this area improve FASTER than the average in Edmonton ? Maybe .. maybe not .. as east of downtown is a lot of room to build and an awful lot of of "weird" areas to be built over .. it`ll be decades for a full transition .. but will be better and better every year between now and 2028 ..

What rent can you get for that half-duplex ? Can you hold 5 years or better: 10 .. then it will probably be a worthwhile investment !!

Did you read the Black Triangle post .. any comments ??

 

[JBagorio]

QUOTE (thomasbeyer2000 @ Nov 15 2008, 11:23 PM)
Edmonton's "Black Triangle": http://myreinspace.com/public_forums/Real_Estate_Discussion/62-5912-East_Edmontons_Black_Trangle.html




I can definitely attest to this article. When I fist entered Edmonton in 2005 and only starting with RE investing I have partnered up 50/50 with someone I thought reliable and more experienced, and purchased a side by side property in the McCauley, an empty lot and lot with an old house for a very low price. The house had a tenant in it that gave us all sort of trouble (Just like what the article said about what type of tenants you can encounter around this area). The area was for sure very rough and I would not recommend it for anybody doing this for the first time just like I was at that time. It was the most grueling experience and a very good lesson to learn for me. I will never forget it. The partnership was not working well and the property was anything but problems. Luckily the market was in its way up and I was able to sell my share and cash out.







At that time I really thought that the area is in transition looking at the neighboring houses being revitalized and new, and now 3 years after it is looking like it still is a bad area.

 

[ZanderRobertson]

Yes, I read the Black Triangle post and I`ve read it before. It`s spot on for sure. Two of the major warnings (trouble tenants and dilapidated building) would be solved by buying a brand new building and being extremely choosy about tenants. Still there are so many unknowns; like would the landlord have the choice of being choosy, is there any interest in the area from desirable tenants?

According to Rent-o-meter the average rent for such a property would be 1200-1700. I would be inclined to think on the conservative side and say 1100-1200 (needs much more research). But, there is a fully suite-able basement as well. It would require a permit from the city and likely a further 15k-25k investment, but it is zoned rf3, so that aspect is not an issue. I suspect 600-800 might be reasonable for the basement. That brings the total rent to 1700-2000 per month. With 90% LTV and an interest rate of 5% amortized over 35 years it is a $902.56 monthly payment plus CMHC fees. With 80% LTV amortized over 25 years it`s a $930.57 mortgage payment. Without doing all the numbers it seems to leave enough room for cash flow, although vacancy allowance would have to be much higher than normal and rainy day fund would have to be high due to higher risk.

As for holding period, "my favorite holding period is forever." I tend to think this area will fully transition over the coming years not least of which due to it`s proximity to the centre. With energy price uncertainty here to stay I agree with Peter Tartzakian that people will use a multitude of options at their fingertips to reduce their dependency upon expensive energy. Cutting driving out is one of those options. But then I think back to what Chris Davies wrote in the black triangle report, it`s the East Hastings of Edmonton. Why hasn`t East Hastings undergone a huge transformation when most of Vancouver`s other downtown areas have. It`s risky for sure.

Thanks for the thought provocation.




QUOTE (thomasbeyer2000 @ Nov 16 2008, 03:47 PM) Any area is an area of transition .. it depends on your time horizon ! 2 years ? 5 years ? 15 years ? 25 years ? 200 years ?

The question is: will this area improve FASTER than the average in Edmonton ? Maybe .. maybe not .. as east of downtown is a lot of room to build and an awful lot of of "weird" areas to be built over .. it`ll be decades for a full transition .. but will be better and better every year between now and 2028 ..

What rent can you get for that half-duplex ? Can you hold 5 years or better: 10 .. then it will probably be a worthwhile investment !!

Did you read the Black Triangle post .. any comments ??