Multifamily in Edmonton

ThomasBeyer

Senior Forum Member
REIN Member
#21
Because I haven't purchased anything yet due to family reasons that is I haven't experienced the real numbers as far as expenses on houses or buildings I keep wondering about those proforma things which apparently seem to be maybe simplified or underestimated as compared to the real numbers in reality. this is because when I check proforma online I generally see the following numbers for expenses:
Property management: 10%
Vacancy: 5%
Maintenance and repairs: 5%

So what I did is I called a number of property management companies to check those numbers before I go forward with any purchase so I won't get surprises down the road and some of those agencies told me the percentage on R&M could be way higher than 5% in reality. They said it could be 15% to 25% on old properties. And vacancy could be 10% or more.

Do you think they could be correct or they may be also exaggerating?
As stated in my post above, capital upgrades and R&M need to be estimated realistically. They can be quite low in a renovated asset in a good area with low suite turnover, or they can be quite high in an older ugly asset in a crappy area with high suite turnover.
 

Matt Crowley

Senior Forum Member
Registered
Dec 14, 2013
776
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Edmonton
#23
The $750 rents are market in that dogshit market. Multi-family brokers are the least reliable brokers in commercial RE in my opinion and have run up the market with wild assumptions. Canada multifamily market is ~60% private investors. For these small deals, it isn't necessary for a broker to get repeat business.

In Edmonton, focus around Whyte Avenue. Zoning rules are going to change in the 5 years (lots of upzoning). Buy for location. Oliver... meh.
 
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ThomasBeyer

Senior Forum Member
REIN Member
#24
The $750 rents are market in that dogshit market. Multi-family brokers are the least reliable brokers in commercial RE in my opinion and have run up the market with wild assumptions. Canada multifamily market is ~60% private investors. For these small deals, it isn't necessary for a broker to get repeat business.

In Edmonton, focus around Whyte Avenue. Zoning rules are going to change in the 5 years (lots of upzoning). Buy for location. Oliver... meh.
I have met MANY reliable MF mortgage brokers. Most in fact. Only rarely do they make poor assumptions or "run up the market with wild assumptions". Who gave you that impression ?

Edmonton has many decent areas and some not so good ones. Just be realistic in your price and rent assumptions. Many overpriced deals in QMP, for example. Saw one today at 119/door with a 4.3% CAP on fake expenses and fake vacancies. More like 100/door.
 
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CorySperle

Senior Forum Member
REIN Member
Sep 1, 2010
605
305
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Edmonton
#25
The $750 rents are market in that dogshit market. Multi-family brokers are the least reliable brokers in commercial RE in my opinion and have run up the market with wild assumptions. Canada multifamily market is ~60% private investors. For these small deals, it isn't necessary for a broker to get repeat business.

In Edmonton, focus around Whyte Avenue. Zoning rules are going to change in the 5 years (lots of upzoning). Buy for location. Oliver... meh.
I must respectfully disagree with almost everything in this response.. Like Thomas, MF Brokers are very reliable and I have not met a questionable one, but hey if buyers are uneducated and willing to pay more why not?

Edmonton has many decent areas to make money, but White avenue is not one of them in my opinion, I know REIN members burned there as well, mostly paying a 20%+ premium on price for the same crappy asset you can find in north Edmonton, same bad tenants, and maybe 5% higher rents if that.

Good call on that listing Thomas, I saw that as well and agree price point <100 a door, maybe 90-95. The good news is vendors are starting to wake up and smell the coffee and I predict more sales in the near future closer to actual values and metrics a building should be purchased for.
 

DustinT

New Forum Member
Registered
Sep 17, 2017
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#26
For over twenty years this shitty area has been “transitioning”. Proceed with extreme caution in that area as light and shadow are meters apart. Values will NOT go up very fast in that area. Edmonton is oversupplied. I think $100,000+ per suite for rents at $750is far FAR too high, and certainly over $110,000 for such an old building with at best avg suite mix.

No condo conversion potential here with that suite mix.
Rookie question: in what situations or why do you want to convert to condos? Thanks.
 

ThomasBeyer

Senior Forum Member
REIN Member
#27
For over twenty years this shitty area has been “transitioning”. Proceed with extreme caution in that area as light and shadow are meters apart. Values will NOT go up very fast in that area. Edmonton is oversupplied. I think $100,000+ per suite for rents at $750is far FAR too high, and certainly over $110,000 for such an old building with at best avg suite mix.

No condo conversion potential here with that suite mix.
Rookie question: in what situations or why do you want to convert to condos? Thanks.
If mainly 2BRs, all above ground, in high demand area close to transit. Then doable with considerable cash required as very tough to finance partially discharged semi-sold building. Usually major upgrades required in-suite and major components plus reserve fund seeding. Very cash and work intensive and usually not worth anymore as buildings and condos trade at comparable prices these days. The gap used to be sizable but ain’t anymore.


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

CorySperle

Senior Forum Member
REIN Member
Sep 1, 2010
605
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Edmonton
#28
Another little nugget I will add, is that for the first time in a very long time investors need to carefully watch interest rates as there is little doubt now that rates will be 1% or higher in a year or two from now, even more. This needs to be carefully calculated into the CAP rate you are paying, as rents will have to be considerably higher to compensate. Borrowing at 5% on a 6% CAP gives you a 1% spread on what you are borrowing compared to the income. When rates shoot higher, say 6%, the CAP would have to be worth 7%, or in other words your likely selling or refinancing your asset at a 7. Owners were very fortunate to get "free" equity in the form of CAP rate compression, which is now over and is going the other way. A brief example:

- 24 suites with a 6 CAP, $165,000 NOI bought for $2,750,000
- When CAP moves to 7, new value is $2,357,000, almost $400,000 erased!
- Rents would have to increase to a new NOI of $192,500 to maintain the $2,750,000 value, or $100 a suite which is very very hard in a flat market!

Hence be extra cautious these days, and factor in a higher CAP rate down the road in addition to all of the above advice.

Happy investing!
 

ThomasBeyer

Senior Forum Member
REIN Member
#31
Five year rates will NOT be moving up 1% in a year or 2 .. maybe 0.2-0.3%
Sounds like a bet to me Thomas! Say loser buys lunch? I also predicted Trump to win the presidency :)

I truly hope your right, I do, but I've talked to a lot of folks as of late who believe otherwise.
Ok

Trump loses in 2020 and 5 year CMHC rates ( for loans over $1M but sub $5M) over 4%: lunch’s on me !


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

Frequent Forum Member
Registered
Aug 26, 2010
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#32
Ok

Trump loses in 2020 and 5 year CMHC rates ( for loans over $1M but sub $5M) over 4%: lunch’s on me !


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
I want that bet too then, just talked to a MF originator for a loan that size range and he said its currently 3.25-3.5 % CMHC 5 yr money ie 100 basis points above the currently 2.4 % CMB.
For rates to move 50-75 basis points in 2 years with a US economy at full employment does not seem in any way unlikely to me. Hope you're right, but anyone buying right now its definitely better to have a plan for rates moving 1 % higher.
Getting 5 yr CMHC money at 2 % could not last, hopefully others here got belly up to that table when it was laid :)
 

TangoWhiskey

Frequent Forum Member
Registered
Aug 26, 2010
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#33
The $750 rents are market in that dogshit market. Multi-family brokers are the least reliable brokers in commercial RE in my opinion and have run up the market with wild assumptions. Canada multifamily market is ~60% private investors. For these small deals, it isn't necessary for a broker to get repeat business.

In Edmonton, focus around Whyte Avenue. Zoning rules are going to change in the 5 years (lots of upzoning). Buy for location. Oliver... meh.
Matt, where do you get that statistic of the Canadian MF market being 60 % private investors? Last summer I hired a business student to do an extremely in-depth inventory of the Nova Scotia market, principally HRM and select small secondary markets, inventorying about 900 buildings total typically in the 800K-3 mill price range. It was actually a fascinating study that you could spin many phDs out of IMHO ranging from wealth building to ethnic changes in ownership predominance (I was amazed to see how 'immigrant' or non Anglo Saxon names now predominate in a very non ethnically diverse part of Canada - so much for all the crap about how you can't get ahead that gov't unions spin). But in this price range, even at the upper end, public ownership was very limited, primarily to Killam. I think price range is your key factor there in determining that statistic, if it is such.
 

bb2

Frequent Forum Member
REIN Member
Sep 10, 2007
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edmonton
www.vivarenttoown.com
#34
Queen Mary Park has some pockets that are very nice. To say it’s a dumpy area is a bit extreme. I owned a 4 plex in that area for years and did very well with it. The further away from 107 ave the better.


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