Vacant Homes and New Builds/Show Homes

[RandyBett]

After a conversation today with two veteran REIN real estate investors-Owen Shaw and Ryan Chernesky-they prompted me to look at the number of total homes on the market that are vacant and/or a new build/show home-either way the home/condo is empty.

Here`s the numbers for Calgary and area-total units at 9:02 pm was 11,882. Total units either vacant, new/never occupied or a show home is 3544!! That means 29.82% of all homes on the CREB MLS are empty!!

How about the greater Edmonton area-Here`s the numbers for Edmonton and area-total units at 9:07 pm was 10,300. Total units either vacant, new/never occupied or a show home is 3434!! That means 33.34% of all homes on the EREB MLS are empty!!

Amazing.

And of course this doesn`t include the FSBO`s!!

Be on the look out for motivated vendors.

 

[nepoez]

Hm.. what does this mean to us?

QUOTE (RandyBett @ Apr 28 2008, 09:16 PM) After a conversation today with two veteran REIN real estate investors-Owen Shaw and Ryan Chernesky-they prompted me to look at the number of total homes on the market that are vacant and/or a new build/show home-either way the home/condo is empty.

Here`s the numbers for Calgary and area-total units at 9:02 pm was 11,882. Total units either vacant, new/never occupied or a show home is 3544!! That means 29.82% of all homes on the CREB MLS are empty!!

How about the greater Edmonton area-Here`s the numbers for Edmonton and area-total units at 9:07 pm was 10,300. Total units either vacant, new/never occupied or a show home is 3434!! That means 33.34% of all homes on the EREB MLS are empty!!

Amazing.

And of course this doesn`t include the FSBO`s!!

Be on the look out for motivated vendors.

 

[Bill]

QUOTE (nepoez @ Apr 29 2008, 09:16 AM) Hm.. what does this mean to us?


Lots of very motivated sellers. If it is vacant, they must be living somewhere else so they are now paying two mortgages, or a mortgage and rent or worse yet they were trying to flip the property and are now paying renovation costs on top of the mortgage. Any of these situations would make them very eager to negotiate.

Also if the property has been on the MLS for quite a while they may not be as concerned about money as they are timing. If you could purchase it very quickly they would consider lower offers. This would make it an excellent time to take advantage of the REIN strategy of submitting two proposals at once to the seller to find out their motivation. Perhaps one low price with a very quick posession, and a second offer with a higher price, longer closing and a VTB?

Did that help?

 

[nepoez]

Thanks for the answer. I had no idea that`s what those numbers imply!
By the way, VTB means the vendor provides you the mortgage and charge you higher rate than bank right? What`s the reasoning behind a VTB. I`m still confused about that.

 

[grantala]

Good post. Always nice to have some actual numbers to judge a market.

As far as the VTB`s go `nepoez`, first, do a search on this fourm for Vendor Takeback Mortgages, as there is alot of discussion on these, and secondly, do a google search as well - you`ll find lots of reading to give you the understanding.

 

[DonCampbell]

Great numbers Randy... and more of a sign that speculators are getting shaken out of the marketplace as predicted.

Generally, you will find a couple of different types of owners who have these properties for sale:

1. Pre-Build speculators who put a `deposit` down during the huge boom (we`re calling the Tiger Woods Years) of 2006 & 2007. These properties are now coming available for occupancy and they must now sell to reap their profit.

2. New Home Buyers who, rather than reduce their risk and sell their current home long before their new house was ready, decided to hold on to it to "Make a Quick & Easy Buck." They made these decisions during the exact same time as the group #1 above did, thinking it is always easy to sell and markets are always hot.

Sadly, people in both of these groups played the total speculation game, just like when you throw the dice in a game of craps... you win some and you lose some.

Investors on the other hand understand that investment is about cash flow, market knowledge and long-term fundamentals.

This number of vacant properties will also have a ripple effect out to the house building industry as many of these properties will be fairly new and/or renovated and immediately available, which will provide a choice to those moving into the city. Watch for a low number of house starts in the city this year while the market `self-cleanses` and gets back to the pre-Tiger Woods years like 04 and 05.

 

[rabrol]

I`ve been watching the Edmonton market for a couple of months now, and I am trying to figure out how to get into it. Having read Real Estate Investing in Canada I feel I am beginning to acquire the right kind of knowledge. However, despite all the current vacancies I haven`t been able to figure out a way to get a cash-flowing property in the city.

Ideally I want to begin my part-time investing career here, as it is where I live. Looking at some of the deals that are around....

1 bedroom condos for sale by a REIN member. Cost $150,000. Monthly rent = $900.
So putting 25% down it would work out at 900 x 12 / 112500 = 9.6%.
According to Don`s book, it doesn`t hit the magic 10% to be considered further. That said it does pass the 8% rule which seems to be thrown around these days!

So we look at the cashflow....
Mortgage payment = $670 per month.
Condo fee = $150
Insurance = $30?
Property management & rental vacancies = $90

That totals out at $950 and I`m sure there would be more costs...utilities etc. Am I missing something, or is there a way to make this work?

I see the economics are looking so good for the city, I`m just struggling to find a way to break in....
All advice welcome ;-)

 

[nepoez]

I`m not expert but what I`m doing is try to find a realtor who will search for properties that match the criteria. Give him the 8-10% rule and he`ll get you a list that you can filter more on.

QUOTE (rabrol @ Apr 29 2008, 02:52 PM) I`ve been watching the Edmonton market for a couple of months now, and I am trying to figure out how to get into it. Having read Real Estate Investing in Canada I feel I am beginning to acquire the right kind of knowledge. However, despite all the current vacancies I haven`t been able to figure out a way to get a cash-flowing property in the city.

Ideally I want to begin my part-time investing career here, as it is where I live. Looking at some of the deals that are around....

1 bedroom condos for sale by a REIN member. Cost $150,000. Monthly rent = $900.
So putting 25% down it would work out at 900 x 12 / 112500 = 9.6%.
According to Don`s book, it doesn`t hit the magic 10% to be considered further. That said it does pass the 8% rule which seems to be thrown around these days!

So we look at the cashflow....
Mortgage payment = $670 per month.
Condo fee = $150
Insurance = $30?
Property management & rental vacancies = $90

That totals out at $950 and I`m sure there would be more costs...utilities etc. Am I missing something, or is there a way to make this work?

I see the economics are looking so good for the city, I`m just struggling to find a way to break in....
All advice welcome ;-)

 

[nepoez]

By the way so far I haven`t got a realtor that`s doing that. He just throws be 20 listings that don`t even match the 8% rule... then another site he owns that is missing prices on half the properties. He doesn`t try to find out the rents either, just gives me a generalized ratio of 1br=900 2br=1100 3br=1300, seems about right though..

A couple of nice REIN members have referred other realtors to me. Perhaps they will be better!

QUOTE (nepoez @ Apr 29 2008, 04:20 PM) I`m not expert but what I`m doing is try to find a realtor who will search for properties that match the criteria. Give him the 8-10% rule and he`ll get you a list that you can filter more on.

 

[RandyBett]

Thanks Don for the input.

Yes the amount of speculators holding new and vacant homes is huge.

Don`s email and comments in regards to economic fundamentals and looking behind the curtain certainly ring true for 2008 and beyond.

We need a shake out of the housing market to get rid of the excesses-like the body getting rid of toxins-a purge will happen. And that probably includes so called experts-check their motivation and their sources/qualifications.

Take the time to read and study before jumping to a conclusion.

Again Don and the REIN team provide a balanced view of the market place.

Till the next Calgary workshop-ask me for a copy of a book that is recommended read by over 5000 millionaires polled over the past 11 years in the US. It is also rated as the number one business book by Canada`s biggest philantropist for 2007!!

Go forth and prosper!