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BC - New MF Builds - ARE YOU MAKING ANY MONEY?

Ivan Sabourin

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So, I don't know if anyone on here is building multifamily in the lower mainland, fraser valley...
Every time I do a price analysis on a property to build a M/F - the numbers don't work. This is no surprise, nothing new. But a month later, a M/F build starts on that site that I calculated bad numbers on. So I think "that guy is gonna work for wages"...
Well, if this happens enough times, it starts to make you wonder... am I doing the wrong calculations.

I would really like to chat with somebody building M/F in BC. Are you building at a loss to play against your portfolio?

It doesn't make sense to build, yet there is building everywhere. I really want to build a mix-use modern hi rise in abbotsford... but its beyond my financial reach... but not my abilities.
 

Devin Roberts

Devin Roberts - Brent Roberts Realty
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Many developers are building at dirt cheap qualities so they probably can do it cheaper. As well, many are larger groups who can afford to buy to hold and add to the portfolio at unreasonable returns. GV is a worldwide market which brings the big players


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Ivan Sabourin

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Building cheap just destroys any potential profit you think you've made with unnecessary early repairs.
I would think GV would still need to provide at least small returns. Some of these properties don't seem to make any return until 30yrs. That seems like a ridiculously long HOLD to lock up your cash and if this is happening, how can I get an invite to that table so I can pitch some of my ideas for developments around here.
 

Thomas Beyer

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I too built at a great financial loss with lots of personal stress.

Don’t do it unless you partner with someone experienced and even then high risk.

Building used to be medium to high risk endeavour with fairly high financial rewards. Today it is high risk with very weak returns. Overtaxed and overregulated.

It’s one reason though why we have a shortage of newly built everything residential: SFHs, townhouses, affordable larger condos AND rental properties. Thus in time prices will make it worthwhile. There’s also firms emerging that have pre-built processes to reduce construction cost AND timelines. We will see more of that as stick built on site with 25+ sub-trades seems indeed very inefficient !!

Gov incentives exist but often far too small.

Proceed with extreme caution.

Thomas Beyer, Asset Manager & Improver, Hard Asset Investor & DeFi Asset Hodler, Author, Father, Mentor, Hiker, Kayaker www.prestprop.com
 
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Ivan Sabourin

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Hi Thomas,

I have ventured into the manufactured builds ( 1 - 6 story multifam sell all, and a few homes)
The efficiency is very high on site and the timelines can be controlled very effectively but I have noticed 2 major drawbacks. 1) the pre-fab is done in a climate controlled building which sucks out the humidity in the lumber. When the pre-fab stack lands at site, they suck up all the moisture and chek, crack, and twist. I find it virtually impossible to get square and true line out of these projects - goes against quality... but hey, nobody cares about that out here. 2) Site dimension... you better not cost cut on the concrete formers or the engineers. If either of those trades is sloppy, you get an absolute ton of back-framing which eats away at all the savings from the pre-fab in the first place.

But I do believe that is the way everything will be build soon.

I do like the foam block homes... only have 2 of those under my belt. I don't know why more people aren't building those (aside from the price). I am defiantly going to build my own next home out of that.

Before I can do all that, I have to stop working for everyone else and work for me in building my own real estate cash-flowing portfolio with properties in western Canada. I just have no interest in Eastern Canada despite everyone telling me to invest there. I guess I don't have the right plan built yet :)
 

stellartran

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i find some useful apps related to estate at apkfun (such as Real Estate & Homes; Housing App: Buy, Rent, Sell Property & Pay Rent)
 

Developer

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We build new rental multifamily in a couple of different Canadian markets (not greater Van) and have made good returns on recent projects but I am concerned about some of our planned projects. There is high construction cost inflation/uncertainty, an increasing rate environment and lots of competition so it is a fairly risky environment to be building in right now
 

RE123

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I can think of a few things - 1) Everyone has different ROI expectations. For some reason many people are content with hitting singles and doubles despite the risks. 2) Most Canadian markets have seen major price increases in the last few years. Combine that with higher construction costs and slightly lower rents (due to the pandemic) and it gets difficult to make projects work. 3) Most development projects won't work if you're paying retail for the big three - land, construction, and money. You need to get at least 2 of the 3 working in your favour. For example, someone who is able to complete the build themselves and have enough money to self-finance or at least secure low rates on construction financing is in a really good position to make projects work. 4) I think some people are working for wages. People who are already in the business of building may take on a development knowing that they won't make money as a developer but that they'll make money as the builder in the same way that they would if they were building for a third party.
 

Thomas Beyer

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CMHC now offers 95% financing .. with some caveats of course.


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Developer

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CMHC now offers 95% financing .. with some caveats of course.


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Been around for a while now via the flex program. This program has certainly encouraged a lot of developers to build more than they otherwise would have - us included
 
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