Central McDougal Area Edmonton

[LauraMalcolm]

Hi,



Wanted to get some feedback on the Central McDougal area in Edmonton. I've read some of the older posts discussing this area and it sounds like it has been a bit of a dog to say the least. I am curious however now with the LRT going ahead and the new arena if it may be time to start looking at this area? Is it still to early or is this area ready to turn around? Would really like to hear what you all think.



Thanks,

Laura

 

[Thomas Beyer]

it will slowly improve .. slowly .. ever so slowly .. especially once LRT is in and if new arena is built .. so 4+ years from now .. and once decent vendors like Starbucks are actually open along 107 Ave. Therefore, prices are much lower today than in better areas of town. Assume a 10% vacancy (aka non-collection) in your pro-forma analysis and realistic rents for $750 to $800 for 1BR and $925 to $1000 for 2BR (if upgraded) .. or $125 to $175/month less if ugly .. and you will do OK if you can buy at a 6% CAP rate on these rents, vacancies and realistic expense assumptions. Also, factor in deferred maintenance, which can be heavy in some buildings.

 

[LauraMalcolm]

Thanks Thomas. That info will be very helpful.



Laura

 

[brentdavies]

I work a lot in Central McDougall, and can tell the good and the bad. Central McDougall has been an area full of new immigrants. Lots of social housing. If you only ever drive down 107 ave, then nothing has changed in the past 30 years. But the change is coming from the south, and this is not visible from 107 ave.



One of the biggest distractions to the neighborhood is the shrinking old skid row area in McCauley. The old hotels and slums have been knocked down and the former residents are migrating out to 107 ave, 118 ave and Beverly. But many of the temporary housing shelters are located close by. One immigration center has relocated to 118 ave, going where the new traffic is located. The community league has stopped a couple of new housing shelters from being located in the area, probably a good thing.



The tenant profile has changed dramatically over the years. One old time property owner told me that his building was once full of nursing students, as it located close to the Royal Alex hospital. That was a long time ago, and it has transition from nurses to a large Asian population, then to a large African population.

High income earners are not found in the neighborhood.



The good that is happening is from the LRT, and new developments on the south end of the neighborhood.

The LRT line is currently under construction and should up and operating in about 2 years. 105 Ave is closed for construction and 105 st, north of 107 avenue is now permanently closed to traffic. The 2 closest stations will be 105 ave and 104 st and the Royal Alex hospital.



The Arena debate is closer to a hole in the ground. It has gone from 20% chance to about a 40% chance to develop. The city has purchased all the lands in the arena development area. Now they waiting for funding from other levels of Government.



Meanwhile the developers have started on 3 large new condo developments in the 104-106 ave corridor, with several others waiting to break ground.



Solid investments can be found in the area. Lots of poor operations with poor tenants litter the area. Central McDougall is the 2nd lowest priced area in the city. But also some excellent properties with good tenant profile and good cash flow. Steel underwear should be part of your management strategy.



Ask again in 10 years, and this could a totally different neighborhood.

 

[Thomas Beyer]

[quote user=brentdavies]Ask again in 10 years, and this could a totally different neighborhood. I heard that 10 years ago, in 2001. I used to own 3 buildings up and down 107 Ave (on 104 street, 106 and 107) and sold them all for a significant profit after years of hard work / investment / negative cash-flow. Brent is right in that a 10+ year view is required and you will probably make money on exit, but no cash-flow while holding and evicting and agonizing and improving for that time period, unless mortgage is 65% LTV or lower.

You CAN make a ton of money if you're patient enough, do not pay too much and have realistic expectations about vacancies, cash flow (or lack thereof), rents and expenses.

 

[brentdavies]

I questioned the area for years too.



I owned 3 lots in 1979 and sold in 1981 after trying to put together a land assembly. The area still looks the same in 2009 as in 1979. Today, it a big empty lot, so something will eventually be built.



But the area is changing and things are happening. And not on 107 ave.

 

[LauraMalcolm]

Thank you all. That is some great information and insights. I have really struggled with pin pointing a geographic location to invest in. Our investment strategy is long term but I am concerned that we do not have the experience required to be successful in this neighbourhood.

 

[brentdavies]

The neighborhood should match your goals and objectives, as well as your experience in the investing world.



Oliver and Strathcona have better tenant profiles, and it cost more to buy in these neighborhoods.

Eastwood and McCauley have poor tenant profiles and are much cheaper. It cheaper for a reason.

Canora, and Stony Plain Rd between 149 st and 170 st are also 2 areas to avoid.

Try looking at Westmount, Inglewood, and the west end, 149 st-99 ave to 87 ave.



In all neighborhoods, you will find a huge difference between buildings. You will find many good clean properties and several dirty and half full of dopers. A helpful tool is to know the signs of property distress. This is when a good realtor work well.

 

[Thomas Beyer]

[quote user=LauraMalcolm]but I am concerned that we do not have the experience required to be successful in this neighbourhood.


That's why you need strong partners on your team !

 

[kir]

Street level observation is ideal, but sometimes analzying data (like the census) might be just as good...



If you see a trend of increasing income levels among young professionals...it could be a sign of gentrification...Census 2011 is coming out.



OF course getting demographic profiles over time is hard work.





Kir.