Good price per condo in Calgary beltine?

[schoobie]

I have seen lately an increasing number of condos on the MLS that are good opportunities to add to my portfolio. But I am trying to set a price range for 1BDRM condos as rental properties in the Calgary inner city area, such as connaught, victoria park, kensington, lower mount royal, etc.

Question: the metric $XXXk/door that some use to quickly assess a good/average/bad price of units, is that only applicable when buying entire buildings? Or also when purchasing single units in a condo conversion? The latter is my case.

 

[bizaro86]

QUOTE (schoobie @ Oct 5 2010, 04:03 PM) I have seen lately an increasing number of condos on the MLS that are good opportunities to add to my portfolio. But I am trying to set a price range for 1BDRM condos as rental properties in the Calgary inner city area, such as connaught, victoria park, kensington, lower mount royal, etc.

Question: the metric $XXXk/door that some use to quickly assess a good/average/bad price of units, is that only applicable when buying entire buildings? Or also when purchasing single units in a condo conversion? The latter is my case.

I certainly focus on condos in Calgary, although I`m not a big fan of the area south of downtown that you`re referring to, for the simple reason that there is a TON of rental supply, which causes rents in that area to be lower (in my experience) than for other areas for equivalent condos. In fairness, I`ve avoided it so far, so I`m not sure if I`d be able to extract a renovation premium as I have in other neighbourhoods. I doubt it, because of all the new highrises.

I should mention that I deal in renovated 2 bedroom condos, so my experience is less relevant to one-bedroom units. I`m actually quite biased in favour of 2 bedrooms, because the condo fees are typically about $50-100 higher, but the rents are often $200-300 higher.

All in all, I`d be extremely unlikely to pay more than 90-100k per door in that area for a 1 bedroom, and only if both the building and the condo corp were in good repair. I definitely wouldn`t buy a unit below grade.

Michael

 

[bizaro86]

I re-read my post, and realized it sounded quite negative, which was not my intent. I should add that the beltline is a big area. I`m sure that there are some spots that are much better for rentals than others, and some buildings that are much better than others. The work of being an investor is to identify those spots and buy well-priced units in them. I`ve never actively tried to do so in the beltline, for the reasons I mentioned above, but I imagine it could be done by someone who chose to specialize.

One big advantage woud be the large amount of inventory available. It should be possible to negotiate an excellent deal once you`ve found an acceptable target. If not, then move on to the next.

Michael

 

[schoobie]

QUOTE (bizaro86 @ Oct 5 2010, 04:19 PM) I definitely wouldn`t buy a unit below grade.
Coincidentally, two units I am considering are below grade. One with 630sqft faces the lawn/street and the other one with 510sqft to a parking lot

both facing south.

I have never lived in a below grade unit, what is so bad about them? I guess It should be as bad as those 2nd suites put in basements?

 

[DaveRhydderch]

QUOTE (schoobie @ Oct 5 2010, 04:34 PM) Coincidentally, two units I am considering are below grade. One with 630sqft faces the lawn/street and the other one with 510sqft to a parking lot

both facing south.

I have never lived in a below grade unit, what is so bad about them? I guess It should be as bad as those 2nd suites put in basements?


They are just seen as inferior to units higher up (i.e. less safe, less light). I would try and only get units on at least the 3rd floor, as you`ll have a harder time renting units on below grade, ground floor and second floor due to safety concerns, esp. in those areas. However, a great deal would bend that requirement.

 

[moparcanuck]

QUOTE (schoobie @ Oct 5 2010, 04:34 PM) Coincidentally, two units I am considering are below grade. One with 630sqft faces the lawn/street and the other one with 510sqft to a parking lot

both facing south.

I have never lived in a below grade unit, what is so bad about them? I guess It should be as bad as those 2nd suites put in basements?

A lot of it is perception (and perception becomes reality when you`re trying to show the unit to a potential renter). I`ve always refused to live in a below grade unit because any problems seem to hit there first. Water problems? Gravity works and water will usually go to the below grade units whether it`s a leaky pipe somewhere or just a really heavy rain. Bugs and vermin targetting your building? Ground floor/below grade is where the ants and mice go first as that`s where they get into the building. Break-in? If someone decides they`re going to pry open a patio door to help themselves, where are they going to go? Below grade (where the window is right at eye level) or 5th floor?

 

[schoobie]

QUOTE (moparcanuck @ Oct 5 2010, 06:34 PM) A lot of it is perception (and perception becomes reality when you`re trying to show the unit to a potential renter). I`ve always refused to live in a below grade unit because any problems seem to hit there first. Water problems? Gravity works and water will usually go to the below grade units whether it`s a leaky pipe somewhere or just a really heavy rain. Bugs and vermin targetting your building? Ground floor/below grade is where the ants and mice go first as that`s where they get into the building. Break-in? If someone decides they`re going to pry open a patio door to help themselves, where are they going to go? Below grade (where the window is right at eye level) or 5th floor?
I hear you when it comes to general problems in the building, but all in all I feel Calgary to be a safe city.

With regards to mice, I thought Calgary erradicated rats long time ago, and as far as ants I believe it depends entirely on the cleanliness of the occupant.

So, you would never own a below grade unit? Regardless of the price?

 

[schoobie]

QUOTE (DaveRhydderch @ Oct 5 2010, 04:38 PM) However, a great deal would bend that requirement.
I am hoping to attract those tenants!

 

[schoobie]

QUOTE (bizaro86 @ Oct 5 2010, 04:19 PM) All in all, I`d be extremely unlikely to pay more than 90-100k per door in that area for a 1 bedroom, and only if both the building and the condo corp were in good repair. I definitely wouldn`t buy a unit below grade.

Michael
Shoot! We are in the slowdown and the days of cheap properties, today these units are going for $200k, and foreclosures for $150k, to think that $100k is doable on a decent unit is like mission impossible!

 

[Thomas Beyer]

QUOTE (schoobie @ Oct 5 2010, 03:34 PM) ..I have never lived in a below grade unit, what is so bad about them?
They are VERY hard to resell !

needs to be priced 30% below a similar upgraded upstairs unit !

pay maybe 100 times rent tops .. so if it rents for $900 do not pay more than 90,000 !

 

[schoobie]

QUOTE (ThomasBeyer @ Oct 5 2010, 09:04 PM) They are VERY hard to resell !

needs to be priced 30% below a similar upgraded upstairs unit !

pay maybe 100 times rent tops .. so if it rents for $900 do not pay more than 90,000 !
Bank`s lawyer said they cannot do less than $130k for the small 500sqft, they said the previous owner bought it for $199k and bank appraised it at $155k for a quick sale.

I do not see rents of $1,300 in that area for the next two/three years for 1BDRMs. But mortgage will be for 25 years... so... there is some 22 years to recover the loss of 2 years?

Maybe I should be more aggresive and not too soft on my deals?

 

[Thomas Beyer]

QUOTE (schoobie @ Oct 5 2010, 08:40 PM) Bank`s lawyer said they cannot do less than $130k for the small 500sqft, they said the previous owner bought it for $199k and bank appraised it at $155k for a quick sale.
..
do NOT buy a 500 sq ft condo below ground .. certainly not over 100K .. as they are hard to IMPOSSIBLE to resell.

If you don`t believe me .. buy one .. and post your results here in a few years !

Besides how to get in, in an investment look how to get out .. and with some investments that is very hard to impossible.

Buy a unit upstairs .. 2BR is best . upgraded .. with a view .. large .. over 850 or better 1000 sq ft !!

 

[bizaro86]

QUOTE (schoobie @ Oct 5 2010, 08:58 PM) Shoot! We are in the slowdown and the days of cheap properties, today these units are going for $200k, and foreclosures for $150k, to think that $100k is doable on a decent unit is like mission impossible!


I didn`t say it was do-able, I said that`s what I`d be willing to pay. If there are no properties of a certain type/area where the numbers work, then I don`t by properties in that area/of that type. I suspect you`ll have a very hard time buying properties that cash flow in your target area. It might not be impossible, but it`ll be very hard.

As for basement units, I own one (its a two bedroom) and its the closest I`ve come to regretting a purchase. It`s at least 5 times harder to rent than the similar unit I own in the next building over, which is on a higher floor. Potential renters show up and complain about the lack of balconey, the lack of light, the safety factor due to ground level windows, and the potential for noise. Most of these issues wouldn`t be issues if they moved in (its bright, Calgary`s a safe city and its a good neighbourhood, and its a concrete building). However, since these people invariably don`t move in because of these objections, it takes much more time and rents for a lower price.

I`m not trying to be discouraging, but it takes work to find a property that cashflows. If the bank won`t take your well reasoned offer now, then wait. Either someone else will save you from a mistake by overpaying, or they`ll come down.

Michael

 

[housingrental]

I support the posts above on below grade apartments
Just don`t do it unless discounted enough to justify - and in most markets they almost never are!

 

[schoobie]

There is no immediate exit strategy on purpose, maybe I will consider selling by 2030 or later to retire to a warmer place. I just want to hold them long term, pay-off mortgage and keep the cash from rents coming in indefinately. Which only seems achivable at the price point you mentioned of $100k, with 20% down, leaving only $80k in the mortgage.

 

[Thomas Beyer]

QUOTE (schoobie @ Oct 6 2010, 11:06 AM) .. Which only seems achivable at the price point you mentioned of $100k, with 20% down, leaving only $80k in the mortgage.
AND in a stable apartment building .. which may NOT be the case here if several (or all ?) units are owned by the bank !!

 

[gwasser]

QUOTE (ThomasBeyer @ Oct 6 2010, 12:54 PM) AND in a stable apartment building .. which may NOT be the case here if several (or all ?) units are owned by the bank !!

Recently I came accross a condominiumized 15-suiter near Edmonton Trail and 16Ave NW in Calgary. It had listed 2 bedroom units for around $125K. Upon inspection, the exterior looked OK (except for an enormous dent where a truck had parked into the buildings exterior wall). The units themselves were build in the 1960s and so were the original kitchens and bathrooms (i.e. junk). Carpets in the common areas were dirty and in the second part of their economic life. Balconies were about to collapse.

The complex was the victim of extensive mortgage fraud. Individual units were mortgaged as high as $300,000 with very respectable lenders (I checked the titles). The units were partially owner-occupied, rented or under various stages of foreclosure. Probably the condocorp was in bad financial shape as well. I had to wonder whether there was even an active condo board or insurance because the truck induced wall deformation seemed to have occurred some time ago.

I guess with $900 per month rent and $250/month condofees (for how long?) the place might cashflow. This was the best deal I saw for buying multifamily units around $100-130K in Calgary. So Michael, to find 2-bedrooms around $100K in downtown Calgary may require extreme patience and tenacity

.

 

[bizaro86]

QUOTE (gwasser @ Oct 6 2010, 02:28 PM) So Michael, to find 2-bedrooms around $100K in downtown Calgary may require extreme patience and tenacity

.

Hi Godfried,

He was asking about 1 bedroom units. I would (and have) paid more than 100k for a 2 bedroom unit.

Michael

 

[bizaro86]

QUOTE (gwasser @ Oct 6 2010, 02:28 PM) Recently I came accross a condominiumized 15-suiter near Edmonton Trail and 16Ave NW in Calgary. It had listed 2 bedroom units for around $125K. Upon inspection, the exterior looked OK (except for an enormous dent where a truck had parked into the buildings exterior wall). The units themselves were build in the 1960s and so were the original kitchens and bathrooms (i.e. junk). Carpets in the common areas were dirty and in the second part of their economic life. Balconies were about to collapse.

The complex was the victim of extensive mortgage fraud. Individual units were mortgaged as high as $300,000 with very respectable lenders (I checked the titles). The units were partially owner-occupied, rented or under various stages of foreclosure. Probably the condocorp was in bad financial shape as well. I had to wonder whether there was even an active condo board or insurance because the truck induced wall deformation seemed to have occurred some time ago.

I guess with $900 per month rent and $250/month condofees (for how long?) the place might cashflow. This was the best deal I saw for buying multifamily units around $100-130K in Calgary. So Michael, to find 2-bedrooms around $100K in downtown Calgary may require extreme patience and tenacity

.

I looked at a few units in this building a couple of months ago, and some of them had extensive water damage on the ceilings/walls/floors. I noticed later that it had been mostly corrected, but I wonder about the initial cause, as I viewed them in spring/early summer. The pattern was consistent with a building with drainage issues, which put me off, even more so than the initial bad impression, which is cosmetic.

Michael

 

[schoobie]

Thanks everybody for pitching in your opinions. Based on all your input, I offered $104k, they countered $130k, and gave me a day to answer. I will go again tomorrow to spend a couple of hours in and outside. I am not to sure how much to counter offer, or if I should at all?

The history is that it was priced originally at $199k for the past 5 months, then reduced to $155k for the past two. City of Calgary show records of a transaction taking place sometime in 2007 for $315k for that same condo. From that same report I saw other units sold in the 2nd and 3rd floor but sold between $251k and $295k. Did a google search on the specific address and one of the links was the BMO gigantic fraud.

My mortgage broker quoted me 35 years and payments of $340 or $380 monthly depending on the final purchase price ($120k to $150k), plus condo fees of $250, property taxes of $80, maintenance of $50, vacancy $90, all-in will put the cost between $810 and $850, rents there are going for $850-$950. Resulting in a potential positive cashflow from $0 to $140.