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"LRTs displace all the poor people"? - Printable Version

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RE: "LRTs displace all the poor people"? - mpd618 - 11-06-2015

(11-06-2015, 02:54 PM)Owen Wrote: What everyone always misses is that the rents are dictated by the mortgages.  Lets assume a a $250k condo with no parking - a landlord gets an 80% LTV mortgage - the payment is $930/month (CIBC mort calculator - 1 yr closed at 2.84%) + property taxes + insurance + condo fees.  That unit is going to be on the rental market for $1500/month.   Pretty sure that's not affordable housing.

In a market with market pricing that has to be competitive, rents cannot be dictated entirely by the mortgages. As one data point, brand new condo rentals in Sage 5 can be had for $1000/month.


RE: "LRTs displace all the poor people"? - MidTowner - 11-06-2015

(11-06-2015, 03:25 PM)mpd618 Wrote: In a market with market pricing that has to be competitive, rents cannot be dictated entirely by the mortgages. As one data point, brand new condo rentals in Sage 5 can be had for $1000/month.

Further to this, I have known or suspected speculators/amateur investors/landlords of individual condo units to be renting their units at a loss, instead hoping for capital appreciation over current income. I've even seen condos pitched to prospective investors as a way to reduce taxable income (through early-year losses on a rental unit).


RE: "LRTs displace all the poor people"? - Owen - 11-06-2015

(11-06-2015, 03:06 PM)MidTowner Wrote:
(11-06-2015, 02:54 PM)Owen Wrote: To both mpd618 & MidTowner: What you're saying makes sense in that it would reduce the overall price slightly, but I think my point still stands:  The cost per unit to build (even completely omitting parking) has very little to do with the luxury/premium finishes within the unit (unless they are exceptionally high-end, but that is not the case with the majority of the units in the condos going up).    Condo units - even without parking - are still in the $200k's or higher.  What everyone always misses is that the rents are dictated by the mortgages.  Lets assume a a $250k condo with no parking - a landlord gets an 80% LTV mortgage - the payment is $930/month (CIBC mort calculator - 1 yr closed at 2.84%) + property taxes + insurance + condo fees.  That unit is going to be on the rental market for $1500/month.   Pretty sure that's not affordable housing.

I don't want to seem like I have no respect for individuals who buy condo units to rent. But purpose-built and professionally-managed apartment buildings are a much bigger part of the rental market. One positive is that we're finally seeing purpose-built rental stock being built again, and I think in many parts of our region rents are holding steady for that reason.*

You're absolutely right that finishes are a tiny part of the cost of providing housing, and people get a bit confused about "high-end" finishes being a big cause or component of high housing costs. I think rents are not really married to construction costs, either, especially when a lot of buildings around could probably have been fully depreciated by now. It's supply and demand which set rents, ultimately, and when supply is constricted (or demand shoots up), rents reflect that.

I don't think we're in the midst of any kind of affordable housing crisis. We should be proactive in trying to ensure that people of a variety of means are able to live in places with good access to employment and services, even when demand goes up as a result of LRT.

*This reminds me of a conversation I had with someone I ran into by chance. She evidently owns a triplex in the Victoria Park area, and was complaining about the city approving condo projects, and viewed that as a cause of her rents going down in the last few years. She told me by how much, but I doubted the veracity of the specific number. Her logic was fuzzy at best. I'm not sure, but my experience does tell me that rents in Kitchener have not been going up very fast lately.

I'm curious what the rents are going to be over at the Belmont project - agree with all your points on supply/demand setting the rental pricing. I've heard from many that a lot of buyers of the new Condo projects are individuals hoping to get into investment properties - personally, i think they are going to be upside-down every month as the price for single bedroom condo is going to require rents higher than the going market rate for a single bedroom apartment just to break even. I own two triplexes and several rental houses (all in the downtown) - we are preparing for the influx of supply by steadily upgrading all our units to the premium fit and finishes - all else being equal (nice kitchens with granite and stainless steel appliances, new hardwood flooring, and nice bathrooms) I think rental of 2 or 3 bedroom houses (with parking and back yards) will easily compete with rental of 1 or 2 bedroom condos. The people who will be in trouble are the ones trying to rent run-down units at high prices.


RE: "LRTs displace all the poor people"? - ookpik - 11-06-2015

Realize too that if you're renting out an apartment you can claim expenses like mortgage, maintenance, even marketing costs so that your net cost is much lower than the nominal cost of those items. Of course when you sell you'll have to report the capital gain (if you're lucky) or loss (if not.) So the economics are much different than they are to the owner of a principal residence.


RE: "LRTs displace all the poor people"? - BuildingScout - 11-06-2015

(11-06-2015, 03:22 PM)insider Wrote: Maybe it's time to push Waterloo to start considering it?


If they are doing anything more than paying lip service to it, the answer is to approve a large number of projects so that vacancy rates hoover around 4-5%. This is the best way to ensure that prices (particularly land) stay reasonable and that landlords do not go about charging $700 per room in a shared unit as they do in the Luxe or $2,300 for two bedroom rentals in the Barrel Yards.


RE: "LRTs displace all the poor people"? - Owen - 11-06-2015

(11-06-2015, 03:29 PM)MidTowner Wrote:
(11-06-2015, 03:25 PM)mpd618 Wrote: In a market with market pricing that has to be competitive, rents cannot be dictated entirely by the mortgages. As one data point, brand new condo rentals in Sage 5 can be had for $1000/month.

Further to this, I have known or suspected speculators/amateur investors/landlords of individual condo units to be renting their units at a loss, instead hoping for capital appreciation over current income. I've even seen condos pitched to prospective investors as a way to reduce taxable income (through early-year losses on a rental unit).

Call me crazy, but I like my investments to make me money every monthWink


RE: "LRTs displace all the poor people"? - ookpik - 11-06-2015

(11-06-2015, 03:47 PM)Owen Wrote: Call me crazy, but I like my investments to make me money every monthWink
Unless your investments are all interest-bearing like savings accounts and GICs then you're indeed crazy Wink

And even with interest-bearing investments you're losing money (earning power) if your net after-tax income is less than the rate of inflation.

Now with something like apartment rentals, even if in theory you're supposed to make money, in practice that will only work if the apartment stays rented, the tenant pays the rent, there are no unanticipated expenses, etc. You're always taking risks. Hopefully you get rewarding for taking them by way of higher rates of return.


RE: "LRTs displace all the poor people"? - Owen - 11-06-2015

(11-06-2015, 04:15 PM)ookpik Wrote:
(11-06-2015, 03:47 PM)Owen Wrote: Call me crazy, but I like my investments to make me money every monthWink
Unless your investments are all interest-bearing like savings accounts and GICs then you're indeed crazy Wink

And even with interest-bearing investments you're losing money (earning power) if your net after-tax income is less than the rate of inflation.

Now with something like apartment rentals, even if in theory you're supposed to make money, in practice that will only work if the apartment stays rented, the tenant pays the rent, there are no unanticipated expenses, etc. You're always taking risks. Hopefully you get rewarding for taking them by way of higher rates of return.

Ha! My point was more that you won't convince me that something that is cash flow negative on a monthly basis is a good investment. As a rule of thumb I make sure they are at least cash flow break-even (with a bit of a buffer to cover those unanticipated expenses.) Overall it's more of a retirement plan than a day job (if it's break-even, the mortgage is being paid down.) Been at it for 10 yrs and up to 15 doors - so far so goodSmile


RE: "LRTs displace all the poor people"? - Andy - 11-06-2015

(11-06-2015, 02:31 PM)MidTowner Wrote:
(11-06-2015, 10:25 AM)Andy Wrote: ..Maybe not so much at Mill/Courtland since that area isn't built up much. I'm expecting the Cedar Hill area to gentrify fairly quickly though. As well as the area around the hopsital...

Out of curiosity, what do you specifically see happening in these neighbourhoods? I know that Cedar Hill is known regionally as being a lower-income area, but I would say both of those areas have a real mix of people, and in both (it seems to me) there are some affluent people already. I wouldn't characterize either neighbourhood as particularly poor, particularly dangerous, particularly rundown. What would "gentrification" in those areas seem like to you?

Cedar hill has a lot of social services in the area. I think having the men's hostel and these services have led to the housing values being cheap for their proximity to downtown. It's got a bad rap, I agree. It's not completely rundown or shady, but a lot of the rental properties aren't completing taken care of. I was trying to convince my wife to buy a house in that area, but it just doesn't feel safe to walk around at night. I think this is bound to change because of the location to downtown. Also Victoria park is within walking distance.

For Mill/Courtland, it's not rundown per-se, but it's certainly not an atractive area. Ottawa/Courtland/Mill are fairly busy streets that split up the neighbourhood. And there's simply nothing around or worth walking to. The neighbourhoods aren't the oldest so you don't have that appeal either.

I'm not an expert on gentrification, but this is just my impression. I feel I'm the target demographic for the first phases of gentrification. I want to live near transit, bike/walk to work, and I can deal with "sketchiness". But Mill/Courtland area had no appeal for me, while Cedar Hill did.


RE: "LRTs displace all the poor people"? - MidTowner - 11-06-2015

(11-06-2015, 03:47 PM)Owen Wrote: Call me crazy, but I like my investments to make me money every monthWink

Haha A lot of realtors would call that "old-fashioned thinking"!

I agree with the points in your above post, and figure the same: many purchasers won't be cash flow positive on new condo units, based on the market rents (which are the rents you actually get...) and the prices they are paying. I've known of cases where the would-be landlord simply doesn't have experience in figuring out a cap rate, and takes the salesman's word on costs. They ignore costs like vacancy, and understate costs like maintenance, and ascribe no value to their own time.


RE: "LRTs displace all the poor people"? - MidTowner - 11-06-2015

(11-06-2015, 04:15 PM)ookpik Wrote: Now with something like apartment rentals, even if in theory you're supposed to make money, in practice that will only work if the apartment stays rented, the tenant pays the rent, there are no unanticipated expenses, etc. You're always taking risks. Hopefully you get rewarding for taking them by way of higher rates of return.

There's risk, but you have to purchase a property with a reasonable expectation of positive cash flow. To do otherwise necessarily means you're speculating that there will be capital appreciation...maybe that's not bad in some cases, but it's not quite the same as investing in rental property. Owen is talking about people who buy condos for "investment" with the expectation that they will be out of pocket every month. They're subsidizing their tenants.


RE: "LRTs displace all the poor people"? - Viewfromthe42 - 11-06-2015

If LRT, or mass transit, truly displaced all these peoples, or all but certain types of development, then Ottawa would not see the decades-long steady state of the station areas around places like Lees, Hurdman, and South Keys, and associated perceptions of affordability, accessibility, and safety.


RE: "LRTs displace all the poor people"? - tomh009 - 11-06-2015

(11-06-2015, 04:23 PM)Andy Wrote:
(11-06-2015, 02:31 PM)MidTowner Wrote: Out of curiosity, what do you specifically see happening in these neighbourhoods? I know that Cedar Hill is known regionally as being a lower-income area, but I would say both of those areas have a real mix of people, and in both (it seems to me) there are some affluent people already. I wouldn't characterize either neighbourhood as particularly poor, particularly dangerous, particularly rundown. What would "gentrification" in those areas seem like to you?

Cedar hill has a lot of social services in the area. I think having the men's hostel and these services have led to the housing values being cheap for their proximity to downtown. It's got a bad rap, I agree. It's not completely rundown or shady, but a lot of the rental properties aren't completing taken care of. I was trying to convince my wife to buy a house in that area, but it just doesn't feel safe to walk around at night. I think this is bound to change because of the location to downtown. Also Victoria park is within walking distance.

I have walked a lot trough Cedar Hill (only in daytime, mind you!) and I find the neighbourhood to be generally quite tidy and well-maintained.  A few mid-rise apartment blocks and House of Friendship on Charles, sure, but I would say 80% or more of the houses are tidy (if not expensive) and well-maintained.  If I were looking for a house near downtown, Cedar Hill would certainly make the list for me.


RE: "LRTs displace all the poor people"? - Andy - 11-06-2015

(11-06-2015, 05:25 PM)tomh009 Wrote:
(11-06-2015, 04:23 PM)Andy Wrote: Cedar hill has a lot of social services in the area. I think having the men's hostel and these services have led to the housing values being cheap for their proximity to downtown. It's got a bad rap, I agree. It's not completely rundown or shady, but a lot of the rental properties aren't completing taken care of. I was trying to convince my wife to buy a house in that area, but it just doesn't feel safe to walk around at night. I think this is bound to change because of the location to downtown. Also Victoria park is within walking distance.

I have walked a lot trough Cedar Hill (only in daytime, mind you!) and I find the neighbourhood to be generally quite tidy and well-maintained.  A few mid-rise apartment blocks and House of Friendship on Charles, sure, but I would say 80% or more of the houses are tidy (if not expensive) and well-maintained.  If I were looking for a house near downtown, Cedar Hill would certainly make the list for me.

It made the list for me too. But not my wife :/ . It definitely has a different feel at night though (I mainly walk around charles/king, can't really speak on behalf of the more residential area). I can see the bad safety perception for a woman on her own.

I was watching the mls pretty religiously over the past year, and relatively speaking I never found an expensive house in that area. I think the area will improve quickly if the two blocks from Cedar->Cameron between King Charles are developed.


RE: "LRTs displace all the poor people"? - mpd618 - 11-06-2015

(11-06-2015, 04:23 PM)Owen Wrote: Ha! My point was more that you won't convince me that something that is cash flow negative on a monthly basis is a good investment.  As a rule of thumb I make sure they are at least cash flow break-even (with a bit of a buffer to cover those unanticipated expenses.)

(11-06-2015, 04:29 PM)MidTowner Wrote: There's risk, but you have to purchase a property with a reasonable expectation of positive cash flow. To do otherwise necessarily means you're speculating that there will be capital appreciation...maybe that's not bad in some cases, but it's not quite the same as investing in rental property. Owen is talking about people who buy condos for "investment" with the expectation that they will be out of pocket every month. They're subsidizing their tenants.

After you've paid out the mortgage, you own the property outright. Even if your rents didn't cover the full costs along the way, and even if there's zero capital appreciation, it seems to me that this can still be a financially reasonable thing to do. Or am I missing something?