Station Park | 18, 28, 36, 43, 50 fl | U/C

[Lens]

Well, from real estate folks, all I've heard is rental vacancies are extremely low if not negligible and we run very little risk of over saturating market with a condo/apartment surplus. Don't forget sales and to a degree rent, is also correlated with prices of houses/townhouses. Is KW at the point where people are priced out of the houses with yards forcing otherwise folks uninterested in condo life, into condo life? That I'm not sure.

This is absolutely true, the market is EXTREMELY tight and prices are constantly rising right now, especially in the mid market

[jeffster]

Well, from real estate folks, all I've heard is rental vacancies are extremely low if not negligible and we run very little risk of over saturating market with a condo/apartment surplus. Don't forget sales and to a degree rent, is also correlated with prices of houses/townhouses. Is KW at the point where people are priced out of the houses with yards forcing otherwise folks uninterested in condo life, into condo life? That I'm not sure.

This is true. We could toss in 5,000 units tomorrow and still have a low vacancy rate. These condos and apartments being aren't going to have much, if any, effect on pricing and vacancy.

[tomh009]

Real Estate Investment Trust
https://en.m.wikipedia.org/wiki/Real_est...ment_trust

Exactly. They will buy buildings and manage them, and return the profits to the REIT unitholders.

[tomh009]

Well, from real estate folks, all I've heard is rental vacancies are extremely low if not negligible and we run very little risk of over saturating market with a condo/apartment surplus. Don't forget sales and to a degree rent, is also correlated with prices of houses/townhouses. Is KW at the point where people are priced out of the houses with yards forcing otherwise folks uninterested in condo life, into condo life? That I'm not sure.

This is true. We could toss in 5,000 units tomorrow and still have a low vacancy rate. These condos and apartments being aren't going to have much, if any, effect on pricing and vacancy.

CMHC stats say 37,664 rental units and a 3.0% vacancy rate (substantially higher than the Ontario average of 1.8%). Let's add in 50% rentals for the new condo buildings in the near term (Barra, Charlie West, DTK, Young, OTIS, first Garment St tower and Avenue M) and that's at least 700 rental units. Add Drewlo, Arrow 2, Market Flats, 262 Queen, Scott & Weber and that's probably at least 900 dedicated rental units.

1600 rental units is over 4% of the rental stock, and that would bump the 3% vacancy rate up significantly. (5000 units would be nearly 15% of the rental stock.)

[Rainrider22]

Having crunched the numbers on a few in the past, I think they're poor investments from the get-go with any honest estimates of vacancy and maintenance. I've seen units being sold for prices whereby the owners would essentially be subsidizing their tenants' housing.

Indeed. At the moment the best-case scenario is pretty close to a break-even on operating expenses vs rental income, and you are completely dependent on property appreciation for your investment. In the meantime, you need to find tenants and manage your property (or pay someone else to do it).

I'd rather invest my money in REIT. Or Canadian bank stocks, for that matter.

I have been investing in Condo's for rent for the past five years.  I agree at best, they are cash neutral right now.  However, you guys are missing a very important factor, it isnt just how much the property appreciates, you have someone else paying for your investment.  Every year that goes by is more equity I have built up, opening more room to purchase more.....   If I said here is 100 stocks, it is worth $100 000.  you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???.  Oh, did I mention the whole tax write off component too ?   So when you say you "crunch the numbers"  make sure you take the whole picture into account.  If it is a bad investment then why are so many people doing ?

[MidTowner]

I have been investing in Condo's for rent for the past five years.  I agree at best, they are cash neutral right now.  However, you guys are missing a very important factor, it isnt just how much the property appreciates, you have someone else paying for your investment.  Every year that goes by is more equity I have built up, opening more room to purchase more.....   If I said here is 100 stocks, it is worth $100 000.  you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???.  Oh, did I mention the whole tax write off component too ?   So when you say you "crunch the numbers"  make sure you take the whole picture into account.  If it is a bad investment then why are so many people doing ?

Don't get me wrong: I have owned rental units, and am not negative about real estate as an investment generally. I just can't see the sense in purchasing at today's prices. You've been very lucky the last five (more like fifteen) years in Canada with real estate, but at some point- logically- the luck will run out. The people buying today are I think in most cases in a cash flow neutral or negative position, and are speculating that prices will continue to appreciate. I'm not really in a position to say whether they will or not, but the one thing we can agree on is that there is risk.

You're right that real estate offers the ability for individuals to leverage, and that's a benefit. But, of course, leverage cuts both ways, and if we see capital depreciation in the future, leverage will magnify that loss.

To answer your question about your hypothetical stock pitch, of course I would take that deal if I knew the stock was going to appreciate- but that can't be known. Buying equities on margin is rightly considered by most people to be an extremely risky proposition. But leveraging into real estate for some reason is not.

[Rainrider22]

Don't get me wrong: I have owned rental units, and am not negative about real estate as an investment generally. I just can't see the sense in purchasing at today's prices. You've been very lucky the last five (more like fifteen) years in Canada with real estate, but at some point- logically- the luck will run out. The people buying today are I think in most cases in a cash flow neutral or negative position, and are speculating that prices will continue to appreciate. I'm not really in a position to say whether they will or not, but the one thing we can agree on is that there is risk.

You're right that real estate offers the ability for individuals to leverage, and that's a benefit. But, of course, leverage cuts both ways, and if we see capital depreciation in the future, leverage will magnify that loss.

To answer your question about your hypothetical stock pitch, of course I would take that deal if I knew the stock was going to appreciate- but that can't be known. Buying equities on margin is rightly considered by most people to be an extremely risky proposition. But leveraging into real estate for some reason is not.

I think traditionally, and historically, you wont go wrong investing in real estate.  And as long as your building up equity at someone else's expense, I don't see a downside even if the unit price does not appreciate substantially.  And again, the amount of tax advantages makes it worth it for me personally.  The caveat to all this is you have to be in it for the long haul, if you are looking to flip and make a lot of money than I agree, right now you might not want to invest in real estate.

[Spokes]

What kind of increase in unit prices do most buildings see from the point of pre-construction sales to when a building is completed?

[Momo26]

This is a great discussion I’m glad ywe are having it right now... I too want to know the real numbers. Without digging and digging online what were the day one pre-construction prices for one Victoria and what did they sell for upon occupancy and what did they sell for three years in? That and city centre are the only two genuine high-rise downtown Kitchener projects if we can compare apples to apples. You could group 100 condos into that but it’s still early days into occupancy.

Reindeer 22 when you speak of tax advantages are you referencing the interest on your line of credit payment, deductions such as utilities electricity and maintenance fees every month or something else?

Analysis of the vacancy rates is a good exercise… It really comes down to what major employers are gonna be opening up shop here attracting people to come and live? The connectivity to Toronto is extremely important and cannot be understated as well. Go transit has just opened up a couple more options from Kitchener to and from Toronto but they had to cut down the time it takes and it’s still not all day 2 way. The hyper loop looks scrapped all together under the ford government government

[ijmorlan]

Analysis of the vacancy rates is a good exercise… It really comes down to what major employers are gonna be opening up shop here attracting people to come and live? The connectivity to Toronto is extremely important and cannot be understated as well.  Go transit has just opened up a couple more options from Kitchener to and from Toronto but they had to cut down the time it takes and it’s still not all day 2 way.  The hyper loop looks scrapped all together under the ford government government

Hyperloop? That is a publicity scheme by Elon Musk. Are you talking about High Speed Rail?

[tomh009]

This is true. We could toss in 5,000 units tomorrow and still have a low vacancy rate. These condos and apartments being aren't going to have much, if any, effect on pricing and vacancy.

CMHC stats say 37,664 rental units and a 3.0% vacancy rate (substantially higher than the Ontario average of 1.8%). Let's add in 50% rentals for the new condo buildings in the near term (Barra, Charlie West, DTK, Young, OTIS, first Garment St tower and Avenue M) and that's at least 700 rental units. Add Drewlo, Arrow 2, Market Flats, 262 Queen, Scott & Weber and that's probably at least 900 dedicated rental units.

1600 rental units is over 4% of the rental stock, and that would bump the 3% vacancy rate up significantly. (5000 units would be nearly 15% of the rental stock.)

This is actually a bit misleading, sorry. The 37,664 is actually the total rental stock for the region, so Kitchener alone is likely well under 20,000 (lots of student rentals in Waterloo) and 1600 new rental units would increase the rental stock by more than 8%.

[tomh009]

I think traditionally, and historically, you wont go wrong investing in real estate.  And as long as your building up equity at someone else's expense, I don't see a downside even if the unit price does not appreciate substantially.  And again, the amount of tax advantages makes it worth it for me personally.  The caveat to all this is you have to be in it for the long haul, if you are looking to flip and make a lot of money than I agree, right now you might not want to invest in real estate.

Most of the time, real estate prices trend up. And most of the time, stock markets trend up. But neither one is guaranteed. Most international analyses see the Canadian real estate market as overvalued. Of course that is not guaranteed to be correct, either.

[tomh009]

If I said here is 100 stocks, it is worth $100 000.  you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???.  Oh, did I mention the whole tax write off component too ?   So when you say you "crunch the numbers"  make sure you take the whole picture into account.

Of course you can do that with stocks, too: it's called a margin account, and you are borrowing money to invest, allowing you to leverage your investment.

So, suppose that you have $200,000 to invest in the stock market, and you borrow another $800,000, and invest in Acme Inc., which is a hot growth stock. If the stock goes up 20%, your holdings are now worth $1.2M, and you have doubled your own investment, net of the $800K loan. Great, isn't it? But wait, if the stock drops 20%, you have suddenly lost your entire equity. This is clearly much, much riskier than investing your own money only, without margin. (And, yes, I personally know someone who lost over $1M, and most of his retirement savings, investing on margin.)

So let's flip over to the real estate scenario: you have the same $200K to invest, and you take a $800K mortgage to buy a $1M condo unit. If the real estate prices go up 20%, your holdings are now worth $1.2M, and you have doubled your own investment here, too, net of the mortgage. But the downside is the same: if prices drop 20%, you have suddenly lost your entire equity here, too.

And how much have prices dropped in Vancouver already?

Anyway, to each his (or her) own. I look at the Canadian bank stocks, which pay a 5-6% dividend yield and tend to appreciate in value. And require no maintenance, repair or tenant management. For me, this works much better. But if the condo rentals are working out great for you, more power to you.

If it is a bad investment then why are so many people doing ?

The "50,000,000 Elvis Fans Can't Be Wrong" argument?

[Rainrider22]

This is a great discussion I’m glad ywe are  having it right now... I too want to know the real numbers. Without digging and digging online what were the day one pre-construction prices for one Victoria and what did they sell for upon occupancy and what did they sell for three years in? That and city centre are the only two genuine high-rise downtown Kitchener projects if we can compare apples to apples. You could group 100 condos into that but it’s still early days into occupancy.

Reindeer 22 when you speak of tax advantages are you referencing the interest on your line of credit payment, deductions such as utilities electricity and maintenance fees every month or something else?

Analysis of the vacancy rates is a good exercise… It really comes down to what major employers are gonna be opening up shop here attracting people to come and live? The connectivity to Toronto is extremely important and cannot be understated as well.  Go transit has just opened up a couple more options from Kitchener to and from Toronto but they had to cut down the time it takes and it’s still not all day 2 way.  The hyper loop looks scrapped all together under the ford government government

Yes I am talking about the things you listed.  Anything you can show towards the maintenance.  advertising, office supplies if you have it set up as a business.  It all adds up to extra money back at the end of the year.  Depending what kind of other investments yo have, you may have to pay taxes...  I am not a big time player. I am just an average family guy who wants a safe platform to build up some retirement income.  Once the places are paid for, it is income for my wife upon retirement.   Everyone is different, everyone has different expectations of how an investment should grow.  I am fine with a slow gradual climb knowing that my equity continues to build in my brick and mortars....

[Rainrider22]

If I said here is 100 stocks, it is worth $100 000.  you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???.  Oh, did I mention the whole tax write off component too ?   So when you say you "crunch the numbers"  make sure you take the whole picture into account.

Of course you can do that with stocks, too: it's called a margin account, and you are borrowing money to invest, allowing you to leverage your investment.

So, suppose that you have $200,000 to invest in the stock market, and you borrow another $800,000, and invest in Acme Inc., which is a hot growth stock. If the stock goes up 20%, your holdings are now worth $1.2M, and you have doubled your own investment, net of the $800K loan. Great, isn't it? But wait, if the stock drops 20%, you have suddenly lost your entire equity. This is clearly much, much riskier than investing your own money only, without margin. (And, yes, I personally know someone who lost over $1M, and most of his retirement savings, investing on margin.)

So let's flip over to the real estate scenario: you have the same $200K to invest, and you take a $800K mortgage to buy a $1M condo unit. If the real estate prices go up 20%, your holdings are now worth $1.2M, and you have doubled your own investment here, too, net of the mortgage. But the downside is the same: if prices drop 20%, you have suddenly lost your entire equity here, too.

And how much have prices dropped in Vancouver already?

Anyway, to each his (or her) own. I look at the Canadian bank stocks, which pay a 5-6% dividend yield and tend to appreciate in value. And require no maintenance, repair or tenant management. For me, this works much better. But if the condo rentals are working out great for you, more power to you.

If it is a bad investment then why are so many people doing ?

The "50,000,000 Elvis Fans Can't Be Wrong" argument?

To be clear, I am not arguing.  I am just making sure all the points are taken into consideration when the numbers are crunched.  Real Estate isnt for everyone.  If you want an aggressive high risk investment that will yield high returns in short order, definitely dont buy a condo and rent it.