Jurock’s Real Estate News
Oct.23 to Oct.30, 2014
“When a market goes down fast, you have no idea how low it can go.” -Dennis Gartmann
SUBURBS THAT ARE UNDER PERFORMING THE MARKET (OR HOW TO STAY IN METRO VANCOUVER)
TOWNHOUSE PRICES A BEST BUY
$600,000 PAYS FOR A LOT OF FERRY FARES
BUYING A RENTAL WITH TENANTS IN PLACE
WHAT APARTMENT MARKET GURUS ARE SAYING
7 HOT SASKATCHEWAN TOWNS
RICH IMMIGRANT ‘DECEPTION’ COST CANADA BILLIONS
HOT PROPERTIES SELL FAST
HSBC IS NOW OFFERING A .99% MORTGAGE FOR 2 YEARS
$75 OIL IMPACT IN PIPELINES?
I N T E R N A T I O N A L
HSBC is now offering a .99% mortgage for 2 years … alas in England. But it does show that there is a worldwide trend to lower rates. There is a battle for customers and homeowners are always the best customers.
Major Point: The lesson is – haggle hard and use a professional accredited top mortgage broker! You’ll be surprised what a deal they can get you!
PHOENIX AND SCOTTSDALE
Your faithful servant came back from Arizona last night. Still groggy from walking 7 deals in size from 29 units to 230 units and dissing 7! (Oh, and I drove 249 miles in 4 days.) But you have to walk the walk before you can talk! Only the best deals with strong returns are good enough for our joint ventures. Where? We like Tempe, Scottsdale and even Glendale and Peoria.
Sales are strong. Competition is strong. A lot of Canadian pension funds and REITS together with Californian and New York funds (yes, all looking for yield) are competing for fewer good deals. More importantly rents are rising. Units we owned in South Mountain and before rented for $675 – $725 are now getting $800.
Metro Phoenix gained 37,800 jobs year over year through June 2014 – a 2.1% growth rate – this ranked Phoenix 14th nationally, just behind Los Angeles.
Ranks third best nationally in US cities over 1 million!
Constructions employment is up 98%, financial sector up 8.7% etc.
Arizona: Top 10 Most Populated States in 2030 – growing to 10,500,000 by 2030.
2nd fastest growing state after Nevada at 109%! (Both states were recommended by us for 4 years.)
Population growth projection by Colliers: Phoenix: 52,000 in 2014, 69,000 in 2015 and 88,000 in 2016.
Average price per unit has risen 33.8% over the same period last year as of September 2014, driven primarily by the sale of higher quality and better located assets.
Investment sales of apartments have been very strong, totaling $2.59B through the second quarter of 2014.
Rents: Still 8 % below 2008 peak rents but up 3.8 % this year.
Major Point: These numbers support and affirm our strong stance of investing in the US since 2010. Individual investor/subscribers have written time and again of their fine profits and strong cash flow. Our larger JV investors (buildings of 69 to 135 units) enjoy 6 – 11% cap rates while they wait for prices to rise … and prices are soaring.
Several comments and questions. NO, I do not generally make comments about the stock market. I profess to know nothing about it – having never invested in it (and never will). I only comment on it, when I think a particular stock market action could have a result in what else people do with the money … as in buying a second property. I did have lunch with Mark Leibovit -ace stock market forecaster and market timer of the year for gold, silver and other commodities. We lunched at Weil’s veggie restaurant in Scottsdale quarters. He saw a possible upward action for stocks (US elections, and Christmas rally), he also thought that the Canadian dollar would recover. Not now but eventually.
Major Point: Without question … most investors in cash flowing US real estate have outperformed the stock markets a) good returns 6% to 11% cash flow every month; b) capital gains because of buying low and most of all LEVERAGE. Buying with low down payments and getting gains on full price.
Ace oil analyst Josef Schachter projects higher oil prices but first a dash down to $75. If so, the question is – will any pipeline be built? In the same vein, analysts talk about the possibility that Saudi Arabia not supporting the price of oil, to teach US shale oil producers … that they may lose their shirt, if you keep up production. Long shot or reality? Your guess is as good as mine.
C A N A D A: Suburbs That Are Out Or Under Performing The Market
(OR HOW TO STAY IN METRO VANCOUVER)
A VanCity Credit Union survey released Monday that rents are rising and that many people are making major sacrifices to live in Metro Vancouver. More than a quarter have cut back on savings for retirement and 22% have stopped saving for retirement all together; 18% are living in space that is too small for them or the family.
Even more startling: 88% of the non-homeowners polled said they couldn’t afford to buy a home. Yet 61% said they do not want to leave Metro Vancouver.
Well, it is possible to live in Metro Vancouver and still own a house. Here we present, first, the Metro suburbs where detached house prices are under performing the overall market, based on MLS prices over the past five years, and where prices are lower. Keep in mind that the average price of a two-storey detached house in Canada is $441,714.
In the last five years, the average detached house in the Lower Mainland has increased 25.4% to $801,900, but increased just 16.6% in the Fraser Valley.
The lowest increases in the past five years were seen in these four markets:
Maple Ridge, with an increase of 7.5% to $479,800
Abbotsford, with an increase of 8.8% to $446,800
Pitt Meadows, with an increase of 9.3% to $522,800
Langley, where the price increased 10.7% to $574,800
These are the four suburban markets that outperformed the rest of the Lower Mainland:
West Side of Vancouver: Average house price up 51.1% to $2.29 million.
Vancouver East: Average house price up 44.5% to $948,700
West Vancouver: Average house price up 44.4% to $2 million
Burnaby South: Average house price up 41.2% to $1 million
Major Point: With the exception of Abbotsford, which is just outside the Metro region, markets with the m ost affordable houses are easily accessible via rapid transit to downtown Vancouver. A family could purchase a detached house in these communities for not much more than living in some other Canadian cities. And if the price appreciates as they have in the top four suburbs, they will also have a retirement nest egg.
Townhouse Prices A Best Buy
But now let’s look at townhouses, which would represent a mild sacrifice for someone who really wants a detached house, but can’t afford it. In some Metro markets, average townhouse prices now are the same or lower than five years ago.
Here are six markets with the smallest increase in townhouse prices since 2009:
Abbotsford, down 8.6% to $219,800
North Surrey, down 2.5% to $248,400
Central Surrey, up 1.6% to $302,400
Cloverdale, down 0.4% to $325,900
Maple Ridge, down 0.2% to $271,500
Tsawwassen, up 4.3% to $466,500
Major Point: With today’s low mortgage rates and Metro’s rapid transit, buyers can buy a semi-detached house in Metro Vancouver for less than the average price of a bungalow in a lesser city. Across all of Metro Vancouver, the average townhouse price is $343,300 – this is $80,000 less than the average Canadian bungalow price.
$600,000 Pays For A Lot Of Ferry Fares
There is also a semi-suburban Metro Vancouver market where detached house prices are much lower than the Canadian average, yet it offers superb beaches, great boating, mountains and all the recreational pursuits that Vancouverites say they crave.
On the Sunshine Coast, just 9 km from the Mainland by BC Ferries, the average detached house in September was $353,400. This compares with an average of $990,000 in Greater Vancouver.
Major Point: The big drawback to the Sunshine Coast is ferry fares, which are now about $65 return for a car and driver. But you would have to make 10,000 ferry trips (or about 40 years of daily commutes) to spend the money you would save on buying a house on the Coast as compared to say North Burnaby, where the average detached house price is $976,700. Retirement? If you sold an average house in West Vancouver or the West Side and bought on the Sunshine Coast, you could pocket at least $1.6 million – and still be only about an hour from downtown Vancouver.
Buying A Rental With Tenants In Place: 6 Questions To Ask
“Already tenanted” is a phrase one often hears when looking at rental properties, but this is not always the best situation. Here are the five questions to ask next:
1: How much is the rent? If the tenant is paying a rent below market value, this can be a problem in B.C., where rents are controlled (maximum increase of 2.2% this year). In this case in B.C., it could be better to let the tenant go (if possible) at purchase time and re-rent the unit (which allows the rent to be raised to market level). If the rent is higher than the market value, it could signal the tenant may be moving out.
2: What is the lease agreement? If a tenant is on a fixed agreement, you cannot make them leave and the tenant cannot break the lease just because the property has changed hands. Also, you cannot increase the rent on a fixed agreement.
3: What has the landlord agreed to? If the landlord has promised a tenant a clean-up, or new kitchen sink, then you may be bound to this. You need to ask whether there have been any verbal, or otherwise, agreements about inclusions for the tenant. You also want to check for unusual additions, or extra allowances in the lease. This may include pets, or the payment of certain bills by the landlord, or even allowing the tenant to sub-let a room.
4: How good is the property manager? You are not required to keep the current property manager. However, it makes sense to keep the process as smooth and simple as possible – particularly if you want to keep those long-term tenants. If the property manager is a dud – and you will find out soon enough – replace he/she as soon as possible.
5: How good is the tenant? Has the tenant been in arrears in the past? Has there been noise complaints or other issues?
Major Point: Finally ask: How easy would it be to rent if there weren’t a renter in place?
Ask yourself whether you could easily get a tenant like this in another property in the area. If you can get a similar home for a better price, with a strong rental market and the ability to run through your own checks and balances, it may be a false economy to go after the one that is already tenanted. Asking yourself about the strength of the rental market will also protect you should the current tenant vanish or become in arrears. Do not assume that the property will always be tenanted just because someone is renting it at present.
What The Apartment Market Gurus Are Saying
Each fall the Canadian Apartment Investment Conference is held in Toronto, which draws expert speakers and pundits on the direction of the multi-family rental market.
David Goodman, of HQ Commercial, who has sold perhaps more apartment buildings in B.C. than anyone else, attended and we have read through his report on the meeting for the following insights:
This is a golden age for landlords: Low CMHC-insured mortgage rates, low vacancy rates and high housing prices will keep rentals in strong demand for the foreseeable future.
A lot of new rental stock is coming: Developers are tapping civic incentives and tenant demand for better units to build a lot more rental housing, some of which are near condo-like.
When doing building upgrades:
Think curb appeal first, meaning landscaping, balconies, lobbies, hallways and lighting Replace single-pane windows to reduce cold drafts. It is costly upfront, but means long-term savings.
Repair the parking garage. Sealing leaks, repainting, upgrading the lighting and installing motion detectors; and cleaning up will keep tenants happier and feeling safer.
Install low-flow toilets and low-energy lighting.
Major Point: Most landlords in older apartment buildings pay for heat and hot water, so energy and water-saving upgrades can pay off, as well as positioning the unit for a rental increase.
Seven Hot Saskatchewan Towns
Saskatchewan has the lowest unemployment rate in Canada, the third-highest weekly wages in the country and just about the lowest housing prices. It also has some smaller centres that have red-hot economies.
The following are seven Saskatchewan centres with strong potential for landlords and other real estate investors:
Swift Current boasts an average household income of $96,900 and an estimated $200 million in construction slated for the next two years. (JREI recommended it in January this year.)
Warman has seen rapid commercial real estate development, including a new 30-acre shopping complex that begins construction next year. Former farmland on the edge of this town, which is a suburb of Saskatoon, have hit a record $25,000 per acre this year. The city’s average household annual income is a $91,725.
Estevan in the oil-fired southern area of the province, has typical income of $143,460, the highest in the province if not in Canada. It also has the lowest unemployment rate in Saskatchewan and projected retail sales of nearly $400 million.
Prince Albert, with a trading area of 150,000, has average household incomes of $91,725 in Saskatchewan’s third-largest city. About $40 million in new retail projects are underway.
Moose Jaw is close to the $4.25 billion K+D Potash Canada mine and has low business taxes in a city of 36,000 with an average household income of $86,400.
Lloydminster has a tight retail vacancy rate of 2.3%, strong real estate development and a trading area of 160,000 that includes the largest concentration of heavy crude oil fields in the province. (JREI recommended it for 3 years.)
Martensville has an average household income of $106,500 and is seeing 9.4% annual population growth. New housing and retail projects are leading the construction curve.
Rich Immigrant ‘Deception’ Cost BC Billions Of Dollars
This is from the South China Morning Post Oct. 9:
Most of the 30,000 rich Chinese who have recently moved to British Columbia told authorities they would settle elsewhere in Canada, with the deception costing the province access to billions of dollars in loans!!!
An investigation by the South China Morning Post revealed the widespread illicit practice, which is demonstrated in a huge discrepancy between approval and arrival numbers of Chinese in BC under the Immigrant Investor Program (IIP). The Post’s revelations come as Ottawa prepares to unveil a wealth migration scheme to replace the federal IIP, which was axed in June. (Which we forecast to happen in September 2013)
The huge influx of rich Chinese is already a hotly debated issue in Vancouver, which has seen property prices soar.
From 2005 to 2012, a total of 29,764 rich Chinese, mostly from the mainland and also from Taiwan and Hong Kong, are known to have moved to BC under the program, which required applicants to loan Canada C$800,000 per family and have minimum assets of C$1.6 million. Yet in the same period, only 13,872 certificates of permanent residency were issued to applicants from greater China who nominated BC as their intended destination.
This suggests at least 53% of all Chinese known to have settled in BC under the IIP said they planned to live elsewhere. Immigration experts said this was mainly done to secure preferential treatment – for instance, by applying via Quebec’s independently run IIP to bypass the queue for the now-defunct federal version of the scheme.
Because the IIP’s loan funds are disbursed to the provinces according to the stated destination of migrants, the deception has cost BC access to about C$2 billion in interest-free five-year loans, the Post calculates!!!
Major Point: Among mainland Chinese, at least 60.3% of arrivals in BC practiced the apparent deception. And because mainland Chinese dominated the IIP, they represented 86.8% of all apparent deceivers. The Post’s data represents the first effort to publicly quantify the scale of the illicit practice.
TECH TIP – Using Airplane Mode to improve battery life/charging speed
1. Save battery life
Putting your phone into Airplane mode reduces the amount of background work your phone/tablet is doing by a significant amount. While in Airplane mode you can still snap pictures, real files or e-mails already on your phone, and check the time. This can extend your battery life by a very significant margin, just be aware that while in Airplane mode you cannot make or receive calls/texts/emails.
2. Speed up charging
If you only have a limited amount of time to charge your phone and want to get the most out of that charge time, try switching your phone to Airplane mode before you start charging. As mentioned above, Airplane mode shuts down nearly all background applications on your phone (Cell connectivity, Wi-Fi, Bluetooth, GPS, etc.) so if you’re charging up your mobile device then that battery indicator will go up at a faster rate in Airplane mode.
1. Victoria 4.6 acre lot with mountain views-on the market since 2007. Least expensive acreage in the west shore. First dramatic price reduction. Was $349,900 now $264,900;
2. Saanich Peninsula, most affordable. 3 bedrooms, 2 bathrooms, 1/2 block to the ocean, needs some TLC. Price: $379,000;
3. Downtown Victoria, most affordable 2 bedroom condo. 35+ age restriction. Building has a workshop and billiards room. Price: $218,000;
4. Victoria, least expensive home (with suite). 5 bedrooms / 2 bathrooms, basement suite has 3 bedrooms! Suite currently rented month to month. Rent at $1,050/month. Tenant would like to stay. Price: $429,800.
Anyone could be here. If you think you have a deal you own or have a personal agency agreement send it in. No warranties … you must do your own due diligence. Contact info on your website.
There is no charge to be here or on your website. Read your disclosure statement on your website.
Best Mortgage Rates – Read This
Are you paying too much interest on your Line of Credit?
Many Canadians are in love with their Home Equity Lines of Credit. The flexibility, interest only payments and no penalties to break the mortgage are very attractive, as well as being able to re-borrow any principal paid down at any time. But are you paying more in interest than you should?
“When the subprime crisis hit in 2008, many banks rose their Line of Credit rates from Prime to Prime +1%, and since then many have moved down to Prime +.5% (3.5%),” says Kyle Green of Mortgage Alliance (778-373-5441, firstname.lastname@example.org). “A surprising number of borrowers are unaware that all they have to do to drop their Line of Credit rate from 4% to 3.5% is make a simple phone call to their bank.”
Dropping .5% on a $300,000 line of credit isn’t chump change either; this adds up to $1500 a year in extra interest.
“Simply dropping your Line of Credit rate isn’t the only thing you should be considering, though,” advises Green.
“If you plan on borrowing the money for more than 5 months, a closed variable (which would incur a 3 month interest penalty if paid off in full) would outperform the line of credit as the interest savings of being at around Prime -.6% (a current going rate with many lenders) instead of Prime +.5% would cover the penalty costs. This .9% interest difference on a $300,000 line of credit is a significant $2,700 per year!”
One concern is that many still want the benefit of their line of credit being “re-advanceable” so they can re-borrow the principal paid. But with the right product, you can get the best of both worlds. “We often advise clients to take a re-advanceable product where they set up a mortgage for the money they are borrowing in the immediate term, and the remainder of their equity up to 80% of the value of their property is available for future borrowing on either a line of credit or a mortgage. And like a line of credit, as the principal on the mortgages is paid down those funds are available again on other mortgage or line of credit portions.”
Major Point: Are you paying too much on your line of credit? It may be worth a quick phone call to your bank or to Kyle if you would like a 5 minute analysis.
Oct. 21, 2014
Information provided by Jurock.com