Thursday, October 25, 2007

investor alert!

In my last post, I compared a house in Arbutus to a house in Killarney. I mumbled about moving 40 blocks west, and the price about moving 4,000 kilometres east? For less?

I was just fiddling around, looking for some info. for a post that I was thinking of, and serendipited (I think I made a word up) onto this place in Kitchener, Ont.

It's a 20 unit walk-up apartment building, that appears to be fully rented, for sale @ $1.075 million. That is a bit cheaper than the Arbutus shack featured @ $1.089 million, though it does not have the prestige of that W. 16th Ave. address (snort!) The thing is, the Arbutus address is in serious need of a wrecker's ball, and another $300 - 400K to build a swish place that befits it's neighbourhood, and it would have no revenue to off-set your $8100/month mortgage (plus taxes, etc. - and don't forget the new construction...).

Here are the numbers - in case you are interested.

Now, I know that this is not apples to apples, and you would still be augmenting the payments by ~$25K/year, but if you lived in one of the apartments, you could eliminate the superintendent's and management's salaries, and you would only be down about $12K/year. You could probably make that back in appreciation (or is the place way past it's best before date?), and jack the rents up a bit, and you are on the road to riches. You would not need an income of $303 G's a year to qualify either - hell, just about anyone with a minimum-wage job could qualify.

I know that these are very different prospects, but if I was going to dump over a million bucks into a dump, it would be a dump with some income.


Londonernow said...

The problem with commercial property is that the banks usually want a large downpayment - circa 45% - so it weeds out all the no money down speculators. Also, given the credit crunch and fact that long term funding costs are creeping up, it would be hard to get the borrowing costs much under the cap rate to make the risks on this worth it. The price will continue to be reduced.

solipsist said...

"...The price will continue to be reduced."

That's what I thought too.

Jojuchst said...

Please keep up posted on this listing. Anyone familiar with area can comment on how it relates to the GVRD region. Does it relate to Whalley? Abbotsford?

aetakeo said...

Hah! I know someone who used to live in this building!
You managed to tap my hometown.

M- said...

Londonernow, a good friend of mine works for a local bank in their commercial loans department. In order to loan money for investment units, they require enough of a down payment so that rental income will fully cover the mortgage, taxes, maintenance, and other expenses. On one recent deal, he required a couple to put 75% down on their investment properties. For the unit Solipsist found, the down payment required would probably be fairly low.

solipsist said...

Thanks for that info. -m. I thought that might be the case, but was not sure.

I wonder if 5% down would be appropriate/sufficient in this case?

Louisville real estate said...

Your last paragraph pretty much sums it up: "I know that these are very different prospects, but if I was going to dump over a million bucks into a dump, it would be a dump with some income." I couldn't agree more.