I am in a unique position – as well as being the editor and content manager of Real Estate Weekly newspaper and REW.ca, I am also a would-be Vancouver real estate investor.
I am in the fortunate position of having a good down payment from inheritance. And of course, because of my job, I have great contacts to help me land the perfect rental unit and find a great tenant. Otherwise, I am subject to the same highs, lows and vagaries of the property-purchasing process as all our readers.
Here I chronicle my journey and share all the lessons I learn along the way. I promise not to hold anything back, although names will be changed for anonymity!
Last time, I shared with readers the first step on my journey to becoming a real estate investor – getting financing in place. That done, I could then start hunting for that most elusive of properties – a cash-flowing unit in central Vancouver.
So far, there has been no shortage of condo listings to view. In fact, the dearth of listings that we keep reporting on is actually slightly misleading. Yes, the number of active listings available at any one time is way lower than this time last year, but the number of new listings coming onto the market each month is actually higher than a year ago. It’s just that they’re getting snapped up so quickly, along with anything else that was already listed, that the monthly snapshot of total numbers is low.
So my real estate agent Bob and I have had a tonne of properties to go and see over the past couple of weekends, ranging from a $299,000 downtown studio to a $399,000 one-bed-plus-den in the West End to a $424,800 loft in Mount Pleasant, to a $448,000 two-bed patio flat in Fairview to a $478,000 rare freehold unit in False Creek. And see them we did, plus many more besides. In fact I think we went to nearly 20 different units.
The first place I saw was enough for me – a loft-style studio in a super-hip building in Strathcona, listed at $398,000. The open house was packed, the floors were polished concrete, the ceilings were high and it was clear the place would rent out for at least $1,800 a month. Check, check, check. This being my first foray into best-offer multiple bids at deadline, I put in what I knew was a “Hail Mary” offer of $430,000, subject to financing. No deal. The unit went for a subject-free offer of $444,000. Looking back, I could have made the financials work at $445,000, and I could have been brave enough to go in without subjects, as it was a great building and the strata documents all checked out. There was no reason to think I wouldn’t have gotten a mortgage for that price, with my down payment. So perhaps a missed opportunity there. Certainly a lesson learned that, in these days of multiple bids, even on condos, you have to treat strata documents like a home inspection and put in your cleanest offer possible. But hindsight is 20:20, so onwards we go.
The next weekend, I found a stunning place just three blocks away from my own West End home, a one-bed-plus-large-den unit with fantastic finishings and a lovely view balcony, in another well-run building. Again, the open house was heaving with everyone from investors to first-time buyers to families whose kids wouldn’t mind a windowless bedroom. I figured I could rent it out for $1,900, and needed to be a bit more aggressive in my bid against all the competition. With Bob's advice, we put in a subject-free offer of $460,000 and held our breath. No deal. That unit will make someone a very lovely home for the bargain price of $506,000 – a whopping $107,000, or 27 per cent, over asking. No way I could compete with that.
Then an interesting opportunity came up. A one-bed unit in the iconic Woodwards development in Gastown, which would rent for $1,800 – except that a tenant has just signed a one-year lease at $1,600 a month, plus there are property management fees of $100 a month for the year. So buyers looking for their own home wouldn’t be interested, and a lot of investors would be turned off by being stuck with the below-market rent for a year. If I could get it below its $450K list price, get a cheap one-year mortgage and suck up the relatively low first-year income, it could be an amazing long-term investment. We put in an early offer of $425,000, willing to negotiate up to $440K. But the listing agent remained convinced he could get multiple offers and above-list price, despite the unit’s disadvantages. So we walked away.
Finally, a couple of days ago, I fell in love again – this time with a gorgeous, three-level loft in a quite basic building in Mount Pleasant, listed at around $425,000 and rentable for $1,750. A spectacular unit with hardwood floors, enormous ceilings and a loft sleeping area – true New York-style loft living, in one of our city’s hottest neighbourhoods. I was all in until I read the strata documents – hardly any money in the contingency fund, and no depreciation report available. This did not seem to be a building that was in good health. Reluctantly, I had to change my position and not put in an offer.
Aside from those, a lot of the units I saw were below-grade or overpriced in my eyes. A couple of others tempted me to put in an offer until I read the strata documents, and saw major capital projects coming up, or not enough in the contingency fund to feel comfortable at the price I’d need to offer.
This is challenging. And if it’s a challenge for me to find a unit that I don’t even have to live in, I certainly feel for those people who are looking for a place to call home. There seems to be a lot of desperate panic-buying going on – especially demonstrated by that lovely West End unit, which is the only one I’ve seen listed in that price range. When something is in such short supply and such high demand, prices inevitably go through the roof.
It may be that I’ll have to adjust my expectations about what kind of investment property I can get. I’m pretty sure a lot of current home buyers out there will have to do the same.
More units to look at this weekend!
Next time: The offer that makes the difference