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  1. #1
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    Default Opinions on University District

    I'm thinking of purchasing one of the Truman Sky View townhomes in the new University District. It's about 1034 sqft, 2bdr, 1 parking stall for about $500k.

    Looking at it as just an investment - either flip when it's done being built (about 18mo) or rent it out if I can't sell it. UD is in its first phase and in a great location (imo) beside the U of C, Children's Hospital and Market Mall. It's not too far from Downtown too.

    One concern I have is that it's on a 99yr leased land to the U of C which may turn off potential buyers when I look to sell. If I have to keep it in the end, I don't think it'll be a problem renting out but it would probably mean I would have to put more money down just so the rent will cover the mortgage.

    Any one else look at UD? Opinions?

    TIA

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    Sounds like a terrible idea. The condo market is so saturated right now with tons more still being built.

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    Flip or rent - neither is a gonna be a good return on your money. If you sell in a year or so you'll need the property to appreciate 10K just to break even to cover realtor and transaction fees. If you rent it out you're basically taken on a new part time job as property manager. Some people are okay with it others are not. Assuming you want to be a landlord next you have to do the math on what kind of return on your equity you're getting. Rental income is also considered to be INCOME, not capital gains, so you'll be taxed at your marginal rate. I suspect the after tax return of your rental property will be under 5%. On top of all that this 5% return will not be available to you - it'll be paid in the form of equity on the home. You will likely be cashflow negative in the first couple years assuming you're not plopping a huge down payment on the home. All of this to make a meager 5% or so. My 2 cents.

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    Originally posted by realazy
    Sounds like a terrible idea. The condo market is so saturated right now with tons more still being built.
    True. Valid point that I didn't consider and most likely not changing within the next year.

    Originally posted by Manhattan
    Flip or rent - neither is a gonna be a good return on your money. If you sell in a year or so you'll need the property to appreciate 10K just to break even to cover realtor and transaction fees. If you rent it out you're basically taken on a new part time job as property manager. Some people are okay with it others are not. Assuming you want to be a landlord next you have to do the math on what kind of return on your equity you're getting. Rental income is also considered to be INCOME, not capital gains, so you'll be taxed at your marginal rate. I suspect the after tax return of your rental property will be under 5%. On top of all that this 5% return will not be available to you - it'll be paid in the form of equity on the home. You will likely be cashflow negative in the first couple years assuming you're not plopping a huge down payment on the home. All of this to make a meager 5% or so. My 2 cents.
    I should mention I have another rental property already - single family home. I've had it for 15+yrs now and I manage it myself so being a landlord isn't new for me. I've had good and bad tenants throughout the years. Preferably, I don't want this new place to be another rental property; it's only my backup plan should it not sell.

    As for Income tax, my wife doesn't work so she would report the income on her personal income tax. If I ended up renting out the place, I would probably put down 20-30% (100k to 150k) to avoid CMHC (I can't remember what the percentage required for a rental). I just hate the thought of that money sitting in the property just to essentially break even.

    The ideal play I'm hoping for with this investment is, 5% down (25k), wait 18mo, skip-transfer on the day of possession to a new owner (i.e. never register myself on title) but if I can't skip-transfer, then sell it immediately after taking possession and pay the buyer's realtor commission (my realtor has a flat fee to list it - 1k). A positive sign for this play is that they've sold quite a lot already but I'm not sure if this is just the spring rush that normally occurs in RE. I'm seeing lots of people buy way out in Livingston too.

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    Not to mention you might only get Student renters in that area and I would never rent a new condo to students.

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    Originally posted by lasimmon
    Not to mention you might only get Student renters in that area and I would never rent a new condo to students.
    /\ this; students are absolutely terrible.... obviously there are some good students; but the likelihood of some just not giving a shit or having parties tend to be higher.

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    Originally posted by Ed the SOHC




    As for Income tax, my wife doesn't work so she would report the income on her personal income tax. If I ended up renting out the place, I would probably put down 20-30% (100k to 150k) to avoid CMHC (I can't remember what the percentage required for a rental). I just hate the thought of that money sitting in the property just to essentially break even.
    I would do some research before you decide to do this. Given that CRA is acting like the police these days, if they ever looked at this and your wife couldn't show that the funds are directly from her to purchase the property they would just attribute the income back to you (based on the fact that she doesn't work so she would have no way of producing the required down payment unless she has cash sitting around from working in the past etc.).

    There are ways to get around it.

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    Have you calculated what the return on your equity will be?

    Drives me nuts when rental owners don't know the expected returns on their single biggest investment. I think that's a big part of the draw of rental property ownership - you don't need to be financially inclined. Make a down payment and let your tenants pay the rent is all everyone seems to care about without realizing that its potentially a lot of work to make a relatively low return. You can safely earn a similiar return in passive investments while being fully/partial tax sheltered and much better diversified.

    A rental property is not as safe as you might think especially in this city. You will have a huge equity stake in one unit in one neighborhood in one city whose economy is dependent on oil prices. People also get a lot more emotionally attached to a rental property than other types of investment so if things go south they'd rather hang on to a bad investment for many years instead of learning and moving on.

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    So you want to buy a 500K place with a 5% down payment and RENT it out? Even if I make some bare-bones assumptions (2.55% mortgage rate, your wife's income tax being 7.5% aka lowest possible, no maintenance, and only $250 in condo fees), you'd have to charge $3000/month just to BREAK EVEN monthly. I doubt you'd find anyone to pay $3000/month to live in a 1034sqft condo right off campus.

    Even if you put 30% down and camp $150K there, the rent you'll need to break even is $2,400/month.

    Stay far away from these units and do some pretty basic math before considering stuff like this.

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    Originally posted by Manhattan
    Have you calculated what the return on your equity will be?

    Drives me nuts when rental owners don't know the expected returns on their single biggest investment. I think that's a big part of the draw of rental property ownership - you don't need to be financially inclined. Make a down payment and let your tenants pay the rent is all everyone seems to care about without realizing that its potentially a lot of work to make a relatively low return. You can safely earn a similiar return in passive investments while being fully/partial tax sheltered and much better diversified.
    I cannot agree more with this. People think that their down payment is all they're investing and ignore the fact that they are on the hook for the entire value.

    5% down is 20x leverage, and people don't seem to understand that.

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    Originally posted by Feruk
    So you want to buy a 500K place with a 5% down payment and RENT it out? Even if I make some bare-bones assumptions (2.55% mortgage rate, your wife's income tax being 7.5% aka lowest possible, no maintenance, and only $250 in condo fees), you'd have to charge $3000/month just to BREAK EVEN monthly. I doubt you'd find anyone to pay $3000/month to live in a 1034sqft condo right off campus.

    Even if you put 30% down and camp $150K there, the rent you'll need to break even is $2,400/month.

    Stay far away from these units and do some pretty basic math before considering stuff like this.
    And good luck getting $2,400 a month in this rental market.

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    Originally posted by realazy


    I cannot agree more with this. People think that their down payment is all they're investing and ignore the fact that they are on the hook for the entire value.

    5% down is 20x leverage, and people don't seem to understand that.
    One of the CP mods got really, really angry at me when I showed him how to calculate his actual rate of return from his leveraged rental investments.

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    Originally posted by suntan
    One of the CP mods got really, really angry at me when I showed him how to calculate his actual rate of return from his leveraged rental investments.
    First, I get your point. The actual rate of return on rental income paying off your mortgage is technically bullshit. We're talking a few % a year if its breaking even or better, and not every property breaks even, and maintenance and your time is a factor too.

    That doesn't mean real estate is a terrible investment. I've done pretty good so far with real estate. I also personally have no problems using ROI as my rate of return, because I'm not using other people's money to buy stocks or businesses; my borrowing potential right now wouldn't be utilized if I wasn't using it for property. But even if you're using the entire leveraged amount for your numbers, i'm sitting at 16.xx% on one flip (owned it a year), and my latest one (bought last may/june), if I sold today, would be sitting at about 15ish% on a conservative estimate of what i'd come out of it with.


    I dont know enough about other investments to see similar 'obvious' increases like I have so far seen in real estate. Getting a mortgage on real estate is pretty easy to do too; any bank will do it and it takes an hour. So I like real estate so far. The problems with it can often be solved by trading your time rather than money also. That's good starting out doing it a hobby, maybe not so good when you have 20 properties and it becomes a full time job (just finding a renter for my wife's place I probably wasted a good 15 hours of my life).




    Now IMO, what makes OP's idea a terrible investment is realistically that property is going to rent out for $1500 or less. that doesn't even cover the mortgage, let alone condo fees, property tax, management fees, and the time it sits vacant in-between renters. So that is reason #1 i'd run from that.

    Appreciation is the next reason i'd run. Realistically it's going to probably only appreciate 2%ish in value year over year for the next decade (that's the projections I've read for calgary for the next decade).

    3rd is it's a new construction, and 4th it's a townhouse. You pay a premium for new, and then it goes down in value as it gets worn out. Whats the quickest way to wear it out? rent it out. Not getting enough wear and tear on it? Want to increase the rate it's getting used and abused? rent it to 18 year olds. Buying new as a rental IMO is a long term investment; decade + imo, because your equity needs to offset the cost of the property being devalued by renting it out. So while properties may be appreciating at 2%, your property make actually be depreciating because year after year it becomes closer to what people would lovingly describe as needs some TLC, aka a shit hole that needs a lot of work.

    5th. 5% down. Income properties require 20% down, and you'll likely get .1% worse than you would on a mortgage for your own place. To get around that you can always declare it your primary residence..... =shady.

    OP, IMO if you want a income property, do the math, and look elsewhere. There are places in this country where real estate makes a hell of a lot of sense, but the math doesn't make sense for me on that townhouse. People always say oh buy downtown for a great investment, buy in the university area! but the numbers never made sense to me because people only pay so much for rent, and yet, places in these 2 areas hold a premium for price far and above what makes sense as a rental.
    Last edited by zhao; 03-25-2017 at 12:42 PM.

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    Originally posted by Ed the SOHC

    The ideal play I'm hoping for with this investment is, 5% down (25k), wait 18mo, skip-transfer on the day of possession to a new owner (i.e. never register myself on title) but if I can't skip-transfer, then sell it immediately after taking possession and pay the buyer's realtor commission (my realtor has a flat fee to list it - 1k). A positive sign for this play is that they've sold quite a lot already but I'm not sure if this is just the spring rush that normally occurs in RE. I'm seeing lots of people buy way out in Livingston too.
    how discounted is the price they are selling pre-construction at for the area? like if they are asking 500k, is everything else in the area that is almost exactly the same selling for 550 or 600.... or is it all selling for 500 or less (that's basically what edmonton is like right now for a lot of new construction)?

    I've been looking at new construction all over Edmonton and haven't found a condo/townhouse/duplex/house that made sense to flip in over 2 years; doubt it's any different in Calgary.

    Infact, around here, they are pricing shit higher now than what they were asking right before the market started to go south IMO.

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    Originally posted by zhao


    First, I get your point. The actual rate of return on rental income paying off your mortgage is technically bullshit. We're talking a few % a year if its breaking even or better, and not every property breaks even, and maintenance and your time is a factor too.
    Wow, your so-called IQ and this is the shit you come up with.

    No dummy, you have it exactly backwards. The problem is that ROI is supposed to consider the money *you* invest, not what the fucking bank gives you.

    That doesn't mean real estate is a terrible investment. I've done pretty good so far with real estate. I also personally have no problems using ROI as my rate of return, because I'm not using other people's money to buy stocks or businesses; my borrowing potential right now wouldn't be utilized if I wasn't using it for property. But even if you're using the entire leveraged amount for your numbers, i'm sitting at 16.xx% on one flip (owned it a year), and my latest one (bought last may/june), if I sold today, would be sitting at about 15ish% on a conservative estimate of what i'd come out of it with.


    I dont know enough about other investments to see similar 'obvious' increases like I have so far seen in real estate. Getting a mortgage on real estate is pretty easy to do too; any bank will do it and it takes an hour. So I like real estate so far. The problems with it can often be solved by trading your time rather than money also. That's good starting out doing it a hobby, maybe not so good when you have 20 properties and it becomes a full time job (just finding a renter for my wife's place I probably wasted a good 15 hours of my life).
    Zzz...

    Should've just bought SHOP.

    VGT

    MAW150

    Fuck even AAPL

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    This is a safe investment because of stable rent. You will most likely rent it out. But if you try to flip in a year or two. Then this property will not be the one. 99 leasing term is not a issue. This model they are using is a copy from UBC and SFU.

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    Originally posted by suntan
    The problem is that ROI is supposed to consider the money *you* invest, not what the fucking bank gives you.
    No shit.

    But you didn't explain what you were talking about very well and ROR =/= ROI. If you said ROI it would have been clearer so forgive me for assuming you were talking about factoring in how much leverage was being used, since you specifically mentioned 'actual ROR on a leveraged property' and the guy not liking your numbers. Makes me wonder wtf you were talking about, or what kind of crappy numbers that guy you are talking about was using.

    Dont you agree OP's tying up all that potential borrowing power to make a decent ROI on a tiny bit of money. That is a factor that should be taken into account over and above just factoring in a ROI...

    Btw, MAW only is averaging 14% and I can't leverage 5:1 on it, which isn't even close to the 80% and 70% ROI from the properties I mentioned.

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    University District is literally in between Alberta Children's Hospital and Foothills Hospital - I'm sure there's plenty of nurses and staff that work in the hospitals before you need to consider renting out to students at the UofC

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    Originally posted by nutella
    University District is literally in between Alberta Children's Hospital and Foothills Hospital - I'm sure there's plenty of nurses and staff that work in the hospitals before you need to consider renting out to students at the UofC
    Better yet, student nurses

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    Anyone have any idea how the property value will change? I remember those university city apartments/condos were selling for around 250-300 i think in the beginning and then people were flipping them for almost 500k!!

    500 seems a bit on the high side for these university district condos but if you could flip right away for 550-600 it might be a nice quick cash grab.

    Beautiful location and I think anything near the uni will hold its value fairly well

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