Aura at College Park Condos (Canderel Stoneridge) - Real Estate -

[ducati0000]

the rental market getting squeezed,I read that downtown Toronto the rentals units is heading towards %1.2 by mid summer and the getting worst if the recession last longer,so those who are buying to rent its still a no lose situation if your in it for the long run.

 

[Big Daddy]

 

[skyscrapersucks]

The result is based on an annual 5% appreciation and a 5% down payment. Firstly, Aura takes 20% deposit. Consider the current economic situation, no appreciation or even a negetive value would be very possible (especially for Aura and Bloor 1 which were sold at such a high price). If 5 years later, the market value depreciate 20%, many buyers may not be qualified for the 75% mortgage. If Aura just took 5% deposit, I'm sure many buyers have already walked away from their deposits.
Your calculation methods is really like a real estate agent.

 

[Big Daddy]

Actually what my example showed was a 10% down payment. A 20% down payment would be $100,000 and there are many, many investors who could easily come up with that. Also, my example showed a 5% appreciation per year when in fact downtown condos were appreciating at a rate of 7 to 10 percent or more a year for the past seven years. I am well aware of the economic climate right now but it is clear you are not. Values right now are still more than 3% ahead of a year ago. Things have slowed down, many higher priced units are not selling as fast and so the mix of units sold includes a higher ratio of lower priced units so the average is lower but the prices haven’t gone down.

The mortgage is not simply a ratio of the value of the property (by the way if I put down 10% my mortgage would be for 90% - if I put down 20% my mortgage would be for 80% of the value - I don't know where you are getting 75%) but on the individual’s ability to afford it (gross income and other securities). You speak about these investments like it’s a huge deal when in reality, those who can afford it can afford it without much difficulty. Think about it, why do you think there were so many people lined up to buy them?

Yes returns may suffer for a while but so what? Investments always move up and down. Do you honestly believe this is it, the world will never recover this time? Put your thinking cap on. 3 to 5 years from now we will not even be talking about this. If things do get worse, then remember, things will also get better. If you are right and the world is done, then I guess we have a lot more to worry about than the return on a small condo.

 

[Big Daddy]

One more thing, if anyone were foolish enough to walk away from an investment of 5% ($25,000 in this case) they didn't deserve the money in the first place. This is a great project on a very well located piece of property in the third largest metro area in North America. Worst case scenario would see them delay the start of construction. So what? That would be prudent. But for an investor to walk away from a project like this, well that’s just foolishness. If someone put down $100,000 (remember this is not their principal residence if they are investing) the banks must have approved their mortgage and Canadian banks don’t suffer fools lightly. If you can’t afford it, they won't lend you the money - period.

You seem so convinced this is Armageddon it’s depressing to anyone reading it. We have had economic downturns before and we will again. Strap in and ride it out.

 

[afransen]

Over at Worthwhile Canadian Initiative, Stephen Gordon produced this graph to help illustrate recent trends in housing affordability in Canada and the US:

So, houses have become somewhat inflated in Canada, but nothing like the binge in the US.

 

[cabbagetowner]

i can't believe people out there still think flipping condos are a good investment.

 

[cdr108]

You sound more like a 'Big City Broker' or a perma-bull.

According to the graph you provided:

The first RE recession in 1959 and lasted until 1964 (ie. 5 years); values peaked at $125,000 and dropped 20% to ~$100,000.

There was a burst of 125% growth from 1965 to 1974; but then the next RE recession started and lasted until 1980 (ie. 6 years); then stagnated for another 5 years until 1985, when it sky-rocketed to a peak in 1989 and crashed back down.
In real terms, values dropped 20% from 1974 to 1980; and after the bubble of late 1980s, there was only 5% appreciation over a 22 year span from 1974 to 1996.

Last RE recession occurred between 1989 to 1996 (ie. 7 years) before there was any appreciation in the markets.
During that time, in real terms, values dropped 37% from $400K => $250K; and still HAVE NOT reached their peak after 18 years.


The point is, there is a danger of buying at the peak, which we are at (or just passed depending on your sources).

The "7 to 10 percent or more a year for the past seven years" appreciation you quoted is unsustainable and perpetuated by cheap interest rates.

Since you bring up historical values and trends then use them and not cherry pick. Historical data shows TO values will decline by at least 20%, some say as much as 30% from it's peak.

RE is cyclical ... you probably have at least 4 or 5 years from the peak to buy before there is any uptrend again.

According to TREB "The average GTA price in November 2008 was $368,582. During the same period last year, the Toronto MLS system recorded an average of $393,747". That does not mean prices have dropped $25,000 - Higher priced homes are selling much slower than lower priced homes so the mix is significantly different with a much higher ratio of lower priced homes which brings down the average. A new price index gets around this apples-to-oranges comparison and shows by how much CREA statistics miss the mark. The repeat-sale price index (RSPI), developed by Teranet Inc. and National Bank, says house prices are still above the level of a year ago by 3.3%.

When the average house price is around $320,000 then one should consider buying.
There will be less market risk, still some but less so than currently.

At an average value of $368,582 according to TREB; or $406,741 as referenced by Teranet Inc and National Bank, we are still WAY OVERPRICED and too much risk of being in NEGATIVE equity in the next coming 5 years.

 

[cdr108]

You missed a few points, some very critical.

1. What is the mortgage rate that you are using?

2. What size of a unit do you think you can get for $500K?
Since you are stating dt TO, by my estimates that may get you ~900 SF, or ~800 SF with parking.

3. Who in the world are you able to rent 900 SF for $3000 in the city of TO??? If you can, it is far and few between for LUXURY suites in LUXURY buildings.
Typical 900 SF dt TO would fetch $2000 - 2200 maximum.

4. Where is your property taxes?
Let's be conservative and say that's another $400/m.


Carry costs not covered by rent:


$148,000 = mortgage interest for 5 years (I will assume your value)
$ 27,000 = maintenance fees
$ 24,000 = property taxes
--------------------------
$199,000 = carrying costs for 5 years


$132,000 = Rent out at $2200/m for 5 years.
------------------------------------------

$ 67,000 loss not covered by rent

 

[Big Daddy]

Still seems like a good investment to me. Bear in mind appreciation may not be 5% for the next year or so but I'll bet its more than 5% in two years - Also, mortgage rates are very good - you can do better than 6% mortgage right now

 

[skyscrapersucks]

You missed a few points, some very critical.

1. What is the mortgage rate that you are using?

2. What size of a unit do you think you can get for $500K?
Since you are stating dt TO, by my estimates that may get you ~900 SF, or ~800 SF with parking.

3. Who in the world are you able to rent 900 SF for $3000 in the city of TO??? If you can, it is far and few between for LUXURY suites in LUXURY buildings.
Typical 900 SF dt TO would fetch $2000 - 2200 maximum.

4. Where is your property taxes?
Let's be conservative and say that's another $400/m.


Carry costs not covered by rent:


$148,000 = mortgage interest for 5 years (I will assume your value)
$ 27,000 = maintenance fees
$ 24,000 = property taxes
--------------------------
$199,000 = carrying costs for 5 years


$132,000 = Rent out at $2200/m for 5 years.
------------------------------------------

$ 67,000 loss not covered by rent

That's why I said if AURA just got 5% deposit, there must be many buyers walk away from it. It's right people lined up to buy it, but it was in Feb, 2008, it was the peak of the cycle, since then, the sales have already been down for almost 40% and the price is also starting downtrend.

 

[Big Daddy]

That's why I said if AURA just got 5% deposit, there must be many buyers walk away from it. It's right people lined up to buy it, but it was in Feb, 2008, it was the peak of the cycle, since then, the sales have already been down for almost 40% and the price is also starting downtrend.

Did you read my post responding to this?

 

[cdr108]

Don't know if you meant 15 FORT York Blvd (dt) or York Blvd (Keele/Finch).

Unfortunately, you are comparing apples to oranges for property values vs rents.

I believe the rent from your example at 15 Fort York Blvd would be < $2200/m

As a comparison, here is another property at 15 Fort York Blvd that's on a higher floor (37FL), larger (1032 SF) with parking & Locker, listed for $2300:

3701 - 15 FORT YORK BLVD, TORONTO, ON M5V 3Y4
City Place Luxury Loft Condo 1032 Sf As Per Builder's Plan, Unobstructed City & Lake View

http://www.realtor.ca/propertyDetails.aspx?propertyId=7836886

==============

278 Bloor Street East, 16 F/L is much larger than the 900 SF you're stating and probably costs more than $500K to purchase:

Type Level Dimensions

Foyer Flat 10 ft x 10 ft
Living room Flat 24 ft ,10 in x 13 ft
Dining room Flat 13 ft ,5 in x 11 ft ,6 in
Kitchen Flat 13 ft ,10 in x 7 ft ,1 in
Eating area Flat 7 ft ,10 in x 7 ft ,10 in
Master bedroom Flat 16 ft ,11 in x 11 ft ,9 in
Bedroom 2 Flat 13 ft ,8 in x 9 ft ,10 in
Solarium Flat 11 ft ,3 in x 7 ft ,11 in

http://www.realtor.ca/propertyDetails.aspx?propertyId=7795045


========


The values and examples you used reminds of several shady RE agents I've met who were trying to persuade people to buy with inaccurate or inflated numbers.

 

[cabbagetowner]

Still seems like a good investment to me. Bear in mind appreciation may not be 5% for the next year or so but I'll bet its more than 5% in two years - Also, mortgage rates are very good - you can do better than 6% mortgage right now

buy a cash negative property in hopes that it's never vacant or needs maintenance... seems like a no brainer. this is not the way to invest in re.

this is why the rich get richer the poor stay poor.

 

[Solaris]

Still seems like a good investment to me. Bear in mind appreciation may not be 5% for the next year or so but I'll bet its more than 5% in two years - Also, mortgage rates are very good - you can do better than 6% mortgage right now

did you mean 15 York Street in your example above ??

this smells a like RE industry person posting ... I agree with cdr108's comments that your numbers seem to be off, there seems to be little correlation betweeen your unit purchase price, unit size, monthly rent, and building age ... these variables seem to be different in the examples you provided (I think generally older buildings have larger units and rent/sell for less then new ones?)

echoing cabbagetowner's post, investing in a cash negative property is definitely the worst thing possible, and yet you are suggeting it is "a good investment" ? ... projecting your possible future profits based only on 'potential' property appreciation in 5 years (less negative cash flow) is purely speculative, I think we all understand the current RE market and economic conditions, unless you have a crystal ball to assume your property will appreciate 25% in 5 years seems like a 'leap of fath', corrections cycles don't necessarily finish in a couple of months ...