return on investment - condo vs. house?

[TrickyRicky]

Oliver Tweed,

I have noticed the same commercial disconnect phenomenon in other places in the city as well. Eventually, and when I mean eventually keep in mind the time frame could be over a decade, a new equilibrium will be reached where local residential needs will be met. In the mean time here are some points that might apply:

-The vast majority of small business owners are not good business people and have risk aversion for changing their business model or re-investing in their business. This has an intergenerational component to it as well. It often takes a generational change-over to initiate change

-Commercial leases are typically 5 or more years. People hang on to what they have even when their traditional client base is being eroded, such as an ethnic store where the established ethnic clientele have moved to the suburbs

-If you look at the profile of the typical property owner they tend to be immigrants over 60 years old and proud of their accomplishments since coming to Canada. They can also be stubborn and inflexible. They tend not to be as motivated by purely financial considerations. So they may ask for a rent they think they deserve on the basis of rising local property values or precedent setting commercial strips. These can be initially unrealistic however many care more about the number than the money (the building iself is likely not over-leveraged), meaning they would sometime rather leave the store empty than not get the rent they feel is justified

-The residents moving in tend to be drivers that make their larger purchases by car. At the same time they want quirky local spots like cute little restaurants and coffee shops with free internet. These are high risk, low return businesses. You have to love what you are doing (and have low rent) to operate such enterprises because they just don't make very much money and have a horrendous turn-over rate

These are just a few point to think about. Many of these issues are life-cycle and intergenerational trends that slowly and silently re-shape the city.

Edit: On the topic of the thread condo vs. house? I don't think it should be condo vs. house; however, in terms of capital appreciation and upside potential over time houses have historically preformed far better than condos. In another thread I posted some random Old City of Toronto examples comparing values from the mid-80's to the present.

 

[simuls]

On the topic of the thread condo vs. house? I don't think it should be condo vs. house; however, in terms of capital appreciation and upside potential over time houses have historically preformed far better than condos. In another thread I posted some random Old City of Toronto examples comparing values from the mid-80's to the present.

I would agree that historically that is the case, but would suggest that historical precedent with regards to condo vs. house appreciation is no longer a valid yardstick. The entire paradigm of home ownership has changed in Toronto in the past 7 years so that condo living is as desirable as owning a house. With this change in attitude I don't think you'll see much difference.

That being said, houses are pretty much built up in the downtown core, while there are still lots of places to build higher. This supply disparity will probably make houses in the core more valuable than condos.

 

[BrianPersaud]

Oliver Tweed,

I have noticed the same commercial disconnect phenomenon in other places in the city as well. Eventually, and when I mean eventually keep in mind the time frame could be over a decade, a new equilibrium will be reached where local residential needs will be met. In the mean time here are some points that might apply:

-The vast majority of small business owners are not good business people and have risk aversion for changing their business model or re-investing in their business. This has an intergenerational component to it as well. It often takes a generational change-over to initiate change

-Commercial leases are typically 5 or more years. People hang on to what they have even when their traditional client base is being eroded, such as an ethnic store where the established ethnic clientele have moved to the suburbs

-If you look at the profile of the typical property owner they tend to be immigrants over 60 years old and proud of their accomplishments since coming to Canada. They can also be stubborn and inflexible. They tend not to be as motivated by purely financial considerations. So they may ask for a rent they think they deserve on the basis of rising local property values or precedent setting commercial strips. These can be initially unrealistic however many care more about the number than the money (the building iself is likely not over-leveraged), meaning they would sometime rather leave the store empty than not get the rent they feel is justified

-The residents moving in tend to be drivers that make their larger purchases by car. At the same time they want quirky local spots like cute little restaurants and coffee shops with free internet. These are high risk, low return businesses. You have to love what you are doing (and have low rent) to operate such enterprises because they just don't make very much money and have a horrendous turn-over rate

These are just a few point to think about. Many of these issues are life-cycle and intergenerational trends that slowly and silently re-shape the city.

Edit: On the topic of the thread condo vs. house? I don't think it should be condo vs. house; however, in terms of capital appreciation and upside potential over time houses have historically preformed far better than condos. In another thread I posted some random Old City of Toronto examples comparing values from the mid-80's to the present.

Little Italy is an example of this, the older Italian/Portuguese owners of the buildings started to sell of properties to make way for development. Perhaps when these people start to make properties available we will see some development

 

[ponyboy]

good ROIs are usually based more on solid income generation than price appreciation, which is often just good fortune.

If it is an investment, I wouldn't count on big appreciation, especially if purchasing in today's market. IMO, most of those who have made a lot of money off appreciation over the past 10 years have been more fortunate than skillful (and some have avoided high transaction costs by having a real estate license). Back in 2000, who would have known that mortgage rates would have been kept so low? The longterm appreciation of houses is only a 1-2% or so above inflation historically, and the track record for condos has been even with inflation. But who knows what the future holds? I am always weary when people cite paradigm shifts. the same kind of paradigm shift argument was offered in the dot com bubble.

I remember a thread on another message board, and several knowledgeable people agreed that the best real estate investments available to middle/upper-middle class folks were multi-unit houses because they generate more income relative to expenses (than single unit houses or condos). A house subdivided into three or four apartments, in a decent area, can be rented easy, and there is a sizable demand for the sub$1000 market. It can be a pain in the ass to manage though. If you keep the property rather than sell it, you can benefit from annual tax deductions and avoid the costly expenses of selling the property. I think it is overall the best real estate play because it hedges your investment with certain income and plausible price appreciation should you decide to sell. It is, however, a good bit of work to manage. If you have a real estate license, your best money making strategy is different.

 

[Oliver Tweed]

I don't really see the parallel between urban intensification and the dot com bubble. There has unquestionably been a rush to the condo lifestyle in downtown Toronto over the past decade or so. Lineups at new projects, bidding wars and skyrocketing prices all attest to this. Not to mention the towers shooting up all over the place.

I don't think it's a trend. For lack of a better term, I would call it the new normal. Environmental concerns, convenience, and demograhics (young professionals getting married later and having fewer kids) have all contributed.

 

[nfitz]

I can't believe I didn't realize that. I always assumed East York went down the the water. Interesting. I never lived in Toronto pre-amalgamation so I'm not too familiar with the old boundaries. Toronto East I suppose I should say? East Toronto? Just Toronto?

Very good question. I think the recent Toronto Star map showed east of Coxwell as Upper Beaches and west of Coxwell as Leslieville. But the Coxwell strip is really it's only area. The old community of Toronto East was centred at Main/Gerrard and you see/hear this still sometimes. I always used east end, but of late, when I read this used in the media, they are talking about Sheppard and Markham Road. How north of 401 becomes east end, I don't know ....

Anyway, I am familiar with the places you mentioned in the area. My main complaint is the Coxwell and Gerrard intersection and the immediately surrounding area, including the strip of Coxwell just north of there. Although I should mention that the Home Hardware is a notable exception. They have a great basic selection of items, knowledgeable staff and the best service I've ever experienced in a hardware store.

Yes, I love that hardware store! You can find pretty much anything in there ... and they'll order it in if they don't have it. It's very seldom worth the trouble of going to Home Depot (which always annoys me ... walk for miles, can't find anything, end up back at Home Hardware ...). There's also that little lumber yard on Coxwell north of Upper Gerrard, just south of the CNR. Good for odd pieces of wood, etc. And quite helpful. And there's competion, there's a new Home Hardware opened on Danforth just east of Woodbine.

It's a little funny to me that you used the term "high-end dollar store" because I'm pretty sure that's an oxymoron. A dollar store is a dollar store in my books.

If you compare the Dollarama, which is a chain, with a relatively well displayed and tidy store, to the old dollar store that was in the large now-empty store south of the No Thrills, then you'd know what I mean by high-end dollar store ... or even the other (three I think this week) tiny dollar stores along Coxwell between Dollarama and Home Hardware.

Goodlife is an interesting step; I'm wondering when the Starbucks arrive for all those people who need their coffee before and after the work-out. I'm a little closer to Woodbine/Gerrard, so the evolution of the cluster of stores there also interests (and fascinates) me. Perhaps we should move all this to a Coxwell/Gerrard thread ...

 

[genx]

East York is north of Danforth!

on Upper Gerrard east of Coxwell at Bowmore is a little Irish pub that's pretty basic, but quite interesting.

QUOTE]

I grew up in the area, I remember this place being a varierty store as a kid,

 

[nfitz]

I grew up in the area, I remember this place being a varierty store as a kid,

Yeah, I don't think it's been there more than 5-8 years.

There must have been a huge number of convenience stores. There's still 2 very close, and another 3-4 within 3-4 blocks and yet another 4-5 a couple of more blocks, all within a 10 minute walk. But I can clearly see where another half-dozen used to be. It's amazing there was ever enough business for them. Shame the province wouldn't let them sell beer ... that would help them, especially as cigarette sales fall.