Presale Condo Investment : BrentwoodFIVE vs Gilmore Place

[GilmoreStation]

I've got some money saved up for a speculative play in the presale condo market. I've narrowed down to two projects right now, my budget will be around $625K~$650K for a small 2-bedroom unit (750-850sqft). Most likely, both of these projects will hit the market either in the Summer or Fall of this year.

Which one of these two will likely to produce superior return on investment?

BrentwoodFIVE


Gilmore Place

[Jebby]

I'd put my money into something else.

[logan5]

Neither. They're both going to depreciate in value.

[Klazu]

I would rather buy two condos in Calgary and rent them out.

[connect2source]

These comments aren't exactly constructive, perhaps more insight might be appreciated.

Most of the pre-sale Buyers I've gotten into the market in the last 2-3 years have made enormous gains! Some of the best were in Olympic Village where some of my pre-sale Buyers bought in the mid to high 300's for 550-625 sf units, 2 - 3 years later most of those are now worth in the mid 600s.

Although the majority of my business is in Vancouver, I tend to like Brentwood over Gilmore. The transit and shopping centric location will be nothing but positive moving forward, always is and typically always has been, can't beat a huge shopping and transport hub for sustaining value. Onni isn't always my developer of choice, I've had tons of experience with them and often finishes and overall finished product is a bit of a let-down. This is a landmark development for Shape so likely they will exceed expectations as their reputation would take a serious beating if this project doesn't wow.

[Alex Mackinnon]

I'd say these are all constructive. It's not an investment if you're almost guaranteed to lose money. Right now the market is edging of a speculative cliff driven by cheap credit. That cheap money is going away and this bubble is going to pop.

Connect2source, you're a real estate agent, right? What other investing experience do you have? I don't see how anybody can expect presale condos to appreciate more than an actual investment in stocks, preferreds, or indices right now.

[GilmoreStation]

The bubble is bursting as we speak, so hopefully the prices will be lowered by the time the projects go on sale

[connect2source]

Originally Posted by Alex Mackinnon

Connect2source, you're a real estate agent, right? What other investing experience do you have? I don't see how anybody can expect presale condos to appreciate more than an actual investment in stocks, preferreds, or indices right now.

Yes I am. Really depends on how long you plan on holding on to the pre-sales, right now I'm not really selling the local market as a flip-market. I don't sell stocks, I sell real estate and invest quite heavily in real estate myself. My real estate portfolio and that of most of my clients has outperformed my stock portfolio by a huge margin over the last 10 - 15 years. Typical gains in condos over the last 12 - 18 months have exceeded 30%. Past performance is no indicator of future gains in either stocks or real estate but demand remains very strong for condos Vancouver and 'close-in suburbs' like Burnaby, North Shore and Richmond and inventory remains tight.

[connect2source]

Originally Posted by GilmoreStation

The bubble is bursting as we speak, so hopefully the prices will be lowered by the time the projects go on sale

Not seeing that at all in Vancouver, sales are way down because inventory is non-existent in condos hence far less transactions taking place, more like a 'stuck market'.

I can't speak for the burbs but condo prices downtown are up quite a bit so far this year, they're no inventory and most desirable suites are selling in multiple offers at records prices. The off-shore money is slowing coming back, the hangover from the PTT is fading a bit as well.

[Jebby]

Originally Posted by connect2source

Most of the pre-sale Buyers I've gotten into the market in the last 2-3 years have made enormous gains! Some of the best were in Olympic Village where some of my pre-sale Buyers bought in the mid to high 300's for 550-625 sf units, 2 - 3 years later most of those are now worth in the mid 600s.

Sure, if you bought in the 300s you did well, especially in a central waterfront location like OV. GilmoreStation is thinking of buying in at mid 600s in a suburban development.

How old are you GS and what is the time frame for your investment? Are you looking to buy presale and cash out once the project is finished? Are you hoping to hold long and rent out? Can you put that money away for 25 years?

[whatnext]

Originally Posted by Alex Mackinnon

I'd say these are all constructive. It's not an investment if you're almost guaranteed to lose money. Right now the market is edging of a speculative cliff driven by cheap credit. That cheap money is going away and this bubble is going to pop.

Connect2source, you're a real estate agent, right? What other investing experience do you have? I don't see how anybody can expect presale condos to appreciate more than an actual investment in stocks, preferreds, or indices right now.

It's all great. Until it isn't.

You have to remember there's a huge amount of realtors out there who have never been through a downturn. Same with flippers. It's hard for them to imagine a world in which things turn out differently, when RE doesn't outperform a stock portfolio. Let the OP roll the dice. Timing is everything, maybe he gets lucky, maybe he doesn't.

[connect2source]

Originally Posted by whatnext

It's all great. Until it isn't.

You have to remember there's a huge amount of realtors out there who have never been through a downturn. Same with flippers. It's hard for them to imagine a world in which things turn out differently, when RE doesn't outperform a stock portfolio. Let the OP roll the dice. Timing is everything, maybe he gets lucky, maybe he doesn't.

Been in this a long time, been through downturns. Not here to coach, just witness to 100's of clients who've done amazingly well in real estate, it's either for you or it's not, people were talking 'bubble' 4-5 years ago, those who took the plunge have made amazing gains. I'm good at what I do, I'm cautious, pragmatic, highly experienced and educated, can't speak for all of my colleagues.

[cornholio]

Originally Posted by connect2source

Been in this a long time, been through downturns. Not here to coach, just witness to 100's of clients who've done amazingly well in real estate, it's either for you or it's not, people were talking 'bubble' 4-5 years ago, those who took the plunge have made amazing gains. I'm good at what I do, I'm cautious, pragmatic, highly experienced and educated, can't speak for all of my colleagues.

People were talking bubble 4 to 5 years ago because the western world led by the US was supposed to start normalizing rates again. There was a delay with expected results, for example very nice profits for your clients.

Jan 25th 2012:

WASHINGTON — The Federal Reserve, declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to spur growth.

The Fed said that it now planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers.

Ninety minutes later, the Fed published for the first time the predictions of the committee’s members on when they would raise interest rates. It showed that 11 of the 17 members expected the Fed to raise rates by the end of 2014. Taken together, the documents suggested that the Fed expected to keep rates near zero until late 2014, but probably not any longer than that.

http://www.nytimes.com/2012/01/26/bu...late-2014.html

The bubble is there. We know all about off shore money etc flowing in as well, but in this case lets stick to rates. Rates are going up. They are going up as we speak. Any pre sale today will be in all probability facing a Canada with interest rates at around 4 points (at least) by the time it is complete and ready for a real mortgage. Today we are at 0.5 points in Canada and the US is at 1 point, and will be probably at at-least 1.75 points before the end of the year (and it was at 0.25 points not too long ago). *Also inventory can be low because of market shock when people hold off on selling, for various reasons which I will not discuss right now. The region has been if anything overbuilding for some time, if true that means there is tons of hidden inventory that can suddenly show up very quickly once poked out from hiding.

Fed, in shift, may move to faster pace of rate hikes

http://www.theglobeandmail.com/repor...ticle34295613/

Normalization:
https://www.stlouisfed.org/annual-re...-normalization

In sum, my testimony showed that the high level of reserves is a legacy of QE, that with the supply of reserves now much greater than demand, the Fed has no alternative to paying interest on reserves as it normalizes policy, and that in the years ahead the balance sheet should be bought down in size to be consistent with a market determined interest rate rather than administratively determined by the Fed. The normalization period, during which monetary policy returns to a normal state, should be as short as possible. In my view, normalization should be shorter than currently implied by the Fed’s “Policy Normalization Principles and Plans.”

https://economicsone.com/2016/05/18/...g-and-how-far/

My question to you is what do you think these rate increases will do to the value of pre-sales that wont be ready for occupancy or a mortgage for maybe 3 years?

[WarrenC12]

Originally Posted by Alex Mackinnon

I'd say these are all constructive. It's not an investment if you're almost guaranteed to lose money. Right now the market is edging of a speculative cliff driven by cheap credit. That cheap money is going away and this bubble is going to pop.

Connect2source, you're a real estate agent, right? What other investing experience do you have? I don't see how anybody can expect presale condos to appreciate more than an actual investment in stocks, preferreds, or indices right now.

I'd even argue the stock market is overvalued. I don't see any really good bets in the short to medium term. If I had serious money looking for an investment I'd pick blue chip dividend stocks, not too much else.

For real estate a good sanity check is to see if it makes sense as a cash flow rental property. Even something in the break even range is worth considering, but new condos in Burnaby would be a huge cash pit at today's prices.

[Alex Mackinnon]

Originally Posted by WarrenC12

I'd even argue the stock market is overvalued. I don't see any really good bets in the short to medium term. If I had serious money looking for an investment I'd pick blue chip dividend stocks, not too much else.

For real estate a good sanity check is to see if it makes sense as a cash flow rental property. Even something in the break even range is worth considering, but new condos in Burnaby would be a huge cash pit at today's prices.

I'd agree with your assessment. I've been trying to pick preferreds that would be buoyed by rate hikes, but then again so is everyone else...

[GilmoreStation]

Originally Posted by connect2source

Not seeing that at all in Vancouver, sales are way down because inventory is non-existent in condos hence far less transactions taking place, more like a 'stuck market'.

I can't speak for the burbs but condo prices downtown are up quite a bit so far this year, they're no inventory and most desirable suites are selling in multiple offers at records prices. The off-shore money is slowing coming back, the hangover from the PTT is fading a bit as well.

Buyers in Vancouver follow the financial news, they're very savvy. The recent hike by the Fed will pause some buyers from purchasing.

Less inventory is because a lot of overseas buyers will buy and leave their houses vacant. I wonder what will the government do with the data once the 1% vacancy tax kicks in.

[connect2source]

All great points!!

It's a highly personal decision, pre-sale prices are high at the moment, so if you're going to purchase, make sure you negotiate hard and plan to keep it at least 3-5 years.

Having worked in pre-sales before going out on my own, ALWAYS negotiate the price, especially for some of the units that are taking a while to sell. This IS an MLS transaction, sales centres are set up to make it feel more like a retail space but like any other transaction it's fully negotiable.

First thing I do is try and negotiate the price down enough to cover the 5% GST which is a total waste IMO as only the first buyer pays, next try and get them to throw-in an extra like a locker, parking or suite upgrades such as hardwood flooring or an appliance upgrade. 9 times out of 10, even in a busy market, I get great deals for my clients. As they wish to hide your discount from the MLS record they will term it a 'decorating allowance' and the credit will show up on your Statement of Adjustments when you're completing the sale.

Bring a Realtor, or you'll have no representation of the project runs into trouble, the developer is paying the commission not the Buyer and if you think you'll get yourself a deal by going-it alone don't expect to be compensated because the developer is saving commissions, in almost all cases they'll negotiate far more in your favour when your represented by an experienced agent.

[GilmoreStation]

Originally Posted by connect2source

All great points!!

It's a highly personal decision, pre-sale prices are high at the moment, so if you're going to purchase, make sure you negotiate hard and plan to keep it at least 3-5 years.

Having worked in pre-sales before going out on my own, ALWAYS negotiate the price, especially for some of the units that are taking a while to sell. This IS an MLS transaction, sales centres are set up to make it feel more like a retail space but like any other transaction it's fully negotiable.

First thing I do is try and negotiate the price down enough to cover the 5% GST which is a total waste IMO as only the first buyer pays, next try and get them to throw-in an extra like a locker, parking or suite upgrades such as hardwood flooring or an appliance upgrade. 9 times out of 10, even in a busy market, I get great deals for my clients. As they wish to hide your discount from the MLS record they will term it a 'decorating allowance' and the credit will show up on your Statement of Adjustments when you're completing the sale.

Bring a Realtor, or you'll have no representation of the project runs into trouble, the developer is paying the commission not the Buyer and if you think you'll get yourself a deal by going-it alone don't expect to be compensated because the developer is saving commissions, in almost all cases they'll negotiate far more in your favour when your represented by an experienced agent.

Great advice! I'll keep this in mind, but I plan to get in during the VIP presale event as early as possible. Last time, Shape only offers like 1% discount or sth

[connect2source]

Originally Posted by GilmoreStation

Great advice! I'll keep this in mind, but I plan to get in during the VIP presale event as early as possible. Last time, Shape only offers like 1% discount or sth

Good Luck! Bring a Realtor if you can and still try and negotiate, Sales Representative still fear people rescinding after the 7 days, when I worked in pre-sales the key was keeping the deals firm. Many buyers are simply putting a 7 day hold on the suites while they shop around so if you can convince them you'll stay 'firm' they may be open to some negotiation.

[cornholio]

Originally Posted by connect2source

All great points!!

It's a highly personal decision, pre-sale prices are high at the moment, so if you're going to purchase, make sure you negotiate hard and plan to keep it at least 3-5 years.

Having worked in pre-sales before going out on my own, ALWAYS negotiate the price, especially for some of the units that are taking a while to sell. This IS an MLS transaction, sales centres are set up to make it feel more like a retail space but like any other transaction it's fully negotiable.

First thing I do is try and negotiate the price down enough to cover the 5% GST which is a total waste IMO as only the first buyer pays, next try and get them to throw-in an extra like a locker, parking or suite upgrades such as hardwood flooring or an appliance upgrade. 9 times out of 10, even in a busy market, I get great deals for my clients. As they wish to hide your discount from the MLS record they will term it a 'decorating allowance' and the credit will show up on your Statement of Adjustments when you're completing the sale.

Bring a Realtor, or you'll have no representation of the project runs into trouble, the developer is paying the commission not the Buyer and if you think you'll get yourself a deal by going-it alone don't expect to be compensated because the developer is saving commissions, in almost all cases they'll negotiate far more in your favour when your represented by an experienced agent.

Best negotiation is often no negotiation. In other words focus you finite energies elsewhere. What you propose is be prepared to compromise. This is faulty logic imo. Compromise for the sake of compromise is not always the right move. Often the right move is to not only to not compromise but instead to not even give the time of day to the proposal/idea/thought etc. that is hoping for a compromise or some sort of random point to work from.

I do however agree that real-estate agents provide some sort of service, but important to remember is that experienced lawyers are 10,000 times more important, along with non commissioned financial advisers.

Also you did not answer my question. What do you think will happen with prices/value for pre sales with interest rates being around 4 points (at-least) by completion date (from today's 0.5 points)?