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  #1  
Old Posted Jan 7, 2014, 4:52 AM
littlewenzi littlewenzi is offline
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Please evaluate my "deal"

Just signed for the units yesterday, but think I am not getting a good deal out of it just want some thoughts. Not an experienced buyer, so your help is greatly appreciated. My overall experience with this transaction haven't been great. The rep from Concorde seems shady and not very helpful. My own real estate agent was pretty helpful, but there were some surprise at the end (read below)


Details: Bought 2 units (Surrey Park Ave by Concorde) (One was bought by my parent)

2 units, same plan, one on 18th floor, other on 32 floor.


Both same plan (C), 515 sq feet + ~50 sq ft balcony
FYI, the plan C is that one that they have in the showroom

There are 3 of these units with this plan left, the last one is on the 5th floor (by fifth, I meant 2nd, since it goes to 5 after ground, iirc).

Price (Both were the original asking price, they wouldn't budge on the price. we did not specifically said a lower price point, just ask them to lower the price.:
Unit 1 $233,900
Unit 2 $240,900 (IIRC, dont have it on me)

Down payment schedule
1. 5% on signing
2. 5% May 2014
3. 7% Sept 2014
4. 3% Feb 2016
5. The rest on completion (est. summer 2016)

"deals"
From Concord
1. Half price locker (Originally $3000, now $1500 additional)
2. Referral Program (Since we bought 2, I "refer" my parent, so we each got $1000 back in Visa Gift card 7 days after we sign)
3. Furniture move in bonus $3000 each

From my real estate agent:
1. My agent actually bought a unit as well, so he referred me, so I got $1000 Visa gift card back.
2. My agent also said he will give me his $1000 referral card as well.
3. My agent will give rebate me back $2500/ unit, so $5000 in total. (but he said I wont get the money until completion (Est. Summer 2016). This was the surprise, he never mentioned anything about the getting the $5000 until completion. I was under the assumption that I will get it 7 days after signing (like the referral program). When asked why I won't get it till 2016, he said that he doesn't get paid from this sale until 2016. When I heard that I was lost, I have never heard of real estate agent getting paid from the developer until completion. I always thought they get their share after the contract is set in stone (ie. after 7 days of signing).

On a side not, another surprise I had was this:
Previously, Concorde Agent said that there is a rental agreement bonus, which was 6%/year for rental income guaranteed. When I went to sign it, she told me that I only get that 6% IF if don't take that $3000 furniture move in bonus
I was never mentioned of this up till the very last moment when I sign the contract. And here's the "deal" with the 6%.
1. You still need to pay a $75 management fee
2. The 6% does not start until the first of 2 calendar month after I get the keys. (ie. If I get the key on Sept 10, then I don't get rent till Nov 1) Even if during this time the property is rented, the money goes to Concorde/management company and not to me.
#1 + #2 was not mentioned right up till the last minute when we signed the contract. I ended up picking the $3000 deal. I guess I will find my own tenant.



So there you have it, I felt somewhat pressured when I signed it, so I need to settle down and evaluate the whole deal.


Sorry if this seems like information overload, but I really couldn't explain it with less words. My deadline is this Sunday, so hope to hear experience from you guys.


On a side note, other deal (gov incentive)
1. I was told I will get a rebate of around $4000 upon completion if someone lives in the apartment (whether rented out or I live in)
2. First time home buyer (if I decide to live in it)

My questions:
1.how would you rate the deal, fair or which side had the edge
2. $5000 rebate from agent at completion, is it true they don't get paid till completion?
3. I thought I could bargain for less, but nah. Concorde didn't drop a penny. All the deal from Concorde was offered and not negotiated. My agent's deal was negotiated from $2000 ->$2500 rebate / unit. Do you think it is reasonable for them to not drop the price (because it is the last 3 unit available with that plan. (BTW: I was told it is the last 3 unit with that plan, I never see any "book" or list with what's sold and what's not. So the Concorde Sales can be BSing and I wouldn't know. When I went to other, like Century, they would have a mock up apartment, showing which unit is sold and which is left. If I had the money, I would buy other. But that is out of the question.

So Should I or ?

Wenzi
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  #2  
Old Posted Jan 7, 2014, 5:00 AM
littlewenzi littlewenzi is offline
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I forgot to mention, this is for investment purpose.
I could walk away if there is a better deal out there.
My budget is low 200's, so there is not a lot to choose from to begin.

I picked Surrey mainly because of the growth in the future, I estimate to sell before 2024.

Wenzi
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  #3  
Old Posted Jan 7, 2014, 6:26 AM
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Alex Mackinnon Alex Mackinnon is offline
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I've been saying this for a while, but I staunchly believe that investors will lose their shirts when higher interest rates come back. Regardless of how much down you put in, the bulk of people out there are leveraged up and can drag the market down with them.

I think real estate is just about the worst investment that can be made in Metro Vancouver short of a needle and heroin right now. While there is likely a lot of shadow demand waiting for prices to fall the average income in Vancouver doesn't support anywhere near the current cost of real estate.
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Old Posted Jan 7, 2014, 8:06 AM
Blease Blease is offline
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Okay Alex, I agree that Vancouver incomes don't support Vancouver property. However, the model you refer to has never really held in this city and Vancouver has never been a typical city in that regards. While Canada is regarded as a leading world nation with a very high standard of living (and quality of life), Vancouver is it's only major city with winters that could be described as non-Siberian. And being surrounded by an ocean and picturesque mountains doesn't hurt. So while Toronto, Montreal and Calgary have all the perks of a major Canadian city, they don't have our weather or scenery and that's the difference. Chinese zillionaires and wealthy Canadians from across the country will ALWAYS pay a premium for a slice of life here. Hence local incomes count for little when it's affluent outsiders who are driving the real estate market. And yes China could indeed fall into a perilous recession, but some other global economy will step in to its place to pay exhorbitant rates to buy that little bit of Vancouver paradise.

Wenzi, sorry to go off topic. I sense you will do just fine investing into his neighbourhood. Park Place looks beautiful, has a lovely park across the road and the King George station development next door looks very exciting.
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Old Posted Jan 7, 2014, 5:00 PM
rofina rofina is offline
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- What kind of cash-flow do you assume on a unit like this?

- What will you reasonably be able to rent this unit out for to maintain constant tenancy and keep headaches low?

- What rate will the bank give you upon completion in 2016 and how will that affect your cash-flow?

- How many competing units will be complete in the area in time for 2016. Development is bullish, overbuilding is not.

- How do these projections stack up against purchasing an existing unit?

- Would you benefit more from purchasing an existing unit, knowing you might have potentially more leverage over a motivated seller.

I certainly would ignore $1000 Visas as an incentive to purchase a $230,000 piece of property, you need to do some number crunching and figure out what kind of cash-flow you can expect out of this unit upon completion.

Also don't forget you are about to tie up your capital with no return for 2-3 years. That money could be earning a conservative 5% in a low volatility REIT.
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  #6  
Old Posted Jan 7, 2014, 5:04 PM
WarrenC12 WarrenC12 is offline
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That area of Surrey is getting a heck of a lot of bad press lately. Paying ~$466/sf seems a bit steep to me. I agree with Alex on RE being a pretty bad investment today.


Since you can effectively walk away prior to completion, I can understand why your agent isn't getting his share. He also wouldn't get a share if 2016 comes and the bank decides not to finance you. The whole thing would fall through. The problem is that 2 years is a long time, and anything is possible between now and then.
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  #7  
Old Posted Jan 7, 2014, 5:18 PM
VanK VanK is offline
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1) $450/psf+ for Surrey is not cheap. I am not saying its a good or bad deal but this is an area that will have LOTS of units coming to the market.
2) Yes its true that realtors don't get paid their full commission until completion.
3) Its very difficult to negotiate with developers at this stage of the sales program. At this stage, sales prices are usually set. It is very likely that the Concord sales rep is BS'ing. You have no real way of knowing how many units are left. In most cases there is a BS-factor. Some developers BS more and some less. In general I am not a fan of the Prompton Real Estate sales reps used by Concord. They are not the most helpful and are only looking out for themselves.
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Old Posted Jan 7, 2014, 5:22 PM
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Alex Mackinnon Alex Mackinnon is offline
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Also, you pay commission to buy, commission to sell, sales taxes, income taxes on the rent and capital gains on the appreciation. All of which pretty effectively offset a couple years of solid capital appreciation if the market doesn't indeed pop like the ridiculous gasbag that I think it is.
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Old Posted Jan 7, 2014, 5:31 PM
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jlousa jlousa is offline
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First, please stop calling them Concorde, there is no e. Sorry major pet peeve.

It is not unusual for a developer not to budge on price. How would that be fair to all the early purchasers if they could've just waited and bought cheaper? Not to mention what that would potentially due to financing when completion comes around. What is normal is if a developer is having difficultly moving units is incentives, which is what you got. Cheaper storage unit, move in allowance, etc. Another common one is prepaid strata fees for a set period of time.
Do not know the contract used by Concord as to weather your realtor is being upfront with you or not. It does seem unusual for them not to receive their commission until completion... But it's certainly not impossible for it to be the case. You could simply ask Concord at this point as they have no reason to keep that info from you now.

While I don't share Alex's point of view on real estate in Vancouver being the worst investment, I would be careful about buying a condo with the idea of positive cashflow right now. I'd only be buying for my own use, or if I truly believed in the area and had no problem with being cashflow neutral for a few years.
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Old Posted Jan 7, 2014, 7:34 PM
littlewenzi littlewenzi is offline
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Thank you guys for your prompt reply.

I forgot to clarify a few things.

1. I don't have enough money for the 20% down payment right now. It was actually one of the things with under construction that I like, I have time to pay up the 20%. I have about 7% right now that I can afford.

2. I still live at home, not paying rent, so my cash flow is actually pretty good.

3. I estimate $1000 upon completion (the current going price is $950 for the tower next to it with similar size/layout). I don't think it will be that hard to find a tenant since it is 2 minute walk to the skytrain.

4. Let's just say I don't pay much tax right now, even if I made money on the investment, I can offset most of the capital gain. (My T4 is "flexible")

5. In case I couldn't sell the unit in the next few years, I estimate I will get about $600 / month to pay for the mortage ($1000 - fees/taxes/insurance), so I will need to fork out about $500 for mortgage payment (which I can afford).

6. One thing I was worried about was over development, because there was few more towers being built next to it
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Old Posted Jan 7, 2014, 8:47 PM
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Alex Mackinnon Alex Mackinnon is offline
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So you have about $15,000 on hand and can save about $14,000 per year for the next two years? If you can't show the income it's going to be hard to get a mortgage.

So you wait 2 years, and sign on for a $184,000+ mortage. Rates will be higher then, no questions. I have no idea how much higher, but lets say 5%.

That's $9000/yr of your $14,000/yr expendable income. Assuming you're in a low tax bracket, you keep about $10,000/yr in rent, you have $15,000 per year to put against the principle minus all other expenses. Subtract some money for maintenance, strata, potential occupancy etc...

Also, any losses that the property takes will be felt 4x more since you're only 20% down. So a 3% loss in price means a 12% loss of your principle. That's a lot of risk considering that lots of people could swear we're in a bubble and that the federal government is try to cool the housing market.

By 2024, assuming a flat market you end up with somewhere near $170,000 in equity, minus agent fees, transfer taxes, etc...


My Alternative

You put $15,000 in your TFSA today, $14,000 in next year, $7500 in year two, and $5500 for every year until 2024. Use it as a trading account. An average yield of 6% would give you $110,000 in your TFSA and another $66,000 in your pocket account that you didn't spend on mortgage payments in 2024. All with no leverage and no additional taxes.

The best part you can get your money back whenever for maybe $50 to $100 in trading fees and a few minutes on a website. If you want to be leveraged for greater returns then you can, and you get the interest deducted off your income when tax times rolls around. That's something you can't do with a mortgage in Canada.
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Last edited by Alex Mackinnon; Jan 7, 2014 at 8:58 PM.
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  #12  
Old Posted Jan 8, 2014, 1:14 AM
rofina rofina is offline
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Quote:
Originally Posted by Alex Mackinnon View Post
So you have about $15,000 on hand and can save about $14,000 per year for the next two years? If you can't show the income it's going to be hard to get a mortgage.

So you wait 2 years, and sign on for a $184,000+ mortage. Rates will be higher then, no questions. I have no idea how much higher, but lets say 5%.

That's $9000/yr of your $14,000/yr expendable income. Assuming you're in a low tax bracket, you keep about $10,000/yr in rent, you have $15,000 per year to put against the principle minus all other expenses. Subtract some money for maintenance, strata, potential occupancy etc...

Also, any losses that the property takes will be felt 4x more since you're only 20% down. So a 3% loss in price means a 12% loss of your principle. That's a lot of risk considering that lots of people could swear we're in a bubble and that the federal government is try to cool the housing market.

By 2024, assuming a flat market you end up with somewhere near $170,000 in equity, minus agent fees, transfer taxes, etc...


My Alternative

You put $15,000 in your TFSA today, $14,000 in next year, $7500 in year two, and $5500 for every year until 2024. Use it as a trading account. An average yield of 6% would give you $110,000 in your TFSA and another $66,000 in your pocket account that you didn't spend on mortgage payments in 2024. All with no leverage and no additional taxes.

The best part you can get your money back whenever for maybe $50 to $100 in trading fees and a few minutes on a website. If you want to be leveraged for greater returns then you can, and you get the interest deducted off your income when tax times rolls around. That's something you can't do with a mortgage in Canada.

This all makes sense, and if you feel like you are missing out on the opportunities Real Estate provides, invest your TFSA into REITS.

This gives you reliable monthly cash-flow, professionally managed properties, fantastic liquidity, ability to own properties you typically wouldn't have a chance to, and any growth including dividends is tax free.

It sounds like your primary motivator behind purchasing is investment purpose, I think the case for a condo investment in the Lower Mainland is shaky at best.

With an investment the picture is black and white - is your capital better of in RE or invested elsewhere? Right now the yields on condos are very poor - you are speculating on future price appreciation. Given our overall weak population growth, and recent condo boom I don't see a rush to dive into the condo market.

Odds are in favour that a better opportunity will arise by the end of the decade - of course a constant review of conditions is important. Things do change, higher immigration, loosening of lending standards, cheaper credit, etc can lead to another bull market. What are the odds of this?

If you intend this unit to become your principal residence upon completion, the picture is different. And the questions become different.
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  #13  
Old Posted Jan 8, 2014, 5:16 AM
b5baxter b5baxter is offline
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Disaster

Over the last five years condos prices in Metro Vancouver have increased by 11.9%. That is the official number from the REBGV.

It is highly unlikely that we will see the same return over the next five years. The last 20 months have seen prices decline. And I would expect the next five years to see flat or declining prices.

But let's pretend that condos do follow the same trend. That means your condo is now worth $23,800 more. Sounds great right? But you spent $500 / month for your mortgage (assuming you had it rented the whole time). That means you spent $30,000 to make $23,800. In other words you lost over $6,000!!!

And your money could have been in a bank making more money!

And that is probably the best case scenario.

Buying a condo as an investment under the current conditions in Vancouver is a financial disaster.

It CAN make sense to buy real estate as an investment under conditions where there is a reasonable price to rent ratio. But Vancouver has one of the highest price to rent ratios in the world.

How does it make any sense at all to buy real estate as an investment in Vancouver right now?

Last edited by b5baxter; Jan 8, 2014 at 5:22 AM. Reason: change LM numbers to GVRD numbers
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  #14  
Old Posted Jan 8, 2014, 9:00 PM
matrix_dot_ca matrix_dot_ca is offline
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littlewenzi,

I am almost at the same boat as you are a month ago. I have looked around Surrey Central developments new and existing and did my math. While some might be cash flow positive, you might end up loosing some $$ down the road due to low or no appreciation when selling time comes. I have looked at Ultra, 3Civic, University District, Park Ave and the existing Park Place.

I almost put an offer on one of the units on Park Place but I backed out on the last minute. If you looked at the sold properties on park Place, the owners got break even and some lost $$$ on their properties. The price has not appreciated at all. Over the next few years, there were more or less a dozen high rises that will be built around central City/Whalley area so overbuilding would be a concern. Rent $$ will be tight as you have to compete with lots of units. I did ask a Property Manger at prompton and some of the rentals at Park Place sits for sometime to get rented.

Condos and TH in surrey almost flatlined in the last 5 years. So don't expect for price appreciation if you were banking on it on your condo investment.
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Old Posted Jan 9, 2014, 4:53 AM
Laniatus Laniatus is offline
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Note: I am not an expert, this is just my thought process in how I would evaluate the purchase if I were in your shoes.

Purchase Price/Assumed Value: $233,900
Down Payment/equity: $46,780
Mortgage Principle: $187,120

year 1 Costs
Mortgage: $13,060 (5% interest)
Strata Fees: $1,854 (~$0.30/sqft)
Taxes: ~$1000
Misc: ~$300+++ (unit maintenance fund)
Total: $16,214

Year 1 Gains
Rent: $12,000
Equity Gained: $3887
Total: $15,887

Year 1 Net: -$327

Assuming no gaps in rental occupancy, you will be hovering around breaking even depending on interest rates. Realistically, there will probably be some gaps in rental which would for sure put you in the red. You should also consider income tax on rental income, albeit you say to assume it is ~0 through a "flexible" T4.

However, by investing in the Greater Vancouver Real Estate market you are banking everything on the Property Value Annual Growth Rate (PVAGR). The big difference maker will be in the equity you gain. Every year the amount of equity you gain will increase as your mortgage principle goes down. Increasing property value will further increase this.

I used this calculator to play with some numbers:http://www.ultimatecalculators.com/h...alculator.html

Equity Gain, year 1
-2% PVAGR: Home Value: $229,222
Equity Gain: -$791

-1% PVAGR: Home Value: $231,561
Equity Gain: $1,548

0% PVAGR: Home Value: $233,900
Equity Gain: $3,887

1% PVAGR: Home Value: $236,239
Equity Gain: $6,226

2% PVAGR: Home Value: $238,578
Equity Gain: $8,565

Also, don't forget Realtor fees when selling your property.

Questions to consider:
  • Is $233,900 a fair price for a 1bdrm condo in Surrey? Will it still be a fair price at completion date?
  • How do you predict property values will change, in your area, over the next 2, 5, 10+ years?
  • How difficult will it be to find a good, reliable, long-term tenant? or will you make it your primary residence?

Concluding Thoughts
  • Personally I think $454/sqft in surrey is asking a bit too much.
  • I believe in the next 2 years we may see prices go down or stay the same
  • However, over 5 years I believe prices will begin to rise again.
  • If I were paying rent and planning to move in, I would consider the purchase (again though, I think I could find a better deal than $454/sqft)
  • Otherwise, I think you are better off either investing your Down Payment money/savings at a modest return as others have suggested, or, wait 2 years, save your money for a Down Payment on a newly completed/resale unit in 2016
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  #16  
Old Posted Jan 9, 2014, 5:02 PM
rofina rofina is offline
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Quote:
Originally Posted by Laniatus View Post
Note: I am not an expert, this is just my thought process in how I would evaluate the purchase if I were in your shoes.

Purchase Price/Assumed Value: $233,900
Down Payment/equity: $46,780
Mortgage Principle: $187,120

year 1 Costs
Mortgage: $13,060 (5% interest)
Strata Fees: $1,854 (~$0.30/sqft)
Taxes: ~$1000
Misc: ~$300+++ (unit maintenance fund)
Total: $16,214

Year 1 Gains
Rent: $12,000
Equity Gained: $3887
Total: $15,887

Year 1 Net: -$327

Assuming no gaps in rental occupancy, you will be hovering around breaking even depending on interest rates. Realistically, there will probably be some gaps in rental which would for sure put you in the red. You should also consider income tax on rental income, albeit you say to assume it is ~0 through a "flexible" T4.

However, by investing in the Greater Vancouver Real Estate market you are banking everything on the Property Value Annual Growth Rate (PVAGR). The big difference maker will be in the equity you gain. Every year the amount of equity you gain will increase as your mortgage principle goes down. Increasing property value will further increase this.

I used this calculator to play with some numbers:http://www.ultimatecalculators.com/h...alculator.html

Equity Gain, year 1
-2% PVAGR: Home Value: $229,222
Equity Gain: -$791

-1% PVAGR: Home Value: $231,561
Equity Gain: $1,548

0% PVAGR: Home Value: $233,900
Equity Gain: $3,887

1% PVAGR: Home Value: $236,239
Equity Gain: $6,226

2% PVAGR: Home Value: $238,578
Equity Gain: $8,565

Also, don't forget Realtor fees when selling your property.

Questions to consider:
  • Is $233,900 a fair price for a 1bdrm condo in Surrey? Will it still be a fair price at completion date?
  • How do you predict property values will change, in your area, over the next 2, 5, 10+ years?
  • How difficult will it be to find a good, reliable, long-term tenant? or will you make it your primary residence?

Concluding Thoughts
  • Personally I think $454/sqft in surrey is asking a bit too much.
  • I believe in the next 2 years we may see prices go down or stay the same
  • However, over 5 years I believe prices will begin to rise again.
  • If I were paying rent and planning to move in, I would consider the purchase (again though, I think I could find a better deal than $454/sqft)
  • Otherwise, I think you are better off either investing your Down Payment money/savings at a modest return as others have suggested, or, wait 2 years, save your money for a Down Payment on a newly completed/resale unit in 2016

Excellent analysis.

I would also like to point out that by not buying today you are not forgoing owning property forever. This is difficult to quantify, but don't feel like you are "missing the boat."

Looking at the last few years of condo prices, if you got this advice 3 years ago and your building was completing now you would be much further ahead having your money invested elsewhere.

The time is on your side to build your savings and purchase a unit closer to completion time - this isn't 2005.
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  #17  
Old Posted Jan 10, 2014, 6:55 AM
jhausner jhausner is offline
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I will read the other comments after I respond to your post:

Quote:
Originally Posted by littlewenzi View Post
Just signed for the units yesterday, but think I am not getting a good deal out of it just want some thoughts. Not an experienced buyer, so your help is greatly appreciated. My overall experience with this transaction haven't been great. The rep from Concorde seems shady and not very helpful. My own real estate agent was pretty helpful, but there were some surprise at the end (read below)
Define shady? If you mean they were putting pressure and not completely answering questions, welcome to the club, every sales person does this because they are pressured to sell or lose their jobs. You have to keep pressing them unfortunately and be honestly willing to walk out.

Quote:
Details: Bought 2 units (Surrey Park Ave by Concorde) (One was bought by my parent)

2 units, same plan, one on 18th floor, other on 32 floor.


Both same plan (C), 515 sq feet + ~50 sq ft balcony
FYI, the plan C is that one that they have in the showroom

There are 3 of these units with this plan left, the last one is on the 5th floor (by fifth, I meant 2nd, since it goes to 5 after ground, iirc).
And I thought my 1 bedroom was small. That seems pretty tiny.

Quote:
Price (Both were the original asking price, they wouldn't budge on the price. we did not specifically said a lower price point, just ask them to lower the price.:
Unit 1 $233,900
Unit 2 $240,900 (IIRC, dont have it on me)
Ok for reference, I got my assessment for this year and it was pretty much static from the year before. $233,000 for my 1 bedroom on the 21st floor, larger than yours. So I think you've probably paid a bit of a premium for your units just an FYI.

Not surprising they wouldn't budge, I have yet to see a developer budge on sales price of purchases by plan (aka pre-sales). There is no pressure for them to and they typically like to give 'incentives' which you have to judge to be good or not.

Quote:
Down payment schedule
1. 5% on signing
2. 5% May 2014
3. 7% Sept 2014
4. 3% Feb 2016
5. The rest on completion (est. summer 2016)
That's not bad. For investment purposes you need at least 25% down so I'm assuming the 'rest on completion' is 5% more? Providing you aren't borrowing the money for the down payments, you're in not that bad shape from an investment purpose.

You qualify for a standard mortgage and 25% of $233,900 would be give or take around $175,000. Add tax and such and that's not too bad. I will warn you though that rent rates currently in the area aren't necessarily sufficient to cover full mortgage of $175,000 with current interest rates when you factor in property tax and strata fees (and other fees like rent management if you go that route).

So be prepared to eat some money per month for the next 5 or so years at least. There are a lot of apartments coming on the market around King George, so I'd imagine prices will stay fairly static and unless something drastic happens, rent will only go up near inflation which isn't a lot.

On my apartment when I go to rent it in 6 months when we move, I am already prepared to eat about $250 a month which I can afford no issue on this property until rents increase enough to compensate for increased interest rates and my losses. We shall see when we get there but just a big caution.

If you expect these properties to make you money in the next 5 years, keep in mind that may not happen. Now 5 years is from today so seeing as completion is in 2016, that gives you maybe around 3 years to eat costs.

Rule #1 in investment, hope for the best, plan for the worst.

Quote:
"deals"
From Concord
1. Half price locker (Originally $3000, now $1500 additional)
2. Referral Program (Since we bought 2, I "refer" my parent, so we each got $1000 back in Visa Gift card 7 days after we sign)
3. Furniture move in bonus $3000 each
What size locker? Hard to see if that is a great deal or not. Just for reference, I rent a locker at U-Haul which is one of the cheaper out in Port Kells. I have an 8 foot by 6 foot by 15 foot high locker, costs me about $850 a year. So if your locker is the same size, you pay for it in a couple years so I'd say good deal. If it is tiny, that bumps up to more years to pay for it. Still _probably_ a good deal as storage in smaller units is hugely at a premium and you almost require having storage space somewhere if you (or your renters) want to 'live' comfortably.

Visa Gift cards I hate. You can't turn them into cash and it forces you to buy stuff. If you already had to buy stuff then you can sort of see it as a good thing. I personally hate gift cards and always prefer money back.

Furniture move in bonus, what is that? Like they pay you when you move in to buy up to $3000 in furniture? What are the requirements if any? Like do they force you to buy from a specific place? Does it _have_ to be furniture? Is it contingent on you moving in because you said this is an investment property so you won't move in? Can't know if that is good or not. I would again prefer to see $3000 cash back.

Concord did that with their last sales here. $15,000 'decoration' bonus. I was like "Seriously? Who spends that much on decorations you're insane." Cash always good.

Quote:
From my real estate agent:
1. My agent actually bought a unit as well, so he referred me, so I got $1000 Visa gift card back.
2. My agent also said he will give me his $1000 referral card as well.
3. My agent will give rebate me back $2500/ unit, so $5000 in total. (but he said I wont get the money until completion (Est. Summer 2016). This was the surprise, he never mentioned anything about the getting the $5000 until completion. I was under the assumption that I will get it 7 days after signing (like the referral program). When asked why I won't get it till 2016, he said that he doesn't get paid from this sale until 2016. When I heard that I was lost, I have never heard of real estate agent getting paid from the developer until completion. I always thought they get their share after the contract is set in stone (ie. after 7 days of signing).
Referals are nice but again Visa Prepaid cards are a pain unless you had a lot of stuff you wanted to buy and absolutely needed. :|

As for your agent, typically they get paid half up front then half at closing. My agent had the same thing with our townhouse unit. He was paid half up front and gave us $500 back, then will get paid half at closing and will cover our legal costs. I'm fine with that because I know how much he was making and it is more than fair given his services.

I have not heard about them being paid only at closing though, they do typically get some money up front. You should have been able to find out though how much he would get and when. Concord can be probed to find out too I'd imagine. Not sure if they are obligated to disclose, but I've never had anyone say no.

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On a side not, another surprise I had was this:
Previously, Concorde Agent said that there is a rental agreement bonus, which was 6%/year for rental income guaranteed. When I went to sign it, she told me that I only get that 6% IF if don't take that $3000 furniture move in bonus
Well the question you have to ask yourself is do you need a rental management company to handle your rental or are you willing to do it yourself. I always suggest to people that are capable to consider doing all the homework then trying to manage it on their own. If you're unwilling to attempt to manage your properties on your own, then you maybe shouldn't invest if you don't have many units. Different if you owned say 10 or more properties spread out, but 1 or 2, should be able to manage.

That said, if you do want the rental company to handle it and to wipe your hands of that burden and a bit of risk, again always factor in full cost. Remember the 6% even if you did get it would not be forever. Typically it is for 2 or 3 years max then rates go up to regular. It's like Telus deals when you sign up for Optic. They sell you $X per month but in the fine print it says in 6 months it goes up to $Y which is a LOT more and will make up for the discount in less than a year on a 3 year contract.

Be careful with insentives. Nothing comes for free in this world.

Quote:
I was never mentioned of this up till the very last moment when I sign the contract. And here's the "deal" with the 6%.
1. You still need to pay a $75 management fee
2. The 6% does not start until the first of 2 calendar month after I get the keys. (ie. If I get the key on Sept 10, then I don't get rent till Nov 1) Even if during this time the property is rented, the money goes to Concorde/management company and not to me.
#1 + #2 was not mentioned right up till the last minute when we signed the contract. I ended up picking the $3000 deal. I guess I will find my own tenant.

Or you walk from the contract. If you just signed, you have 7 days to pull out. That's always an option. That said like I said above and you pointed out, you can handle it yourself and save not just 6% but all the fees. There are risks but it is something to consider for sure.

Quote:
So there you have it, I felt somewhat pressured when I signed it, so I need to settle down and evaluate the whole deal.
Always happens. It's part pressure it is also often nerves. Doesn't matter how many times you sign contracts, you always get nervous and that just makes it seem more pressure filled than it is. Remember you can always say no (well up to a point of course once the contract is signed. )

Quote:
Sorry if this seems like information overload, but I really couldn't explain it with less words. My deadline is this Sunday, so hope to hear experience from you guys.
No problem. I'm sure you'll get various opinions. At the end you have to do what is comfortable for you. Just keep in mind that you will not have to qualify for a mortgage until 2016 when closing happens. There is some added pressure to your life though that you maintain your credit ratings and don't go into major debt in that time. You will also have the added pressure of sitting under a contract and watching interest rates slowly rise which they will over the next 2-3 years.

As long as you are prepared to pay I would say 6-9% interest, and assume you may not rent it for full mortgage value so will eat some costs, and you are able to budget, qualify, and eat those costs, then you're in good shape. Investment real-estate isn't always an immediate win situation. It can be risky though less so that many other investment options, but it is also longer term with gains coming over the long haul. Don't expect to flip the units quick if something goes wrong financially and get out of it fast especially if you have lease agreements in place with tenants.

Quote:
On a side note, other deal (gov incentive)
1. I was told I will get a rebate of around $4000 upon completion if someone lives in the apartment (whether rented out or I live in)
2. First time home buyer (if I decide to live in it)
First time home buyer requires you to live in it for at least 1 year. It also has to be the first home you have purchased period OR your spouse. So if you have a girlfriend that qualifies as a spouse or a wife who have purchased a property already, you will not qualify as a first time home buyer.

Rebate, what is that on? Do you mean GST rebate? On brand new properties you get a GST rebate that helps cover the GST you have to pay. Only on brand new builds you don't get it on previously owned. There are a few ways it works but be prepared that sometimes depending on your lender, you have to pay the GST up front on closing time then apply to the government for the rebate.

So have some extra cash available to at least cover legal fees and GST at closing. You have a few years. Now this depends on if you are renting or living. If you are living on $233,900 you'd pay around $7800 in GST. You may have to pay that right at closing then submit for your $4,000 rebate. That means you would need $7800 up front then will get the $4k about 2 or 3 months later.

On investment, you will be paying more around $11700 in GST on your purchase and you WILL need that at closing because the rebate requires you to prove you have a tenant which you can't really do at closing.

Same deal you would submit for your $4k rebate. So that does mean at the end you will need for investment to foot about $7500 extra on top of your down-payments at closing after you get your rebate. Be prepared.

This stuff all adds up quick.

If this is your first ever place and you're renting right now, I may actually suggest you seriously consider moving in yourself for a year. Qualify for first time home buyer, get your rebate, live in it paying your mortgage until you get a feel for the property without the added pressure of day dot first purchase having to rent it out.

Unfortunately I don't know your situation and you may already own (assuming you don't since you mentioned first time home buyer rebate). It does mean you live in the unit and will need to either move out eventually and rent yourself, or buy a second place and move in there then rent the apartment out.

That would be far less risky. You would also have the benefit of seeing how your parents' rental property goes.

Also keep in mind for property tax you don't get the same rebates from the city so you'll pay about $700 a year more in property tax versus living in it. You have to account for that too. $1500 a year = $125 a month added to your monthly costs.

Quote:
My questions:
1.how would you rate the deal, fair or which side had the edge
On new builds, developer almost always has the edge. So is it fair, I wouldn't say it is completely unfair but it really depends on 1) what you plan to do with the property in the longer term and 2) what you want out of it.

If you want a quick flip to make money, you lost our and Concord squarely won.

If you want to live in the unit for a while then rent it out after a year or so, then it's probably a lot closer to fair.

If you want to simply invest and rent it out, given price and costs of ownership, right now it is not fully fair to you as you _will_ eat costs for a number of years. That may (and probably) will change in 5 to 10 years.

If you still own the property in 10 years and it is in good shape and you have a good tenant, you'll make money and a fair amount of equity.

Again it depends on 1 and 2 above how you would judge it fair or not.

Quote:
2. $5000 rebate from agent at completion, is it true they don't get paid till completion?
I'm certainly no expert but I've never actually heard of this. Instead I've always been told half up front, half at closing. I guess it comes down to the developer and I didn't use an agent for my Concord apartment purchase so not sure how they handle agents, but again I've never heard of that so I'm a bit ify on that. Others may know better though.

Quote:
3. I thought I could bargain for less, but nah. Concorde didn't drop a penny. All the deal from Concorde was offered and not negotiated. My agent's deal was negotiated from $2000 ->$2500 rebate / unit. Do you think it is reasonable for them to not drop the price (because it is the last 3 unit available with that plan. (BTW: I was told it is the last 3 unit with that plan, I never see any "book" or list with what's sold and what's not. So the Concorde Sales can be BSing and I wouldn't know. When I went to other, like Century, they would have a mock up apartment, showing which unit is sold and which is left. If I had the money, I would buy other. But that is out of the question.
I rarely see new purchase units drop in price unless they are pressured to do so let alone when you're negotiating. My townhouse dropped by $25,000 from the original selling price only because they weren't pushing it then when they started construction they had pressure to unload the last townhouse unit in the development. They dropped the price and I walked in and purchased it then.

I ran the risk of someone else buying it at the higher rate but it was a risk I was willing to take. So yes they can rebate and discount, but if there is no pressure, very rare, especially if as you said there truly were only 3 units left. That's about as no pressure as you can get for a developer.

Your agent may have had the advantage based on what they purchased and the availability or may have done a lot of business with Concord or had the push to just walk away if Concord didn't budge. I would bet on the "has done a lot of business." Welcome to the business world.

Quote:
So Should I or ?

Wenzi
Only you can answer that.
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  #18  
Old Posted Jan 10, 2014, 7:00 AM
jhausner jhausner is offline
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Join Date: Oct 2007
Location: Surrey
Posts: 2,819
Quote:
Originally Posted by littlewenzi View Post
I forgot to mention, this is for investment purpose.
I could walk away if there is a better deal out there.
My budget is low 200's, so there is not a lot to choose from to begin.

I picked Surrey mainly because of the growth in the future, I estimate to sell before 2024.

Wenzi
Sell before 2024? How much before? If around 2024 that's about 8 years. You will probably make some money but given you will eat costs the first 5, you may actually not.

Remember every loss you net per month initially, you have to make up for when you reach black before selling if you aren't strictly hoping for equity return. You will be paying off the mortgage but for the first 10 years or so you largely pay interest not principal so you're banking on prices raising quite a bit.

1 bedroom units around here rent for between $950 and $1100 a month right now. I would be surprised if you could get more and I'd go with the lower of the numbers for estimations.

Take that number, add inflation every year for the next 10 years, then factor in your costs which are mortgate + strata + property tax + any damage repairs (appliances, etc.) + rental management if you go that route.

That will then tell you when you will turn from red to black (if you are red at all) and how long you have to be in the black until you are making money now completely outside of equity gain.

That then will tell you how much equity you need to gain in that time frame to make a profit. And remember you have to gain equity to actually make a profit because even though you will make money on selling, if you gain or lose equity, you only make back your original down payment basically so you're no better off.
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  #19  
Old Posted Jan 10, 2014, 7:07 AM
jhausner jhausner is offline
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Join Date: Oct 2007
Location: Surrey
Posts: 2,819
Quote:
Originally Posted by Alex Mackinnon View Post
I've been saying this for a while, but I staunchly believe that investors will lose their shirts when higher interest rates come back. Regardless of how much down you put in, the bulk of people out there are leveraged up and can drag the market down with them.

I think real estate is just about the worst investment that can be made in Metro Vancouver short of a needle and heroin right now. While there is likely a lot of shadow demand waiting for prices to fall the average income in Vancouver doesn't support anywhere near the current cost of real estate.
I don't disagree but not sure how helpful this is to this specific poster.



The problem a lot of people face is they don't realistically calculate their total cost of ownership (TCO) and miss a lot of costs or the fact that if you lose up front you have to gain to get back to $0 before you actually made money outside of equity.

Last edited by jhausner; Jan 10, 2014 at 7:27 AM.
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  #20  
Old Posted Jan 10, 2014, 7:26 AM
jhausner jhausner is offline
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Join Date: Oct 2007
Location: Surrey
Posts: 2,819
Quote:
Originally Posted by littlewenzi View Post
Thank you guys for your prompt reply.

I forgot to clarify a few things.

1. I don't have enough money for the 20% down payment right now. It was actually one of the things with under construction that I like, I have time to pay up the 20%. I have about 7% right now that I can afford.
Ok that's a bit more worrisome. I know it technically is 20% but most lenders want 25% keep this in mind, especially if you are seen as high risk aka you are quite close to the GDS and TDS maximum ratios.

Given you have 7% though, that's $16373. That means you need another $30407 to reach 20% + another $11600 for the GST at closing (and maybe $700-1500 for legal fees). So worse case scenario you need at least another $43507 before closing.

Summer 2016 so let's say June. That's 29 months or $1500 per month every month until closing. If you can afford above and beyond your regular expenses today (car, gas, food, etc.) then you're OK.

Quote:
2. I still live at home, not paying rent, so my cash flow is actually pretty good.
Make sure based on your income you will qualify for the mortgage. If you have 0 debt and you make a good coin you probably will, but it is 39% GDS and 42% TDS and they do now take into account credit cards and lines of credit when calculating.

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3. I estimate $1000 upon completion (the current going price is $950 for the tower next to it with similar size/layout). I don't think it will be that hard to find a tenant since it is 2 minute walk to the skytrain.
For rent? $1000 is probably right. $950 is the minimum here in Park Place but keep in mind our units are larger. Also keep in mind our strata will be less than yours since you have more expensive amenities so you have to factor that in your costs. I'd expect to pay around $200 a month in strata at least for your unit.

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4. Let's just say I don't pay much tax right now, even if I made money on the investment, I can offset most of the capital gain. (My T4 is "flexible")
There is no capital gain until you sell and only if it is a rental property not your primary residence. It is just income on your tax return.

[/quote]
5. In case I couldn't sell the unit in the next few years, I estimate I will get about $600 / month to pay for the mortage ($1000 - fees/taxes/insurance), so I will need to fork out about $500 for mortgage payment (which I can afford).[/quote]

You won't be able to sell it in a few years, not for more than you purchased it for. In a new development there is a flood to the market so selling becomes very difficult without losing money especially if Concord doesn't sell out all their units. Once the buildings are built Concord will largely discount the remaining units.

So expect not to be able to sell and make money for a good 5 to 10 years. Minimum. King George is a new area not a mature area so the market will be flat for the next decade more or less.

As for your mortgage payment $500 or $600 a month what? What are you calculating based on???

Your interest rate will be based on 2016 rates. If we assume even 4.5% interest on a 5 year fixed (which is low), that puts your mortgage payments at:

$233,900 - 20% downpayment = $187,120

5 year fixed @ 4.5% am 25 years (maximum you can do now) = $1,035.66 a month.

So not sure where you're getting $500.

$1,035.66 per month + Strata of $200 + $125 for property = $1360.66 a month minimum cost to you.

So if you're renting for $1000 a month, you are losing (red) $360.66 a month. Please let me know where you are getting a $500-600 mortgage from??

Quote:
6. One thing I was worried about was over development, because there was few more towers being built next to it
There will be upwards of 2,000 more units built around King George station in the next decade. So yes, yes there will be more development. Over development? I don't know yet. But like I said, expect the market to be flat. If you want a quick buck then I would definitely suggest you pull out of the contract and purchase somewhere else in a more mature market.
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