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Real estate investment Part 2: condo pre-sales and LPs – Western Investor

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Vancouver real estate investor Ralph Case helped his son buy a pre-sale condominium in central Surrey in the summer of 2016, putting $30,000 down for a $200,000 apartment scheduled for completion in late 2018. In the summer of 2018, months before the project closed, his son sold the condo as an assignment for $330,000. Minus the down payment, the net profit was $120,0000, Case told the Jurock Land Rush conference March 6 in Vancouver.

In this second of a four-part Western Investor series on real estate investing, we outline how investments in pre-sale condominiums, or purchasing a share of a limited partnership in new condominium or multi-family rental projects can allow investors to get onto a real estate ladder that could carry them to their first home and beyond.

The advantages of buying pre-sale condominiums is that you are investing at today’s prices for a property that will complete in three years, when you expect the price to be higher. Also, a number of Metro Vancouver condo developers are currently offering discounts to move pre-sale units.

There is no guarantee, of course, and investors must be selective about what and where they will be buy. The overall benchmark price of a condominium apartment in Greater Vancouver is now actually 0.4 per cent lower than it was three years ago, but it increased 4.7 per cent in Surrey, 8.7 per cent in Maple Ridge and by 18 per cent in Mission over the same period.

For investors, the concept is not to move into the condo, but to sell it upon completion, or even earlier if assignments are allowed, or to place it on the rental market when the building is complete.

The following are current examples of pre-sale opportunities that are launching shortly, likely by April 2021, compiled with the assistance of Ryznar Media Inc.

• Era, by Swiss RealGroup Canada, is a 20-storey condo tower in Maple Ridge with about 200 units. The developer is offering selected pre-sale one-bedroom condos from $249,900.

• Belvedere, 275-unit condo concrete tower in Central Surrey at a SkyTrain station, by Square Nine Developments. One-bedroom units start in the high $300,000 range. More than 1,000 buyers have registered though it has not officially launched pre-sales yet.

• Telford on the Walk, in Burnaby’s Metrotown, by Intracorp, launched pre-sales in January 2021 and sold out 70 per cent of the 332 units in three weeks. The studio units pre-sell from $389,900 and the completion is set for 2024.

Limited partnerships

There are a number of limited partnerships involved in the real estate investment space, some of which allow income-producing property to be sheltered inside of a registered retirement savings fund. Most of these are targeted at accredited investors, who are those holding at least $5 million in assets (not counting a principal residence) and with incomes of $200,000 or more.

Nicola Wealth of Vancouver is one of the larger groups, with holdings in both commercial and residential and with three funds, including two which concentrate on long-term income and one, a capital fund, that focuses on buy-hold opportunities. According to the company, $1 million invested in Nicola Wealth in 2000 would now be worth $4.08 million. Nicola’s composite annual return is 6.9 per cent over the past 20 years.

One of the smaller limited partnership, and fairly typical of genre, is the Greater Victoria Property Group (GVPG), which concentrates on new multi-family rental apartments.

The latest GVPG offering is a 22-suite rental building in the Esquimalt area of Victoria, being developed as a joint venture with a general partner. The plan is to complete the building, rent the units and then sell the project within three years. Minimum investment is $50,000. The projection – not guaranteed – is for a net profit of $2.4 million, of which the limited partners would take a 40 per cent share, or about $966,958. The simple return on investment is projected at 48.3%, or 16.1 per cent per annum over the three-year horizon.

Developers can also act as partners for condo investors. An example is Mission Group, Kelowna’s largest residential developer, which pre-sells some new condos that are destined to put into a rental pool. An example is the Bertram building, which has 257 condos ranging from studios to two-bedroom suites, with prices starting in the mid-$200,000 range. It is close to the future University of British Columbia Okanagan downtown campus that was approved last summer. The Kelowna rental vacancy rate is 2.7 per cent and monthly rental averages $1,345 for a one-bedroom, but is higher for new projects.

Next in the series: real estate investment trusts.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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