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HAPPY ST. PATRICK’S DAY!
May you have…leprechauns,
castles, good luck and laughter;
lullabies, dreams and love ever after.
Poems and songs with pipes and
drums; a thousand welcomes
when anyone comes.
- Irish Eyes Not Smiling At House Prices
- The Numbers – Fraser Valley
- Laneway House Can Bite At Tax Time – Note!
- Toolbox: Investing In Real Estate Via A Limited Partnership
- Low Balling Nanaimo Without Guilt
- Vancouver Retail At $1,355 Per Square Foot
- Ozzie’s Astounding Predictions
- Thought Of The Week
- Plots Of The Week
- Best Mortgage Rates
Win An Oscar? And Win A Real Estate Action Award … All In The Same Year?
Well at Monday’s Real Estate Action Group (REAG) Award function, Colin MacKenzie won the top award for putting together a
creative multi family deal in the Lower Mainland. To everyone’s surprise he announced that he just came back from LA with a brand new Oscar for being the Executive Producer for the best short documentary. Actually our REAG has a lot of people that
work in and around the movie and TV production umbrella – Cameramen, lighting experts, producers, actors, extras. We also have very successful musicians,
bands and other artistic members. They all have something in common: They may have a ‘gig’, a part, a movie, a CD, a show that has hired them for a limited
time engagement. They get paid well for the duration, but after it is over there may be several months’ delay before they get the next one.
Investing in cash flowing real estate is the ideal way to spread out the income. Interesting enough our top winner flipped a land deal in Ft.St. John at a
profit of over $3 million and one innovative Vancouver developer made $1 million plus just flipping a contract – never owning the property. Of course I
always enjoy the Rookies’ of the year that get involved for the first time in an investment property.
CONGRATULATIONS TO ALL AWARD WINNERS … AND A SPECIAL SHOUT OUT TO COLIN FOR BEING A DOUBLE WINNER!
I N T E R N A T I O N A L: Irish Eyes Not Smiling At House Prices
With blessed St .Patrick’s Day coming up, we take a look at the Irish housing market, which has been in a wee bit of death spiral for the past decade.
And we had to look away after checking the latest numbers and forecasts from Finfacts Ireland.
Lord help us! It still looks bad.
in Dublin are 48.2% lower than at their highest level in early 2007. Apartments in Dublin are 55% lower than they were in
February 2007. ALL residential property prices in Dublin are 50% lower than at their highest level in February 2007. The fall in the price of residential
properties in the rest of Ireland is somewhat lower at 46.8%. Overall, the national index is 47% lower than its highest level in 2007.
Expect property prices to remain underpinned in 2014
The continuing recovery in house prices belies a property market that remains constrained. Negative equity constrains sellers, while house completions are
failing to keep pace with even meager demand. These supply constraints will continue to underpin prices. Prices could rise 4% this year, but we wouldn’t be
betting’ the mortgage on it. The average house price in Ireland is now 177,000 Euros, down from the peak of 332,000 Euros in 2007.
All markets bottom. ALL! … But for now – best to have a beer and check back again next year.
C A N A D A: The Numbers – Fraser Valley
1,102 sales made it over the lawyer’s desk in February, an increase of 21 per cent over the 913 sales during February of last year. Not as big an increase
as in Vancouver (+40%) but notable nevertheless.
Ray Werger, President of the Board, says, “Although sales have picked up, it’s important to mention that they’re still hovering about 10 per cent below our 10‐year average and the
increases in activity are specific to property type and location … ” Indeed!
The Board posted 2,666 new listings last month, an increase of 3 per cent compared to the 2,582 posted during February of last year bringing the total
number of active listings in February to 8,210 – 11 per cent more than were available in January and 8 per cent less than were available during February
Werger adds, “…demand for single family detached homes and townhomes is the most consistent with certain pockets in Langley, Abbotsford and North
Delta that are thriving, which is why prices for detached homes in those areas are either on par or elevated compared to last year.
In February, the average price clocked in 10% higher at $645,000 (benchmark price of single family detached homes in the Fraser Valley was $558,100, an
increase of 3.2 per cent compared to $540,900 during the same month last year.) The benchmark price of apartments was $193,200, a decrease of 4.6 per cent
compared to $202,500 in February 2013.
In February, it took on average 51 days to sell a detached home compared to 58 days in January. Apartments spent an average of 70 days on the market in
February compared to 86 days in January.
Overall a better start to the year, but while volumes of sales are higher than last year, they still lag behind 2012 and 2011. The average price is higher
though and listings are lower … all boding well for a stronger spring market. Condo prices are lower. Best Buy? Abbotsford NEW condo: $157,000,
guaranteed rent at $850 a month. New condos … make offers … Developers will welcome them.
Laneway House Can Bite At Tax Time – Note!
Laneway Houses – those 500-square-foot second rental homes that have sprouted on hundreds of single-family lots across Vancouver – are doing what was
expected of them. They are helping homeowners cover Vancouver’s high housing costs and providing extra rental units. Many of you may have seen the address
by Laneway Housing pioneer Jake Fry at Land Rush 2014 which explains the program’s advantages.
However, the little houses can also
serve up big surprise when homeowners go to sell their property, according to tax experts at the Vancouver firm of Grant Thornton LLP.
One of the most generous tax breaks provided to Canadians is the principal residence exemption. Under certain circumstances, the principal residence
exemption permits individual taxpayers to shelter gains realized on the sale of a housing unit that qualifies as the taxpayer’s principal residence in any
given year. A
key concern, however, is the impact that building or renting a self-contained laneway house will have on the ability to use the principal residence
The main distinction for income tax purposes between building and renting a self-contained laneway house-versus renting out a suite in your home-is that
laneway house, and the land it is situated on, will commence to be considered a separate housing unit that is not part of your original principal
residence, and unless the laneway house is subsequently occupied by a you or your child, it may not be eligible for the principal residence exemption!
In the year that a laneway house begins to be rented, the owner will realize a disposition, for income tax purposes, of the portion of the property used
for the laneway house. If the owner is not entitled to use the principal residence exemption to shelter gains for every year of ownership, then any gain
realized could result in a tax liability for the owner. Depending upon the value of the property, the number of years the principal residence exemption is
available to the owner, and the portion of the property used for the laneway house, this tax liability could be significant.
Furthermore, if the property owner does not designate which years they are claiming the principal residence exemption for the property, the Can ada Revenue Agency will arbitrarily designate the principal residence exemption to apply to each eligible year of ownership. While this
might be the best result in some situations, it may not be an appropriate strategy if the owner owns another property, which also qualifies for the
principal residence exemption. This is because any ability to designate that second property for the same years will be lost. If the average annual gain on
the second property was larger, then ultimately more tax could be payable.
When the entire property is eventually sold (or when the owner dies), any gain realized on the laneway house portion will not be eligible for the principal
residence exemption. The owner is required to track all costs associated with building the laneway house as well as keep records related to the original
cost of the property, capital improvements made, the relative value of the land versus the main residence on the date of the deemed disposition and on the
date of sale.
If you have a Laneway house or contemplate building one – read: <
Toolbox: Investing In Real Estate Via A Limited Partnership
By Neil Hamilton
A limited partnership (LP) is a common arrangement for investing in real estate, especially where there exists a group with the expertise but not the
required funds to proceed with a project.
The term “limited partnership” is actually pretty self-explanatory. The “general partner” is the one that holds the bulk of the power in the relationship.
The “limited partners” possess limited powers within the arrangement but also have limited liability as well; in short, they are only liable for the amount
of their original contributions (unless agreed to otherwise at any point in the arrangement). So the limited partners are something akin to shareholders in
Real estate-based limited partnerships can be quite attractive to individual investors. As well, LPs can offer certain tax benefits to the individual
investor, such as deductibility of syndication costs and funds borrowed to make the investment, a flow-through of tax benefits created by the project, and
certain personal tax deferrals.
Other benefits to LPs for the individual investor can be the relative “hands-off” nature of the investment (remember the general partner is basically
driving the bus and handling all day-to-day operations) and the ability to diversify a portfolio into different types of projects and geographical areas.
There can be different financial models within the LP concept, the two main ones being the “income model”, in which the LP investors get paid out on an
ongoing basis (i.e. monthly, annually etc.) once the project is generating a profit or the “cash-out” or “income” model whereby all LP investors get paid
out a lump sum at the end of a certain period (say 5 years), or at a pre-agreed time.
The key to evaluating an LP arrangement is two-fold: First, who are the people comprising the general partner? What is their track record and how many
similar (successful) ones have they completed in the past? The second key question is: What are the current market conditions for this type of project, and
in this particular location?
That’s a quick primer on real estate-based limited partnerships; however here are some final thoughts: If you are considering entering into an RE-based LP
arrangement, do a considerable amount of your own due diligence. Seek out and consult with people who know the general partner’s main individuals and can
hopefully vouch for them. Also vet the GP’s prospectus with a lawyer with LP expertise, a financial professional with the same and a good accountant.
Lastly, the big question: do you like these people?
– J. Neil Hamilton is a Senior Property Advisor with Macdonald Realty Ltd. with expertise in the buying, selling and leasing of both residential and
commercial properties throughout the GVA. He can be reached at 604-569-1940 or firstname.lastname@example.org.
Low Balling Nanaimo Without Guilt
There are (finally) signs of life in the Nanaimo housing market but a veteran local realtor says that the 61% increase in MLS sales last month compared to
February 2012 does not mean housing prices have taken off. The average detached house now sells for $374,776, up 4% from a year ago but just $23,000 higher than in 2011.
The higher sales could mean that many buyers, frustrated by a flat market that has endured for nearly seven years, are listing the homes to sell. And, says Steve Padosky of Royal LePage Nanaimo (www.stevepakozdy.com) you can help these buyers out,
good person that you are. Ahem!
“Don’t be afraid to write that lower offer,” Padosky said, ” But low ball offers should only be reserved for listings that are languishing on the market for extended periods.”
These should not be hard to find. It now takes an average of 55 days for the typical detached house to sell and this is only one day faster than last year.
The typical condo apartment is on the market for 78 days; building lots for nearly 100.
A closer look at February sales shows that low-balling can work.
Of the 164 detached houses that sold in the first two months of this year, 30 were priced below $250,000 and 10 of these sold for less than $200,000.
(Parksville / Qualicum home sales were up 16% from Feb. 2013 thru Feb. 2014. The average sale price was up 15%. The median house price was $375,000.)
Padosky’s advice for investors is to look at fourplexes, houses with suites and sixplexes, which he said can be found at very reasonable prices, especially
to those from the Lower Mainland.
As the BC Ferries protest in Victoria this week underlined, coastal communities have been suffering, but Nanaimo has enough going for it that it creates a
near self-contained marker. If you want to see where the ferry cuts are really being felt, look at Garibaldi Island just off the Nanaimo coast: Not a
single home sold on MLS last month, though 42 are listed.
Vancouver Retail At $1,355 Per Square Foot
It costs an investor – or owner/occupier – an average of $565 per square foot to buy a retail space on Davie Street in Vancouver. Move up
to some space on Robson Street and costs can top more than $2,000 per square foot (that is what SDLP Snowcat Ltd. paid for 13,000 square
feet in the 1700 block of Robson).
Rents can also appear daunting: net rental rates on prime Robson storefronts are $150-$200 per square foot; and they average around $60 psf anywhere downtown. These are annual rents, of
course, so a 1,000 square foot space would be $60,000 or a year, but still around $5,000 per month.
But there is a reason for the high rents:
the average Vancouver retail store in good location makes gross sales of $610 per square foot, but the best stores in the best spots do much better. In
fact, Vancouver is only the second city in Canada (Toronto is the other) with two of the top performing shopping centres in North America: Oakridge Mall, where the mall retail sales average $1,132 per square foot; and Pacific Centre Mall, which takes in $1,355
in gross sales per square foot. Pacific Centre in fact ranked No. 3, out-priced only by flagship malls in Los Angeles and Las Vegas.
If you are considering diversifying, being a retail landlord may work for you. Tenants are responsible for upgrades and finishing. They don’t move as often
as residential tenants and, if they can make 10 times what they pay you rent, it can be a profitable arrangement for you both. Fair warning, though: more
people are shopping online so bricks-and-mortar retail must stay fresh and unique to thrive.
BEST MORTGAGE RATES
Ozzie’s Astounding Predictions
One of my predictions at Landrush was that we would have more and more strikes this year as people struggle with continued inflationary price increases on
EVERYTHING and no increases in salaries. There are already more strikes so far this year … and you ain’t seen nothing yet!
PLOTS OF THE WEEK:
1. NANAIMO, 6-Unit Ocean View Apartment Building. PRICE: $585,000!
This 3 storey, positive cash flow property features 5100 sq.ft. of space in 6 bright suites: 5 x 2 bed units and 1 x bachelor. Most suites have
views of the harbour;
2. NANAIMO 7-Unit Apartment Building. PRICE: $838,000!! Immaculate, well-maintained 7-unit
apartment building directly across from Nanaimo Regional General Hospital and close to all amenities.
If you have something that you think is a good deal,
please send it. There is no charge to have your property (or one that you legally represent) featured here.
Thought Of The Week
To feel better is the root of every desire.
(For us to feel better is the only reason any one of us wants anything.)
If you had only one goal, and that was to feel good, you would live successfully and happily
Ever after, fulfilling your life’s purpose.
THIS WEEK, PUT THIS ON YOUR CAR VISOR:
Nothing is more important than that I feel good.
I won’t do anything I don’t really want to do.
I will keep myself in a place of feeling good.
I will always reach for the thought that feels better
and watch what happens.
I have felt good, and I have felt bad…feeling good is better.
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While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed
Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.