Bob Bracken : Blog : Latest Blog Posts

2020 Property Assessment: How Does It Affect Property Taxes?

Thu, 23 Jan 2020 22:27:11 GMT

Annual Property Assessment Notices from BC Assessment Authority were mailed out in early January 2020, & by now you should have received yours. The “Assessed Value” figure is BC Assessment's estimate of the market value of your property as of July 1st, 2019 & this value is used to determine how much you will pay in property taxes this year. Many of the “Frequently Asked Questions” about the Assessment process are addressed in the brochures included with the Assessment Notice. Some of the major points worth repeating here are the following:

• The Assessed Value is an estimate of the market value of your property as of a July of the prior year, i.e. 2019, for the purpose of taxation. Few properties are actually visually inspected by a BC Assessment appraiser, & most assessments are computer generated using information from Real Estate MLS Sales records, Land Title offices, as well as building permit & zoning information from the cities or municipalities.

• The Assessed Value, however, cannot be relied on as an accurate representation of the current fair market value of your property. The Assessment Notices reflect Market Values determined 6 months before being delivered, which can be an eternity in the Vancouver/Lower Mainland Real Estate Market. For most years in the past 2 decades, it was safe to say that the Assessed Value was well below Market Value, as prices had been steadily, often dramatically, moving up. That trend reversed a couple years ago, & it was safe to say that, for most of 2019, market values were well below the January 2019 Assessments. The right hand column of the 2020 Property Assessment Notice displays the % Value Change for your property from 2019, its Property Value Assessment History each year from 2017, & the Average % Change for all Vancouver property, which for 2020 is minus 10% from 2019. Do the 2020 Assessments generated in 2019 accurately reflect Market Values as of January 2020? This is debatable - the Vancouver Real Estate Market can turn on a dime, & an “End of Year” mini surge in Sales & Market enthusiasm suggest that 2020 begins with values/prices back near the 2019 Assessment Levels (generated in 2018).

• How will the 2020 Assessment Notices affect the amount of tax Vancouver property owners pay this year? BC Assessment does not set property taxes, but only supplies value information, to which tax authorities (eg. the City of Vancouver) apply a complex formula to set the amount of tax each owner pays, ultimately expressed as a mil rate or tax levy rate which is the dollar amount for every $1,000 of property assessed value. The Levy is the sum of at least 6 different components including the General Purpose Levy, Provincial School Tax Levy, Translink Levy, BC Assessment Authority Levy, GVRD Levy, & Municipal Finance Authority Levy. For the past 3 years in Vancouver (2017-2019), the Total Levy has been between $2.47/$1,000 & $2.56116/$1,000 of Assessed Values. As well, the BC Provincial Government has tacked on an additional tax of $2/$1,000 for Assessed Values between $3M - $4M & an additional $4/$1,000 for the portion of Assessed value above $4M.

• On December 17, 2019. Vancouver City Council voted to increase overall property taxes by 7%, & apportioned this between Commercial & Residential properties by increasing Commercial property taxes by 6% & Residential taxes by 8%. Before applying this increase to the Tax Levy for 2020, the City Tax dept must 1st account for the overall (average) 10% drop in Assessed Values by raising the 2019 Taxation Base Rate by 10%, then tacking on the 8% increase (for Residential properties) so that the General Purpose Levy will rise approximately 18%. To apply the tax increase to an individual property, the % change in Assessed Value for that property compared to the Average % change must be calculated. Given the Average Residential Assessment decline of 10% in 2019, properties with less than 10% Assessment decline will see a relatively higher tax bill than those properties where Assessments declined more than 10%. In either case however, virtually ALL Vancouver property owners will receive an increased tax bill in 2020.

• Is it worthwhile to dispute or appeal your assessment? It is easy to dispute your assessment by telephoning your local assessment office & reviewing your property’s assessment with a staff member there. If they agree with you, they will recommend that the Court of Revision correct your assessment, & you may save on your taxes - a good deal for the price of a phone call! If they disagree with you, you will have to file an appeal with your local Assessment office by January 31! The telephone book has 25 listings for enquiries anywhere in the Lower Mainland. The Vancouver office is at #200-2925 Virtual Way, Vancouver, 604-739-8588 phone, 604-739-8666 fax.

• The Court of Revision is a 3 person panel appointed from the community by the provincial government. It is independent of BC Assessment and the tax jurisdiction. The Court hears evidence to determine only if your property has been valued & classified correctly. It does not have the power to adjust property taxes.

• What is the likelihood of a successful appeal? Even though your assessment may have decreased significantly from last year to this year, the test will be whether this yours is an accurate estimate of those market values, & whether you were fairly assessed. Sometimes the BC Assessment process is inefficient in setting value for a specific property, which may be basis for an appeal. It is probably wise to review your Assessment Notice to see how Assessed Values for your property changed compared to the Average Change for your area. The BC Assessment website, evalueBC https://evaluebc.bcassessment.ca/ allows you to compare your property to neighbouring properties, look up any other BC property by address, & to compare sales & assessment values.

• How much will the Property Tax increase actually cost you? As mentioned above, that is a complicated calculation, depending on a number of factors including your property’s value change relative to the Average. The City doesn’t actually finalize the Tax Levey Rate until May or so after all appeals and other information has been accounted for. To get a head’s up on this though, and to get a more specific indication on how your property tax may be impacted on this, you can direct your questions (with the above info as a reference) by email to Property.Tax@vancouver.ca .

If you want to discuss your property assessment and the appeal process, as well as the City of Vancouver Taxation process, please contact Bob. If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Real Estate Market Improving: Van East & West Detached Stronger Than Metro Vancouver

Tue, 18 Jun 2019 19:13:00 GMT

The Real Estate Board of Greater Vancouver Stats Report for May 2019 showed a significant increase in Greater Metro Vancouver homes Sales - up 44% from Sales in the region for April. May Sales were also up for Vancouver West Detached homes (+55%) and Vancouver East Detached homes (+88%) verses April, & other Market Stats are even more encouraging for those areas. While Greater Metro Vancouver MLS shows a 30% increase in MLS Listings compared to May 2018, Vancouver West and Vancouver East Detached shows a 15% decrease in Listings compared to May 2018. And, while Metro Vancouver May Stats show a 14.2% "Monthly Sales to Monthly Listings Ratio" for May across the region, Vancouver West registered a 39% S/L Ratio and Vancouver East a 54% S/L Ratio during the month - almost 3 to 4 times stronger!

Another Analysis Metric used by many Realtors to assess market strength is also encouraging. Called "# of Month's Supply", this is calculated by dividing the # of Active Listings at the end of a month by the # of Sales during the month, with the product being the theoretical time it would take for all inventory to be sold, if listing activity ceased. Typically a 6 Month "Supply" is considered a "Balanced Market", less than 6 Month supply favours Sellers, while a greater than 6 month Supply trends toward a "Buyers' Market". In the Hot markets of 2016, with its bidding wars, & rapidly escalating prices, Vancouver West & East often had "# of Months' Supply" of 2.5 to 4 months.

The market changed dramatically from there, and sales activity declined significantly through 2017 & 2018. January 2019 showed almost 20 "Months' Supply" for West Side Detached properties, and over 13 "Months' Supply" on the East Side. Things have improved since, however, and in May Vancouver West showed an 8.5 "Months' Supply" & Vancouver East registered 5.6 "Months' Supply" - basically a Balanced or "Normal" market.

Will this trend continue from now, and through a usually slower Summer market? That's hard to say for sure, but barring any further disruptive or disconcerting news or policies by governments, it appears that the latent strong confidence and demand for Vancouver Real Estate is cautiously re-emerging - with local & domestic Buyers taking the lead.

Please contact me to discuss your real estate strategies for selling, buying, or any aspect of Real Estate ownership. I sincerely appreciate any referrals for your family, friends & associates. Please feel free to "Bother" me.

Market Expectations Market Realities

Fri, 10 May 2019 19:17:20 GMT

Market Expectations, if sustained, sooner or later become Market Realities. A significant reduction in Sales activity fuelled by politically motivated, economically flawed taxes & government policies targeting (while vilifying) real estate investors, users, & homeowners alike, has caused a “clawback” in property values in Vancouver. Monthly REBGV “Sales Summary” report data shows that the Average Price/Unit for Single Family Detached properties in East Side Vancouver in April 2019 is at the levels of late Fall 2015 approx $1,400,000 & down from approx $1,700,000 in April 2018. The West Side Average Price/Unit of approx $3,000,000 in April 2019 is back to early 2015 levels, down from $3,600,000 in April 2018, & down approx 30% from the peak of $4,200,000 in 2016. These price changes reflect the dramatic drop in sales volumes for the same periods. For East Side, approx 200 Detached Homes sold in the 1st 4 months of 2019 compared to approx 300 sales in 2018, & down from 650 sales Jan-April 2016. On the West Side, there were approx 200 sales through April 2019, down from over 800 sales in the 1st 4 months of 2016. The market has changed dramatically in favour of buyers, with more opportunity for them to search, select & negotiate a purchase. Buyers are still buying though, & are moving with some urgency still when they find something that fits their needs & their budget.

At the same time, however, Sellers & property owners are not rushing to dump their homes onto the market. Vancouver owners are generally well capitalized, with plenty of equity in their properties & no real financial pressure to sell. The number of properties for sale, both East Side & West Side, are 12% - 15% fewer than 1 year ago, so that side of the market is also adjusting to the situation. The majority of owners regard this market as a temporary & understandable correction, & are confident that they can hold their properties for years to come, & still prosper. Those that are selling have a good reason for doing so, are accepting the current market reality, & pricing their properties appropriately. Sales activity has been subdued in large part to the fact that Buyers & Sellers alike are cautiously waiting to see market stability.

Despite the current anti-business climate & ever increasing tax & policy burdens aimed at Residential Real Estate, Vancouver is still Vancouver & latent demand remains strong. The physical beauty, excellent climate, & “liveability index”, unparalleled in North America, makes our City one of the most attractive in the world. This, coupled with the limited supply of land here, will continue to underpin values through the short term political & economic cycles that every market experiences. Change happens, is inevitable, & always brings opportunities. This is an excellent market for move-up buyers, & for those wishing to upgrade their investment base to something with higher value, & higher returns. It is also a good time to dispassionately re-examine all assumptions, & to consider alternate strategies. My general observation for those involved is that they might want to step back & look at this situation as a game they wish to win.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Update on Making Room in Vancouver Rezoning Initiative

Wed, 20 Mar 2019 23:44:16 GMT

In my News Bulletin Fall 2018, I outlined the City of Vancouver initiative to increase the supply & affordability of housing for both renters & buyers in most Vancouver’s residential neighbourhoods. Called “Making Room Housing Program” the City proposed dramatic re-zoning proposals to increase density & supply in most Vancouver’s residential neighbourhoods. These initiatives included:

Amendments to most RS (single family) areas to allow the construction of (strata titled) two family dwellings, two family dwellings with secondary suites, & Principal dwellings with lock-off units in a two family dwelling.
Re-zoning the current RT-7 & RT-8 districts in Kitsilano to RT-5 to allow for laneway houses, secondary suites within duplexes, & to permit infill dwellings on sites already containing a one family dwelling. This is for families, downsizing seniors & others who seek “right sized” housing that falls between single family houses & higher density dwellings in larger condo buildings.
Re-zoning the existing RT-10 & RT-10N zones to maintain the existing “small house/duplex” option while allowing additional laneway houses, secondary suites within duplexes, & additional infill options.

I applauded these initiatives as being bold and ambitious, directly tackling the problem of housing affordability & offering the prospect of neighbourhood revitalization as new housing stock replaced old, & as younger families added new blood & energy to whole blocks that currently house empty nesters & seniors. I also cautioned that the politics around this was still uncertain, awaiting outcome of the October 21 City elections.

The then City Council, in a very lengthy public hearing on Sept 19, 2018, approved the amendments to the RS zones, but deferred the proposals for the RT Zones to a later date, to be addressed by the incoming Council after the October election.

In mid-November, the New Council instructed staff to report back with wording of a bylaw to reverse the effects of those changes. On December 4, 2018, Council approved a staff recommendation to rescind the motion from the earlier Council re amendments to RT zones in Kitsilano & Kensington-Cedar Cottage. Kitsilano & Kensington-Cedar Cottage will be included in future planning for low-density neighbourhoods as part of the Making Room initiative.

On December 19, 2018, Council voted to allow duplex to remain as a use in RS zones as a trial housing option over the next year, with some modifications to the proposals approved on September 19, 2018.

It appears to be 2 steps forward, 1.5 steps back on this, although in fairness, the proposed changes are dramatic, & this Council will have to oversee & be accountable for the outcomes over their mandate. What remains to be seen if bureaucratic inertia & political micro-management will completely stifle any real changes. Fingers crossed.

Please consider Bob a resource if you have questions regarding Vancouver Real Estate. Please contact Bob Bracken at
604-220-2035 cell
604-263-2823 office
bob@bobbracken.com email

“feel free to bother me”

Printable PDF of this article - click here.

Speculation Tax - a Misnomer, Selective Cash Grab

Wed, 20 Mar 2019 23:34:00 GMT

By now, BC property owners should have received a mailed notice from the BC NDP Government requiring them to complete a Declaration (by March 31, 2019) to be exempt from a new, selective tax that targets their homes & property, which will, in thousands of cases, cause them to pay a tax of 0.5% of its assessed value. The declaration must be made each year going forward, & be completed by each & every registered property owner. Under the misnomer “Speculation Tax”, this “negative option billing” automatically charges the property owner unless they voluntarily report to the Government to gain the exemption. The NDP speculation & vacancy tax is intended to punish people who own homes left vacant for extended periods of time, including vacation properties, & 2nd homes that owners choose not to rent but to use for themselves, family members, guests, etc.

The tax targets mostly urban areas & regions where people might have 2nd homes & includes: Vancouver Island Capitol Regional District; Metro Vancouver Regional District (excluding Bowen Island & Lions Bay): City of Abbotsford, District of Mission, Cities of Kelowna & West Kelowna; City of Nanaimo, District of Lantzville. The NDP describe this tax as “...a key measure in tackling the housing crisis in major urban centres ... where home prices & rents have skyrocketed out of reach for many British Columbians.” Interesting that they have exempted areas like Squamish, Whistler & Pemberton which have very significant housing affordability issues for Buyers & renters alike. The Gulf Islands were originally included, but the backlash from those owners caused Minister Carol James to exempt them. While the tax is currently 0.5% of assessed value for BC residents, it will be 1% for other Canadian residents, & 2% for non-resident, foreign owners.

The NDP are selling the tax by saying it “only” affects 1% of BC residents. 1.6 million BC property owners are required to Declare, so 16,000 BC residents (approx. population of Esquimalt or Cranbrook, & greater than Port Moody) will be whacked by the tax. Those caught by the tax include i) Prior owners/residents of affected areas, now moved elsewhere but keep condo/house for business/work. ii) Retired Seniors, now keeping 2nd home, pied-a-terre. iii) Vacation homes owned by families, & Canadian residents of Prairies, Ontario. Owners of Belcarra beach cottages - Taxed thousands of $$; Owners of Gulf Island getaways - Exempt.

“Speculation Tax” is a misnomer as it doesn’t address any “quick profit” manoeuvre by the owners, as the vast majority of these properties are for personal use. Call this what it is - an NDP Tax, an expropriation of personal wealth disguised within a flawed, tyrannical policy to force private property owners to create market rentals out of private homes. “Speculation” & “Speculators” are trigger words used to exploit the politics of envy & poverty consciousness which resonates within the NDP constituency & the media. The claim that “only” 1% of BC residents (plus “Foreigners” of course) are affected is used to marginalize & downplay the effect that this will have on thousands of BC citizens.

The real rub is that this Tax will be ineffective in meeting its stated purpose to “Turn empty homes into good housing for people” and “Raise revenue that will directly support affordable housing”. Only a few owners will be forced into selling their property, & the inducement for increasing rentals through this policy will deliver very marginal benefit to BC’s rental pool. As for “Raising revenue” evidence now shows that these discriminatory tax policies has caused an economic chill, reducing investment & new housing starts, resulting in declines in overall tax revenue & a Net Loss to BC taxpayers far greater than any gained by their measures. More on this in a future article.

Back to the Declaration - you must complete it by March 31, but it is actually pretty easy. Call the # listed on the Notice 1-833-554-2323, give the clerk the Declaration Code & Letter ID printed on the Notice, your Property address, Social Insurance #, date of Birth, Email address, Telephone #. You will then receive a confirmation # to verify you have completed the Declaration. You can do this on line also at gov.bc.ca/spectax. All Done - til next year, when you must do it again. Now they have your information & that of all 1.6M BC property owners, in one big database, in one location. Easily accessible, just in case they want to use it again.

If you want to contact the Minister of Finance to give feedback on this, Carol James’s email is: FIN.Minister@gov.bc.ca

Please consider Bob a resource if you have questions regarding Vancouver Real Estate.Please contact Bob Bracken at
604-220-2035 cell
604-263-2823 office
bob@bobbracken.com email

“feel free to bother me”

Printable PDF of this article - click here.

Market Outlook Winter 2019

Wed, 20 Mar 2019 23:14:39 GMT

The Vancouver Real Estate market - especially for Detached Homes - went through a rough patch from late Summer 2018 to Winter 2019. The effect of restrictive new mortgage lending policies introduced by the Federal Government, combined with a sense of uncertainty and trepidation created by policies of both the Provincial NDP and Vancouver City Council intended to subdue Real Estate prices & activity, caused a definite market chill. During this period, total Detached home sales declined by approx 40% on the East Side & 25% on the West Side over the same period in 2017. During that same period, average sale prices showed a decline of approx 9% on the East Side & 12% on the West Side over Fall 2018 prices. The market also had that “sour” & depressed vibe, with a lot of negative (or at least indifferent) sentiment that is common in almost every “late Fall” market I have experienced over 33 years as a Vancouver Realtor. At the end of December 2018, sales #’s showed an overall decline from 2017 of approx 33% for both the East & West Side. West Side showed an overall decline of 9% in Average prices from 2018 but, interestingly, East Side Average Prices were unchanged from the prior year.

January & February 2019 started sluggish, with the # of Sales, $$ Volume & Average Prices down from 2018, & the media has solemnly reported record declines in local Real Estate market activity. However, every New Year seems to bring a “Brighter Sunrise” & a “New Day” to the Vancouver market, and 2019 appears to be following that trend. As February moved into March, there has been a different tone to the market with more activity, enthusiasm & urgency being expressed by Buyers & in Sales activity. We have seen quick sales turn-around, & multiple offer situations with Sale Prices over list price. Like in most years past, the New Spring Market often sees properties sell at above prices that caused them to be ignored at those same prices a few months earlier. To be sure, these recent sales are at the reduced prices that are the new reality today, but the demand for Vancouver Real Estate & homeownership remains constant, strong. While the current market faces challenges - the most obvious risk is the announcement of new, pejorative Real Estate policies from the City, Provincial, or Federal Governments - we can anticipate an adjusted, steady, “normalized” Real Estate market through to the Summer.

Please consider Bob a resource if you are looking to sell, buy, or have questions regarding any topic on Real Estate. Please contact Bob Bracken at
604-220-2035 cell
604-263-2823 office
bob@bobbracken.com email

“feel free to bother me”

Printable PDF of this article - click here.

CMHC VANCOUVER RENTAL MARKET REPORT FALL 2018

Wed, 19 Dec 2018 00:22:00 GMT

On November 28th, Canada Mortgage and Housing Corporation released its Fall Rental Housing Market Report for the Census Market Areas of Vancouver. CMHC releases these reports semi-annually, and the lengthy document contains a great deal of statistical information that should be of interest to landlords and tenants alike.

The report details a rental market which tightened further this year as strong employment growth, population growth and declining home sales (especially at entry level prices) contributed to even stronger demand for rental accommodation, which outpaced additions to supply. This has put upward pressure on rents, in spite of increased starts of purpose built rental housing.

As a result, the overall rent change (increase) in the CMA was 6.2% - well above the 2018 allowable increase of 4.0% as set by the Residential Tenancy Branch. This was driven by a strong job market, and even though employment growth increased by only 1.2% - down from previous years - an unemployment rate of 4.3% places upward pressure on housing and rental demand. However, improving economic performance in other Canadian provinces has resulted in lower net interprovincial migration into the Vancouver Census Market Area (CMA).

Highlights of the Fall 2018 Report include:

• Average rental increases through the Vancouver City neighbourhoods ranged from 3.6% (University E.L.) to 8.3% (English Bay), with a City average increase of 6.1%.

• Over the entire Vancouver CMA (from the North Shore, to Langley, Delta, Tri Cities/Pitt Meadows), Average Rents increased by 6.2% - well above the allowable 2.9% for existing tenants allowed in 2016 by the Residential Tenancy Branch.

• The overall Vacancy Rate in the total Vancouver CMA increased to 1.0% from 0.9% in 2017, and up from 0.7% in 2016.

• For “Investor Held” rental condos, the Vacancy Rate remained at 0.3%, while the average rent for condominiums rose to $1,855 - up from $1,758/mo in 2017.

• 793 new, purpose-built rental units were added to the rental condominium stock in 2018, compared to almost 1,850 units in 2017. Purpose built apartments now constitute about 5% of total rental units.

• Private Apartment Turnover Rates remained in a fairly tight range in Vancouver (between 8.4% & 16.2%), while being highest in Richmond (19.4%) & Delta (33.3%), with an average of 14.1% over the full Vancouver CMA.

Summary of Key analysis findings:

1. “The apartment vacancy rate remained low but edged higher as supply increased more than demand; meanwhile, rents continued to increase.” (Eric Bond, Principal, Market Analysis).

2. Strong demand kept vacancy rates lower for both primary rental apartments and rental condominium apartments.

3. The supply - demand dynamics have put upward pressure on rents in the region.

4. Financial barriers for entry-level homeownership is keeping some in rental housing.

Included in this Fall 2018 report are specific details on rental and vacancy rates by municipally and neighbourhood, unit type, and structure size. As well, there is data and charts on turnover and availability rate, and much more data than most people would need or want! CMHC offers to supply these and their other housing reports via email for free by subscription, as they are released at their website. Another great service by one the very valuable and useful Government organizations. It is gratifying to see our tax dollars put to such good use!

For the full CMHC VANCOUVER RENTAL MARKET REPORT FALL 2018 - click here.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

Making Room in Vancouver

Wed, 10 Oct 2018 20:09:08 GMT

Under a policy initiative titled “Making Room Housing Program” the City of Vancouver is introducing dramatic re-zoning proposals to increase housing density & supply in most of Vancouver’s residential neighbourhoods. These initiatives include:

Amendments to RS (single family) areas to allow the construction of 2 family strata titled dwellings, 2 family dwellings with secondary suites, & principal dwellings with lock-off units in a 2 family dwelling.
Re-zoning the current RT-7 & RT-8 districts in Kitsilano to RT-5 to allow laneway houses, secondary suites within duplexes, & to permit infill dwellings on sites already containing a one family dwelling. This is for families, downsizing seniors & others who seek “right sized” housing that falls between single family houses & higher density dwellings in larger condo buildings.
Re-zoning the existing RT-10 & RT-10N zones to maintain the existing “small house/duplex” option while allowing additional laneway houses, secondary suites within duplexes, & additional infill options.

The goal of the Making Room program is to provide more housing choice within neighbourhoods & to address citywide goals of simplifying & consolidating regulations. The initiative aims at providing “affordable” ground-oriented housing in established residential neighbourhoods to allow long term residents to remain while bolstering new family populations & revitalizing shrinking school populations. The City catch phrase for this is “The Missing Middle” - i.e. housing that sits between high priced single family homes (57% of the City) & the high density housing that has been developed in the downtown & along transportation arterials. It is hoped that half of the anticipated 72,000 homes built in Vancouver over the next decade will be affordable to households with incomes of $80,000 or below. The City anticipates that these changes will also expand rental housing supply with the inclusion of secondary suites, infill dwellings, laneway houses & lock-off units within the newer homes built under the rezoning.

These are bold initiatives which tackle the problem of housing affordability, but also clearly promise or threaten, significant change to both West & East Side areas. On the positive side is the prospect of neighbourhood revitalization as new housing stock replaces old & as younger, families add new blood & energy to whole blocks that currently house empty nesters & seniors. It promises local business growth & prosperity & will likely reverse the trend of declining school enrolment. On the negative side will be the disruption from ongoing construction & the concern that the quality & character of neighbourhoods will be diminished.

The devil, of course, is in the details. Can these changes be incorporated efficiently & developments managed in a way that meets the stated goals of the housing initiative while respecting & preserving the quality of life of existing residents? The Making Room program was 1st introduced in the Fall of 2016 & has moved forward since then, with public consultations & reports to Council. There are many questions to be answered & specifics to be revealed, but the initiative went to public hearing on September 18 & the changes to add duplex as a use in RS zones were approved by Council & will be enacted Oct 30. The proposed changes to the RT zones were deferred due to time constraints, to be reviewed by the next Council after the October City election. To get more details, visit the City website at https://vancouver.ca/people-programs/making-room.aspx.

This ambitious initiative would have been unthinkable a decade ago. As an observer, practitioner & participant in Vancouver real estate for over 30 years, I am hopeful of its success & very impressed by the City’s moxie!

Call Bob Bracken anytime to discuss this topic and real estate.

Printable PDF of this article - click here.

Importance & Value of Pre-Listing Home Inspections

Wed, 16 May 2018 21:22:13 GMT

Real Estate markets change, & strategies used to market & sell properties must adjust & change as well. The hot Vancouver market of a couple of years ago - with high sales, low inventory, easy access to cheap mortgages, listings priced to create multiple offers & sale prices dramatically over list prices - is gone. Also mostly gone are unconditional offers where home inspections were done quickly in advance (if done at all), where Buyers often overlooked many deficiencies regarding property condition. Now, with a changing, more tentative market, buyers are more cautious - even skittish, & inspection reports carry much more weight in the buying decision. Property condition deficiencies are no longer ignored, & often are the basis for price re-negotiation, or offer termination. In this market, I strongly recommend a “pre-listing” home inspection be done by the Sellers in advance of their property going on the market. The cost for this is relatively low - usually less than $1,000 - & can provide great benefits in the marketing & sale/transaction process. A comprehensive report identifies condition issues with the property, which can allow the Seller & Agent to be forewarned & forearmed in dealing with them. Serious problems may be addressed & remedied (or at least quantified) in advance of showings, while minor problems can be dealt with quickly. The Agent may be able to disclose many of the condition issues to buyers, & this can eliminate “surprises” & perhaps blunt the consequences of another inspection report done during the Sale process. The Sellers’ inspection report can also balance a pejorative report done by a zealous home inspector acting for the Buyer, especially if that report causes the collapse of an offer, & potentially “stigmatize” a listing. Buyers & Sellers, both require more quality information & less uncertainty to proceed confidently in today’s market. A pre-listing home inspection is a quick and inexpensive method to help that along. Call Bob Bracken anytime to discuss this topic and real estate.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Market is Tentative for Sellers & Buyers

Wed, 16 May 2018 21:14:37 GMT

Changes in Government Legislation & Taxation Policies along with the policy statements accompanying these changes, is being felt in the Vancouver Market. Stiffer taxes on purchases by non-residents, increased transfer taxes on higher priced homes, tax levies on “vacant” homes (including vacation & secondary homes) - combined with the changes to mortgage lending rules - have signalled that every government level is determined to imprint the Real Estate market. The Governments’ actions are characterized by putting downward pressure on property values, while simultaneously taking a piece of owners’ equity & wealth. Data released by the Canadian Real Estate Association showed sales in Greater Vancouver falling 8.6 percent in March from a month earlier to 2,108 transactions - the fewest since 2013 - in contrast to the broader Canadian market, which showed signs of stabilizing in March. CREA also reports that local prices over the whole region ticked up by 1% in the month. Vancouver Detached homes’ sales profile was different, however. Both the West Side & the East Side saw the # of sales fall by 40+% in March & April vs those months in 2017, but the West Side saw Average Sale Price declines of as much as 14% in March, while Vancouver East saw an Average Sale Price increase of 3% vs 2017. A more telling stat is the Average Sale Price trend in 2018 vs 2017. Jan 2018 West Side Average Sale Price was up 14% over Jan 2017, but by April, the gap was 0%. East Side Average Price for Jan 2018 was up 14% over 2017, but by April, only 8%. That narrowing gap is an indicator of a general downward price trend, which naturally follows the downward sales #’s. While the long term outlook for Vancouver Real Estate values remains strong given its many attractive features - high quality, limited supply, strong local & international demand - the effects of Politics, Political Risk & Political Uncertainty has sidelined many buyers. Under a similar political regime during the mid 1990s, declines in population & immigration levels, property values & general economic conditions continued for several years, but this doesn’t really look like that - yet. We have a robust economy with strong employment growth & Amazon’s recent decision to expand its local operations, bringing 3000 new high paying jobs to downtown Vancouver is a harbinger of Vancouver’s brilliant future in this century. Real Estate markets operate in cycles, & changes like we are now seeing are a natural part of those cycles. Call Bob Bracken anytime to discuss this topic and real estate.

Printable PDF of this article - click here.

New Vancouver Empty Homes Tax, Will It Empty Your Pockets?

Fri, 16 Mar 2018 23:20:56 GMT

By now you likely thought we have been taxed enough? Did you also think that the City’s social engineering agenda had completely gone into Totalitarian State mode? As of Feb 2nd (now moved to March 5th) all Vancouver residential property homeowners must submit a property status declaration each year to determine if their property is subject to the new Vancouver Empty Homes Tax. The question everyone may be thinking is “how will this impact me?” If you own your own home (principle residences) or rent out any additional residences for at least 6 months of the year, you will not be required to pay the new Tax. Property owners with empty or vacant houses, condos and apartments will be subject to the new tax of 1% of the property’s assessed taxable value and a $250 non-declaration fine. For example, if your Vancouver residential residence is declared “empty” and has an assessed value of $1,500,000, you pay the new tax of $15,000; for $2,000,000 you pay the new tax of $20,000; for $3,000,000 you pay the new tax of $30,000 - and so on - Every Year!

The likelihood that this will have any significant impact on vacancy rates in Vancouver is nonsense, but take a moment to think through the larger implications of this bylaw. This means that those owning a 2nd home in Vancouver (because their work or business is in, say Whistler, Prince George, Nanaimo etc) will be subject to the tax. Those who have owned a Vancouver home for years but have outgrown it, moved to the burbs or out of country, but keep it as a pied a terre are taxed. Celebrities and regular folks owning a vacation home in the City are subject to the tax. Corporations and businesses which maintain residences here for visiting staff and clients are subject to the tax. Developers which may retain a unit from their projects going forward are subject to the tax. At least that is the theory. It will be interesting to see how vigilant the City auditors will be in enforcing this on say, Oprah Winfrey & other celebrities/important types, or Microsoft, Amazon, or other large corporations which necessarily maintain residences here. Oh, by the way, Vancouver City owned properties are exempt from the tax.

The City’s stated reason for this new tax is to help address Vancouver’s housing crisis. Net Revenues from the Empty Homes Tax are proposed to go towards affordable housing. In case anyone is going to try and dodge the tax and provide inaccurate information, the City will have a team out there doing random audits.
Where is the mandate for this by-law coming from? If the current City Council majority had made this policy a stated part of their last election pitch, would it have been accepted by City voters? In any case, it is what it is, and it is the new reality for property ownership in Vancouver.

The City of Vancouver website has pages of data on the New Vancouver Empty Homes Tax at this link:

http://vancouver.ca/home-property-development/empty-homes-tax-frequently-asked-questions.aspx

The Website has very detailed instructions regarding requirements for disclosure and compliance with this new bylaw and taxation structure. If you are a property owner in Vancouver, you MUST review it and become familiar with its rules, and your obligations under it.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at

604-220-2035 cell,
604-263-2823 office, or
bob@bobbracken.com email.

Printable PDF of this article - click here.

Real Estate Is An Expanding Investment

Mon, 12 Mar 2018 00:05:00 GMT

The following Case Study illustrates one of the most compelling reasons for buying and owning rental investment real estate is the phenomena of expanding value and expanding return on investment. This occurs as a well bought and well maintained property experiences income growth and decreasing debt over the investment period. As rents increase (modestly) year to year, and mortgages are paid down on a regular, escalating basis, the prudent and patient investor can watch while other people (tenants) work to pay off his/her property - bought (largely) with other peoples' (the bank's) money. This case study was done originally in 2001. Below is a brief summary update regarding value performance for this property to 2017.

Sale/Purchase Price Nov 2000: $427,500
Current Assessed Value 2017: $2,387,000
Capital Appreciation Factor 11.3%/annum: Gross $$/Wealth Gain: $1,959,000
(Not including mortgage balance pay down by tenants/income.)

Cash Flow Gain - Wealth Gain: This Wealth Gain does not include mortgage balance pay down by tenants/income, and the cash flow returns which would increase each year as rental rates increased. Given the decline in mortgage interest rates, it is possible that the entire mortgage balance would have been paid off if the original mortgage payment schedule was maintained, adding $337,500 to the Buyer’s Wealth Gain. Current rental rates in this area indicate current monthly Gross Income in the range of $65,000 - 80,000/yr, creating very high net cash flows to the Owner.

The Property: A legal 6-plex containing 3 X 1 bedroom suites and 3 bachelor suites in a well maintained building, with an area of approximately 3650 sq. ft. (including laundry, storage, mechanical areas etc.) It sits on a 50" x 124" RT-6 zoned lot approximately 2 blocks to Vancouver City Hall. The roof is newly replaced, the drain tiles have been redone and an underground oil tank has been removed. There is a rear yard garage containing 3 separate single car bays, each with their own doors and electrical power.

The Income and Expenses: The current rental income is $4,030/month from the 6 suites, laundry and garage rental. This income may be immediately increased by renting out 2 of the garage bays (currently used by the owner for storage) for $125/month each.

Current expenses (adjusted for the latest Gas and Hydro increases) are $10,000/year, plus an additional $2,000/year for maintenance reserves. The Net Operating Income (NOI) is:

Rental Income (including garages): $4,280/month
Expenses (including reserves): 1,000/month
Net Operating Income (NOI) $3,280/month or $39,360/year.
We are predicting that Net Income will increase at a rate of 3% each year over the 5 year analysis period. This assumption is supported by historical rental information from CMHC, and by the fact that Vancouver has been experiencing a flat rental (and real estate) market for several years, and is now poised for a period of higher demand. The rental increases may not be as "straight line" as the analysis shows, but will average out over the 5 year period.

The Investment Analysis for this Legal 6 Unit Building Vancouver B.C.
Purchase Price: $450,000, Capitalization Rate: 8.75%
Expense ratio: 23.4%
Net Income (NOI): $3,280/mo. or $39,360/yr Gross Rent Multiplier: 8.76

Financing: Purchased with a $337,500 (75% loan to value) 1st mortgage @ 7% interest, 5 year term, 25 year amortization and payments of $2,364/month or $28,368/year...
Down Payment: $112,500 , Net Income (yr 1): $3,280/mo or $39,360/yr
Closing Costs: 8,000 Less Debt Service: 2,364/mo or 28,368/yr
Total Investment: $120,500 Before Tax Cash Flow: $916/mo or $10,992/yr

Summary: Mortgage Balances & the Mortgage Pay Downs at the end of each of the 1st 5 years:
Year 1 Year 2 Year 3 Year 4 Year 5
$332,257 $326,641 $320,624 $314,179 $307,275
$5,243 $5,616 $6,017 $6,445 $6,904

Basic Real Estate Tips & Principles:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
Great deals, in a strong market, are usually “made”, rather than “found”- or delivered
If you want inflation and amortization schedules to work for you, you have to give them something to work with - and time to work.

Is there anything you want to know regarding real estate, please contact Bob Bracken at
604-220-2035 cell,
604-263-2823 office, or
bob@bobbracken.com email.

Printable PDF of this article - click here.

All information while deemed to be correct, is not guaranteed
Copyright © 2017 All rights reserved Bob Bracken

Market Outlook Winter 2018

Mon, 26 Feb 2018 23:46:13 GMT

The Vancouver Real Estate market - especially for Detached Homes - has gone through a bit of a roller coaster ride from Winter/Spring 2016 through to now - Winter/Spring 2018. 2016 1st half saw a very robust, hot market which was chilled by the BC Government introduction of the 15% Non Resident Tax. This caused the 2nd half 2016 into early 2017 to experience a significant increase in listing counts, accompanied by a drop in sales and market values. As 2017 proceeded through the Spring, however, sales and values picked up, and by Summer’s end they had regained, even surpassed, the 2016 value drop. As fall 2017 proceeded to Year end, however, we again saw sales numbers and market activity subside, possibly due to concerns over the newly elected NDP/Green government, and certainly in anticipation of the negative effect of the Federal Government’s new, restrictive mortgage lending rules. See article (New Mortgage Lending Rules). This new lending policy came into effect on January 1, 2018, and January sales reports from BCREA show a 10% decline in sales numbers compared to those of December 2017.

This is not surprising as the new lending rules reduce the amount of mortgage funds available to buyers by about 15% compared to the “pre-rule” funding levels. Given that conventional mortgage funding typically represents 65% to 80% of the purchase price of a property, this means that there could be a downward pressure of between 10% - 12% on recent prices simply due to the Buyers’ ability to pay. If nothing else, the rules will certainly influence - and probably already have influenced - the perception of market price levels.

More ominously, this new policy is the leading example of a political climate - at the National, Provincial and Municipal/City level - which is proving hostile to real estate purchases - both for home ownership as well as for investment purchases.

These are some of the challenges the Vancouver Real Estate market faces going forward. On the other hand, there remains a strong demand for Vancouver real estate and home ownership generally. In the past this is a force which has found ways to adjust to, and move past market changes and challenges and it will likely do so again. Our general economy remains strong, and we are going into the traditional Spring Market period in Vancouver, and sales have typically strengthened and advanced during this period through almost every market period over the past 30 odd years. I expect that buyers and sellers will find their way, now as before, to do deals which satisfy their own interests and desires. We Realtors are here to help that happen.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email. Printable PDF of this article - click here.

New Mortgage Lending Rules

Mon, 26 Feb 2018 21:21:09 GMT

As of January 1, 2018, uninsured mortgage consumers (i.e. those with 20% or more downpayment) must now qualify for property financing using a new minimum qualifying rate. The rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%. Previously, the home buyer/owner qualified at the contract rate offered by the lender, so this new rule significantly impacts & reduces the amount of mortgage for which the home buyer/owner will be able to qualify. While the actual mortgage payment will still be paid at the contract (lower) rate, a higher calculation will be used for qualification purposes. This rule is applied not only to new purchases, but also to borrowers applying for refinancing on properties they already own. All mortgage lenders, except for Credit Unions and Private Lenders, are bound under this legislation.

This policy has attracted a fair amount of criticism from the Real Estate and mortgage lending industry who point out that imposing a stress test on all buyers will put a chill on the housing market at a time that it can ill afford it. The restrictions would affect about $15 Billion a year in new borrowing, and the tighter rules could disqualify as many as 12 per cent of borrowers. Many economists and real estate industry officials anticipated the rule change could curb home sales through the coming year. The Canadian Home Builders' Association has forecast the rule changes combined with other recent housing-sector policy reforms could reduce total house transactions by 10 per cent to 15% - a potential decline in resale-home transactions of 50,000 to 75,000 units a year, while housing starts could drop by 20,000 to 30,000 units. The cumulative amount of government intervention in the housing market means that many people will no longer be able to buy their first home or upsize when the kids come along.

This new policy comes along at a time when there is no evidence of elevated mortgage default, or risk of that in the Canadian economy. The irony of the policy is that it is driving a sizable segment of the buyer population to private lenders who, while being exempt from the legislation, charge much higher rates of interest, thereby creating a much higher risk of financial stress & potential mortgage default and foreclosure in the future. The new rules seem to be part of a larger agenda by various levels of government to curtail home purchasing by Canadians, and to drive down real estate values nationwide. The effect is to make more difficult - & even prevent - young people and new buyers from acquiring their 1st home, while curtailing or diminishing the equity & wealth of those who already own their homes and other property. In the last few months of 2017, and into the 1st few weeks of 2018, it appears that the new rules have caused a cooling and uncertainty into our local Real Estate market. As this is a real, continuing constraint on purchasing power, as opposed to the political perception of policies such as the 15% Non-Residents’ Tax, it will likely be more difficult for the market to shake off this trend to continue the robust activity of the past decade or so.

Is there anything you want to know regarding real estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Vancouver Real Estate, Can Prices Go Any Higher

Thu, 15 Feb 2018 20:41:41 GMT

(originally published in 2010, updated to 2017) By Bob Bracken

The following Case Study illustrates an answer to the title question, ‘’Vancouver Real Estate, can prices go any higher?” This question has been asked over and over in the many years that I have been in the business. The answer is always a matter of supply and demand, economic climate and the political climate in British Columbia. Having said that, prices have consistently advanced over the past 50 odd years in Vancouver Residential Real Estate (See Website Article “The Older You Get The Richer You Get”). This case study was done in 2010. Below is a brief summary update regarding value performance for this property to 2017.

Sale/Purchase Price August 2010: $803,500
Current Assessed Value 2017: $1,574,000
Capital Appreciation Factor 10%/annum: Gross $$/Wealth Gain: $770,500
(Not including mortgage balance pay down by tenants/income.)

Cash Flow Gain - Wealth Gain: This Wealth Gain does not include mortgage balance pay down by tenants/income, and the current cash flow returns which would increase each year as rental rates increased. The original mortgage balance of $602,600 would have been paid down to approx. $482,000 if mortgage rates remained at 3.6+/-% over the ensuing years, adding an additional $120,000 to the Buyer’s Wealth Gain. Continued increases for rental rates in this area & for this property indicate current monthly Net Operating Income could be in the range of $5,000/mo or over $60,000/yr, creating very decent net cash flows to the Owner.

The Property: A 2200 sq.ft., 3 level “character” house containing 6 bedrooms, 4 bathrooms and 3 kitchens on a 24.75’ X 112’ lot on West 12th (busy street) in the City Hall area of Vancouver. Built in 1910, the building is structurally sound, with partially upgraded plumbing, electrical, and cosmetic work. The accommodation is Top floor: 1 Bdrm suite; Main floor: 2 Bdrm, 2 Bath suite; and Basement: 3 bdrm suite; plus single car detached garage with electric service.

The Revenue: At closing, the house was delivered vacant. Area rents indicated that the monthly revenue should be Top floor: $1,100; Main floor: $1,500; Basement $1,550; Garage $250 = total of $4,400/mo or $52,800/yr. An expense ratio of 25% or $13,500/yr, gave Net Income = $3,300/mo or $39,600/yr.

The Sale: The Property was listed for $845,000, reduced to $799,000, and sold for $803,500 in August 2010, after 45 days on the market.

The Analysis (2010): Financing @ 3.6%, 5 year term and 25 year amortization was available. If the Buyer put down 25% ($216,000 including closing costs), the mortgage payment for $602,600 was $3,040/mo or $36,500/yr, giving a modest positive cash flow. Assuming an average annual net income increase of 3%, the 1st, 5 year-end holding period should give the Buyer’s financial position as: Mortage Balance=$520,900, Net Income= $3,825/mo or $46,000/yr.

This change in financial position provides “Mortgage Rate Insurance” for the Buyer, so that interest rates could rise to 7.5% before increased mortgage payments would cause the Buyer to be out of pocket and “feed” the investment - or be forced to sell it.

The Update (Dec 2013): As noted, this property sold in August of 2010, and is still owned by that Buyer. Presently, 3 years later, the property generates $5,000/mo (estimate $1,650/mo for owner’s main floor suite), with a 25% expense ratio, current net income = $3,750/mo or $45,000/yr - a compounded increase in net rental income of 4.35% since purchase date - better than predicted. At purchase in 2010, the Assessed Value was approximately $720,000; the 2013 Assessed Value for the house is $910,000, for an annual, compounded increase of 8.12%. If the 9% “historical” appreciation factor is applied over the 3 years, the computed market sale price would be $1,040,000 today, giving a 4.3% cap rate - a feasible likelihood. This deal was available for anyone in mid 2010. It is likely that there are properties available today that provide the same opportunity for Buyers.

Basic Real Estate Tips & Principles:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
Great deals, in a strong market, are usually “made”, rather than “found”- or delivered
If you want inflation and amortization schedules to work for you, you have to give them something to work with - and time to work.

Is there anything you want to know regarding real estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

All information while deemed to be correct, is not guaranteed
Copyright © 2018 All rights reserved Bob Bracken

Good Investments Often Made NOT Found

Mon, 05 Feb 2018 23:07:11 GMT

(originally published in 1999, updated to 2018)

The following Case Study illustrates that Sellers may not want to be tied up with long completions and will look at all offers as to when they would best receive the sell proceeds and their price. It is always the story to have your financing in order to be ready to compete with what you can afford and thus can compete and win against offers that turn out to be higher in price but with longer terms. This case study was done originally in 1999. Below is a brief summary update regarding value performance for this property to 2017.

Sale/Purchase Price June 1999: $780,000
Current Assessed Value 2017: $3,738,100
Capital Appreciation Factor 9.6%/annum: Gross $$/Wealth Gain: $2,958,000
(Not including mortgage balance pay down by tenants/income.)

Cash Flow Gain - Wealth Gain: This Wealth Gain does not include mortgage balance pay down by tenants/income, and the cash flow returns which would increase each year as rental rates increased. The original mortgage balance of $585,000 would have been paid down to approx. $260,000 if mortgage rates remained at 6.5% over the ensuing years, adding $325,000 to the Buyer’s Wealth Gain. Given the decline in mortgage interest rates, it is possible that the entire mortgage balance would have been paid off if the original mortgage payment schedule was maintained. Current rental rates in this area indicate current monthly gross income in the range of $15,000/mo or over $180,000/yr, creating very high net cash flows to the Owner.

The Buildings: Two “Duplex Buildings”, with a total of 4 three level (including full basement) townhouse units. Each of the units is totally self-contained with its own hydro and gas meters, hot water tank, furnace and laundry hook-up. The units are just over 1600 sq.ft., for a total building area of 6500 sq.ft. The buildings are very plain and about 60 years old, but are in reasonable condition with no pressing maintenance issues. The basements are mostly unfinished and have further development potential.

The Land: is a 66’x115’, RM-4 (Multifamily) zoned, corner lot in the Kitsilano neighbourhood of Vancouver. The RM-4 zoning allows for redevelopment of the property to a multifamily building of 8 to 14 units, and up to 10,800 sq.ft. of floor area. The neighbouring properties had recently sold (for $135 PSF) and a large condo development has been built.

Replacement Cost: Land prices for similar types of property in the area had ranged from about $110 PSF to $135 PSF. Building costs under current City code would be about $100 PSF. Total replacement cost would be about $220 PSF or ($220 x 6,500 sq.ft.) = $1,430,000.

The Revenue: 2 of the units were rented at an “under market” rate of $1,100/month, while the other 2 units had been brought to “market rents” of $1,400 and $1,500 for a total monthly income of $5,100, or $61,200/yr. The units are fully self-contained, there is no common area maintenance and the tenants pay all utility costs. So expenses are quite low - after taxes, gardening, garbage removal and maintenance, yearly expenses are about $12,500/yr.

The Sale: The property was listed for $875,000 and sold for $780,000. Offers were received from developers planning to build a new multifamily project, at a higher price than the eventual sale price. These offers were marred by the requirement for lengthy “tie-up” periods, and other conditions unattractive to the seller. The successful buyer is an investor who plans to hold the property.

The Financing Analysis: The buyer received a mortgage for 75% of the sale price ($585,000), at 6.5% interest with a payment of $3918/month or $47,000/yr. The Setup:

Gross Yearly Income: $61,200
Less Expenses & Reserves: (12,500)
Cash Flow from Operations (CFO): $48,700
Less Financing Costs (FC): (47,000)
Cash Flow after Financing (CFAF): $ 1,700
- Return on Assets (ROA): $48,700/$780,000 = 6.25%
- Financing Cost (FC): $47,000/$585,000 = 8.03%
- Return on Equity (ROE): $1,700/195,000 = 0.87%

The “Upside”: The buyer purchased an “easy care” property in good condition at a price close to “land value”. The property was “under rented” and the units contained “unimproved” space in the basements, allowing the buyer to add value immediately. By renovating the basement areas and adding a bathroom and bedroom at an estimated cost of $10,000/unit, he should be able to increase rents to a total of $1,700/unit. If he finances these reno’s at the same rate as his purchase, his “New Setup” looks like this:

Gross Yearly Income: $81,600
Less Expenses & Reserves: (12,500)
Cash Flow from Operations (CFO): $69,100
Less FC ($625,000 @ 6.5%): (50,240)
Cash Flow after Financing (CFAF): $18,860
- Return on Assets (ROA): $69,100/$820,000 = 8.43%
- FC: $50,240/($585,000+$30,000) = 8.17%
- ROE: $18,860/$205,000 = 9.20%

Basic Real Estate Tips & Principles:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
Great deals, in a strong market, are usually “made”, rather than “found”- or delivered
If you want inflation and amortization schedules to work for you, you have to give them something to work with - and time to work.

Is there anything you want to know regarding real estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

All information while deemed to be correct, is not guaranteed
Copyright © 2017 All rights reserved Bob Bracken

Investment Property Equals Very Affordable Home

Sun, 07 Jan 2018 00:53:00 GMT

(originally published in Spring 1997, updated to 2017)

The following Case Study illustrates Investment Properties have equaled a very affordable Home for some savvy Investors. Income from Suites can make the difference of every owing real estate, especially in Vancouver and not having to pay rent. It is a number game, between the sell price of the property, down payment, available cash flow rental income from the property Suites and the mortgage obtained. This case study was done in the Spring of 1997 - 20 years ago! Below is a brief summary update regarding value performance for this property to 2017.

Sale/Purchase Price Feb 1997: $260,000
Current Assessed Value 2017: $1,397,000
Capital Appreciation Factor 9%/annum: Gross $$/Wealth Gain: $1,137,000

(Not including mortgage balance pay down by tenants/income.)

Cash Flow Gain - Wealth Gain: This Wealth Gain does not include mortgage balance pay down by tenants/income, and the cash flow returns which would increase each year as rental rates increased. Given the decline in mortgage interest rates, it is possible that the entire mortgage balance of $195,000 would have been paid off if the original mortgage payment schedule was maintained. Current rental rates in this area indicate current monthly gross income in the range of $5,500/mo or over $66,000/yr, creating very high net cash flows to the Owner.

The Property: A small, 3 level triplex (legal duplex with unauthorized basement suite) in the Mount Pleasant area of Vancouver. The building is approx. 2100 sq.ft., with 3 X 1 bedroom suites on a 40’ x 66’ lot. The condition is good, as the owners had done renovations during their 4 years of ownership.

The Revenue: The property generates rent of $1,750/month, with tenants paying heat and light. Taxes and expenses are roughly $350/mo. At closing, the house was delivered vacant. Area rents indicated that the monthly revenue should be Top floor: $1,100; Main floor: $1,500; Basement $1,550; Garage $250 = total of $4,400/mo or $52,800/yr. An expense ratio of 25% or $13,500/yr, gave Net Income = $3,300/mo or $39,600/yr.

The Sale: The property sold for $260,000 to an owner occupier planning to live in the smallest unit, and collect rent of $1,250/month from the other 2 suites. Down payment was $65,000 (25%) and a 1st mortgage of $195,000 was arranged a 6.25% on a 5 year term, 25 year amortization. Monthly payments are $1,276 plus $90 net taxes. The selling Realtor observed that “Someone with a paper route could afford to own this house!”

The Investment Analysis: For an investor, the initial “numbers” look like this: Down payment of $68,500, including property purchase tax and closing costs: 1st year net income of $16,800 less $15,320 debt service = $1,480 before tax. Assuming that net income will increase at an average rate of 3% year, the net income after 5 years will be $18,910, or $3,590 after debt service, and the mortgage balance would be $175,800. At a capital appreciation of 3% per year (very conservative), it would be worth $301,500 after 5 years. At that point, the investor could refinance or sell. If the property is kept, the monthly net income of $1,575 could support a new 1st mortgage for the balance of $175,800 to a rate of 11% - providing some interest rate “risk insurance” for the owner. If Interest rates stayed the same (6.25%), the income would permit the investor to “take out” his original investment of $68,500.

The Summary: If the property sold at $301,500, the net proceeds (after commission and mortgage balance) is $113,370. The internal rate of return to the investor for the 5 years (before tax) is 13.5%.

Basic Real Estate Tips & Principles:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
Great deals, in a strong market, are usually “made”, rather than “found”- or delivered
If you want inflation and amortization schedules to work for you, you have to give them something to work with - and time to work.

Is there anything you want to know regarding real estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

All information while deemed to be correct, is not guaranteed
Copyright © 2017 All rights reserved Bob Bracken

Case Study - What most Missed, One Buyer Saw

Mon, 23 Oct 2017 22:14:22 GMT

The following Case Study illustrates, again, the principle that there are always gems and opportunities in the Market. These are usually found by looking past the superficial elements of a property to realize its potential for value upside. Sometimes (often) it takes a bit of time for the right buyer to come together with the Seller to work this out as a Win-Win for both. For this Seller, we agreed that it was essential to take all steps to get the highest price possible for the property. That started with a more aggressive price than the market would respond to, and they decided to make adjustments after a bit of time on the market. There were a couple false starts and collapsed offers resulting from what was a lack of confidence on the part of those Buyers’ rather than anything seriously wrong with the property. Ultimately we were able to find a perceptive and confident Buyer, and negotiate a price that was a bit of a stretch for both them and the Seller. The value of the investment property was never in doubt for the Seller, and the Buyer could see that the income potential could be quickly realized to add value immediately make the deal work.

The Property: Big 4 Level Multifamily Building, built in 1912 Legal for 5 suites, but converted to 4 self-contained. In a great location in the popular Commercial Drive area, it sits on a 30’ X 124’ RT-5 lot with lane. Building is in good condition (if a bit plain inside) with updated gas, electrical, plumbing and appliances, and had a newer metal roof, character features, high ceilings, stained glass, wood floors, shared (non-coin) laundry and lots of storage. There are balconies or decks on Main & Up levels, and nice views from 2nd and Top floors. The Suite Mix: 1 Bdrm Top, 2 plus den 2nd, 2 Bdrm Main, 2 Bdrm Ground, was strong, but since the 2 largest suites (Main and 2nd) were held vacant, the total rental income available was not apparent.

The Revenue: Prior to sale, the Top floor was generating $1,775/mo but the 2nd floor was vacant, and the Main was Owner occupied, while the 2 bdrm Ground suite was rented as a 1 bdrm suite at $1,050/mo - well below potential rent. The Buyer was able to immediately rent the vacant 2nd floor for $2350/mo, and the former Owner’s suite for $2,200/mo. The Ground suite would move to $1,550/mo (as a 2 bdrm suite) upon expiration of the existing lease, and the conversion of the Laundry to coin operated machines adds an add’l $100/mo to income. With total monthly rent now increasing to $7,795 ($95,700/yr) and expenses of approximately $14,000/yr the result is Net Income = $81,700/yr or $6,808/mo.

The Sale: The Property was listed for $2,028,000 and sold for $2,000,000 after approx. 30 days on the market at this price. With the changes and enhancements made to rental income, the Buyer created a Cap Rate of 4.1% and the investment was shaping up to make a great deal of sense. The final piece was the financing terms gained by the Buyer.

The Analysis: The Buyer was able to achieve, through a local Credit Union, a 1st mortgage of $1,375,000 (68.75% loan-to-value) at an interest rate of 2.89% with a 35 year Amortization, and a monthly payment of $5,200, giving a positive net cash flow of $1,608/mo or $19,296/yr. Assuming an average annual net income increase of 3%, the 1st, 5 year-end holding period should give the Buyer’s financial position as: Mortgage Balance=$1,250,000 Net Income=$7,873/mo or $94,713/yr, Net Cash Flow of $2,693/mo or $32,313/yr.

The Summary: This Buyer, with a bit of vision, imagination, and enquiry took action to acquire a great investment property with positive cash flow in a great Vancouver location in the midst of what is considered to be a prohibitively priced market. Many “experts” (including in the Media) would consider this an unlikely scenario, but any qualified Buyer could have done it.

Basic Real Estate Tips and Principles worth repeating:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
Great deals, in a strong market, are usually “made”, rather than “found” - or delivered.
If you want inflation and amortization schedules to work for you, you have to give them something to work with and time to work.

Is there anything you want to know regarding real estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Market Outlook Fall 2017

Mon, 23 Oct 2017 21:56:24 GMT

The 1st half of 2017 in the Vancouver Residential market (at least for Detached and land based property) can justifiably be characterized as “The Comeback” - i.e. from the effects of the 2016 Non Resident Sale Tax introduced by Christy Clark’s Liberal government on July 29, 2016.

In the 1st couple months after that event, we saw a significant, downward movement in the Vancouver market. For the West Side, sales in Aug 2016 were down 44% from the # in July 2016, and down 59% from sales in Aug 2015. In Sept 2016, sales were also down 44% from July/16 and down 52% from Sept 2015. As well, Aug and Sept 2016 saw average prices drop 10-13% from end of July/16. On the East Side, end of August 2016 sales dropped 33% from end of July/16 sales, and 48% down from Aug 2015. For Sept/16, sales were down 47% from July/16, and down 57% from Sept 2015. Average prices dropped as much as 13% from the July/16 highs.

By the end of August 2017, the West Side still saw sales #’s down by 14% vs Aug 2016, but average price was up by 11%. For Sept 2017, sales #’s were up 30% from Sept 2016, and average prices up by 10%. On the East Side, # of sales were up by 46% at end of Aug 2017 over Aug 2016, and by 60% in Sept 2017 vs Sept 2016, while average prices had come up 5% to 8%. From what I have seen and sold, prices in 2017 appear to achieving new highs.

As per my prediction in both my Fall 2016 and Winter 2017 Newsletters, the Vancouver Real Estate Market did in 2017 what if has done almost every time there is some drama, setback or correction - i.e. pause, adjust, suck it up, and keep moving.

This is not to sound too bullish or cocky for the months ahead though. We are still in a somewhat cautious, if positive market and in Vancouver, that market can turn on a dime. Having experienced a blow from the political actions of a supposedly “business friendly” government, the change of regimes to the current more Left Wing government - widely perceived as much less business friendly - has many buyers (particularly investment buyers) on the sidelines with a “wait & see” approach. The fact that the BC’s new governing coalition has only a razor thin mandate, however, tempers both the expectations and fears of market sentiment. The outcome of the upcoming Liberal Party leadership race will be watched closely and may cause the market to pop or settle back a bit one way or another. It’s never my intention to make my reports a political analysis or commentary, but in BC and Vancouver, it is a fact that politics and real estate activity/values are joined at the hip.

Having said that, the long term outlook for Vancouver Real Estate remains bullish, with Bloomberg News describing the market here as “relentless” (see accompanying article), and at least one major Global Consulting firm, recently located here, considers Vancouver as “...a City in its adolescence”. To my clients & readers, I guess I say “Onward”!

Bloomberg News “Gets” Vancouver Real Estate Values

Mon, 23 Oct 2017 21:41:20 GMT

For decades - as many of my Clients and Readers know - I have been expounding (ad nauseam ?) my belief in the underpinnings of Vancouver Real Estate values and the fundamental economic conditions that predict an inexorable continuing increase in those values. This opinion has often flown in the face of the opinions and predictions from the Major (Toronto) Banks and major (Toronto) news media. Well! Now my views seem to be shared by no less an authority than Bloomberg News. A recent Bloomberg article by Natalie Obiko Pearson titled “Why Bother with Stocks in Vancouver’s Relentless Housing Market?” describes Vancouver as being “...among a clutch of Cosmopolitan, attractive cities around the globe where the appreciation in home prices is seemingly unstoppable”. The article points out that “Vancouver, consistently voted one of the world’s most livable cities, shows just how difficult it is for policy makers to control runaway prices.” The Bloomberg article goes on to describe the resiliency of values in the housing market, and describes the experiences (in his own words) of a local real estate investor. This is a good read (Click here to read it) and, for those Naysayers in Toronto, well they can chill ‘cause Big Brother New York City has Spoken lol.

Printable PDF of this article - click here.

As well, please consider Bob a resource if you have questions regarding Vancouver Real Estate Values. Contact Bob anytime to discuss this topic and Real Estate.

Bob Bracken
604-220-2035 cell
604-263-2823 office
bob@bobbracken.com email

“feel free to bother me!”

Market Remains Strong After BC Election

Thu, 17 Aug 2017 21:12:50 GMT

After a significant change in Government and the look of the BC Political landscape following the May 9 Provincial Election, the Vancouver Real Estate market continued strong through May and June 2017. While single detached inventories are higher in both the East and West Sides of the City compared to the same period in 2016, the number of sales recorded are almost equal to one year ago, and Average Prices/Unit for Detached Homes (approx $1,700,000 Van East, approx $4,000,000 Van West) are virtually dead even with 2016. Sales/Listing ratios indicate a modestly “Sellers Market” bias, trending towards a healthy “Balanced Market”.

On the Attached/Condo side of the Market, inventories are also a bit higher this year than in 2016, with Sales only very slightly lower, but that Market is very strongly “Seller Favourable” still, with Average Prices approx 5% - 8% higher on the West Side, and 15% - 20% higher on the East Side compared to May and June of 2016.

Having said that, there is evidence - both statistically and anecdotally - that the Market (especially West Side Detached) may be cooling a bit as some Buyers adopt a “wait and see” attitude in response to the Election results.

It is quite likely, however, that this is more a case of the “Sniffles” than a full-on “Political Flu”, as the BC Political Landscape remains quite fluid with the potential for more change within months rather than years.

The Summer tends to be a bit slower sales period as both Realtors and Buyers take holidays, but we are often surprised by persistent activity during this time. There always seems to be “Something” going on in our City and Province, so the current situation can still be characterized as “Normal” for the Vancouver/Lower Mainland Real Estate Market. Call Bob Bracken anytime to discuss this topic and real estate.

Printable PDF of this article - click here.

Vancouver Out of Gas by 2050

Thu, 10 Aug 2017 20:40:00 GMT

In July 2016, Vancouver City Council voted to ban Natural Gas fuel from homes and restaurants by 2050. The 1st phase of that policy was put into place and applied on May 1 of this year to affect all developments requiring Re-zoning. As of March 2018, the policy will apply to all multi-family projects of 4 or more stories, and eventually it will apply to all single family homes, duplexes, and rowhouse/townhouse projects. It will also apply to commercial and retail spaces, including all restaurants, bars etc, as well as to schools and factories. City officials also indicate that in the future, all businesses, existing buildings and homes will be required to retrofit to eliminate all use of natural gas.

General reaction from residents, business and industry has ranged from the incredulous (“It’s April Fools, right?”), to concern and open anger. Fortis BC, as well as business and industry associations point out that the policy will cost consumers 3 times what they now pay for natural gas, while giving them less choice in lifestyle - and still likely not achieve what the City states as its goal.

The Canadian Taxpayers Association estimates that the cost for energy bills will be $1,400/yr for residents by changing to electricity, and many thousands of $$ more for retrofit of homes and business. For the restaurant industry the challenge is even greater as 99% of all restaurants cook with natural gas. The City, for its part, insists that this is not an outright ban, saying users will have the option of using biofuels and ”re-cycled” natural gas. Fortis and others have responded to this by pointing out that biofuel and other options have the capacity to service less than 1/3 of Vancouver’s requirement. Ian Tostenson of the BC Restaurant Assn reports that no one at the City has been able to answer the question “How is everybody going to be able to handle this?”

As Vancouver residents contemplate losing the right to enjoy gas stoves and bbqs, gas fireplaces, home furnaces and water heaters, patio heat lamps, pool and hot tub heaters, and even Vancouver’s Olympic Cauldron along with a flame broiled steak at their favourite restaurant (to mention a few items) they can ask the question “Is this what we elected and hired our City Officials, Council and Mayor to do?

Update to this Article

The Chevron gas station located in Vancouver at 41st & Oak closed on August 15, 2017, and the Chevron at 16th & Cambie will be boarded up by August 18. This follows the sale of the Chevron at 1698 West Georgia (supposedly for $72M and the proposed site of a 350 ft tower), as well as the station at 39th & Dunbar, and will soon be followed by the closing of the Chevrons at Broadway & Alma, 4th & Macdonald, plus 59th & Cambie.

The sites will be redeveloped into high density residential buildings, possibly some Market Rentals. This is the latest in the trend of closing gas stations in Vancouver. The Esso station at Davie & Burrard is also for sale and a sign of the times, we suppose. This will have more than a slight impact on getting gas on Vancouver’s West Side, especially since these are all highly frequented location, some open 24 hours.

On a personal note, the 41st & Oak and the 16th & Cambie Chevrons have been my "favorite gas ups" for decades, so I’m all ahoo with grief. The City of Vancouver seems unconcerned, as they had been aware of Chevron’s plans for this move, as they changed the zoning for the West End properties years ago. "I have no concerns..." said Vision councillor Raymond Louie - a sentiment echoed by official City of Vancouver statements. One can only wonder if this is part of Mayor Robinson and Vision Vancouver’s agenda for a city of no gas, no cars? Call Bob Bracken anytime to discuss this topic and real estate.

Call Bob Bracken anytime to discuss this topic and real estate. If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please contact Bob Bracken at 604-220-2035 cell, 604-263-2823 office, or bob@bobbracken.com email.

Printable PDF of this article - click here.

Market Tweaking itself

Wed, 05 Apr 2017 21:34:00 GMT

Wow! That was one wicked, snowy, cold (record breaking) Winter here in Vancouver! Now, we may see a more enjoyable Vancouver - maybe some Sun? The Vancouver Real Estate Market seems to have found a sort of Spring as well, recovering & “normalizing” - i.e. normal for Vancouver. The 2nd half of 2016 was a dismal, depressing time for Vancouver property sales, but I predicted that our market would ..”pause, adjust, suck it up, & keep moving” - & that seems to be happening.

March 2017 saw West Side inventory & prices equal to March 2016, while, on the East Side, sales were down only 25%, & average prices were dead even. Vancouver is experiencing a healthy, normal market, & a robust Sellers’ market at some price points, & for condos. Most market impediments largely due to stringent, Kafka-esque, mortgage lending policies by Banks & major lenders.

Politics remains the “elephant in the room” & the 15% Non Resident’ tax is still a fresh memory - even though the gov’t has eased that policy & has also introduced other Real Estate friendly initiatives. The May 9 Provincial Election may also have a sobering effect on the Market. Demand, however, isn’t the problem as Vancouver Real Estate continues to be regarded as great value by locals & the international community. Look to see the market continue to strengthen (barring a catastrophic Election outcome) as we move through 2017. Call Bob Bracken anytime to discuss this topic and real estate.

Printable PDF of this article - click here.

BC & Ontario Governments Non Resident Tax Update

Mon, 03 Apr 2017 21:40:00 GMT

Premier and BC Gov’t Revises 15% Non Resident Property Transfer Tax

The BC Premier & Government recently implemented positive changes to the 15% Non Resident Property Purchase Tax & announced a Refund Policy for Non-Resident Buyers who were unfairly caught by the sudden announcement of the Tax on July 29, 2016. Non Resident Buyers may now claim a refund if they paid the additional 15% Tax as long as they were confirmed as a B.C. Provincial Nominee between August 2, 2016 & March 17, 2017, & also if they became a Permanent Resident or Canadian Citizen within one year of the property transfer being registered. To qualify for the refund, the home must be their principal residence, they moved into the home within 92 days of the date the transfer was registered, & have lived in the home as their principal residence for at least one full year after that. They must apply for a refund within 18 months from the date the property transfer was registered.

Ontario Follows Suit with their Own 15% Non Resident Property Transfer Tax

Ontario is following British Columbia's lead, promising to introduce a tax on foreign homebuyers that the province hopes will help cool the frantic housing market, easing concerns about a potential bubble in Canada's fastest growing urban region. The 15% "Non Resident speculation tax" was among 16 housing measures the provincial gov’t announced, which also included a promise to expand rent control, allow Toronto to impose a vacant homes tax & use surplus provincial lands for affordable housing. Some economists were skeptical about the impact the new tax would have on house prices, noting that all 3 levels of governments admit they lack housing market data. CIBC economist Benjamin Tal doesn't believe there are enough foreign buyers in the Toronto-area market for the tax to have a lasting effect, but predicts a short-term slowdown in the market once the measures are in place. The Ontario Government promises that the new tax would not target immigrants, & a rebate would be available to foreigners who work in Ontario, those who subsequently get citizenship or permanent resident status & international students. Once legislation passes, it will be effective retroactively to April 21, 2017. Call Bob Bracken anytime to discuss this topic and real estate.

Printable PDF of this article - click here.

Market Outlook Winter 2017

Wed, 01 Mar 2017 22:09:56 GMT

As noted in my last Fall Newsletter, 2016 was a “Dr. Jekyll/Mr. Hyde” Real Estate Market in Vancouver. After a very robust 1st half, the market was blindsided by the 15% Non-Residents Tax, and struggled and limped a bit through the latter half of the year. This period was characterized by what I referred to as a “reset” - a euphemism for a softer market with much greater supply, sharply decreased sales, and discernibly lower prices. I predicted that the beginning of 2017 would be “interesting times” for our market.

We have started 2017, through the end of January, with much the same market conditions as the end of 2016. Listing inventory for Detached Homes on the West Side up about 13% from January 2016 levels, sales trending much lower, and average prices (for the month) down about 13% from the year prior. For the East Side, the listing counts are double in January. 2017 vs January 2016, sales are down at least 50%, and averages prices are off approx. 9%. Having said that, I expect an active market through the Spring of this year.

I have been quite busy with the types of investment and multifamily properties I deal with; my listings are selling, I get calls every day from Buyers and Agents looking for those types of listings and my own clients want to do business on both the buy and sell sides of Real Estate. Transactions require a bit more patience and creativity, Banks and Lenders are much more cautious, and most deals require a bit of arm wrestling to finalize. This is what I call a “normal” market - similar to what I have experienced for the majority of my 31 years as an agent in Vancouver - and I am quite comfortable and optimistic about Vancouver Real Estate going forward.

Anecdotally, there are many signs of a healthy market. In mid-January, a colleague listed an old Vancouver Special with a leaky roof and deck, in shabby condition, near 45th & Fraser at a (sharp) price of $1,289,000. He had 80 plus viewings over a weekend, received 23 (yes 23) offers, and sold it for $1,439,000. In early 2016 this was a routine transaction, in 2017 it is an encouraging sign of willingness by local buyers to act on value, and there are at least 22 of those Buyers still in the hunt.

For my Sellers I say “Price it Right and It Will Sell”. For my Buyers I say “If it Looks Good, Make Your Move or Someone Else Will”. The rest of the year is still a bit opaque. We have a Provincial election coming - always a nervous time for investors, buyers and people wanting to do business - and we have a Civic government that continues to find ever more goofy and objectionable policies to burden and cost current and future Vancouver property owners. There are some good news stories - the Provincial 1st Time Home Buyers Loan and a continuing very healthy local economy (see Bob’s newsletter article New BC 1st Time Home Buyers’ Loan Program).

It seems that the Vancouver Real Estate Market is doing what it has done almost every time there is some drama, or a setback - i.e. Pause, adjust, suck it up, and keep moving.

New BC LandLord Registry - for Owners and Tenants

Wed, 01 Mar 2017 21:54:22 GMT

Finding a good Landlord is about to get a little easier in BC, thanks to the new online BC Landlord Registry. Perhaps the timing could be perfect to help Owners and Tenants, since we can expect an increase in Landlords locally with the introduction of the upcoming Vancouver Vacant Housing Tax.

Landlord BC (a resource to help make owning rental Real Estate easier) is launching the registry called “I Rent it Right!” in February. The goal is to professionalize the rental industry even if the rental market has had a very low vacancy rate for months, if not years.

Here is how it works: The BC Landlord Registry is a voluntary program where property owners take an online course and exam on the Residential Tenancy Act. If they pass, landlords receive a competency “I Rent it Right” certificate that is posted on the Landlords BC website where prospective Tenants can check for free.

It will be a tool for Landlords knowledge base, which they will be able to use in the future to refer back to if they are uncertain about certain parts of the Act. The cost is $39 for a 3 year certification, so the Landlords will continuously have information, including notification if the Act is updated. Landlords can also differentiate themselves in the market with this certificate and use it as a marketing tool displaying competency. This program is offered on the Landlord BC website, and there are options for enhanced versions of the program. The Property Owners Plan costs $130/yr and includes additional features such as Landlord Registry Access, Proprietary Tenancy Forms, Educational and Operational Resources, Cost Saving Programs, and Phone Support. There is also a plan for professional Property Managers, which costs $1,000/yr with additional resources such as Marketing Programs.

Tenants can benefit too, by knowing their Landlords know their rights and the rules they must abide by. This could be a win win for both Owners and Tenants. If Landlords understand the do’s and don’ts of landlording they will be better Landlords. The Tenants will be able to search a database of registered Landlords when they are looking for a smart Landlord. Both Owners and Tenants could avoid conflicts, court cases, loss of time and money, by knowing the Residential Tenancy Act. For more information see www.landlordregistry.ca and www.landlordbc.ca.

As well, please consider Bob a resource if you have questions regarding appropriate rental rates for different suite types and areas, resolving tenant disputes etc. Call Bob Bracken anytime to discuss this topic and real estate.

New BC 1st Time Home Buyers’ Loan Program

Wed, 01 Mar 2017 21:47:01 GMT

Finally, for a change, some positive news and policy initiative by Government to support property owners and buyers, and strengthen the Real Estate market locally and throughout BC.

Through the B.C. HOME Partnership Program, the Province of BC is helping first-time home buyers get into the home ownership market by contributing to the amount they have already saved for a down payment with a loan that is interest-free and payment-free for the first 5 years. The program will match the buyer’s downpayment up to 5% of the home’s price, to a maximum price of $750,000. The Government contribution will be registered as a 2nd mortgage on the property, with no interest payable for 5 years. After 5 years, buyers can either repay their loan or enter into monthly payments at current interest rates. Loans through the program become due after 25 years - the same length as most mortgages.

To qualify for the program, all individuals with a registered interest on title must reside in the home and:

Have been a Canadian citizen or permanent resident for at least five years •
Have resided in British Columbia for at least one year immediately preceding the date of application
Be a first-time buyer who has not owned an interest in a residence anywhere in the world at any time
Use the property as their principal residence for the first 5 years
Purchase a home at a price of $750,000 or less (excluding taxes and fees)
Obtain a high-ratio insured first mortgage on the property for at least 80% of the purchase price
Have a combined, gross household income of all individuals on title not exceeding $150,000
Have saved a down payment amount at least equal to the loan amount for which the

buyer applied Buyers will need:

Proof of status in Canada and residency in British Columbia
Secondary identification (must include your photo)
Proof of income and tax filings
Insured first mortgage pre-approval

Some naysayers are raising alarm over what they consider the already unbalanced demand/supply conditions in the BC housing market. They further complain that this program is an attempt by the Government to prop up a real estate market poised for a sharp decline in 2017. Setting aside that the current real estate market decline (in the Lower Mainland) was predicated by prior Government intervention policy, these critics apparently believe that a decline in values affecting thousands of current home and property owners would be a good thing.

The Program has been praised however by developers, the real estate industry, mortgage brokers, and housing analysts who point out that it will help those who already qualify for mortgages but might lack sufficient downpayment, and that it can speed their entry into the housing market. It is also likely welcomed by many parents who appreciate not having to contribute large $$ to their adult children for home purchase!

This initiative is also positive as it helps 1st time buyers recently hampered because of new restrictive mortgage lending rules from the Federal Government. The Government Loan is fairly revenue neutral to taxpayers as it will eventually be repaid - either upon re-sale, or through payments after the initial 5 year period. The amount of risk to the Buyer, and the Government as 2nd mtg lender, is also quite manageable. Given a purchase at the maximum allowable value of $750,000, with a Buyer’s 5% downpayment of $37,500, the matching Home Buyer loan of $37,500 and a 1st mortgage of $675,000 at today’s 5 yr rate of 2.79% with a 25 yr amortization, the total debt owning after 5 years would be $574,600 (1st mtg balance) + $37,500 (Home Buyer mtg) = $609,600, or $102,900 less debt than when purchased.

Given the $750,000 maximum qualifying price point, this initiative is very significant help to buyers outside of the Lower Mainland’s pricey market, and should also provide a bit of stimulus to the market here in Vancouver and surrounding municipalities. Have to call this a “Win-Win” strategy by the Government.

Applications for the program will be accepted starting Jan 16, 2017, for purchases that will close on or after Feb 15 2017. For more information and how to take advantage of the Program, go to https://www.bchousing.org/housing-assistance/bc-home-partnership

Property Assessment 2017

Thu, 19 Jan 2017 20:48:58 GMT

Annual Property Assessment Notices from BC Assessment Authority were sent out in the mail starting January 4, 2017, and by now you should have received yours. The “Assessed Value” figure is BC Assessment's estimate of the market value of your property as of last July. This value is used to determine how much you will pay in property taxes this year. Many of the “Frequently Asked Questions” about the assessment process are addressed in the brochures included with the Assessment Notice. Some of the major points worth repeating here are the following:

• The Assessed Value is an estimate of the market value of your property as of a July of the prior year (i.e. 2016), for the purpose of taxation. Few properties are actually visually inspected by a BC Assessment appraiser, and most assessments are computer generated using information from Real Estate Multiple Listing Sales records, Land Title offices and building permit and zoning information from the taxing authority (city or municipality).

• The Assessed Value cannot be relied on as an accurate representation of the current fair market value of your property. By the time you have received your Assessment Notice, approximately 6 months has passed, which can be an eternity in the Vancouver Market/Lower Mainland Real Estate Market. In recent past years, it was safe to say that the Assessed Value was well below Market value, as values have been steadily moving up. With the latest assessments, however, It is quite likely that the current market value of the property is lower than Assessed Value - largely due to the market and price changes that occurred since the BC Government imposed their new “Non Residents’ Purchase Tax” in late July of 2016. It is also quite likely the 2017 Assessed Values will be lower than the 2016 assessments, when the notices become available in 2018.

• You can dispute and appeal your Assessment if you disagree with it. If you think your assessment is wrong and wish to dispute it, 1st call your local assessment office and have them review your assessment. If they agree with you, they will recommend that a change be made to the Court of Revision. If they disagree with you, you will have to file an appeal with your local Assessment office by January 31! The Court of Revision is a 3 person panel appointed from the community by the provincial government. It is independent of BC Assessment and the tax jurisdiction. The Court hears evidence to determine only if your property has been valued and classified correctly. It does not have the power to adjust property taxes.

• BC Assessment does not set property taxes. It only supplies market value information, to which tax authorities (eg. the City of Vancouver) apply a tax or mil rate to set the amount of tax you pay. Property assessments have risen, on average, well over 30% from the year earlier, but this is an across the board increase, so relative property taxes should only increase modestly - largely as a result of the Municipal Government actually designating and imposing a slightly higher tax rate.

Is it worthwhile to dispute or appeal your assessment? It is easy to dispute your assessment by telephoning your local assessment office and reviewing your property’s assessment with a staff member there. If they agree with you, they will recommend that the Court of Revision correct your assessment, and you may save on your taxes - a good deal for the price of a phone call! If they still disagree, you may want to appeal. Launching an appeal is easy, but the following two factors might be considered before investing the time and effort:

1. What is the likelihood of a successful appeal? Even though your assessment may have increased significantly from last year to this year, the test will be whether this is an accurate estimate of today’s market value. Sometimes BC Assessment has to play “catch-up”, and a sharp increase may mean that your property is only now properly assessed. Property assessments have risen, on average, well over 30% from the year earlier, and may be vulnerable to challenge or review.

2. How much will the assessment increase actually cost you? Possibly nothing and it could also actually result in a reduction in your property taxes if your assessment has increased at a lesser % than the average % increase in your neighbourhood, or across the City. The BC Assessment website, evalueBC https://evaluebc.bcassessment.ca/ allows you to compare your property to neighbouring properties, look up any other BC property by address, and to compare sales and assessment values.

You can call your local BC Assessment office. The telephone book has 25 listings for enquiries anywhere in the Lower Mainland. The Vancouver office is at #200-2925 Virtual Way, Vancouver, 604- 739-8588 phone, 604-739-8666 fax. If you want to appeal your assessment you must make it in writing by mail or fax to your assessment office by January 31.

For the BC Assessment website evalueBC - click here

If you want to discuss your property assessment and the appeal process, please contact Bob.

Printable PDF of this article - click here.

CMHC VANCOUVER RENTAL MARKET REPORT FALL 2016

Sun, 11 Dec 2016 18:11:00 GMT

The report details a rental market which tightened further this year as strong employment growth, populations growth and rising home prices contributed to even stronger demand for rental accommodation, which outpaced additions to supply. This has put upward pressure on rents, in spite of record highs for starts of purpose built rental housing.

As a result, the overall rent change (increase) in the CMA was 6.4% - well over double the 2016 allowable increase of 2.9% as set by the Residential Tenancy Branch. This was driven by a strong job market which saw employment growth increase by 5.8% generally, and by over 12% in the 15-24 year age group. With more than 12,000 full time jobs and 7,000 part time jobs added, it’s easy to see why Vancouver and the Lower Mainland has experienced significant in-migration from the rest of Canada and abroad, and why upward pressure has been put on housing and rental demand.

Highlights of the Fall 2016 Report include:

Average rental increases through the Vancouver City neighbourhoods ranged from 4.0% (Marpole) to 10.7% (English Bay), with a City average increase of 7%.
Over the entire Vancouver CMA (from the North Shore, to Langley, Delta, Tri Cities/Pitt Meadows), Average Rents increased by 6.4% - more than double the allowable 2.9% for existing tenants allowed in 2016 by the Residential Tenancy Branch.
The overall Vacancy Rate in the total Vancouver CMA declined from 0.8% to 0.7% in 2016.
For “Investor Held” rental condos, the Vacancy Rate fell from 0.9% to 0.3%, while the average rent for condominiums rose to $1,625/mo.
Approximately 1,500 new, purpose-built rental units were added to the rental condominium stock in 2016, compared to almost 5,000 units in 2015, which likely contributed to the drop in vacancy rates for these units.
At the same time, Turnover Rates remained consistent with those seen over the past number of years, ranging from 10% - 30%, with an average of 15.8%, which means that rental units have been regularly available, in spite of the low rates.

Summary of Key analysis findings:

Strong employment growth, population growth and rising entry-level home prices support strong demand for rental properties.
Strong demand for rental accommodation outpaced new additions to the supply, pushing vacancy rates lower for both primary rental apartments and rental condominium apartments.
These supply - demand dynamics have put upward pressure on rents in the region.
Starts of purpose-built rentals have reached record highs.

Included in this Fall 2016 report are specific details on rental and vacancy rates by municipally and neighbourhood, unit type, and structure size. As well, there is data and charts on turnover and availability rate, and much more data than most people would need or want! CMHC offers to supply these and their other housing reports via email for free by subscription, as they are released at their website. Another great service by one the very valuable and useful Government organizations. It is gratifying to see our tax dollars put to such good use!

For the full CMHC VANCOUVER RENTAL MARKET REPORT FALL 2016 - click here.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

New 15% Non Resident Property Purchase Tax

Fri, 04 Nov 2016 22:33:14 GMT

On July 28, the BC Liberal Government passed Bill 28 - the new Property Transfer tax - adding 15% to the price of all residential home and multifamily property purchases closing after August 2. The tax applies only to purchases by non residents of Canada (Asia, Europe, US etc), and does not apply to Commercial, Industrial, Farm etc properties. It only applies to properties in the Greater Vancouver Regional District, and does not include properties outside of that District, including Squamish, Whistler, Mission, Abbottsford, and all points North in the Province. Tax went into effect on August 2 and applied to all transactions closing after that date, even if the agreements were unconditionally in place months prior to that date - ie the tax is being applied retroactively. Many sales contracts were caught by this, and many Buyers were trapped into unforeseen financial stress by the Gov’t action.

To put this in context, consider a non-resident buyer of a $500,000 condo who now needs an additional $75,000 to register their purchase at BC Land Titles. For a purchase of $1,500,000, the amount is $225,000 and for a $3,000,000 sale, the number is $450,000 and so on. These sums are all cash, were totally unanticipated, and represent approx triple the amount currently held as deposits to secure the sales. Not surprisingly, many of those buyers have walked from their deal and fail to complete - who can blame them? The extra $$ they must pay buys them nothing and it is likely that values will decline, not advance because of the policy, making them double losers. The result? A daisy chain of further failed transactions as the Sellers of these homes are left high and dry without the proceeds of sale that they need to make their own purchase. These secondary casualties are almost all local Canadian citizens.

Premier Clark’s timing and action was puzzling. Perhaps she took her cue from the Republican Convention and Donald Trump’s success in appealing to public fear and xenophobia. While stopping short of calling non-resident buyers “rapists and murderers” Clark has definitely erected a wall around the Lower Mainland and the clear message to non-resident buyers and future citizens is; “You Are Not Welcome Here”. This includes not only the highly visible “Rich Asian Buyer” but also non resident students, University employees, Microsoft, Amazon, film and tech companies, and foreign owners of local businesses - i.e. - many who contribute to the fabric of our communities and the economy. The decision by Clark to introduce housing policies modelled on those of Asian dictatorships was knee-jerk overkill - which they would have realized had they taken time to consult with industry. The Vancouver housing market was already showing clear signs of slowing into a Buyers’ Market by early Summer (see Bob’s article Market 2016 Summary and Fall Outlook).

Choosing to diminish the wealth and equity of Lower Mainland home and property owners in the face of perceived political vulnerability is just politics. The decision by Clark to do this retroactively, with all of the financial damage and grief caused to ordinary citizens and families however, was unnecessary and dishonorable. Having said that, the Vancouver market is very strong with a solid underpinning of high equity ownership. It is also favoured by very strong economic fundamentals - a very limited (even diminishing) supply of land based residential property, a strong economy and 1st class social infrastructure (jobs, education, health care etc.) in one of the most beautiful natural environments and climate in the world. This all contributes to a long term, steady and increasing demand from international and local home buyers and investors. Our market was due for a correction, which is happening now (and which has happened in the past), and it will adjust and stabilize before continuing to grow.

Printable PDF of this article - click here.

Market 2016 Summary and Fall Outlook

Thu, 03 Nov 2016 22:43:00 GMT

The Vancouver home sales market was extremely active - hot - for the 1st half 2016 and it was constantly in the News and top of mind for Buyers and Sellers throughout the City, and beyond. After the July 25 announcement on the 15% Non-Resident Buyer Tax by the BC Government, the market has also been top of mind and constantly in the news - for the opposite reason. 2016 is shaping up to be the Dr. Jekyll/Mr. Hyde of Vancouver Real Estate markets, and looks unlike anything we have seen for a long time, maybe ever. The records of Sale and Listing activity (for Detached homes) over the past 6 months tells the story. By applying the crude, but useful “Rule of Thumb” analysis whereby the # of Active Listings at month’s end divided by the # of Sales = a “Number of Months’ Supply” we can gauge the direction and state of the market. Generally 6 months supply is considered a “balanced market”: less than 6 months supply indicates a Sellers’ market, more than 6 months supply is trending towards a Buyers’ market.

Vancouver East: March 2016 saw 207 sales from a total of 361 listings, or 1.7 Months’ supply - an intensely strong Seller’s market, with very similar numbers to those of March 2015. End of June saw 163 sales from 522 listings - a still strong 3.2 months supply, but compared to June 2015, sales were down by 26% and listings were up by 56%. July had 117 sales - down 21% from 2015 & finished with 572 listings - up 61% from July 2015. The market was clearly softening, and trending in favour of Buyers. On July 25th, the BC Government announced the 15% Foreign Buyers tax.

Vancouver West: March had 219 sales, comparable to 2015, but from a total of 541 listings compared to 739 in March 2015, so a stronger market at the beginning of 2016. June 2016 had 152 sales on 591 listings compared to 236 sales on 630 listings in 2015, so the market was showing definite signs of slowdown. At the end of July, there had been 108 sales on 607 listings - 5.6 months’ supply, or a Balanced market. This, again, is the time at which the BC Government introduced the 15% Foreign Buyers’ tax.

In the midst of this softening market, the tax caused real estate sales to come to a virtual standstill in Vancouver. Despite foreign buyers’ participation being minor in most sectors of the Vancouver Market, the tax caused a drop in confidence by local Buyers. Media headlines screaming “80% Drop In Vancouver Home Sales” indicates the caution and confusion. BUT: “Where does the Market go next? What other surprises does Christy Clark have up her sleeve? Will prices collapse?” have been the questions, and Buyers have been taking a wait and see approach.

This has resulted in a significant drop in sales, while inventories have roughly doubled - at least in the Detached home sector. The end of October found sales to be 50% of 2015’s in Vancouver West, while # of listings remained the same. In East Vancouver, sales were less than 50% of 2015 levels, while the # of listings was up 90%. This is showing up in the “Average Price/Unit” numbers which are declining back towards 2015 levels. The “# of Month Supply” ratios have flipped from early in the year, and now indicate a strong Buyers market.

At the end of October, things are settling down somewhat as Buyers continue to look, and offers continue to be made - but more slowly, and at lower prices. Vancouver residents are very astute, and have a level of confidence in long term values here. The Vancouver fundamentals have not changed by the tax: There is still a very limited supply of land, still an affluent ownership base with strong equity, still a strong economy with favourable interest rates, and still a City perceived as one of the most desirable and livable in the world. The Vancouver Real Estate market is adjusting. If prices pull back, that was foreseeable & inevitable, as they had advanced far - and too rapidly. A re-set is healthy for any market, and while things may be a bit slower now, confidence and optimism is reasonable, moving forward. The rest of this year, and into the beginning of 2017 will be “interesting times for Vancouver Real Estate!”

Printable PDF of this article - click here.

CMHC VANCOUVER RENTAL MARKET REPORT FALL 2015

Mon, 21 Dec 2015 21:18:16 GMT

On December 16th, Canada Mortgage and Housing Corporation released its Fall Rental Housing Market Report for the Census Market Areas of Vancouver and Abbotsford-Mission. CMHC releases these reports semi-annually, and while the lengthy document contains a great deal of statistical information that is likely not of interest to everyone, the report contains important information regarding the state and trends of the local rental market that should be of interest to landlords and tenants alike.

The report details a rental market which tightened further this year as purpose built apartment vacancy rates in the overall Vancouver Census Metropolitan Area (CMA) declined to 0.8 per cent from 1.0 per cent in 2014 - the first time since 2008 that the overall vacancy rate in the CMA has fallen below one per cent. This is in spite of an increase in construction of new, purpose built rental units as over 834 new units were added, marking the 3rd consecutive year that the # of new rental units have increased in the area.

As well, the overall rent change (increase) in the CMA was 3.9 per cent, considerably higher than the allowable increase of 2.5 per cent in 2015 as set by the Residential Tenancy Branch. This was driven by rental demand as landlords in all areas were able to charge higher rents upon turnover of suites in their buildings.

Highlights of the Fall 2015 Report include:

The Vacancy Rate in Vancouver City edged up slightly to 0.6% from 0.5% in 2014, although average rental increases through the Vancouver City neighbourhoods ranged from 5.5% to 6.4% - well over double the mandated increases set by the RTB.
Average rents per every type of unit in Vancouver City showed increases, with the lowest average rents occurring in Marpole, while the highest average rents are recorded in Westside/Kerrisdale, & Downtown.
Vacancy Rates for apartment condominium units was at 0.9% - higher than for purpose built apartment units, largely due to a very large increase in the number of condo rental units. There were over 4,975 apartment condos added to the stock in 2015 vs only 1,499 new units added in 2014. This is the largest addition since 2009, and is a result of newly completed condo projects (from the projects started in the past 2 years) coming on to the market. Even though these new condos rent at a premium over the purpose built stock, the increase in new supply causes the average rent premium to decline by over 60%.

The Major Factors contributing to Current Rental Market conditions, according to CMHC, include:

High In-Migration: Almost 16,000 new immigrants came to BC in 2015 and there was strong interprovincial migration with approximately 6,600 persons moving to BC from other Provinces. Approximately 75% of all people coming to BC will settle in the Lower Mainland.
The population of people aged 20-34 (the strongest renter demographic) grew by over 9,400 (1.7%).
Rising employment levels in full and part time jobs, partly a result of the decline of the Canadian $ plus the strengthening US economy has increased business opportunities, increase tourism, & caused an increased in local retail spending due to the decline of cross border shopping.
Higher prices, resulting from higher demand for home ownership which may delay movement to home ownership, and leave some buyers in the rental market.

Included in this Fall 2015 report are specific details on rental and vacancy rates by municipally and neighbourhood, unit type, and structure size. CMHC offers to supply these and their other housing reports via email for free by subscription, as they are released at their website. Another great service by one the very valuable and useful Government organizations. It is gratifying to see our tax dollars put to such good use!
For the full CMHC VANCOUVER MARKET REPORT FALL 2015 - click here.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

FALL Vancouver Sales Summary and Early 2016 Market Forecast

Mon, 30 Nov 2015 20:34:02 GMT

The Vancouver home sales market has been extremely active - even hot - for most of 2015, and it has been in the News & top of mind for Buyers and Sellers throughout the City, and beyond. We are well into the 4th Quarter of the year, so here is a summary of the Fall listings and sales activity to date, with a comparison/perspective from 2014, along with a forecast for the start of 2016. If you find the stats & numbers a bit dry, you may be interested in what they reveal and foretell. The statistics here are from the Single Family Detached home category, but they apply equally well to the Residential Multifamily or Rental property category.

Vancouver West: October 2015 saw a total of 165 Sales out of a total of 633 Active Listings. This compares with 157 Sales on 823 Listings for Oct 2014. Of the 2015 Sales, 25 were under $2 million, 59 were between $2M - $3M; 48 were from $3M - $4M; 17 from $4M- $5M; and 16 sold above $5M. The highest number of sales was in Dunbar (27) and Kitsilano (22). Average Sale prices were up approximately 20% from the same period in 2014. At the end of October 2015, there were 599 Active Listings - 22% lower than end of October 2014.

Vancouver East: October 2015 experienced 149 Sales from a total of 383 Active Listings. This is down a bit from the 164 Sales on 466 Listings for Oct 2014. Of the 2015 Sales, 4 were under $900,000; 109 were between $900,000 - $1.5M; 34 were from $1.5M - $2.0M; and 2 homes sold above $2M. The highest number of sales was in the Renfrew (23) and Knight (22) neighbourhoods. Average prices were up approximately 23% from the same period in 2014. At the end of October, there were 355 Active Listings - down 14% from end of October 2014.

The Active Listing inventory is trending downwards as occurs virtually every year at this time. For Vancouver West, the end of Sept/15 had 666 detached listings available. By end of November, that # is likely to be approx. 510; projecting through December, 2016 could begin with fewer than 420 homes for sale on the West Side. For Vancouver East, the end of Sept/15 had 407 detached listings available. By end of November, that is likely to be approx. 310 and looking past December, 2016 could begin with fewer than 230 homes for sale in Vancouver East.

To summarize: For 2015 to date, both Vancouver West Side and Vancouver East Side have experienced slightly lower (5-10%) numbers of properties listed for sale, with slightly higher (8-12%) number of properties sold. This differential, along with other economic factors such as continued low interest rates, a stable political and economic environment, and a highly Real Estate conscious and optimistic population, have resulted in property values increasing by about 20%. For those buying this year, and given that the majority of buyers will finance their purchase with a 25% - 35% downpayment, some folks have benefited from an equity investment growth of 50% to 100%. Not too shabby.

Looking ahead, 2016 appears to be starting in a similar fashion as 2015; lower inventory, or supply; steady or similar # of buyers (demand), with a resulting, continued upward pressure on values. More of the same, in other words.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

MINOR CHANGES TO RESIDENTIAL TENANCY ACT

Mon, 30 Nov 2015 20:12:26 GMT

Those who are, or are thinking of becoming, rental property owners and landlords, may be interested in the following proposed minor changes to the Residential Tenancy Act:

In keeping with government’s goal to reduce red tape, landlords will be able to repay security deposits electronically.
Tenants will be able to terminate a fixed-term lease early without a financial penalty if they are fleeing violence or headed for long-term care. They will be permitted to give one month’s written notice, accompanied by written 3rd-party verification from a professional, who will likely include victim services workers and justice system and healthcare professionals.

For complete BC Residential Tenancy Act Regulations - click here.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

2015 Vancouver Commercial and Real Estate Forecast.

Wed, 21 Jan 2015 22:46:00 GMT

2014 has been a very strong year for Real Estate activity and sales for both the Commercial and Residential sectors in the Greater Vancouver market, and throughout B.C. generally. Furthermore, this strength is predicted to extend through 2015 and beyond.

Commercial Real Estate strength is measured by the BC Real Estate Association’s “Commercial Leading Indicator” (CLI) which was designed to forecast changes in broad Commercial Real Estate activity.

The CLI does this by recording and measuring changes in economic variables and changes in employment and other business cycle indicators, as well as monitoring indicators from the financial markets that could signal turning points in the Commercial Real Estate market. The BC economy grew approximately 2.3% in 2014, led by key Commercial Real Estate sectors such as retail and manufacturing. The latest CLI rose 1.4 index points to a record high of 118.4, surpassing the previous high of 117.1 set in the second quarter of 2014 & has now advanced for seven consecutive quarters. That trend signals significant strength in the economic environment underlying the Commercial Real Estate market, and points to growth in investment, leasing & other Commercial Real Estate activity two to four quarters ahead. Given the current trend, growth in the Commercial Real Estate market is expected to continue through the first half of 2015.

Residential Real Estate also had an extremely positive 2014, and that trend is expected to continue, according to both BCREA and CMHC.

BCREA Chief Economist Cameron Muir reports that “Consumer demand has ratcheted up in 2014 and is expected to remain at a more elevated level through 2015. While historically low mortgage rates support demand, the housing market is also being underpinned by a more robust economy and associated job growth, strong net migration and consumer confidence." BC Multiple Listing Service® (MLS®) residential sales increased 15.1% to 83,900 units in 2014, and are forecast to edge up a further 1.2% to 84,900 units in 2015. The average MLS® residential price for the province increased 6% to a record $569,800 in 2014 and is forecast to increase a further 1.2% to $574,300 in 2015. MLS sales records and data indicates that foreign buyers make up approximately 3% of home sales in any given month.

So the robust sales figures are indicative of a very strong demand from domestic, local buyers. The overall message from Canada Mortgage and Housing Corporation’s 2014 Housing Outlook Conference held November 4th 2014 in Vancouver, echoed the BCREA’s forecast, and predicted that the real estate market in British Columbia, and specifically in the Lower Mainland, will remain strong and steady into 2016.

CMHC cited several reasons for this:

Canada’s economy will continue to improve, and attract immigrants and new residents to BC.
No interest or mortgage rate increases are expected until late in 2015.
Shifting demographics will see more senior households and single owners, leading to more renovation activity (and jobs), keep detached resales buoyant, and keep the demand for new condos and townhomes high.

Housing Affordability - Steady Supply
Keynote speaker Bob Rennie weighed in on the affordability issue. When you factor out the top 20% of sales, he said, average prices become much more reasonable, so that, the average price of a detached home drops from the $1M range to around $670,000, while condos drop to $316,000. He also stressed the need to assess zoning policies to create more opportunities for density. Today’s buyers are attracted to ‘energy centers’ where amenities like shopping, transit and schools are easily accessible. Keeping this supply steady while an estimate 40,000 new residents move to BC each year is key to keeping affordability in check. “Because without supply, there’s no cure for affordability,” said Rennie.

All of this is good news for property owners and investors - both current and future - as the Lower Mainland Real Estate will continue to offer opportunities for Buyers and Sellers alike. Steady and increasing demand for housing and commercial enterprises alike will spur development and encourage zoning authorities to consider innovation and expansion of housing options.

This is already happening in Vancouver where new, medium to high density market rental housing developments are being approved and built along transportation corridors, in areas that were formerly single family or duplex zoned. There is also some hope and push from both the development industry and from affected neighbourhoods to also see more encouragement of ground oriented townhouse style developments to meet the space and affordability needs of families.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

Immigration Trends and the Future of Vancouver Real Estate.

Thu, 18 Dec 2014 01:32:00 GMT

Real Estate values are driven by supply & demand. The most potent drivers of real estate demand are population growth & economic growth. Vancouver & the Lower Mainland, with its limited, even fixed, supply of land, responds to these forces directly & quickly.

In 21st century Canada, population growth & economic growth are inextricably linked to immigration trends & legislation, particularly in B.C. & the Lower Mainland. At a recent REBGV seminar, Richard & Heather Bell of Bell Alliance Lawyers, a Vancouver firm specializing in Real Estate, Business & Immigration Law, presented a detailed & encouraging outline of the latest Immigration legislation, & how that might affect Real Estate in Vancouver.

Canada’s immigration profile has changed a great deal over a generation. In 1970, the top 5 Immigration Source countries were: #1 United Kingdom, #2 USA, #3 West Indies, #4 Italy & #5 Portugal. In 2012, the top 5 Immigration Source countries were #1 China, #2 Philippines, #3 India, #4 Pakistan, & #5 USA. The Philippines & Pakistan were not in 1970’s top 10, & China & India rose from #9 & #8 respectively. Of these, a larger % of immigrants are going West to B.C. & Alberta, & the immigration demographic is now 60% Economic Class & 25% Family Class vs. 35% Economic Class & 45% Family Class 30 years ago. Over 250,000 immigrants become permanent residents & over 150,000 foreign workers come to Canada every year. Currently, over 20% of Canada’s population is foreign born, & that is to increase to 28% by 2031.

Canada’s immigration policies & programs have changed more in the past 5 years than in the previous 20 years. The intent of these changes is aimed at ensuring that new immigrants will enhance the economy & future of the country by meeting specified business & labour/skills requirements, & require that they are also able to function & integrate into Canada’s socio-economic fabric upon arrival.

The new Bill C-24 Citizenship Act has become law, & this Act strengthens Canadian citizenship by making it more difficult to acquire. The new law lengthens the residency requirement (requiring physical residency 4 out 6 years), & asks for a statement of intent from would-be Canadians to make sure they actually plan to live in this country. Adult applicants must file Canadian income tax to be eligible, & applicants 14-64 years must complete language & knowledge tests.

Many of the prior economic & general immigration policies have been changed, or closed, & new programs have been announced or implemented. The “Old” Investor & Entrepreneur program has been terminated. Speculation that this would dampen property markets has subsided, as it appears that a new Immigrant Investor Pilot Program is imminent. The new program may stipulate investment amounts in the $2-$5 million range, & require that the investments be “active” & at risk. The focus of this program encourages venture capital enterprises, & may resemble programs in the US & Australia.

A new “Express Entry” Program is coming in 2015, making the Economic Class Application into a 2 step process: 1. Applications go into a pool with other candidates, & 2. The Federal Government invites highest ranked applicants - those judged to have best chance of success, & those with valid job offers - to apply for permanent residency. Those eligible under Canadian Experience Class, Federal Skilled Workers or Federal Skilled Trades will qualify for this program, as will those nominated under the BC Provincial Nominee Program. This program promises shorter processing times, approximately 6 months & favours applicants who are young, educated, experienced & who have language proficiency.

For Business candidates, the Express Entry and BC Provincial Nominee Programs take approximately 2 years for approvals, so these applicants may be better served under the new Investor Pilot Program. OR, they can take advantage of the Intra-Company Transferee Startup Program which allows foreign businesses starting a branch subsidiary in Canada to transfer its key employees (executives, senior management, specialized knowledge workers) to set up the Canadian business. Once in Canada, these companies are expected to open offices, establish the working business, & create jobs. This program offers faster processing times, & the approved individuals are provided a work permit for 1 year (with possible extension) & options for permanent residency once in Canada & operating the business.

In spite of current emphasis on attracting & admitting high functioning & economically qualified immigrants, Canada’s immigration policy is not all business, & there are over 60 different ways that people can apply to come to Canada. This is a good thing, as Government figures show that net growth in Canada is only coming from immigration.

The impact of these policies are very significant to BC. Over the next 10 years, the Province will have one million job openings, with 1/3 of these openings expected to be filled by immigrants. Some of this will come from an increase of Business immigrants providing active investment in BC’s economy, & some will come from the addition of immigrants with technical and trade skills, international graduates, and young workers - all who will arrive job ready, with English language proficiency. For Real Estate, the impact will be pronounced, as the immigrant demographic has a strong tendency to purchase homes and properties - often within a very short time after arriving in the country. This combination of population increase with employment & investment growth will have a profound multiplier effect on local markets, as it leverages & expands residential & commercial/industrial development. This in turn will raise the level of economic activity across all sectors of local economies, & be truly an engine of prosperity. Lower Mainland & Vancouver real estate owners & investors will continue to benefit & profit from the resulting demand, growth, & innovation.

If you are looking to sell or buy real estate or wish to discuss further any topic on Real Estate, please call Bob Bracken at 604-220-2035 or 604-263-2823.

Printable PDF of this article - click here.

Case Study: Vancouver Real Estate, Can Prices Go Any Higher!?

Fri, 24 Jan 2014 00:38:00 GMT

The Property: A 2200 sq.ft., 3 level “character” house containing 6 bedrooms, 4 bathrooms and 3 kitchens on a 24.75’ X 112’ lot on West 12^th (busy street) in the City Hall area of Vancouver. Built in 1910, the building is structurally sound, with partially upgraded plumbing, electrical, and cosmetic work. The accommodation is Top floor: 1 bdrm suite; Main floor: 2 bdrm, 2 bath suite; and Basement: 3 bdrm suite; plus single car detached garage with electric service.

The Sale: The Property was listed for $845,000, reduced to $799,000, and sold for $803,500 in August 2010, after 45 days on the market.

The Analysis (2010): Financing @ 3.6%, 5 year term and 25 year amortization was available. If the Buyer put down 25% ($216,000 including closing costs), the mortgage payment for $602,600 was $3,040/mo or $36,500/yr, giving a modest positive cash flow. Assuming an average annual net income increase of 3%, the 1^st, 5 year-end holding period should give the Buyer’s financial position as: Mortage Balance=$520,900, Net Income= $3,825/mo or $46,000/yr.

Basic Real Estate Tips & Principles:

Buy Something Sooner Than Later.
Getting an acceptable deal is more likely to create wealth than waiting for the “perfect deal”.
If you want inflation and amortization schedules to work for you, you have to give them something to work with - and time to work.

Printable PDF of this article - click here.

So Real Estate Is A Great Investment - Why Vancouver Real Estate?

Fri, 24 Jan 2014 00:01:00 GMT

Can prices go any higher!? Every year people ask this question about real estate in the Vancouver area. For local investors, this is a critical question as investment returns here rely heavily on capital appreciation of the property. Before predicting the future investment potential of Vancouver real estate, however, it is useful to consider what has happened here over the past 5 decades. I first did this analysis in 1995 - almost 20 years ago - and when I revisited it in 2010, I was struck by how consistenly increases in Vancouver Real Estate values had continued over time.

The Real Estate Board of Greater Vancouver has kept a record of average home sales prices (of MLS sales) going back to 1960. These average sales figures are calculated by dividing total dollar volume of all yearly sales by the total number of sales in that year. The figures don’t show a value history for any single piece of real estate, but are great as a measure of the trend in values for all properties during these years. From this broad analysis in 2010, a number of interesting facts emerged:

The average price of a Vancouver home in 1960 was $13,105.
In 1994, the average price of a Vancouver detached home was $303,535.
This change, from $13,105 to $303,535, represented an increase of 9.7%, compounded, each and every year from 1960-1994 (34 years). Impressive!
In 2010, we reviewed this analysis to see if this value increases rate had been sustained through 50 years.
Through the end of September 2010, the sales statistics for detached homes in Vancouver were:

→ Vancouver East: 1286 sales: Total $$ = $ 990,591,739

→ Vancouver West: 1329 sales: Total $$ = $ 2,577,824,750

→ Average Price 2010: $3,568,416,504/2615 sales = $1,364,595

Compounded % change 1994 - 2010 (16 years) = 9.8%; Compounded % change 1960 - 2010 (50 years) = 9.7%.
When leverage is considered, properties which were bought with a 25% - 35% downpayment, have given Vancouver owners an average rate of return on initial investment of 28% - 38%, compounded, for over 50 years!
This look back demonstrates what most of us already know, namely that the Vancouver area has been a fantastic place to build wealth in Real Estate over the past 5 decades. For those of us suffering from the “coulda, shoulda, woulda’s”, do we still have the same chance to do this, or have we missed the boat?

What Economic Fundamentals Are At Work To Sustain Value Growth?

A City with a Global Reputation for Live-ability benefitting from: Long Term, Bright Economic Outlook; Steady Population Growth; Limited Supply of Land, and Land Based Housing: etc, etc.
This positive outlook makes sense - until you watch the evening news. So, don’t watch the evening news!

The Major Determinants of Wealth Building For Vancouver Property Owners Has Been the Decision to Buy, and the Ability to Hold.

Is This Simple Strategy Still Workable? See Case Study: Vancouver Real Estate, Can Prices Go Any Higher!? that illustrates the above financial, economic model. The Case Study was originally done in Oct 2010, with an update as of Dec 2013.

Printable PDF of this article - click here.

Real Estate Investment Is For Everyone!

Fri, 21 Jun 2013 16:31:00 GMT

The Vancouver area Real Estate market has taken a significant hit lately, and the bloom is certainly off the rose. This is partly a result of the challenges now facing all world finance markets, and also due to a “natural” turning of the local demand and valuation cycle. A bit of perspective should be applied at this time however, and the changing market should be view in the light of potential opportunity rather than inevitable disaster. A decision to invest in real estate (with appropriate caution) is still a good decision for those able and willing to permit real estate to work over the longer term. History supports this view and real estate has provided tremendous results for a great variety of buyers including 1st time homeowners, non-profit societies, small and large investors, business owners and institutions. Real estate provides housing for families, facilities to provide services for business, plant and equipment for industries and great returns for small and large investors - and owners - alike!

As an investment, Real Estate is Unique in that it offers a range of features and benefits that don’t exist, together, in any other type of investment. These include:

Leverage: Even though real estate is a “big ticket” expenditure, properties can be bought with a partial small, and even no downpayment or cash investment. This allows a person to control a large asset - with the great potential to create wealth - by using a limited investment. Leverage, of course, can be very risky, unless there is sufficient ....

Cash Flow: Land and buildings can provide rental income to cover expenses and provide a return of, and on, investment for investors. Homeowners and other users of real estate provide their own “cash flow” by paying mortgages or loans instead of rent. In most cases, Owner’s equity increases as mortgages are paid down and as the property experiences ....

Capital Appreciation and Compound Growth: As populations grow and communities experience cycles of prosperity, values move upward. This growth compounds on the value of real estate and, over time, dramatic returns occur - especially if leverage has been used. Other factors also cause values to increase, including changes in use and the ability of the owner to add value by exercising ....

Control: Unlike most other investment types, real estate allows the owner to contribute to the value of the investment. This can be done by determining how and by whom the property is used, how it is maintained and how it is improved. A “hands on” owner is often able to “bonus” his investment return, while reaping the benefits of ....

Tax Shelter: The increase in equity and wealth from principal residences is non-taxable. Proceeds of value increases for investment properties are taxed only on sale, and cash flows are taxable only when in excess of expenses, including financing costs. Negative cash flows can be offset against other income (both personal and investment), so the Revenue Canada effectively subsidizes leverage and acquisition of other investments. Additional investments in real estate are mandated by constancy of ....

Demand and Long Term Performance: Real Estate is a simple (although not always “easy”) business, with a continuing and universal demand for its use. People need a place to live, work, eat, buy goods and services, educate and entertain themselves, even locate when they pass on! And this is another unique feature of Real Estate its ....

Flexibility of Use: Real Estate is re-cyclable! Industrial buildings become apartments or retail outlets, houses become sites for newer houses or other new developments, investment properties become homes (and vice versa) for owners and their families. The adaptability of real estate allows it to be a truly long term investment. And all through the ownership period, real estate is something you can ....

See and Touch: Real estate is there. Unlike most other investments, real estate is not an abstraction, not something written on a piece of paper. In a time when wealth and cash are merely electrons in a database, real estate is still something you can walk around on, bump into and show to the world.

Can you think of another investment that offers all of these features and benefits in one package? I can’t so that is why I have sold real estate since 1986 - I feel very good about dealing and working with the best!

Bob Bracken

Real Estate Readings Road to Wealth

Thu, 20 Jun 2013 23:23:00 GMT

Real Estate ownership is probably the simplest & most direct means of people becoming rich today. One of the keys to prospering through real estate is the ability to think creatively, and use available information to see opportunities missed by others. This is a very learnable skill, and there are some very good books out there to help develop this skill. Here is a "book report" on my favorite "top 5" books for Real Estate investors:

1. "Real Estate Riches" by Dolf de Roos. This is part of the "Rich Dad Advisor" series and in 160 pages, has more great ideas on how to find, buy, manage, sell andthink Real Estate than any other book that I have read. Many of the opinions and tactics presented in this book will make your Realtor, banker, lawyer, and parents cringe, but most of these ideas are just common sense. Best quote in the book:"The Deal of the Decade Comes along About Once a Week"! Published by Warner Books, available @ Chapters, Amazon $24.95.

2. "Rich Dad" Series by Robert Kiyosaki. Currently 5 books: "Rich Dad, Poor Dad"; "Cash Flow Quadrant"; "Rich Dad's Guide to Investing"; "Rich Kid, Smart Kid"; and "Retire Young, Retire Rich". I have lumped all of these books into one selection because they all expand and develop a few powerful themes. A few of these themes are: "Relying on a safe, secure job almost guarantees that you won't get rich." "How you make your money is more important that how much money you make." and "Using leverage is critical, and the most powerful leverage is your mind!" Published by Warner Books/Cash Flow Technologies. Chapters Books or Amazon are good sources, prices range from $20 to $30.

3. "Buy It By The Acre, Sell It By The Foot" by Sam & Sheldon Allman. This tells the detailed, step by step story of a Vancouver Island subdivision development. From the initial desire to do something, through finding something, raising money, and taking the project through governments, banks, construction, etc. to sale. The story, told by the developer/author, is practical, entertaining and interspersed with 37 "Great Truths". Best Quote: "If you've ever lost any money in a real estate deal, this book will tell you where it went." Published by Crossroads Press, available at Chapters/Indigo $19.95.

4. "Buffettology" by Mary Buffett and David Clark. This book explains the methodology and calculation processes that Warren Buffett - the World's most successful investor - uses to identify businesses that he feels are worthwhile investments. There is no mention of Real Estate in this book, and, in fact, Buffett does not invest in pure Real Estate. However, what he does do as an investor considering investments, is bring an approach and discipline to the selection process that can be applied to Real Estate. Think of this as enjoyable "cross-training" for the Real Estate game! Available @ Amazon.com $17.95.

5. "The Real Estate Game" by William Poorvu. The author is head of the Real Estate program at Harvard Business School, but don't hold that against him - he is also a very experienced owner/developer/manager of his own properties. This book is a very systematic examination of the decision making process in the real estate business from the viewpoint of small and medium-sized players. It is interspersed with a good number of case studies & provides a great "back of the envelope" analysis tool. Available @ Chapters & Amazon $29.05.

How To Help The Bad Tenant . . . Move On

Thu, 30 May 2013 23:28:00 GMT

There are some situations where a rental property owner or landlord may be best advised not to be "hands-on", but instead turn the problem over to a professional or professional service. A great example of this is when a tenant must be evicted for legitimate cause, and when that tenant makes it clear that they intend to ignore notice to move. I am often asked for advice or help in these matters - usually by a client who is very frustrated, worried, and unsure how to act. In recent years, I have been able to confidently direct my clients (and others) to valuable, professional help.

Mr. Stephano Muzzatti is in the business of handling these types of disputes in a professional and cost effective manner, saving the landlord (and the tenant) a lot of time, money and emotional energy. Mr. Muzzatti spent 12 years as a Court Bailiff, and saw 1st hand the high costs, unnecessary hassle, and business disruption that landlords were incurring by attempting to deal with these disputes on their own - in an environment where the courts and regulations were stacked against them. After years of being asked by landlords to "moonlight" in unpleasant tenant disputes, Mr. Muzzatti started his own company, Vancouver Eviction Services (VES), to handle a constant demand for his services.

For a total fee of $650 to $800, VES will handle the legal eviction of a bad tenant in breach of tenancy. This is often a 2 step process. First, it is necessary to get an "Order to Vacate" - this includes serving legal notice on the tenant, making application for a hearing at the Residential Tenancy Office if the notice is disputed, serving notice of the Hearing to the tenant, & attending the hearing & defending the notice on behalf of the landlord. Second, once the Arbitrator gives an Order of Possession, VES ensures that the tenant complies with the Order. This involves again serving notice on the tenant, and firmly keeping the pressure on the tenant to comply. All of this saves the landlord a significant amount of hassle & paperwork - especially if a mistake is made. In the case of compliance alone, using Court appointed Bailiffs to evict can cost a property owner between $1,300 to $4,000!

I recently asked Mr. Muzzatti a few "Frequently Asked Questions" regarding tenant disputes:

Most Common Reason VES is Hired: Non-compliant tenants who defy or ignore landlord notice. The most common issues include unpaid rent, gross breaches of tenancy agreements, disruptive or destructive behavior, and drug use. As well, disputes often arise when the premises are sold, and the tenants refuse to vacate, in spite of receiving legal notice.

Most Common Mistake by Landlords in Tenant Disputes: Not following correct procedures, and making costly mistakes in the eviction process. Documents are filled out incorrectly, wrong or invalid documents are used, and documents are served improperly to the tenant. Many landlords fail to keep good tenant records (receipts, rental agreements, notices and letters etc.), and this proves their undoing at Arbitration, or in Court.

How Long to Evict a "Bad Tenant"? This depends on when VES becomes involved, and how far along the process is. Unpaid rent is the easiest issue to deal with, and usually takes 13 to 17 days to resolve. Other disputes can be less cut & dried, but VES can usually expedite the process by getting involved early, and ensuring that all paperwork & notices are prepared and delivered correctly.

What Can Landlords Do to Minimize the Risk & Cost of Tenant Disputes? Good tenant selection is critical - landlords should even consider using a professional tenant screening service. Keep good records, receipts, etc., and documenteverything. However, even good tenants can turn "bad" - this is just a fact, and the cost of doing business. Every rental property owner can be prepared for the worst by having a plan of action for when things start going wrong. One of the most important good habits is to not let a bad, or deteriorating situation drag on un-addressed and unresolved.

Mr. Muzzatti and Vancouver Eviction Services can be contacted at 604-868-0533.

Book Review - The Warren Buffet Way

Wed, 01 May 2013 23:29:00 GMT

It’s book report time! In addition to stuffing my face, I have put the holidays to good use by catching up on my reading, so here is a book that any investor of any kind of investment should consider a “must read”!

It’s called “The Warren Buffett Way - Investment Strategies of the World’s Greatest Investor”, written by Robert Hagstrom Jr. and published by John Wiley and Sons, Inc. For those who aren’t familiar with Warren Buffett, he is probably the most famous investor in North America, and a man who has turned a $100 investment in 1956 into a 1994 net worth of approximately $10 Billion. When he talks, everyone should listen!

Although he has made his fortune by buying (and mostly keeping) businesses on the stock market, his investment principles and strategies apply equally well to other investments - including real estate. The book reveals the basic simplicity of Buffett’s thinking and common sense approach - an approached based on the ability to assess value by doing the necessary homework, and then being willing to act upon the knowledge without regard to the “mood” of the market.

On Market Timing:

“The most common cause of low prices is pessimism....We want to do business in such an environment, not because we like pessimism but because we like the prices it produces.” “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

On Investment Decisions:

“From his experience, Buffett has learned that good businesses enable the investor to make an easy decision, but tough businesses require difficult decisions. If the decision to purchase... is not easy, he will not pursue the (investment).”

On Basic Rules for Investment Success:

“Invest within your circle of competence” Buffett observes that investment success is not a matter of how much you know but how realistically you define what you do not know. “An investor needs to do very few things right as long as he or she avoids big mistakes.”

The book is available at most good bookstores in the Vancouver area and sells for approximately $20 or less at Costco. It’s a great investment!

Case Study: Investment Property Equals Very Affordable Home!

Wed, 01 May 2013 19:59:00 GMT

The Property: A small, 3 level triplex (legal duplex with unauthorized basement suite) in the Mount Pleasant area of Vancouver. The building is approx. 2100 sq.ft., with 3 1 bedroom suites on a 40’ x 66’ lot. The condition is good, as the owners had done renovations during their 4 years of ownership.

The property generates rent of $1,750/month, with tenants paying heat and light. Taxes and expenses are roughly $350/mo.

The Sale: The property sold for $260,000 to an owner occupier planning to live in the smallest unit, and collect rent of $1,250 from the other 2 suites. Down payment was $65,000 (25%) and a 1st mortgage of $195,000 was arranged a 6.25% on a 5 year term, 25 year amortization. Monthly payments are $1,276 plus $90 net taxes. The selling Realtor observed that “Someone with a paper route could afford to own this house!.”

The Investment Analysis: For an investor, the initial “numbers” look like this: Down payment of $68,500, including property purchase tax and closing costs: 1st year net income of $16,800 less $15,320 debt service = $1,480 before tax. Assuming that net income will increase at an average rate of 3% year, the net income after 5 years will be $18,910, or $3,590 after debt service, and the mortgage balance would be $175,800. At a capital appreciation of 3% per year (very conservative), it would be worth $301,500 after 5 years. At that point, the investor could refinance or sell. If the property is kept, the monthly net income of $1,575 could support a new 1st mortgage for the balance of $175,800 to a rate of 11% - providing some interest rate “risk insurance” for the owner. If Interest rates stayed the same (6.25%), the income would permit the investor to “take out” his original investment of $68,500.

If the property is sold at $301,500, the net proceeds (after commission and mortgage balance) is $113,370. The internal rate of return to the investor for the 5 years (before tax) is 13.5%.

Building Bylaws Insurance Coverage

Tue, 30 Apr 2013 23:25:00 GMT

One of the most common questions I am asked by someone considering buying an investment property is “What will happen to my investment if I have a fire?” If the place is completely destroyed, any decent fire insurance policy will probably protect the owner. In the event of a partial loss however, an important and often overlooked coverage may not be on the policy. In a city like Vancouver, or any city where the housing stock is older, Building Bylaws Insurance Coverage is a smart investment. When a building was built, it met the bylaws of the time but these bylaws may have changed. When there is a partial loss to a building, municipal ordinances may require that you comply with new codes - such as building with different materials, incorporating underground parking, including sprinkler systems, or adding wheelchair ramps. These requirements can turn a small loss into a devastating one because most insurance contracts exclude coverage for losses arising from bylaws or other ordinances affecting repair or reconstruction of a damaged building. If municipal authorities demand that an owner tear down the undamaged portion of a building before rebuilding, or that reconstruction can only take place if, for instance the building is equipped with a sprinkler system, then the owner will be out of pocket for the differences in cost which are not covered by their insurance policy.

Other common areas of exposure to financial loss resulting from inadequate or nonexistent “bylaws coverage” are as follows:

1. If a building suffers a loss and municipal ordinance requires that it be torn down, the owner will be responsible for the cost of demolition.

2. The owner will also be responsible for the costs of subsequently removing the debris.

3. In addition, if different quality materials must be used or alterations made to meet upgraded building standards or zoning requirements, the owner will be responsible for those costs.

Building Bylawn Coverage is inexpensive, can guard against experiencing these devastating surprises and can be purchased in the following forms:

1. Value of Undamaged Portion of Building Coverage: this covers the replacement cost value of the undamaged portions which must be torn down because of a bylaw is in effect at the time of loss.

2. Demolition & Debris Removal: this covers the costs of tearing down and carting away the debris from the damage.

3. Increase in Cost of Construction Coverage: this will cover, for example, if a building of mixed construction suffers heavy damage and ordinance stipulates that the new building be of masonry or even fire resistive construction.

Transferring the risk of loss of your assets to Insurance Companies is one way of managing risk. However, the policy is only as good as the coverage, which should be built to meet each owner’s specific requirements. Bylaws Coverages are an inexpensive way to customize your insurance policy to meet your specific needs as a property owner. This information was provided by Heather Scheibal of Reliance Insurance Agencies Ltd. For more details and specific information on this and other property insurance issues, please call Heather Scheibal at 255-4616.

New Housing Policies May Have Dramatic Benefits

Tue, 30 Apr 2013 22:19:00 GMT

Vancouver Housing Affordability is like the weather - everybody complains about it, but nobody does anything about it! The City of Vancouver now appears to be serious about promoting and facilitating housing affordability, especially by encouraging construction of hundreds, even thousands of units of new, for "profit," market rental housing units. The Mayor’s Task Force on Housing Affordability Final Report (Nov 19/12) and the City’s Rental 100 Secured Market Rental Policy (May 15/12) propose intriguing policy guidelines and action plans offering tangible incentives to vastly increase the feasibility of private, profitable, “rental only” development projects. Many of these opportunities will allow significantly increased densities in neighbourhoods currently single family and duplex zoned, as well as reducing the parking requirements, and eliminating Development Levies for qualifying projects. The City also promises to streamline and cut much red tape in the application process, and to take steps to provide more “certainty” and “timeliness” as to the outcome/approval for developers’ applications. Here are some of the major features of these initiatives:

Rental 100: This program offers incentives for projects which create secured market rental housing, including:

Reduced Parking for qualifying developments, the Parking Bylaw reduces parking standards & allows substitution of car share services.

DCL Waivers where 100% of the residential development is rental, Development Cost Levies can be eliminated – a saving of up to $12.50/sq.ft.

Additional Floor Area - a dramatic benefit allowing re-zoning for qualifying properties. In Commercial Areas (“C” Zonings) possible increases to up to 6 stories. In RT Zonings along busy streets, possible increases from current .60 & .75 FSR up to RM-4N levels of 1.45 FSR. For example; a RT-5 property on a 50’x125’ lot, currently redevelop-able to 3-4 new strata units with total floor area of 4685 sq.ft. might achieve a floor area of 9,060 sq.ft. & 8–12 rental units under the revised rules - and the developer might also save $113,000 in waived DCL fees. For qualifying C-2 properties, the numbers are even more dramatic.

Affordable Housing Task Force: In addition to adopting many incentives of the Rental 100 program, including parking relaxations and DCL waivers, the Task Force also proposed the following: Expand the Laneway House Program: to include all Single Family zones, and to consider allowing Laneway Houses in Duplex and RT zones.

More Secondary Suites: Require all new single family houses to be built “suite ready”, and to allow secondary suites in ground oriented strata titled duplexes, town houses and row houses.

Increased Density in Residential Areas: For 100% rental developments located within 1.5 blocks of major arterials, the City will consider rezoning to allow multi-unit Row and Stacked Townhouses etc. of up to 3.5 stories. For properties (including residential single family) fronting on busy streets which are well served by transit, and within 500 meters of neighbourhood & local shopping centers, the City may allow rezoning allow mid-rise developments of up to 6 stories. These projects will dramatically change and re-vitalize their neighbourhoods as well.

The New Affordability Proposals also include policies to promote non-profit & co-housing projects, renew and replace existing housing co-operatives, and utilize land currently owned by the City to create innovative, affordable housing options. For many owners, the new incentives could increase the value of their properties and allow them to reap the benefits of Vancouver’s forward thinking policies-a genuine win-win.

Case Study: Good Investments Often Made, Not Found!

Tue, 30 Apr 2013 19:59:00 GMT

The Buildings: Two “Duplex Buildings”, with a total of 4 three level (including full basement) townhouse units. Each of the units is totally self contained with its own hydro and gas meters, hot water tank, furnace and laundry hook-up. The units are just over 1600 sq.ft., for a total building area of 6500 sq.ft. The buildings are very plain and about 60 years old, but are in reasonable condition with no pressing maintenance issues. The basements are mostly unfinished and have further development potential.

The Land: is a 66’x115’, RM-4 (Multifamily) zoned, corner lot in the Kitsilano neighbourhood of Vancouver. The RM-4 zoning allows for redevelopment of the property to a multifamily building of 8 to 14 units, and up to 10,800 sq.ft. of floor area. The neighbouring properties had recently sold (for $135 PSF) and a large condo development has been built.

Replacement Cost: Land prices for similar types of property in the area had ranged from about $110 PSF to $135 PSF. Building costs under current City code would be about $100 PSF. Total replacement cost would be about $220 PSF or ($220 x 6,500 sq.ft.) = $1,430,000.

The Revenue: 2 of the units were rented at an “undermarket” rate of $1,100/month, while the other 2 units had been brought to “market rents”of $1,400 and $1,500 for a total monthly income of $5,100, or $61,200/yr. The units are fully self contained, there is no common area maintenance and the tenants pay all utility costs. So expenses are quite low - after taxes, gardening, garbage removal and maintenance, yearly expenses are about $12,500/yr.

The Sale: The property was listed for $875,000 and sold for $780,000. Offers were received from developers planning to build a new multifamily project, at a higher price than the eventual sale price. These offers were marred by the requirement for lengthy “tie-up” periods, and other conditions unattractive to the seller. The successful buyer is an investor who plans to hold the property.

The Financing: The buyer received a mortgage for 75% of the sale price ($585,000), at 6.5% interest with a payment of $3918/month or $47,000/yr. The Setup:

Gross Yearly Income: $61,200

Less Expenses & Reserves: (12,500)

Cash Flow From Operations (CFO): $48,700

Less Financing Costs (FC): (47,000)

Cash Flow After Financing (CFAF): $ 1,700

- Return on Assets (ROA): $48,700/$780,000 = 6.25%

- Financing Cost (FC): $47,000/$585,000 = 8.03%

- Return on Equity (ROE): $1,700/195,000 = 0.87%

The “Upside”: The buyer purchased an “easy care” property in good condition at a price close to “land value”. The property was “under rented” and the units contained “unimproved” space in the basements, allowing the buyer to add value immediately. By renovating the basement areas and adding a bathroom and bedroom at an estimated cost of $10,000/unit, he should be able to increase rents to a total of $1,700/unit. If he finances these reno’s at the same rate as his purchase, his “New Setup” looks like this:

Gross Yearly Income: $81,600

Less Expenses & Reserves: (12,500)

Cash Flow From Operations (CFO): $69,100

Less FC ($625,000 @ 6.5%): (50,240)

Cash Flow After Financing (CFAF): $18,860

- Return on Assets (ROA): $69,100/$820,000 = 8.43%

- FC: $50,240/($585,000+$30,000) = 8.17%

- ROE: $18,860/$205,000 = 9.20%

It's Book Report Time - Buffettology

Mon, 01 Apr 2013 23:27:00 GMT

unabasehed regard and admiration for the famous U.S. investor, Warren Buffett. I have just read and re-read another great book about Warren titled “Buffetology”. Written by Mary Buffett his (ex) daughter-in-law and David Clark, a long time friend of the Buffett family. This book is designed to teach Buffett’s system for picking successful investments. The reader is taken through the qualitative analysis and then the (relatively) simple quantitative analysis Buffett uses to determine whether an investment is worth-while or not. The book shows how Buffet takes into account the effects of taxation and inflation to determine the minimum investment return he must have and then reveals the approach through “case studies” of actual investments he has made.

The book is a delightful read, with step by step discussion broken into short chapters, making it easy to understand the approach of this modern day investment wizard. The real value of this book is that it illustrates again that the genius of Buffett is in the employment of solid, simple business principles to create wealth. Again the name of the book is “Buffetology”, cost is $21.00 in paperback.

Case Study: Real Estate is an Expanding Investment.

Mon, 01 Apr 2013 20:00:00 GMT

One of the most compelling reasons for buying and owning rental investment real estate is the phenomena of expanding value and expanding return on investment. This occurs as a well bought and well maintained property experiences income growth and decreasing debt over the investment period.
As rents increase (modestly) year to year, and mortgages are paid down on a regular, escalating basis, the prudent and patient investor can watch while other people (tenants) work to pay off his property - bought (largely) with other peoples' (the bank's) money.

The following Case Study illustrates dramatically how this can be done. This analysis is of a property that I currently have listed for sale in Vancouver at 225 West 12th Avenue...

The Property: A legal 6-plex containing 3 - 1 bedroom suites and 3 bachelor suites in a well maintained building, with an area of approximately 3650 sq. ft. (including laundry, storage, mechanical areas etc.) It sits on a 50" x 124" RT-6 zoned lot approximately 2 blocks to Vancouver City Hall. The roof is newly replaced, the draintiles have been redone and an underground oil tank has been removed. There is a rear yard garage containing 3 separate single car bays, each with their own doors and electrical power.

The Income and Expenses: The current rental income is $4,030/month from the 6 suites, laundry and garage rental. This income may be immediately increased by renting out 2 of the garage bays (currently used by the owner for storage) for $125/month each.

Current expenses (adjusted for the latest Gas and Hydro increases) are $10,000/year, plus an additional $2,000/year for maintenance reserves. The Net Operating Income (NOI) is:

At a purchase price of $450,000, the analysis for this property is as follows:

Investment Analysis for Legal 6-plex, 225 West 12th Avenue, Vancouver B.C.

Purchase Price: $450,000 Capitalization Rate: 8.75%
Expense ratio: 23.4%
Net Income (NOI): $3,280/mo. or $39,360/yr Gross Rent Multiplier: 8.76

Financing: Purchased with a $337,500 (75% loan to value) 1st mortgage @ 7% interest, 5 year term, 25 year amortization and payments of $2,364/month or $28,368/year...

Down Payment: $112,500 Net Income (yr. 1): $3,280/mo or $39,360/yr
Closing Costs: 8,000 Less Debt Service: 2,364/mo or 28,368/yr
Total Investment: $120,500 Before Tax Cash:Flow: $916/mo or $10,992/yr

The Mortgage Balances and the mortgage paydowns at the end of each of the 1st 5 years:

Year 1 Year 2 Year 3 Year 4 Year 5
$332,257 $326,641 $320,624 $314,179 $307,275
$5,243 $5,616 $6,017 $6,445 $6,904

Risk & Real Estate

Sun, 31 Mar 2013 23:28:00 GMT

Risk - one of the most critical factors to consider in making any investment! Risk in real estate investing exists because the market place is imperfect, and seldom can real estate investors make perfect projections or forecasts of investment performance.

There is , however, a difference between risk and uncertainty. With uncertain outcomes, no reliable information exists to determine an outcome’s chance of occurrence. In contrast, investors can use their own assessment of an investment with information that allows them to judge the risk in each investment alternative.

There are several categories of risk as it affects real estate investment, and in later issues of this newsletter we will address these in greater detail.

What Lies Benath? A Toxic Headache . . .

Sun, 31 Mar 2013 22:13:00 GMT

Environmental concerns affect every area of our lives.

This is ever more evident in Real Estate, especially with Underground (Furnace Oil) Storage Tanks - also known as USTs.

There are thousands of old buried oil tanks in the Lower Mainland, and the B.C. Fire Code requires the removal of any buried tanks that have been inactive for more than 2 years. Each municipality has its own requirements, and checking with the local fire department will confirm how the regulations are applied. More importantly for owners, buyers, and sellers of real estate, however, is the fact that UST’s are considered as latent defects, and most banks & lenders may refuse to lend or advance funds on a property containing a UST – at least until the tank is removed with all of the permits and paperwork.

UST’s may not be obvious or visible – especially with older buildings - but they are usually easy to detect. Unless they have been contaminating the surrounding soils, they are relatively inexpensive to remove - costs for removal can be as low as $2,500. Once the tank is removed and the site declared free of contamination, the UST contractor will provide a report confirming that the UST has been dealt with according to requirements. In Vancouver, this report is provided to the Fire Dept and to the Environmental Services department.

If a UST has leaked, and the surrounding soils are contaminated, the property could be designated as a “Contaminated Site” under the Environmental Management Act of BC, and the EMA’s “Contaminated Sites Regulations” require the owner to remediate the property. This usually requires that an environmental engineering company oversee the removal of the contaminated material and prepare a report documenting the site remediation. Costs for this service may start at about $3,500, but can also run into the tens of thousands of $$ if the contamination has spread under buildings or on to neighbouring properties. The basic principle behind the Environmental Management Act is that “The Polluter Pays”, so that the liability for remediation can be traced back through the ownership history of a property, and be made the responsibility of owners who sold the property many years prior to the discovery of the contamination.

As a REALTOR®, I strongly advise owners to get rid of existing USTs asap, and definitely before listing or preparing to sell their property. An un-tended UST will lie in wait for the worst time to create a nasty, expensive headache for an owner, and Buyers will require, in a contract, that the owner remove any UST found. Removing a tank with the property under contract will complicate the transaction, and can also cause the lender to require additional, expensive investigations, such as a Phase 1 Environmental review. It might even kill the deal.

Environmental regulations continue to expand, authorities will demand more documentation and certification for UST removal, and this will cause more aggravation and expense. Acting early can eliminate the problem in an affordable & stress free manner.