This came about after a past client of mine asked what I though of him doing a side deal to purchase a tenant occupied one-bedroom in a 50-year-old high-rise in Oliver with a view. There are very few people I can be as blunt as I would like to be with and simply say “side real estate deals are offered to buyers because the deal often overwhelmingly benefits the seller”. I go into that HERE. Over the last few years, I have been asked a lot about investing in the Edmonton Real Estate market. In short this is what I’ve seen from a buy and hold perspective.
Why Not the Downtown Highrise Condo Market
The conversation started with investing downtown, so lets start there and then move on to more seemingly profitable ventures. There are a few factors that scare me with the Oliver/Downtown condo market as an investment.
These buildings are old, and large with expensive complex systems to maintain. Typically, owners pay to have these systems ungraded with special assessments and increased condo fees. These costs eat into profit and can cause financial burden.
When the older systems fail, they can become insurance liabilities. There was a building on 109 St this year having trouble with its radiant heaters for example. There were multiple leaks in different units which caused flooding, which caused insurance claims, which caused premiums to sky-rocket, which caused condo fees to double. The owners were further assessed +/- 46K a unit. The re-sale market caught wind of this and the prices in the building plummeted to where a owner couldn’t give a away a unit for 130K after prices had ranged for years between 200-300K.
The market is soft. Prices keep coming down, unanimously in the Downtown, Oliver markets. This is likely driven by our economy and over-building. The downtown condo market has been soft for years and we are still coming to market with new product. As it takes years to come to market with a new building, many of the units coming on are now being converted to rentals. Couple that with the glut of re-sale units that haven’t been able to sell and are now on the rental market. The downtown market is cannibalizing itself.
Right now, I like central buildings that have undergone major overhauls and that cost has already been eaten by owners. Low-rises and a select number of high-rises. There are some BnB friendly buildings as well, who’s return is worth the risk.
Here are three investment scenarios I see working long-term.
A Low-rise Unit in Blue Quill
This style of condo has a low buy-in and the risk of huge assessments is negated by the small building size smaller building systems. As you walk through, most work looks to be completed, and anything that can’t be seen like a boiler replacement, will likely be a max of a 7K assessment per unit, if ever. The location of this particular unit is across the street from a park and school and the building looks to be full of young families and seniors making for a more predictable and safer rental pool. The neighbourhood single family home market in this area is more affluent as well. If the mortgage costs $381/month and condo fee’s cost $411 add $150 for tax and insurance, ask for $1050 a month to have someone work off the mortgage quietly. Note, I would not treat this as liquid, its a long-term hold as the prices in units like these have dropped from the $180s to the $100K range over the past few years.
Attached housing in Edmonton’s Urban Sprawl Areas
Over the last few years, we could pick something like this for $310K – $315K in the dead of winter when builders want to get rid of their inventory, Right now they’re priced at $330K. I’m not sure what builders will do this winter because the price of building materials is through the roof. But the principal is, buy new/newer, maintenance free, close to a school to attract long term family tenants. Hold the asset until the mortgage is paid and sell. Secord has a bunch of these units by a school. With 20% down, the mortgage comes in around $1050, tax and insurance $225. Charge $1600 for rent. Not a lot of margin for profit, but with the right tenants, a good buy and hold investment vehicle that will see you profit in the long term. These units are more or less always in demand for first time home buyers as they are ‘new’, affordable, have small maintenance requirements, and no condo fees.
The 1000 Sq.Ft Bunglaow Flip
This style of home can be picked up in just about any established neighborhood in the city. There is the baby boomer phenomenon where there are a huge number of seniors are leaving structurally sound homes and they go for sale by family members. Often these homes can be purchased, updated and resold for a profit. Depending on the location, they can be used as flips and or rentals for up down suited propeties. Location is SO important. Cost of contractors, market timing, and location dictate profits.
Thank you for taking the time to engage me in the process. Please reach out if you would like to put your feet in motion putting money into the Edmonton Real Estate Market.