The holiday season is upon us and budgets are tightening up - everyone is looking for the best deals or the hottest sales of the year, and if you're in the market for a new condo, condominium developer Mastercraft Starwood is offering a pretty special and unique promotion to help those that may not have a large ammount of money save for a deposit, something that most new home builders require. For as little as $5,000 as an initial deposit, you can purchase a brand new luxury condo at their downtown location, SoHo Lisgar. Here's how it works:
Once you have decided on one of the 13 remaining suites (there are 1 bedroom, 1 bedroom + den, & 2 bedroom condos still available) all you need as a minimum deposit is $5,000 - the regular deposit is 15% due over 90 days. After 1 year you will need to put down the balance of a 5% deposit combined with evidence of a mortgage that covers the remaining 95% of the purchase price. During that year you will lease the condo from the builder for 1 year at market rent - starting at $1,560/month for 1 bedrooms and $2,150/month for 2 bedrooms. But here's the catch, half of your rent will be credited towards the balance of the 5% deposit owed. So effectively, you would be renting a downtown 1 bedroom condo at $780/month or 2 bedroom at $1,075/month!
Let me demonstrate this promotion is greater detail. For this example I'm going to use SoHo Lisgar's 'D1' plan - a 922 sq. ft. 2 bedroom/2 bathroom condo (you can view the floor plan here). The purchase price on this particular suite starts at $437,900 (incl. HST), and as I mentioned above, the monthly rent would be $2,150.
Price.......................................................................................$437,900
5% Deposit...............................................................................$21,895 ($437,900 x 5%)
Monthly Rent..............................................................................$2,150
Initial Deposit..............................................................................$5,000
Remaining Balance of 5% Deposit.............................................$16,895 ($21,895 - $5,000)
Total Rent Paid After 1 Year............................................$25,800 ($2,150 x 12)
Credit Towards 5% Deposit.............................................$12,900 ($25,800/2)
Remaining Balance of 5% Deposit Due After 1 Year....................$3,995 ($16,895 - $12,900)
Now let's say you are a buyer who's intrigued by this promotion, but that four-letter word scares you: RENT. Even if half of it is being credited towards your purchase, you still can't stomach handing over a monthly rent cheque. I can relate, I was raised to believe that renting (a.k.a. paying someone else's mortgage) should be avoided if at all possible. So, what do you do? Is this promotion a waste? Hardly.
The first condo I ever lived in was a 2 bedroom/2 bathroom condo approximately 1,000 sq. ft. I wasn't into paying a lot of rent, but I needed a roof over my head, so I rented out a room for $900/month, approximately cutting my rent in half (Sound familiar??). The $900/month I wasn't paying in rent I put away in a savings account that I ultimately used to help fund my next real estate purchase - which is essentially what SoHo is doing with this new promotion. But let's run the numbers again with this additional income coming in from "Roommate Rent", and since this two bedroom condo at SoHo is slightly smaller than the one I rented, let's lower the "Roommate Rent" to $800/month. I know what you're thinking '$800/month can't possibly change the outcome that much, can it?' I'll let you be the judge.
Price.......................................................................................$437,900
5% Deposit...............................................................................$21,895 ($437,900 x 5%)
Monthly Rent..............................................................................$2,150
Initial Deposit..............................................................................$5,000
Remaining Balance of 5% Deposit.............................................$16,895 ($21,895 - $5,000)
Total Rent Paid After 1 Year............................................$25,800 ($2,150 x 12)
Credit Towards 5% Deposit.............................................$12,900 ($25,800/2)
Total "Roommate Rent" After 1 Year..............................$9,600 ($800 x 12)
Remaining Balance of 5% Deposit Due After 1 Year..................-$5,605 ($16,895 - ($12,900+$9,600))
You read that correctly, between this new promotion and by adding a roommate into the mix, you won't have to pay the remaining balance out of your own pocket. In fact, you will have a little over $5,000 extra that you can use to increase your deposit (if you're prudent with your money) or maybe take a very nice Caribbean vacation for 2 (if you're less prudent). Plus, in a condominium building like SoHo Lisgar, you will experience other savings as well: no more monthly gym fee (SoHo Lisgar has a professional Dalton Brown gym, complete with all the exercising essentials - NOT your typical condo gym), cut down on your entertainment costs (host your own movie nights in the 24-seat private theatre) and trim back on your relaxation or spa budget (as part of the 7,000+ sq. ft. of hotel-inspired amenities, you will have access to the exterior lap pool, hot tub and indoor sauna).
For more details on this promotion or to learn more about the SoHo products, don't hesitate to send me an email.
Thanks for reading.
Taylor Bennett
Sales Representative - Bennett Property Shop Realty
www.BennettPros.com
Taylor@BennettPros.com
@OttawaTails
Wednesday, November 20, 2013
Friday, November 15, 2013
Condo Surplus in Ottawa? - Another Side of the Story (Part II)
If you read my most recent post (click here if you haven't) I have decided to take a page out of Ben Myers' of Fortress Real Developments playbook and started to dissect various news pieces that focus on the Ottawa real estate market.
In my last post I attempted to shine some light on the discrepancy in the number of condominiums listed for sale this year versus 2011 in a CBC Ottawa News article published last month - I invite you to read it here, if you haven't done so already. Due to the apparent increased number of condominium listings, the author concludes that prices will be dropping. In fact, according to the article, not only will prices be dropping but in some cases entire condominium projects are shutting down due to lack of sales.
In today's post I'm going to focus on some of the specific condominiums the CBC article used as examples to illustrate this supposed failing market.
The first example mentioned in the article is Ron Hu. Who is Ron Hu? - I have no idea. All I know about him is that he purchased a condo "close to the By Ward Market" with his wife, who is a real estate agent, and they put $40,000 of renovations into the condo that they haven't been able to sell in 6 months. At first glance this certainly sounds like quite the horror story - the couple have not only been unable to recover their $40,000 of renovation costs, but their also incurring more and more costs every month the property doesn't sell; definitely not the most pleasant situation to be in. But there are a lot of details missing in this story:
Have either of them invested in real estate before? This can make a huge difference. Like trying anything new, if investing in real estate is foreign to you, you're more likely to make mistakes. Being mentored or advised by an experienced or professional investor is something I recommend all novice investors should seek. Even if you're licensed to sell real estate, it doesn't mean you have the necessary knowledge to be a savvy investor, it only means you have easier access to such knowledge.
Have they ever renovated a property before? As I mentioned above, if renovating is new territory for them, they're more apt to make an error. And when you make a mistake renovating, it can usually end up being quite costly. Again, this is an area where expert advise is priceless.
Where was the $40,000 of renovations spent? Anyone who has ever renovated a property with the hopes of flipping it for a profit can tell you that spending money is the right or wrong places and make or break your real estate investment. You need to know which areas to improve and which areas to leave as-is before taking on such a project. You also don't want be guilty of superadequacy - also known as over-renovating; although some additions may look great, if the market place isn't demanding such a feature the cost may not be recoverable.
And where exactly is this condo located? "Close to the By Ward Market" is quite ambiguous. For those of you unfamiliar with Ottawa, the condo could very well be located in Vanier, Centretown, Ottawa U campus, Chinatown, Mechanicsville, Gatineau (the closest Quebec city to Ottawa), or a number of other neighbourhoods near the By Ward Market - some of these neighbourhoods are great and would yield a great return on your investment, while others are just starting their gentrification process and it'll take more time to turn out a profit. As the old saying goes, the three most important factors about real estate investing are: location, location, location.
If the author of this news piece had chosen to use a subject that was a known or experienced real estate investor, this story would certainly have had much more impact. But just as they hand-picked a random "investor" who didn't get the return he was looking for, I could easily find you a successful real estate investment story where, with the proper guidance and knowledge, they were able to get the results they wanted.
The author then moves on to some of the new condominium sites in Ottawa - The Bowery (being built by Richcraft Homes formerly known as The Edge. It was recently re-branded and hosted a pre-launch last weekend - as of Nov. 14 over 15% of the project reserved), Claridge Icon (being sold by Claridge Homes at the corner of Carling Ave & Preston St. - as the CBC article states, they have only sold approximately 10% to date), and The Rhombus (a cancelled project that was to be built by Tega Homes and was recently sold to Quebec builder Brigil). I will agree with the author - these are definitely signs that the condo market in Ottawa is changing. Five years ago it would have been unheard of to see a new project cancelled or re-branded. Back then, after a condominium project was released, the most change you would see were new floor plans or new specifications introduced - but even that was relatively rare.
Why are these projects re-branding, re-designing or closing up shop? After 10 years of steady growth, are people in Ottawa suddenly rejecting condos? Were they just a fad or a trend-du-jour? Or is there something else contributing to the lack of sales? One fairly important fact that the article failed to mention was that within 3 kilometers of all the aforementioned new condo sites, there are other condo sites that have sold very well and some have even already started and completed construction.
In my last post I attempted to shine some light on the discrepancy in the number of condominiums listed for sale this year versus 2011 in a CBC Ottawa News article published last month - I invite you to read it here, if you haven't done so already. Due to the apparent increased number of condominium listings, the author concludes that prices will be dropping. In fact, according to the article, not only will prices be dropping but in some cases entire condominium projects are shutting down due to lack of sales.
In today's post I'm going to focus on some of the specific condominiums the CBC article used as examples to illustrate this supposed failing market.
The first example mentioned in the article is Ron Hu. Who is Ron Hu? - I have no idea. All I know about him is that he purchased a condo "close to the By Ward Market" with his wife, who is a real estate agent, and they put $40,000 of renovations into the condo that they haven't been able to sell in 6 months. At first glance this certainly sounds like quite the horror story - the couple have not only been unable to recover their $40,000 of renovation costs, but their also incurring more and more costs every month the property doesn't sell; definitely not the most pleasant situation to be in. But there are a lot of details missing in this story:
Have either of them invested in real estate before? This can make a huge difference. Like trying anything new, if investing in real estate is foreign to you, you're more likely to make mistakes. Being mentored or advised by an experienced or professional investor is something I recommend all novice investors should seek. Even if you're licensed to sell real estate, it doesn't mean you have the necessary knowledge to be a savvy investor, it only means you have easier access to such knowledge.
Have they ever renovated a property before? As I mentioned above, if renovating is new territory for them, they're more apt to make an error. And when you make a mistake renovating, it can usually end up being quite costly. Again, this is an area where expert advise is priceless.
Where was the $40,000 of renovations spent? Anyone who has ever renovated a property with the hopes of flipping it for a profit can tell you that spending money is the right or wrong places and make or break your real estate investment. You need to know which areas to improve and which areas to leave as-is before taking on such a project. You also don't want be guilty of superadequacy - also known as over-renovating; although some additions may look great, if the market place isn't demanding such a feature the cost may not be recoverable.
And where exactly is this condo located? "Close to the By Ward Market" is quite ambiguous. For those of you unfamiliar with Ottawa, the condo could very well be located in Vanier, Centretown, Ottawa U campus, Chinatown, Mechanicsville, Gatineau (the closest Quebec city to Ottawa), or a number of other neighbourhoods near the By Ward Market - some of these neighbourhoods are great and would yield a great return on your investment, while others are just starting their gentrification process and it'll take more time to turn out a profit. As the old saying goes, the three most important factors about real estate investing are: location, location, location.
If the author of this news piece had chosen to use a subject that was a known or experienced real estate investor, this story would certainly have had much more impact. But just as they hand-picked a random "investor" who didn't get the return he was looking for, I could easily find you a successful real estate investment story where, with the proper guidance and knowledge, they were able to get the results they wanted.
The author then moves on to some of the new condominium sites in Ottawa - The Bowery (being built by Richcraft Homes formerly known as The Edge. It was recently re-branded and hosted a pre-launch last weekend - as of Nov. 14 over 15% of the project reserved), Claridge Icon (being sold by Claridge Homes at the corner of Carling Ave & Preston St. - as the CBC article states, they have only sold approximately 10% to date), and The Rhombus (a cancelled project that was to be built by Tega Homes and was recently sold to Quebec builder Brigil). I will agree with the author - these are definitely signs that the condo market in Ottawa is changing. Five years ago it would have been unheard of to see a new project cancelled or re-branded. Back then, after a condominium project was released, the most change you would see were new floor plans or new specifications introduced - but even that was relatively rare.
Why are these projects re-branding, re-designing or closing up shop? After 10 years of steady growth, are people in Ottawa suddenly rejecting condos? Were they just a fad or a trend-du-jour? Or is there something else contributing to the lack of sales? One fairly important fact that the article failed to mention was that within 3 kilometers of all the aforementioned new condo sites, there are other condo sites that have sold very well and some have even already started and completed construction.
- A few blocks east of the Bowery, the Slater (being built by Quebec builder Broccolini Construction) has already reached its sales quota and construction will be starting later this year - this 22-storey condo has only been on the market for less than a year.
- A short drive from where the Rhombus was planned, you will find the Eddy, a small 6-storey, 53-unit condominium by Windmill Developments located on Wellington Ave. in Hintonburg. It has been slightly over a year since it was released and construction on the project has already reached the 3rd floor.
- One kilometer to the west of the Icon you will come across two new condo developments - Soho Champagne (by Mastercraft Starwood) and Hom (by Domicile). Soho Champagne is a two-phase project comprising of 20 and 24 storey towers; they are pouring the concrete for the 5th floor for the Phase 1 this week. Hom, a 12 storey condo, is already built and most residents have already moved in.
It's clear that people are still buying new home condos in the same areas where you find sites that have struggled with sales - so it's not the neighbourhoods or areas that the marketplace isn't responding to. And after speaking to some of the sales staff and analysis old and new price lists from the Slater, the Eddy, Soho Champagne and Hom, they didn't have to dramatically reduce their prices to attract these buyers as the CBC article suggested. In fact, in some cases, such as Hom and the Slater, they actually increased their prices substantially; upwards of $25,000 on some units - which adds support to the argument that it's not their prices that are the cause for the slowing sales. In my opinion, buyers are seeking condos that suit their life style, and not the other way around. And once they find some that do, they look for the best value - and value is weighed different by each buyer.
If you take a close look at some of the successfully-selling new condominium sites that I highlighted above, you'll notice that they have all been marketed, designed and created to appeal to a specific demographic. With their competitive and affordable pricing combined with its downtown location, the Slater attracted a tonne of first-time buyers and young professionals. The Eddy, being one of the smallest new condo buildings in the city and having LEED (Leadership in Energy and Environmental Design) certification, fit in very nicely to an already-environmentally conscious neighbourhood. As Soho's past two projects, Soho Lisgar and Parkway, have proven, buyers looking for a little more pampering and hotel services have naturally gravitated towards the Soho hotel-inspired brand.
Contrarily, the other condos whose sales have struggled were marketed to attract all potential condo buyers - investors, first-time buyers/young professionals and down-sizers - and by doing so they lost any type of unique identity making it problematic for would-be buyers to relate to the projects. The Bowery/Edge seemed to realize this and on their second attempt of selling, looking at the success of their neighbour, their latest marketing campaign was aimed at a specific demographic - young professionals. It's still a little too soon to analyze the results, but thus far the response has been positive.
If you are in the market for a condo, but haven't found something that has fit your needs, my advice to you is to be a patient and keep looking. There is a multitude of options out there, and as more developers realize that the business model of "one condo fits all" is broken you'll see more unique projects offering different life-styles. But if you're waiting on the side lines for the prices to drop significantly, I'm afraid you'll be waiting for some time, as a few builders have demonstrated already they're more willing to re-design, re-brand or close up drop before they heavily discount their prices.
Thanks for reading.
Taylor Bennett
Sales Representative - Bennett Property Shop Realty
www.BennettPros.com
Taylor@BennettPros.com
@OttawaTails
Friday, November 1, 2013
Condo Surplus in Ottawa? - Another Side of the Story
Inspired by the series of articles "The Other Side of the Story (I-IV)"
written by Ben Myers of Fortress Real Developments I
decided to take a similar look at a fairly recent and popular article written about the Ottawa condo market
published on CBC News
Ottawa. The core message of this news piece was that the condo market
in Ottawa is over saturated and therefore prices will drop, as will the rate of
development. And from a quick glance, that's what would appear is
happening - but a little further analysis will reveal much more of the story.
In this weeks post, I'm going to analyze the CBC's articles opening
statement "there are more
condos up for sale in Ottawa than ever before - nearly 50 per-cent more than 2
years ago".
However, before I start, I think it's
important that we define "condo" so we're all on the same page.
The term "condominium" is a type of ownership; it has nothing
to do with the style of property. Many people often think "high
rise" when they hear the word "condo", but condos in Ottawa come
in all shapes and sizes; high-rises, low-rises, townhouses, stacked townhouses,
and even single family homes can be designated as a condo.
Now, let's get back to the CBC article.
It claims that the amount of condos for sale has doubled in over 2 years.
That sounds like an awfully staggering number; there must be cranes and
construction sites everywhere in the National Capital Region, right? Well,
actually, not really. There are a few key contributors to this apparent rise
of condos for sale.
Firstly, new home condos (that is condos
that have yet to be built or are in the midst of construction) are being
marketed differently than ever before. When I first started working in
this industry over 10 years ago, I would hardly ever see a real estate agent
come by my new home office - this was mainly due to the very low (bordering on
insulting) co-operating commission builders used to offer to outside real
estate agents - back then it was common for developers to offer $500-$1,000 for
a successful transaction, a far cry from the 2%, 3%, and even 4% co-operating
commissions you see today. Not only was a low commission offered, but
often the commission wasn't paid until after final closing of the property,
which in some cases could be well over a year. Now, I'm not saying that
real estate agents are only after money, but when your income is solely based
on commissions, cash flow can be an issue. And when you have to wait for
over a year to get paid that can present some serious problems - especially if
you have things like bills to pay and groceries to buy. This pay
structure was one of the main reasons there was a divide between the new home
and the resale industries - it was almost as if they were two completely
separate industries despite both falling under "real estate".
It wasn't until recently where that divide was narrowed, builders saw
that resale agents were being alienated and changed not only the co-operating
commission amount, but also the pay structure - it's now more common to see
commission payments come in two parts; half is paid when the offer is firm, and
the other half is paid when the property has been constructed and delivered to
the purchaser. This change not only brought more agents and their buyers
to new home offices, but it also enticed more agents to help builders sell
their product. And what do real estate agents primarily use to advertise
the properties they have for sale? You guessed it, MLS.
A quick search on MLS (conducted the date this blog post was published -
Nov. 1, 2013) showed that 162 of the 1,566 condominium properties on MLS have a
"year built" date of 2014 or later - that means over 10% of the condominium market
on MLS is a new home condo, a pretty substantial number considering there was
only 1 new home condo listed in 2010.
The secondary reason for this increase in
condos for sale are the number of "discount brokerages" that have
popped up in recent years - personally, I define "discount
brokerages" as brokerages who significantly reduce their commission or
offer a small flat fee to home sellers for their listing "services".
I use the term "services" loosely since their types of
brokerages don't offer much in the way of service - for their small fee or
commission they will often post your property on MLS, provide you with a few
"For Sale" and "Open House" signs and give you a few tips
on how to sell your home. You often get little to no guidance from an
actual real estate agent and you're more or less left selling your property on
your own. With the increase in popularity of these services, and the low
cost incurred, many home sellers have opted to list their property for sale
"just to see how it goes". This new option to list your home for
sale has reduced the amount of obstacles that historically stood in the way of
potential sellers and has increased the amount of properties for sale on the
market.
So does this mean that there are no more
condos (new home or resale) on the market today than there was last year?
Of course not, as Ottawa goes through its intensification of the downtown
areas and our Baby Boomers age, you will see that number climb, but not quite
at the rate the CBC article would have you believe.
Next week, in my continuation of my
analysis, I'll dissect some of the examples of Ottawa's condo market mentioned
in the CBC article.
Thanks for reading.
Taylor Bennett
Sales Representative - Bennett Property Shop Realty
www.BennettPros.com
Taylor@BennettPros.com
@OttawaTails
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