urbandreamer
recession proof
Why don't you update us once a week? Not once an hour or once a day--too time consuming.
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Focus on your website, not this site.
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Baby, we got a bubble!?
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azureray
Active Member
Does anyone have any data of the average rent price for a one bedroom in the downtown core?
My theory is, as long as the rent can cover the carrying cost of an 80% mortgage, we dont have a bubble.
My theory is, as long as the rent can cover the carrying cost of an 80% mortgage, we dont have a bubble.
cdr108
Senior Member
well that depends on the size of the 1 bed unit.
i think the going market rate for new construction condos is $30-36 psf .... ie. 500 sq ft condo can get from $1250-1500/m
examples i found on mls that indicated sq footage:
http://www.realtor.ca/propertyDetails.aspx?propertyId=13101819&PidKey=2140315189
http://www.realtor.ca/propertyDetails.aspx?propertyId=13082564&PidKey=-1003522294
http://www.realtor.ca/propertyDetails.aspx?propertyId=13060306&PidKey=-2105596948
http://www.realtor.ca/propertyDetails.aspx?propertyId=13101138&PidKey=-1237429141
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daveto
Active Member
While I'm not sure I agree with your theory, nonetheless here are some figures
Consider a $300k condo, earning $1500 rent, 500 sq.feet
Monthly Costs
$1136 Mortgage @ 3%, over 25 years, paid semi-monthly (presumes no CMHC fee)
$200 Property tax at 0.8% of value
$250 Condo fee at $0.50/sq.ft
$1586 Total
ie 5.7% above monthly rent income. Therefore, needs 8% mortgage principle decrease to be in balance
Note the following very generous assumptions
-3% mortgage rate
-zero maintenance costs
-zero unoccupied months
-condo fees at $0.50/sf.ft, no special assessments
azureray
Active Member
Here's my calculation, using a recent unit sold at Yonge + Rich @ 25 Richmond E using real data:
Purchasing Price: $350K (530 sq. ft one bedroom + 300 sq.ft terrace on 24th floor with a view, direct access to PATH and Queen Subway)
Monthly Mortgage with 21% down @ 3% - 25 year amortization: $1308.52
Maintenance Fee (0.52 /sf): $275.6
Property Tax (Aprox. 1% of property value) - $291.6
Total Carrying Cost: $1875.8 / month
Since the occupancy is 2018, so the question would be for a one bedroom unit with 300 sq ft terrace + locker at Queen / Yonge corridor with a view, can we get a $2000 / month rent to make a positive cash flow?
Purchasing Price: $350K (530 sq. ft one bedroom + 300 sq.ft terrace on 24th floor with a view, direct access to PATH and Queen Subway)
Monthly Mortgage with 21% down @ 3% - 25 year amortization: $1308.52
Maintenance Fee (0.52 /sf): $275.6
Property Tax (Aprox. 1% of property value) - $291.6
Total Carrying Cost: $1875.8 / month
Since the occupancy is 2018, so the question would be for a one bedroom unit with 300 sq ft terrace + locker at Queen / Yonge corridor with a view, can we get a $2000 / month rent to make a positive cash flow?
Kenny
Active Member
For core condos, I am seeing a lot in the 1500 to 1800 range for a 1 bedroom. These are for properties that sell for 350~400K, for which you're looking at a 1650-1900/month 3% mortgage.
drewp
Active Member
Ha! Good thing I am one. What I say is true--no need for me to "sell" you on anything. Most of you have very strong opinions, so anything I say won't sway your point of view. Remember I am comparing to last summer onward. During that time, there were the first signs of a crash, bubble, correction....call it what you like. This year has rebounded, not to the levels of 2011-2012, but much better than the second half of 2012. Another strong sign is the rental market, and if that continues to perform well which it has, I don't expect that much of a price correction.
I think a 25% drop is not forseeable. I will guarantee my life on that. With companies continually moving their headquarters from the suburbs to the core, unemployment dropping, interest rates holding steady until at least 2015, 20,000 people moving to the core every year.....yes the debt ratio is a concern, but the 25-40age group receives or inherits the baby boomer generations money. Also, it is very common for a 2 income household, the family unit has splintered, and more and more people are "living the life". It is important to look at the changes in our society to see that more and more people are choosing downtown living for many reasons. The days of marrying your highschool sweetheart are becoming extinct. With more single people enjoying their life, working downtown, partying downtown, and extending their single life well into their thirties. Unless this trend moves back into traditonal roots, this is going to be the way our society lives moving forward.
And rechart, one thing I wanted to add; you say that there are no bidding wars in 905. There is a very good reason for that, in 905 there is still land where builders can build on. Buyers have the luxury of choosing resale or brand new. Whereas in Toronto no houses are being built so stock is very limited. Bidding wars are occuring in hot places like Bloor West Village, Islingotn Village, High Park, Roncesavalles, Leslieville, Beaches, Danforth and so forth. Ok I think I am done for now.
interested
Senior Member
Kenny is bang on.
I think you are in the $1650 to 1800 max range.
Daveto, if things stay as they are, no investor for a $1000/year loss ($86 x 12) is going to sell at a loss and will ride it out I am quite sure. As you correctly point out, vacancy and R/E commission and insurance however should be added to the equation and this may well bring the loss to $3-5000/year. That said, most investors who can already close can probably ride that out unless they are stretched to the absolute max already.
I think you are in the $1650 to 1800 max range.
Daveto, if things stay as they are, no investor for a $1000/year loss ($86 x 12) is going to sell at a loss and will ride it out I am quite sure. As you correctly point out, vacancy and R/E commission and insurance however should be added to the equation and this may well bring the loss to $3-5000/year. That said, most investors who can already close can probably ride that out unless they are stretched to the absolute max already.
urbandreamer
recession proof
Azureray: the Yonge + Rich unit you refer to is the Dundas - floor 6-21 - 527 sf - 280 sf balcony - NW view -$350k
It states maint fees are projected to be .52/sf. We know it always goes up--I expect more like .65/sf here.
Did you include the $25/month locker maintenance fee? + the locker price at $5000 (which most ppl buy I assume) Will property tax be increased by 2019 registration? I bet it will
Did you include the floor premium? IIRC it was $1000/floor.
Did you include any upgrades in your unit?
Can you redo your math with these (realistic) fees added in? thx.
Let me try:
$1450 mortgage (24th floor premium, right?)
$342 maintenance fees
$300 property tax (guess)
$25 locker
---------------------------
$2117 total
That doesn't include vacancy fees, cleaning, unexpected expenses etc.
It states maint fees are projected to be .52/sf. We know it always goes up--I expect more like .65/sf here.
Did you include the $25/month locker maintenance fee? + the locker price at $5000 (which most ppl buy I assume) Will property tax be increased by 2019 registration? I bet it will
Did you include the floor premium? IIRC it was $1000/floor.
Did you include any upgrades in your unit?
Can you redo your math with these (realistic) fees added in? thx.
Let me try:
$1450 mortgage (24th floor premium, right?)
$342 maintenance fees
$300 property tax (guess)
$25 locker
---------------------------
$2117 total
That doesn't include vacancy fees, cleaning, unexpected expenses etc.
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daveto
Active Member
...and again, presuming that 3% mortgages will still be available in 2018...
azureray
Active Member
Thanks Urbandreamer, yes I was referring to Dundas.
So here's the revision after your inputs:
Dundas say 18th floor + locker:
Purchasing Price: $363K (527sq. ft one bedroom + 280 sq.ft terrace on 18th floor with a view, direct access to PATH and Queen Subway)
Monthly Mortgage with 21% down @ 3% - 25 year amortization: $1357.13
Maintenance Fee (0.65 /sf): $343 + $25
Property Tax (Aprox. 1.2 % of property value) - $363
Total Carrying Cost: $2088.13 / month
It's very close. Unless you can rent this unit + locker for $2100 / month in 2018 you will be in loss. Maybe we can take a look at the average rent increase in downtown core, and if we say its inline with the 4% recommended YOY increase, if we get $1800 / month in 2013, we should be able to get $1800 x (1.04)^5 by 2018, which is $2189.90.
So here's the revision after your inputs:
Dundas say 18th floor + locker:
Purchasing Price: $363K (527sq. ft one bedroom + 280 sq.ft terrace on 18th floor with a view, direct access to PATH and Queen Subway)
Monthly Mortgage with 21% down @ 3% - 25 year amortization: $1357.13
Maintenance Fee (0.65 /sf): $343 + $25
Property Tax (Aprox. 1.2 % of property value) - $363
Total Carrying Cost: $2088.13 / month
It's very close. Unless you can rent this unit + locker for $2100 / month in 2018 you will be in loss. Maybe we can take a look at the average rent increase in downtown core, and if we say its inline with the 4% recommended YOY increase, if we get $1800 / month in 2013, we should be able to get $1800 x (1.04)^5 by 2018, which is $2189.90.
Azureray: the Yonge + Rich unit you refer to is the Dundas - floor 6-21 - 527 sf - 280 sf balcony - NW view -$350k
It states maint fees are projected to be .52/sf. We know it always goes up--I expect more like .65/sf here.
Did you include the $25/month locker maintenance fee? + the locker price at $5000 (which most ppl buy I assume) Will property tax be increased by 2019 registration? I bet it will
Did you include the floor premium? IIRC it was $1000/floor.
Did you include any upgrades in your unit?
Can you redo your math with these (realistic) fees added in? thx.
Let me try:
$1450 mortgage (24th floor premium, right?)
$342 maintenance fees
$300 property tax (guess)
$25 locker
---------------------------
$2117 total
That doesn't include vacancy fees, cleaning, unexpected expenses etc.
Attachments
azureray
Active Member
urbandreamer
recession proof
Rent increase won't happen. Record suppy gonna hit the market 2017-2018 holding prices in check. Every time there's a tight vacancy rate within a few years that dissipates and the opposite occurs. If we're at the low vacancy rate today 2018 won't be pretty.
I would always calculate using today's valuation--$1800 max/month here. Clearly, a bad investment If I were a realtor, I wouldn't recommend this unit as an investment.
Also factor in it's easier to rent out furnished units--$8000 for decent knockoffs of modern furniture?
The Bank of Ireland just doubled their interest rate to nearly 5% for mortgages. An early warning of what's to come?
I would always calculate using today's valuation--$1800 max/month here. Clearly, a bad investment
If I were a realtor, I wouldn't recommend this unit as an investment.Also factor in it's easier to rent out furnished units--$8000 for decent knockoffs of modern furniture?
The Bank of Ireland just doubled their interest rate to nearly 5% for mortgages. An early warning of what's to come?
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azureray
Active Member
I know for a fact that 1 King West a 450sq ft studio today with no locker or terrace rents for $1700+ / month. Locations does play a big factor. Investors are probably ok if they are in the heart. If you purchase the same thing further out, it's not wise. But I share your point, free breakfast is near over. It's beyond imagination that an 80% mortgage is carry-able by rent, not in NYC, not in London, not in Hong Kong, not in Beijing, not in Vancouver, thats what made Toronto the No.1 destination of condo investment in the past few years. But now the price is at the break point of balancing out positive cash flow.
Rent increase won't happen. Record suppy gonna hit the market 2017-2018 holding prices in check. Every time there's a tight vacancy rate within a few years that dissipates and the opposite occurs. If we're at the low vacancy rate today 2018 won't be pretty.
I would always calculate using today's valuation--$1800 max/month here. Clearly, a bad investment
The Bank of Ireland just doubled their interest rate to nearly 5% for mortgages. An early warning of what's to come?
interested
Senior Member
^^^
I think that is a very dangerous assumption.
Rents were quite stagnant over the past 8-10 years. They are up perhaps 20%. There was a large increase the past year.
With the extra product coming on line and presumably more choice, this may in fact not be the case.
I personally would hope for 4%/year but I certainly would not plan on it. Wages are not going up 4%/year and there is as such a limit to how much renters can pay.
I think that is a very dangerous assumption.
Rents were quite stagnant over the past 8-10 years. They are up perhaps 20%. There was a large increase the past year.
With the extra product coming on line and presumably more choice, this may in fact not be the case.
I personally would hope for 4%/year but I certainly would not plan on it. Wages are not going up 4%/year and there is as such a limit to how much renters can pay.