Quote:
Originally Posted by jhausner
Yah I wouldn't take poor business sense as equating to bad investment. Anyone who buys a unit be it a 1 bedroom, 2 bedroom, micro-suite, or heck townhouse with the expectation to turn around and sell it immediately for a large gain or any gain is an idiot and has bad business sense. That doesn't mean buying these units can't be or isn't a good investment.
The quick flip though especially in Surrey Central where the market it saturated right now with a lot of projects on the horizon, is non-existent. The same thing happened around Edmonds a number of years ago and Metrotown more recently. If you bought at the start the unit prices went up slightly but then stayed relatively stable for many years before finally going up again once the building stopped.
I have a former colleague who purchased a unit in Edmonds for around $200,000 years ago. He ended up selling it for about $240,000 a few years later so earned a bit of money (was his primary residence so no capital gains) on it but the market was saturated as there were a bunch of other buildings going up. Today if he sold that unit, he would net $400,000+ given current market around there.
He sort of kicks himself but at the same time he had to sell because they were starting a family and they needed the money for a downpayment on a house out in Surrey. So for him it was ok but it just shows how many of these types of investments need to be long term if you want to make any good amount of money.
In Surrey Central right now, even for 2-bedroom condos, the increase in property values has been relatively flat. An example is my 1 bedroom. First year completed it shot up from the $150,000 I paid to $230,000. It has since hovered around that including last year's assessment.
Why? Because there are a lot of condos being built. Even if it dropped slightly it would have to drop below probably $180,000 for me to actually "lose" money on my return (doing quick math in my head so could be a bit off). It won't drop by $50,000 any time soon I don't think.
So I rent it out for enough that it pays for itself. Even though I am basically not making a profit on the unit, it pays for itself and a little bit extra to deal with unforeseen expenses which are virtually none given it is < 5 years old. But that was my long term plan. Live in a few years then move into something bigger and rent it out.
I may sell it one day but that will likely be in 10 years or so. By then you'll have virtually all the buildings around King George Station built up and more services and population base out in Surrey Central so I'd imagine the value will inch up from the $230,000 mark. Even if it stays the same over the next 10 years or raises to maybe $300,000 in that time, I still make a healthy profit on it and would deem it a good investment because the rent will go up over the next 10 years + my mortgage will go down meaning my equity will be even greater than it is today.
You're correct though that there are a lot more 1 bedrooms around and available so anyone expecting a huge profit is in for a surprise. Even if I sold today I'd make over $60,000 in profit if not a bit more after capital gains and fee and such.
I don't think anyone would laugh at a cheque for that amount of money.
At the end though it is still a gamble. Real-estate if invested in properly can be a relatively safe investment and lead to some good money in the longer term (look at the top billionaires in the world, many are in real-estate). But it is still a gamble and you do always run the risk of losing money on an investment. Some of it will always just be guess work and trying to predict the future.
I can educated guess how things will unfold in Surrey Central in the next 5 to 10 years, but I could be completely wrong at the end of the day who knows.
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I think Central City area will boom in about 10-20 years. Surrey has about 1000 new residents a month so there is demand for affordable housing. With the professional jobs in the city core, including CRA, the hospital, medical buildings, City Hall, SFU, Coast Capital Headquarters, etc. there will be demand for housing around the city core so the value will be there for many. We should also expect to see more money flowing to the South of the Fraser since Metrotown is becoming unaffordable and starting to bear the characteristics of Vancouver in the early 2000s where prices were jumping higher than family incomes, particularly driven by foreign demand. Where Surrey has the advantage right now is that you can catch on to that fever before that happens, whether that be 5-25 years from now. This will have a cascading effect on the 1 bedroom units and in your case, you've already seen some great gains in just the last few years.
A good thing to remember is that many people will achieve some capital appreciation, and they think they made money on their home. However, true economic profit exists when you subtract your mortgage interest, property taxes, and strata fees from capital gain and what results is a net profit. Otherwise, renting would have been financially better with the returns on investments on what would have been your down payment. Since you are renting your one bedroom, you're minimizing your holding costs.
The current climate right now in Surrey is that 2 bedroom condos are the way to go if you want to sell within 5 years - for small gains. Either way, you're going long with your position if you really want to cash in on one or two bedrooms.
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