Quote:
Originally Posted by Klazu
What is considered a good ROI for a rental apartment in Vancouver? One rental agent told us that 3% return would be considered good or even very good.
If one assumes that the new owners didn't seriously overpay for our current unit, they should have paid around 1.5 million for it. There are and have recently been several similar units on market for 1.5-1.65 million and I am pretty sure haggling would get you this place for around 1.5 million.
With that price our current rent should yield 2,86% ROI. That is of course on the cheap side, but our highest offer would mean 3,28% return for their investment. Their ask price would mean a ROI of 3,84%. This is all of course excluding Strata fees, property taxes, etc. but what do you guys think about those numbers?
The suite has now been on market for 4.5 weeks for the +35% markup price and there has been very little interest towards it. Soon after they listed it for the first time there was supposed to have been "lots of interested viewers", but surprisingly every single one of them cancelled just 15 minutes before the scheduled viewing. We called their BS on that case, but after that there has actually been three couples to see the place. I don't think two of the couples were serious at all and the third viewer made a pass on it.
I can imagine their desperation growing every day and we have already heard comments like "we would love to keep you if you just change your mind" from the rental agent. It is definitely a different tone than earlier, but we are not budging with our best offer. I think both we and them will run out of time and we have to schedule a move-out crew next week (already quite late!). We have not found anything nice enough or worth the prices people are asking, so we are now considering moving to a furnished suite for few months. It is double the hassle, but will allow us keep looking without being against an immovable deadline like we currently are.
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You're kind of simplifying how it goes when you rent a unit out you purchase. ROI is important, but not everyone buys a unit with a fixated ROI based around rental income in their plans. Some people don't even care about rental income from a unit. If they paid for the unit outright, the only return they need is enough to cover ongoing Strata/maintenance fees. It comes down to how much they paid and if not 100%, what the mortgage is on the unit.
As for pressure, again it depends. Someone buying a $1.5 million condo unit in Wall Center Downtown Vancouver I doubt is pressed to rent it out. It would be a bad investment to put yourself in a position where you absolutely need to.
Their rent increase to me underlines that fact, that they are not in a rush to rent nor is rent a primary motivation for their purchasing the unit.
If for example they had enough to buy it outright as a real-estate market investment, then they just need enough rent to cover strata, property tax, etc. which would likely require only a few months out of the year at the highest rate rented. They then just sit on it for 5-10 years and flip it.
So without knowing their financial situation and the final buying price + how much they actually purchase % of the selling price, it's just speculation.
Like I said though, based on their rent increase and all the information you've posted here regarding similar units in the building and other landlords' asking around the neighborhood, my suspicion is they aren't pressed to rent and probably purchased entirely for the location and resale value. Rent is just a nice to have.
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