experts: real estate column Tuesday, March 04, 2008

The $80,000 Condo

$80,000 condos do exist. In our BC survey, we didn't count condo hotels, fractional ownerships or any form of timeshares (which we don't like), or condos in very remote towns, such as Port Hardy. We looked only at MLS listings.

By Ozzie Jurock

At the Jurock Real Estate Investment Course, we teach to first look at ourselves and decide who we are. Shark? Do some learning. Sit in court locally, understand foreclosures ... short term in and out deal. Flipper? Can also buy anywhere. Find bird dogs, be a 'wheeler-dealer flipper' ... short term in and out deal. Investor? Ah, this person is interested in creating passive income over time. Not concerned with the market as he or she has a tenant pay off the mortgage and eventually will create passive income of $4,000 or more. We suggest to look for an $80,000 condominium, anywhere, which can be rented to cover expenses. Ideally at $800 or so (the goal: rent to be 1% of the purchase price). Then you will own the asset clear in 17 years (our favorite mortgage term). Do it five times and you have that magic $4,000 a month for the rest of your life. $4,000 a month gives you the ability to service a million dollars. And that even if house prices and rents never should rise. Of course, on the way to the $4,000 per month, you have an ever increasing income stream already after the 4th and 5th year.

Well, people now ask us, where are these $80,000 condos? Fortunately, there are plenty of $80,000 condos, even in British Columbia. In fact, a search just through found more condos for under $80,000 in B.C. than in Alberta or even Saskatchewan (we found more detached houses in the Prairies under $80,000 than condos.) In Toronto and the Golden Horseshoe area (where most Canadians live) we found literally dozens of condominiums priced at $80,000 or less. Don't even ask about Atlantic Canada where we found more than 1,500 homes priced under $75,000.

Put down 10% (though, even as an investor it is possible to put down as little as five percent with CMHC insurance) and your mortgage payment on a $72,000 mortgage at 5.99% (available for example through mortgage broker Meridian Canadian Mortgage - Michelle Beet 604-949-1070 ext 222) on a 17-year amortization is $560.50 per month. (Payments are even lower with 25-year amortization.) Add in taxes and strata payments and the cost is around $700 per month. Rent it out for $725, which can be increased by 4% a year.

It is simple math and it is still possible even in the overheated BC market.

And the $80,000 condos do exist. In our BC survey, we didn't count condo hotels, fractional ownerships or any form of timeshares (which we don't like), or condos in very remote towns, such as Port Hardy. We looked only at MLS listings.

Yet we found $80,000 condos, and less, in Ashcroft near Kamloops, Prince George, and the Kootenays. Push the limit to $85,000, and there are condominiums in Lake Cowichan or Vancouver Island.

Notch the spending up to $100,000, go with a 30-year amortization and a 15% downpayment, and suddenly you are shopping the market for cash flowing condos in Chilliwack and the eastern Fraser Valley.

When shopping for a rental condo, consider towns that have something happening. We look at towns that have vacancy rates below 4% (or are for solid economic reasons on their way there) where there is good employment, good investment, some new event happening (new employer, new highway, new Wal Mart?) and a good employment base. Hire a local manager to look after the property (vital, and an inexpensive investment) and move onto the next deal.

The advice, of course, is to get started and to remember there are no good or bad markets, only the deal that you make for yourself.

Today in B.C., interest rates are still low, thousands of people are moving into the province from across Canada and around the world, the Olympics are generating global exposure and the economy is strong. Because of our multi- year belief that we are in the world's most underreported inflation - driving all hard assets higher - ten years from now, all prices will be higher (even if we have to go down through the wall of worry worldwide right now) but also in BC prices will be higher because of strong economic fundamentals. Yep, even with the double-digit increase in prices over the past few years.

We also teach investors to look at the housing markets of the last 30 years ... we have had a lot of peaks and valleys... We have come through all of them. And we will come through the current U.S. subprime "crisis", the downturn in the B.C forestry industry and even climate change. (Remember the misplaced fear generated by Y2K?)

These $80,000 condos are for investors, those who want to have a long term, passive income from real estate. It is possible to start your lifelong income from real estate. Right now. Today.

For those who are looking to buy and sell quicker, or perhaps are veteran investors with strong capital, there are other B.C. opportunities that offer potential this year.

Examples: Condos for $80,000 or less in BC

$68,000, 2 bdrm. Ashcroft (near Kamloops) MLS 70769
$70,500 3 bdrm Prince George. MLS N174241 (1,700 sq. foot townhouses at $84,900 - which we recommended to buy for $40,000 in 2004 - are also still good value.)
$71,900 1 bdrm Logan Lake MLS 71929
$74,900 2 bdrm Prince George MLS N178500
$77,021 1 bdrm Sparwood (near Fernie) MLS K167260
$78,000 studio Sun Peaks, Kamloops, MLS 67535
$79,900 1 bdrm Sparwood (near Fernie) MLS K167260

Published in Westcoast Homes and Design, February, 2008

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