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In the Press

Hot buys in BC real estate

So you've got $200,000 to buy a real estate investment somewhere in British Columbia this year...

FRANK 0'BRIEN
WESTERN INVESTOR

May 2004

Taking this premise, Western Investor visited the Land Rush 2004 conference in Vancouver last month to hear from the professionals. The lineup of speakers - in front of a sold-out room of more than 500 - included Vancouver condominium expert Michael Sikich of D'Ovidio Sikich Marketing Corp.; Eugen Klein, a commercial realtor with Goddard and Smith, Vancouver; Vancouver Island realtor Randy Forbes of Coast Realty Group, Nanaimo; Gerry Halstrom of Sea-to-Sky Real Estate, Squamish; Rudy Nielsen, founder and president of giant Niho Land & Cattle Company of New Westminster; and, of course, Vancouver real estate guru and author Ozzie Jurock. Jurock has been presenting the Land Rush conference for 10 years.

D'Ovidio remains bullish on the downtown Vancouver condo market, despite mounting evidence that it may already be overpriced and under-rented. For $200,000, however, the pickings are slim in the new condo market in the core. According to D'Ovidio, the price of new suites is accelerating past $425 per square foot and he forecast that the latest new towers may approach $700 to $800 per square foot when they come to market in 2005 and 2006.

For our $200,000, therefore, we could perhaps buy a new 450-500-square foot studio suite that will not be ready for occupancy for another two years.

We calculated, though, that the rental return on such a unit, based on average rent for a bachelor suite in Vancouver, would be less than $700 a month, or about 4 per cent annually on our investment. While the eventual appreciation on the condominium may make the deal worth it, we are concerned that downtown prices are already near or at their mid-term peak.

Next?

Eugen Klein pointed to mobile home parks as a solid investment, offering steady returns in the 7 per cent to 14 per cent range and a number of potential income options. One great thing about a mobile home park, Klein noted, is that the units can be replaced if a tenant takes his home and moves out, unlike, say, an apartment building.

For maximum investor returns, though, the park should have at least 50 pads, which would require at least 10 acres of land and about an investment of $1 million to $2 million. Still possible, if we used our $200,000 as a downpayment and financed the remainder.

The potential income streams include increased appreciation for well-located parks; the buying and selling of the mobile homes at a profit; and financing the buyers of mobile homes, who often don't qualify for conventional loans. Most parks also offer fairly low maintenance and, with the right on-site manager (typically paid $2,000 a month), a handsoff investment.

On a typical mobile home set up, the rent on a mobile that you buy and set up for $25,000 averages $395 per month, which translates into a return of around 19 per cent.

This looks good. What else do the experts have?

Vancouver Island

Randy Forbes explained that Vancouver Island, especially the mid- and north end of the Island, offers some good real estate buys right now.

The Comox Valley has seen an 8 per cent increase in home prices and 31 per cent increase in sales in the last year, he noted, and the updraft is spreading south. Forbes' picks for ground-floor buys include Cumberland, where the average house price is around $125,000; Ladysmith; and Nanaimo, where there is a strong and steady rental market.

For instance, you can buy a side-by-side duplex in Nanaimo right now for $198,000 that will bring in $700 a month rent for each side, he noted. Forbes is confident that there are many pockets of great investments on the Island and in the Gulf. Gabriola Island, just off Nanaimo, has detached houses for $148,000 and half-acre building lots from $49,000 - and there is a zero vacancy rate, as with most of the Gulf Islands, he explained.

Port Alberni is another sleeper. The central Island city has an average house price of $110,000 and townhomes sell for an average of $57,000.

So, for our $200,000 we could buy a townhome in Port Alberni and a house in Cumberland, both of which would rent out for $600 - $700 a month, for a monthly income of $1,400. The appreciation upside looks solid.

OK, what's next?

Sea-to-Sky high

Vendors on the Sea-to-Sky highway apparently believe the Olympics are going to start next weekend. That is the only way to explain what has happened to real estate prices in the area. The average price of a Whistler condo is now $800,000 and the average price of a house in Squamish has gone up $100,000 in the past year and the price of a two-bedroom condo has shot up by $50,000, according to Gerry Halstrom of Sea-to-Sky Real Estate.

"Most of the profit has already been taken," Halstrom understated, adding that sales in both Whistler and Pemberton have fallen sharply this year. Whistler has seen only 121 sales so far in 2004, compared to 1,385 in all of 2002 and 630 in 2003. Joked Halstrom: "There is an 18-year supply of Whistler houses priced at over $5 million."

However, he pointed to some long-term buys in Squamish that perked up our ears. Halstrom explained that the "horrid" downtown will be transformed with the upcoming redevelopment of 70 acres of mostly waterfront at the formerly industrial Nexan lands. He added that a new university and fresh investors at Furry Creek and Britannia Beach point to continued growth along the highway.

"There are some good buys in downtown Squamish now, but you'll have to wait two years" for the payoff, he noted. Typical rents in Squamish are $800-$900 a month for a two-bedroom, and Halstrom expects them to rise to the $1,200 per month range over the next two years.

Our $200,000 could also buy into new townhome developments coming up at Squamish - the next phase of Garibaldi Springs (priced from $175,000 for small units) and the new Season View townhomes, where prices are closer to $300,000. Looks promising, but we wish we had bought along the Sea-to-Sky three years ago. So where are the other groundfloor buys?

The Interior

Rudy Nielsen, one of the largest landholders in B.C., has plenty of real estate for $200,000 and well under, if you don't mind a four- to eight-hour drive from Vancouver.

For example, we could pay Niho $115,000 for a 200-acre ranch near Vanderhoof; pick up 120 acres of riverfront in the Chilcotin Plateau for $90,000; or, for $199,000, buy 400 acres at Scott Creek near MacKenzie. But, since we can barely find these places on a map, we wonder how our investment would pay off.

Neilsen noted that perhaps the best cash-on cash buys right now are in the Gulf Islands, the South Okanagan, the Kamloops area and, somewhat surprisingly, in the Queen Charlotte Islands. He also likes Powell River and the southern Sunshine Coast.

Nielsen has been right before, so it may be worthwhile to pull out a road map and check out raw land deals, investing strictly for appreciation.

Summary

Ozzie Jurock summed up where the best areas were to plunk down our $200,000 investment and gave some warnings of what to avoid. Jurock maintains, however, that it is not location but the actual deal that is important today.

His top picks: waterfront anywhere within a two- to four-hour drive from Vancouver; the Mt. Washington ski resort on Vancouver Island; the Squamish and Howe Sound areas; Kimberley in the Kootenays; and Kamloops/Sun Peaks. He posted a caution on buying anything that requires a fractional investment (such as quarter-shares at resorts), condos at Whistler and the new downtown Vancouver condo market.

As well, Jurock recommends taking advantage of current lending deals. "Lock in at today's mortgage rate, especially if you have high-ratio financing," he said.

 


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