Saturday, June 21, 2008

More on ridiculous discounts



Some more on the ridiculous discounts offered back in February:

The second building is located in Aldergrove, not far from West Edmonton Mall. It’s a terrific location, with walking trails on 2 sides of the building and with easy access to everything. Prices int his building normally range from $199,900 to $214,900 for a 2 bedroom and $178,900 to $188,900 for a 1 bedroom. He is asking us to sell these first 10 units at $155,000 for a 1 bedroom and $165,000 for a 2 bedroom.

We WILL NOT be reporting these sales to the MLS system so that these sales don’t bring down the values of the buildings.

Some of the condos in the west end are still on the MLS and asking $167,500 for a two bedroom. Anyway I found the google cache of the original offer on Feb 23rd here. Enjoy.

12 comments:

BearClaw said...

Heres the text from the blog:

$25,000 - $65,000 Discount for Early Bird Buyers
February 23rd, 2008 · 44 Comments

Yesterday, the seller of 2 of our condo projects provided us with an amazing discount. He wants the first 10 condos in each building sold right away, and as such he’s offering a ridiculous discount on the pricing.

The first building is in Lakewood, and contains both 1 and 2 bedroom suites. The 1 bedrooms normally range in price from $179,900 to $190,900. The 2 bedrooms range from $204,900 to $227,900. The building has an excellent location, with easy access to both the Whitemud and Anthony Henday. The developer, for these first 10 units only, is selling them at $150,000 for a 1 bedroom and $160,000 for a 2 bedroom.

The second building is located in Aldergrove, not far from West Edmonton Mall. It’s a terrific location, with walking trails on 2 sides of the building and with easy access to everything. Prices int his building normally range from $199,900 to $214,900 for a 2 bedroom and $178,900 to $188,900 for a 1 bedroom. He is asking us to sell these first 10 units at $155,000 for a 1 bedroom and $165,000 for a 2 bedroom.

We WILL NOT be reporting these sales to the MLS system so that these sales don’t bring down the values of the buildings.

If you would like more details on these buildings, go to www.BoldHomes.ca and click on Property Currently Being Marketed. The buildings are organized by location. You can also contact John Carle or Sharon Gregresh directly at 780-701-1902 for information.

We are willing to place 4 day holds on condos for you to ensure that you can take advantage of these offers. We will also be having an information session on the buildings this Thursday night, provided that we haven’t sold them all already!

Tags: Property for Sale · Rental Property
44 responses so far ↓

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1 Peter // Feb 24, 2008 at 10:36 pm

I wouldn’t touch either of those dumps for half the price.
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2 Alex // Feb 24, 2008 at 11:01 pm

Me either, trash.
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3 John // Feb 25, 2008 at 8:04 am

Aren’t they brand new developments?
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4 John Carle // Feb 25, 2008 at 10:08 am

John;

These are condo conversion buildings. They were rental buildings, and are now being sold as condos.

They present an excellent opportunity for first-home buyers and small investors to get into the market now that prices have climbed so dramatically in the past 2 years. Sure, they aren’t palaces… but they’re solid condos with great locations and excellent growth potential.

Also, the rents in them are excellent for investors. The 2 bedrooms in the west end are renting at $1,200 a month… that’s fantastic rent for the purchase price!

Alex & Peter;

I find it interesting that you pass judgement on property that you haven’t even seen or walked through.

Do you always pass out your negative opinions so readily about something you know nothing about?

John Carle
http://www.WorkingTogether.ca
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5 Dubina // Feb 25, 2008 at 12:13 pm

The discount smacks of desperation - sure sign of a market cratering. In addition, I definitely wouldn’t get involved in a rental converstion - they’re built to a much lower standard.
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6 John Carle // Feb 25, 2008 at 12:42 pm

Dubina;

Thank you for your opinion. I would like to correct something though; condo conversions don’t have their own construction standards. They’re apartment buildings that have been standing for a while. These particular buildings were built approximately 25 years ago and are in good condition. Personally, I prefer buying conversion condos because we know what we’re in for… there’s maintenance & utility history on these buildings so there are no surprises; unlike brand new buildings with no history of costs or maintenance.
Be careful not to paint everything with the same brush; I agree that some of the conversions out there are absolute garbage. But that’s more dependant on the company that does the conversions than the buildings themselves. I’ve looked at some conversions that were simply terrifying to walk through at ANY price, with no reerve fund and no plan for moving forward with maintenance and management.
This conversion company, Premier City Investments, has a longstanding history of excellence and competence. NONE of their buildings have had any issues, and there has never been a “levy” or “cash call” on any of their projects. Heck, the condo fees haven’t even needed adjusting after possession. That’s something that most of the new buildings can’t claim!
This company does it right. As their Realtor, and a buyer of 10+ of their condos, I know this first-hand.

John
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7 John Carle // Feb 25, 2008 at 12:44 pm

Oh, and Dubina… don’t mistake a stabilizing market with a crashing one. The U.S. is crashing, we’re stabilizing. There’s a BIG difference.
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8 Peter // Feb 25, 2008 at 6:27 pm

Dubina,

You’re right these discounts are a sure sign of a market crash. Who offers close to a 30% discount if the market is stabilizing? And by the tone of John’s response it sure sounds like these “specials” are going like hotcakes.

Let’s watch the flippers hold the bag on these overpriced condo conversions.
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9 Michelle // Feb 25, 2008 at 8:42 pm

I bought condo conversions before and I have nothing against them I made enough money to put a good downpayment on my house it was a smart move you should think about how you can make money and stop thinking about what the seller is doing thats his problem not yours
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10 John Carle // Feb 25, 2008 at 11:07 pm

Peter,

I’m curious… what would you consider to be NOT overpriced? These condo conversions are among the most resonable prices available in the city… yet you still think they’re overpriced.

Just a guess… but you don’t actually own any real estate at all, do you. Someone increased your rent and now you’re a bitter & angry tenant?

John
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11 J.P.H. // Feb 25, 2008 at 11:48 pm

John Carle,
You sound desperate.
Be careful not to bring down the values of the buildings by listing them on MLS. Smart, how else would you generate high commissions without the illusion of a blistering market? These units will definitely compete with the thousands of new units nearing completion in 2008.
I am a bitter and angry tenant.
Regards and good luck.
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12 Dubina // Feb 27, 2008 at 9:43 am

The Case-Shiller real estate index down south is in a freefall - even still there may be lots of downside profit if one were to short a few futures. At least it would be a partial hedge against buckling prices here until we get a similar contract in Canada.
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13 Dylan // Feb 28, 2008 at 12:00 pm

I would never, never, never pay more than $130,000 for a 30 year old 1-bedroom apartment conversion condo.

I’m not slagging the realtor or the developer. Relative to the rest of the market the prices are pretty fair.

But it’s funny how real estate has priced itself out of a market. Who would enslave themselves with a 40 year mortgage to live in these places?
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14 Peter // Feb 28, 2008 at 6:43 pm

John Carle,

Given that rents are currently softening (I’m seeing incentives offered by several brokers) coupled with the huge oversupply of condos we currently have, I believe once the dust settles on this correction these units will fall in the 50-75k range.

And for your information I do own a bungalow, according to my assessment it is worth close to 400k. But you know it certainly doesn’t feel like I live in a 400k house. I certainly wouldn’t be surprised if it levels off in the 200-250k range in the near future.

Dubina,

Thanks for bringing those contracts to our attention. I just may short a few – I’m with you the party is just beginning. . It’s too bad there is no contract in Canada – I bet the open interest would be huge!
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15 patriotz // Feb 29, 2008 at 12:00 am

Oh, and Dubina… don’t mistake a stabilizing market with a crashing one. The U.S. is crashing, we’re stabilizing. There’s a BIG difference.

That’s right. The US market was “stabilizing” a year ago.

Bwahahaha.
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16 Dave // Feb 29, 2008 at 9:00 am

I find it odd that John considers the RE market is “stabilizing” when in Fort Saskatchewan they filled in basements that were dug last summer and still cannot sell the junk they built last spring. Well I guess you could say nothing selling is a pretty stable market.
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17 John Carle // Feb 29, 2008 at 9:41 am

Dave;

The new home sales market is in trouble, of that there’s no doubt. Many of the builders have over extended themselves and are therefore in precarious positions. It’s not only because of the bad 2nd half of 2007, even though that did factor in for them, but mostly because of their cash-flow positions. Many of them are carrying massive debt loads, and can’t service it.
Nothing selling? You are kidding, right? January was one of the highest volume sales months in history according to MLS statistics. Further, prices did in fact start to climb again in January, and February will likely show the same. Calgary, which is usually about 2-3 months ahead of us for activity, began to recover in December and is showing strong market trends right now. If you look back over the past 20 or so years, the Edmonton market has almost always followed the Calgary market.

I don’t recall the U.S. ever saying that they were “stabilizing”. They went straight from boom to bust. With the sub-prime lending, up to 150% loan-to-value and the massive slow-down to their economy, they didn’t have a hope. But by the rationale of people like Dave and Peter, we’ll follow suit. Even though we don’t have a sub-prime mess, nor the 150% issue, and our eonomy is in a boom… yeah. Sure. We’ll follow suit.
But I guess that maybe the multi-billion dollar companies that are investing in Alberta to the tune of 80+ Billion dollars over the next decade have it wrong. They should be listening to you guys, and not millions on the 100’s of highly educated and well trained economists that they hire. How silly of them.

It’s interesting that you’re only looking back 18-24 months to guage the current market. Based on most marketplaces in Canada, and the history of the Edmonton market over 15-20 years; we’re in an excellent market. But yes, based on the last 2 years things are bad. It’s not a realistic point of reference though.

Peter, I can’t speak to “Rents softening” beacuse there’s no real concrete way to track what’s happening in the rental market, except for a personal opinion. You have certainly proven to us that a personal opinion of a market can be very subjective when you don’t have any real information.
All I can say about the Edmonton rental market is that of the 700+ rental suites that I’m involved in, there is hardly a single vacancy to be found and there are waiting lists on most of the buildings. In discussion with various Edmonton leasing agencies over the past month, they consistently tell me that they have lists of renters, and a lack of property for them. According the the Edmonton Apartment Association, vacancy rates are well below 2% and rents are still increasing. But again, it’s not a market that I’m comfortable voicing an opinion on. I’ll leave that to you.
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18 John Carle // Feb 29, 2008 at 9:46 am

J.P.H.
I am desperate. Desperate to find a good contractor who can fix the deck on the back of my house, which was built incorrectly when the house was built. Do you know anyone?

1,000’s of new condos coming onto the market is an insight? Really? How is that different than the 1,000’s of new condos that come onto the market every year? Yes, we’re competing with them. We always have, and always will.
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19 John Carle // Feb 29, 2008 at 9:51 am

Oh, and Peter… if you think that your home is dropping by almost 50% “in the near future” it would be a smart move for you to sell it before you lose your shirt. Tell you what; I know lots of people who would love to pay you the $250K (top end of your assessment) tomorrow so that you can go on your merry way and not stress about it anymore.
That way, you can sell at a high price… take advantage of these declining rents that you are talking about… and win on both ends of the deal. If you truely believe what you’re saying here on my blog, then that would be the logical step for you to take. IF you believe what you’re saying, that is.
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20 Dave // Feb 29, 2008 at 10:25 am

I don’t know if you are aware of it but one upgrader, the Synenco one that the Chinese were going to build, has been cancelled and another one, BA energy, has stalled due to lack of funding.
That being said you are correct that there is still a lot of investing taking place here in Alberta but the bulk of it continues to be Fort McMurray.
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21 Dave // Feb 29, 2008 at 10:34 am

John another thing I forgot to mention, Stats Can. repoted a net decline in Albertas population for the last quarter of ‘07, the first time since ‘94.
Shell Canada has a hard time attracting workers for their project in Fort Saskatchewan….why….because the workers find rent and housing unaffordable. As a consequence Shell is looking to build a camp in the area to house temporary workers during the construction phase just like everyone is doing in Fort McMurray.
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22 Michael // Feb 29, 2008 at 10:37 am

Rent softening? Not in the 39 or so units in the Edmonton area that we’ve bought through John so far! On the contrary, our latest round of increases last month didn’t result in a single tenant’s notice - not one angry or bitter tenant.
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23 Peter // Feb 29, 2008 at 12:59 pm

John,

Yes, that strategy will work. I’ve actually seen an article in the Economist showing how people have employed it in bubble markets like this. The only trouble is finding someone to give me the 400k. The way buyers have disappeared it doesn’t seem like it’s an option. Last year at this time it would have been no problem. The only places selling right now are the ones with steep discounts (kind of like the deal you are offering) and even still they’re tough sells.

The article was similar to this (basically the state we are at right now):

http://www.bankrate.com/bos/news/mortgages/BubbleMain.asp

You’re right a sample of 700 apartments is not representative to base an opinion on. I’m glad you realize this and value my opinion because as you say you would believe a “highly educated and well trained economists” which I happen to be.

And to correct your statement about 1000’s of new condos coming on the market every year. This isn’t always the case - there are years where practically nothing gets built. In fact this was just a few short years ago. But I guess you were in short shorts back then.
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24 Michael // Feb 29, 2008 at 8:19 pm

Though I am new to these blog postings, I would like to add my perspective on the credentials of your host, John Carle, for the benefit of those weighing (or attacking) his opinions as expressed in this blog.

I met John at a seminar he was hosting in partnership with the Royal Bank of Canada, with his business partner Sharon Gregresh, on the topic of real estate investing in Alberta. This was in 2005. I typically choose to work with heavyweights in any given area, so I thought that if the people at RBC were working with John and Sharon, they were probably worth listening to.

John and Sharon discussed real estate investing with a very real “how to” approach, advising from personal experience as to what works, and what doesn’t. Further, the information being conveyed was unquestionably sound from every business perspective. As an attorney specializing in international commercial litigation (backed by a philosophy degree specializing in logic), I am trained to grab onto the slightest flaw in the description of any business plan, and I found none in the advice offered by your host.

I followed the advice that I received, and I pitched some money into real estate (though not that much).

To be clear, the advice I that received was not simply “buy this (because I’ll make a commission)”, but it was “buy this, for this reason” and sometimes “don’t buy this, but run away instead (commissions be damned)”, or “if you do buy this, here is some advice as to what to do next”. It was all very practical and all very useful information.

Two and a half years later, more or less, I have avoided the headaches of the properties I might have bought but for proper advice, and I have reaped the benefits of owning very lucrative properties (which I can promise you is not connected to how they look physically), and I have added better than seven digits to my net worth with not much money into the process on the front end. I now reside in the Cayman Islands where I still practice international commercial litigation and still invest in real estate, and I still seek John and Sharon’s advice on real estate because there simply isn’t any better source for real estate advice.

You might think that I am biased and that I am waving the flag of your hosts. I’ll be honest: if you make me a million dollars, I’ll wave your flag too. John and Sharon did, and I’m going to wave their flag every chance I get.

For those of you reading this blog, you may wish to consider the track records of your various advisors, and make sure you are following someone who can take you where you want to be.

Good investing.

Michael
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25 Cynic // Feb 29, 2008 at 10:12 pm

Peter - I’ll offer you $250K. Despite Edmonton’s ’softening rent’ I figure I can get enough cash flow out of your place to make my Lexus payments…
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26 John Carle // Mar 1, 2008 at 1:10 am

Well Peter, you have offers on the table right here according to Cynic. What you do with them is up to you.
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27 John Carle // Mar 1, 2008 at 1:12 am

Michael;
Kinder words could never be spoken. Thank you.

John
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28 David // Mar 1, 2008 at 2:47 pm

These real estate agents are not contented in no houses being sold. They continue to flip it to each other to keep the price up. Greed pure greed. Who would invest all that money in a city like Edmonton with very few long term jobs and extremely cold weather. I got 60 thousand sitting in the bank and it will stay there. I refuse to pay for a honda civic type building at Rolls Royce prices.
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29 Richard // Mar 2, 2008 at 9:14 am

I have been watching the discussion on this topic for a couple of days. I thinking about buying real estate in Edmonton - a house or condo to rent out. But I haven’t been sure if now is the right time.
After reading what John has to say here I think that I am ready to do this. At first I thought that these other posts had some merit. Now I realize they are just screaming at the wind.
It was Michael’s and David’s comments that finally made up my mind. If Michael has made over $1,000,000 through John, and David has $60,000 in a bank account as his savings - the choice is clear. I want to me Michael, not David.
I was reading what Peter and Dabina said earlier. At first, I thought Peter was a good conservative voice. Since he’s not “putting his money where his mouth is” I won’t put much stock in his words. Given that this Michael person is putting his money where John’s mouth is… that speaks volumes.
John, I sent you an email a few minutes ago. Let me know when we can start looking for some rentals and what you think I should buy. My bank has laready given me the go a head.
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30 John Carle // Mar 2, 2008 at 9:56 am

Richard;

I have your email and have left you a voicemail. Call me at yoor convenience.

P.S. That’s one of the funniest answering machines I’ve ever heard.

David;

“These real estate agents are not contented in no houses being sold. They continue to flip it to each other to keep the price up.”

I guess our secret is out! Yes, the real estate transactions that are happening out there are only between Edmonton Realtors to make it look like the market isn’t completely dead. You caught us!
While I’m coming clean, I guess we should be totally honest…

1. We also have a secret society that controls the government from behind the scenes. We dress is black robes and masks and chant like monks when we’re together. (the robes chafe)

2. There are secret messages in our advertising to give instructions to our covert super-human agents in the world.

3. The gunman on the grassy knoll was really a real estate agent. We shot JFK.

4. Elvis. He’s actually selling real estate in Edmonton now.

5. There are aliens here on earth. We set up a secret group to police their activities. Those agents wear black suits, and have really cool guns and cars that fly. It made sense for us to help these aliens; they need a place to live too right? Greed, pure greed!!

6. We suppressed the all - electric car so that oil prices wouldn’t drop. It was easy… our alien friends helped us to do it!

Whew! I sure feel better now that I have all that off of my chest!
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31 BigBanker // Mar 2, 2008 at 4:00 pm

Richard,

I’ve done well with many properties over the last 20 years as well as first and second commercial mortgages. If you base your decision to buy on this anonymous blog may god bloody well help you.
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32 Michael // Mar 2, 2008 at 6:46 pm

Richard:

Following up on BigBanker, I agree that there are many factors to consider when deciding on any investments, and real estate is no exception. Having a good agent is critical – John will do very well for you. So is having a good lawyer (this isn’t rocket science, but errors in a property deal can be rather irritating) – find a good one (but it need not be expensive). You will also need to do a financial analysis on how the property is going to run: it is after all a small business. You will need people to fix the things that break that you can’t or don’t want to fix. There is more, but there is nothing that you need to be overly worried about. None of these things are particularly challenging – you just have to account for them.

Further, and perhaps most important, is that you must make decisions that work for you and will provide for your future. I fear for David with his $60,000.00 nest-egg. I fear that he hopes that this money sitting in the bank will somehow grow into enough money to support him in his retirement. It won’t, and I expect everyone here knows that. I hope there is more available, for his sake.

As for digging up help and advice, John has provided a forum here for investors to discuss real estate and investing in real estate and we can take advantage of that and share what we know. BigBanker, this is pointed at you too – jump in!! Richard, go ahead and ask questions. An anonymous blog is clearly not infallible, but weigh what you hear in full context and you’ll be able to sift the useful information from the noise.

Michael
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33 speculator // Mar 3, 2008 at 8:17 pm

Richard
You should consider joining (REIN) they have a meeting on wed you could meet lots of peaple who have done well in real estate. Don’t make decisions based on these web sites. Most real estate investors are quite poor for the first five years
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34 Cynic // Mar 4, 2008 at 9:59 am

Latest Sighting: A black helicopter lands in Ottawa, a black robed realtor is seen shaking hands with men in suits and a bizarre exchanging of briefcases occurs. BOC cuts 0.5%.

Coincidence???…
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35 Michael // Mar 4, 2008 at 11:59 am

Rate cut!! Time for a bidding war!

I’ll raise Cynic to $260,000 for Peter’s house (never mind that I haven’t seen it), and the offer expires in 3 hours unless Cynic beats it with another offer in which case mine goes up by $5,000 per cycle until I win at all costs…

Ahhh, the good old days…

Michael
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36 Dave // Mar 4, 2008 at 3:16 pm

Cynic,
The reason they dropped the interest rate was not to support a housing bubble it was to try and lower the Canadian dollar against the US dollar.
Our economy in Canada is slowing down and this last quarter was the first time in years Canada has seen a trade deficit.
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37 Cynic // Mar 4, 2008 at 4:44 pm

Dave,
I hope you don’t really believe that nonsense about the dollar? The rate cuts were done for two reasons: inflation & banks.

I wasn’t suggesting that it was done to “support a housing bubble” I was poking fun at the conspiracy theorist posts earlier in the blog. However, the consequences of the cut will in fact probably be continued inflation of that asset class.
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38 Michael // Mar 4, 2008 at 6:33 pm

I also agree that the rate cut was not done for the purpose of supporting a housing bubble (I should be careful in jesting on-line), however it will undoubtedly have the effect of supporting home sales - though I don’t personally believe there is an Alberta housing bubble in any real way. (Monitor Florida to see a bubble in action.)

Lowering the cost of borrowed money means (among other things) that a higher price can be paid for a revenue-producing asset while still yielding the same cash-flow after debt servicing. It will also bring more buyers into the market for any given price-point, since more people can afford the payments at the lower rates (investors and non-investors alike). This will ramp up demand and we know what that does to price – it ain’t rocket science.

A failure to project cash-flows after the rates return to normal can easily hurt investors who are not prepared for that.

For the record, the “bidding war” days were not (from my perspective) the “good old days”. It was damn hard to find value and buy it before someone got lucky and scooped it.

Finally, I’m sure it was John in Ottawa with the briefcase and the funny robe… and he does sort of resemble a thin Elvis. D0n’t you think?

Michael
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39 Peter // Mar 4, 2008 at 9:32 pm

Michael,

It’s easy to look like a genesis in a bull market. Ask any tech refugee from the 90’s.

I’ve been short RioCan Real Estate Investment Trust since the $25 level and even at these levels ($19~ish) I see no reason to cover. In fact, I may add more. I’m very comfortable paying the distribution since I’m up over 25% in less than a year. Given the negative comments out by analysts today on all REITs – I’m really considering adding to my position. There’s a lot more downside profit to be had in all REITS.

I don’t see today’s rate cut turning this ship around. Record inventory levels coupled with non-existent sales means we’re in for one hell of a summer. Watch peoples ‘paper gains’ in real estate will quickly dwindle away.
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40 Sharon Gregresh // Mar 4, 2008 at 11:38 pm

Hello, Everyone I have been sitting back and observing your posts. Interesting is what comes to mind to sum up my opinion on the exchanges on this post.

I find it interesting that everyone has ignored Michelle’s Post (Post Number 9), all you nay sayers need to go and reread her post. Michelle Congratulations on your success. And thank you for your comment “….you should think about how you can make money and stop thinking about what the seller is doing that’s his problem not yours”

You are absolutely right it is the seller’s problem or ‘I like to think of it as a decision’ to Market the first 10 units in each complex at a remarkably low price. For those that are skeptics it is very easy to take a look at comparables to determine that there is good value in this offer.

From my own experience’s rental rates are not dropping. I have been investing in Real Estate for the majority of my career and for the first time ever I am consistently experiencing rents that are covering carrying costs. And considering that carrying costs get higher with the rising cost of Real Estate this is quite remarkable.

Unfortunately if you are a tenant this is not an easy pill to swallow in most cases. This is why you should strongly consider entering the Real Estate Market. It always astonishes me when I come across people that have been willing to pay rent for 2, 5, 10, 20 or even 25 years. These same people often tell me that they kept renting because they were unwilling to take on the risk of purchasing there own home.

The way I see it, it is far riskier to rent for a long period of time, every rent payment that is made gets the tenant a place to live with no equity for them. And they constantly stand the risk of a landlord raising the rent, or being at the whim of what the landlords needs are If the landlord needs to sell the tenant could end up with a new landlord, or worse could be given three tenancy months notice to leave so the new buyer can move in. Had the tenant of bought, they would of built equity, bought down their own mortgage instead of the landlords, and would not have to move until they decide to.

Sharon
P.S. Michael Thank You Very Much for Your Kind Words Regarding Our Part In Your Real Estate Successes. John and I Appreciate Them and Have Enjoyed Working With You. We Look Forward To More Successes In The Future!
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41 Michael // Mar 5, 2008 at 5:20 am

Hi Peter:

The markets we are discussing are rather different. These are the top tenants of RioCan:

1. Famous Players/Cineplex/Galaxy Cinemas
2. Metro/A&P/Dominion/Super C/Loeb/Food Basics
3. Zellers/The Bay/Home Outfitters
4. Wal-Mart
5. Loblaws/No Frills/Fortinos/Zehrs/Maxi
6. Canadian Tire/PartSource/Mark’s Work Wearhouse
7. Winners/HomeSense
8. Staples/Business Depot
9. Reitmans/Penningtons/Smart Set/Addition-Elle/Thyme Maternity
10. Shoppers Drug Mart

My top-10 tenant list starts with a lady named Isabel, though I am fortunate to have many good tenants.

The distributions for RioCan show consistently increasing payments, per the list below, and the falling stock price helps to demonstrate that the group mentality of stock investors will not always track what the company’s underlying performance warrants (which you appear to know about from the tech bubble). I hasten to add that I don’t track RioCAn and should not be taken as expressing an opinion on that REIT.

2007 $1.3275
2006 $1.2975
2005 $1.2725
2004 $1.2275
2003 $1.14
2002 $1.105
2001 $1.075
2000 $1.07125
1999 $1.04
1998 $0.95

I agree that a rate cut will not change the course of a nation’s economy (Bush Jr. wished it were so), but it will bring some new players to the table.

Michael
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42 Michael // Mar 5, 2008 at 8:22 am

Sharon:

I agree that Michelle makes a good point. Unless the price discloses something about the property, who cares why the developer prices in the way that they do? Maybe they want to create a market “buzz” from a special offer (like so many other successful ad campaigns)? Alternatively, maybe they are generating cash for new acquisition, or to meet a cash call for an investment portfolio, or to build a mansion or take a vacation or to pay for a wedding… who knows? (Disclaimer: I have absolutely no idea why this developer is pricing his buildings like this.)

In the end, an investor has to understand the market, decide what their model portfolio looks like, and then go and find properties that fit (or so you taught me, not so many years ago).

And on the “kind words”, you are most welcome. The privilege of this relationship has been all mine.

Michael
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43 Klaus // Mar 5, 2008 at 8:10 pm

Peter, thank you for hitting the nail on the head about any clown being able to pass for an investor worth his salt in a good bull run.

The smart money doesn’t ride the boom all the way to its inevitable collapse, and for a while thereafter. This is just the last boom all over again - incidentally the price of oil reached the inflation-adjusted high we saw at end of the last bubble.

I read an excellent piece in the WSJ in which I believe the former head of reservoir management for Saudi Aramco put a large dent in the peak oil theory, arguing new technologies in extraction from conventional and non-conventional reserves more efficient puts peak oil out decades. Yes, the world is using more oil but there’s lots of it. It’s not “real” money which has pushed it to where it is (though it’s been aided by scandalously loose monetary policy in the US since Volker). Things will get back to normal.

David, I’d look at your $60,000 nest egg this way. I don’t feel much compulsion to own more the roof over my head, some blue chip REITS with geographical diversification as well as some private commercial mortgages. At this price, there are as good/better hedges against inflation which we’ll all need, such as gold. Not that I’m a gold bug. There are also less risky ways to obtain real estate exposure without having to leverage yourself to buy physical real estate. The boom always feels “different” this time.

Oh, and Peter, you may wish to consider a short on BEI.UN – more exposure to the Alberta market than the Ontario-weighted REI.UN. I rode RioCan up from $13.50. While I think I may as well stay long for the yield, I can understand the rationale to short.

Tally ho
*

44 Michael // Mar 6, 2008 at 6:07 am

Hi Klaus:

It’s always nice to hear different perspectives on how to obtain financial security for the future. My view obviously differs from yours in that I prefer real property as an asset class over securities. Periodically we all hear the reports of a corporation’s collapse or bankruptcy, or of the “restatement” of their financial statements to admit massive losses instead of the profits the investor thought the company was earning. Sometimes the price of a security just collapses for no apparent reason other than the whim of the market. I am happy to say that none of my buildings have ever done that to me. On the other hand, I do like to hold some securities as part of a diversified overall portfolio, though none of them have performed as well as real estate and none of them are as secure.

I would, however, like to point out a major flaw in your post where you say: “Peter, thank you for hitting the nail on the head about any clown being able to pass for an investor worth his salt in a good bull run”. It is not true that any clown will achieve wealth in a good bull run (for whichever asset class is under discussion). It is only those clowns who see the opportunity that exists, round up the cash and takes the steps needed to buy into that asset class who will achieve wealth. The other clowns who don’t do those things will be left standing about wishing they were in the first group of clowns. Missing this important point appears to be a major flaw in your argument.

Cheers.

Michael

Anonymous said...

good one..the comments are amusing i especially like the one where the blogger states she has bought 39 condos..goes to show the greed mentality that powered the bubble

now 4 months later the bears have been proven right

squid

Anonymous said...

Sure is a lot of desperation in the above discussion. I guess if you are in massive debt (I mean, you drive a Lexus but you have PAYMENTS to make), and have 39 properties and god only knows how much in loans that must scare the bejeezuz out of you at the thought of a sudden move into negative equity...I sure am glad I got out of this ratrace and all my debt before the top of the bubble. Some of us are just quietly sitting back watching until the market drops back down to reasonable prices to buy back in - not to greedily try to own 39 properties (how many pieces of silver did Judas get?) just to buy another home of our own, and know that our friends, neighbours and children will have the opportunity to do the same without decades of enslavement. Call me an optimist.

Toronto real estate agent said...

It looks like a summer sell out. How on earth can anybody afford to sell his proprerty like that. As a Toronto real estate agent I can only say that it is that I'm lucky to not have come across clients like that.

Anonymous said...

Love the realtor spam from not only a different city, but a completely different province.

squidly77 said...

House prices won't recover until 2015, ex-MPC expert warns
times are a changing

squidly77 said...

Barclays warns of a financial storm as Federal Reserve's credibility crumbles

bearclaw..this letter log in has to go

squidly77 said...

slaughthouse..the best of the best

squidly77 said...

june creb report

Anonymous said...

Thanks for putting this up on the net; the original went away and I liked those conversations (I thought the Clown part was funny).

Not sure I understand the reference to Judas though... am I going to have to burn in hell if I invest in real estate? Crap!

John said...

The original went away because that Real estate team is no longer working together, and their website has been closed down.

You can still find me (John) at http://www.knock-knock.ca

I too enjoyed this conversation. It amazes me that some people can have such passionate opinions about something they know nothing about... Where are the quick quips against real estate investments, compliments of our stock fans, now that the stock market is imploding? Amazing how quiet they've become.

HAHAHAHAHA

John

PropertyFusion said...

These conversations also gave me a good chuckle, and I will admit the Judas comment went over my head to.
As a member of the Origional Real Estate team to this blog post I would like to invite you to my new site www.PropertyFusion.ca or blog.propertyfusion.ca