NAI Commercial Apartments team - Vancouver

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Going once… Going twice… Not sold..?

by Brandon Harding

We have seen a new phenomenon rising in 2016 that is taking the sale of apartment buildings into one of the oldest forms of buying or selling goods and services..the auction. Originally established in 500 B.C, some brokers have rebranded this ancient method of bidding as a modernized way of achieving higher values. One of the reasons this strategy has developed, in this rapidly increasing market, is a fear by Real Estate professionals of under pricing properties. In principle this old method does have some merits that can be beneficial for specific types of properties and should be considered when determining the best way to generate top dollar for your investment, but not as often as the process is being used.

 

Why Tender?

Not having an asking price on a property does come with some benefits. Firstly,  there is no price expectations established to the Buyer, they must compete on what will be a good enough offer to beat out the competition. In a efficient and well environment, an experienced investor will do extensive research to determine value.

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Six-suite Kitsilano rental building, built in 1947, sold this in July for $750,000 per suite. - NAI Commercial

69-year-old rental suites sold for $750,000 each


Multi-family prices in Vancouver redefine “stratospheric”

Frank O'Brien Western Investor

 

We continue to pioneer pricing to new heights in this ever skyrocketing market. Many of our Buyers have been aggressively bidding on properties that come on the market but have been losing out to a multiple offer scenario. Once they reach a certain level of frustration there comes a point that they will go above and beyond to secure the next available investment. The Western Investor has published this sale as one of their headlines for recent deals of the month.

A 69-year old, wood frame rental apartment building in Vancouver has sold for a mind-bending $4.5 million, or $750,000 for each of the six units in the West 6th Avenue project where rents average $1,680 per month.

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Vancouver is shrinking


The supply/demand of the development market

 

Understanding the price of your investment can be summed up in one simple economic concept; supply and demand. The balance between both sides of the equation represents a constantly evolving equilibrium that influences the overall value of every single development site. There are so many components at work that trying to grasp every point would be futile. However, understanding a few of the important aspects that are behind the scenes manipulating the different factors, like a marionette puppet, should help to give you a better grasp of the circumstances that generate the final value of ...

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Metrotown Development Plan


The Calm Before the Storm

 

Over the last couple of years the real estate pot has been bubbling in the Metrotown area as the new official community plan edges closer to fruition. We know many land owners anxiously wait to find out if their property falls under a new zoning policy that may significantly increase the value of their land. Due to this reason, many investment owners in the area are reluctant to put their property up for sale, until the new value of their land is known, which can only be calculated when the density for your specific property is released. Once the city releases the community plan there may be a frenzy of activity in the area, similar to what is happening in Marpole. My recent article, Land Assembly Logic, gave you an introduction into the land assembly process and outlined Metrotown as a redevelopment opportunity, this will engage the area specifically.

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Problematic Pricing


Are Buyers getting priced right out of the apartment building market?

 

Apartment building market prices remain consistently strong all over the Metro Vancouver area due mainly from the limited supply. What constricts or releases that supply is you, the apartment owners. However there are many influences outside of your control that seem to affect most people’s decision making process.

The biggest concern we hear is “what do I do with the money?” This is a problematic scenario, as it diminishes any motivation to keep investing. For example, when you sell your property the gain will be susceptible to a tax of approximately 22%. Even after you receive market value for your property, and pay taxes, you no longer can afford an apartment building of equal size, defeating the purpose of re-investing your money. Without more profitable alternatives, apartment owners will continue to keep their money safely invested in their current properties. For this reason, sales typically occur as a couple wishes to retire, or no longer wants to dedicate their time and energy into the upkeep of the property.

The problematic pricing scenario. Now we understand the limited supply aspect, how does this affect the Buyers investing in the multifamily market?

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Land Assembly Logic

Vancouver Apartments Land Assembly

Is the land under your property more valuable than the property itself? This premise may be counter-intuitive to you as the property owner. How can the dirt be more valuable, sometimes much more, than the entire improvements, which provide a steady rental income?

The answer is simple. Land is a finite commodity, there is not going to be any more of it. We live in a landlocked city with the mountains and ocean presenting insurmountable obstacles to potential development. We now have to look skyward to create new housing opportunities.

Land assembly is a very complicated process to all parties involved, except for the individuals or company who own the land for sale. To you, as a land owner it should be a simple function of price. The improvements are worthless in a land assembly deal. It could be condemned, or completely renovated; to a potential developer it’s just dirt. The major factor, besides location, that will ultimately determine your value is ...

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