Author Topic: Thoughts on the Calgary real estate market?  (Read 836 times)

grilledcheese

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Thoughts on the Calgary real estate market?
« on: February 23, 2018, 06:34:29 AM »
Hello.

My husband and I own a revenue property (condo) in downtown Calgary, and are considering selling it. We feel the condo market is over saturated at the moment and don't feel confident in the value of the condo increasing much over the next few years. We bought the place back in 1999, so we will make an okay profit, and are hoping to put that money to work for us in other ways. Since we lived in it up until 2006, we will only pay capital gains tax on the difference of value from that point, which is actually a loss compared with today's value.

For anyone who might have an understanding of the Calgary housing market, do you agree that things are looking bleak in terms of condo prices? Ours is an older unit in a walk up building, and we can't see it competing well with all the new builds out there. Figure we should cash out now and try to get a higher return through other methods.

Any thoughts?

grilledcheese

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Re: Thoughts on the Calgary real estate market?
« Reply #1 on: February 23, 2018, 09:17:43 AM »
Boo. Nobody cares about the Calgary market.

BNgarden

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Re: Thoughts on the Calgary real estate market?
« Reply #2 on: February 23, 2018, 05:30:29 PM »
Sorry to say you'll have to do the 'mathy-math' (as blogger Squawkfox calls it)to see for yourselves.  (Unless you want to post everything here and have someone run a check...)

Not meaning to be flip or anything, I don't know that I'd value any general opinion (for example, mine) on the state of the condo market (other than agreeing it seems over-supplied at the moment).  Downtown has a goodly number of new/newer units still to be absorbed AFAIK / have read?

It will all come down to you making some assumptions on selling price and time on the market to sell / closing costs, as well as where you'd invest and assumptions on the market returns of that portfolio allocation.  You know the location, layout, finishes, amenities etc and the carrying costs and haven't shared that or any current / likely revenue info here.  You can work out the prospective capital gains well enough for yourselves given a range of selling prices.

Good luck with your decision!

joonifloofeefloo

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Re: Thoughts on the Calgary real estate market?
« Reply #3 on: February 23, 2018, 05:51:19 PM »
Yeah, you won't find a good volume of people on the forum specifically familiar with the Calgary market, so it would be general concepts:

1. Except as a true home (i.e., unconcerned with costs/loss/profit), buying is speculating. Selling as a financial strategy is too.

2. On the forum, we're clear that we have zero idea what any given market will do -a single stock, a single currency, a single real estate area or type. We acknowledge that any market can go up and down, and probably will, and that we rarely know when it's going to do what.

I'm usually biased toward selling, just because homes cost a lot to maintain -taxes, strata fees, maintenance, insurance- and those costs can go up significantly at any point, and an area's tenancy laws can put a landlord at too high a risk. I prefer index funds. But, some people on the forum love holding real estate. It's their only option for investing OR they scored great deals, love dealing with people, etc.

No one can know what condos in Calgary will or won't do. You're already interested in going that route, you can sell for a profit, you know how to invest the net well, and those three pieces are all you can know for sure. Buying or selling always brings the risk of losing out, but so does not buying, not investing, and not selling.

grilledcheese

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Re: Thoughts on the Calgary real estate market?
« Reply #4 on: February 24, 2018, 11:29:13 AM »
Sorry to say you'll have to do the 'mathy-math' (as blogger Squawkfox calls it)to see for yourselves.  (Unless you want to post everything here and have someone run a check...)

Not meaning to be flip or anything, I don't know that I'd value any general opinion (for example, mine) on the state of the condo market (other than agreeing it seems over-supplied at the moment).  Downtown has a goodly number of new/newer units still to be absorbed AFAIK / have read?

It will all come down to you making some assumptions on selling price and time on the market to sell / closing costs, as well as where you'd invest and assumptions on the market returns of that portfolio allocation.  You know the location, layout, finishes, amenities etc and the carrying costs and haven't shared that or any current / likely revenue info here.  You can work out the prospective capital gains well enough for yourselves given a range of selling prices.

Good luck with your decision!

Thank you so much for the reply.

The mathy-math... ugh. Something neither my DH and I are very good at. We did ask a close accountant friend to run the numbers, and he figured our investment was only bringing in 2% return, which is kind of crap. We've also talked to our local realtor friend about it. I guess I was hoping there were enough Calgarians on here to get a more rounded opinion on things and feel more confident about our decision. I listen to a ton of podcasts, and every once in a while I hear one about how amazing real estate investing is and I wonder if we are being crazy to sell our only bit of real estate investing.

Anyways, thanks again for the reply. Pretty sure we will sell, mainly because we are done with landlording, particularly with a condo unit. A detached house might be more doable (thinking Inglewood/Ramsay if you're familiar with the city.

grilledcheese

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Re: Thoughts on the Calgary real estate market?
« Reply #5 on: February 24, 2018, 11:35:00 AM »
Yeah, you won't find a good volume of people on the forum specifically familiar with the Calgary market, so it would be general concepts:

1. Except as a true home (i.e., unconcerned with costs/loss/profit), buying is speculating. Selling as a financial strategy is too.

2. On the forum, we're clear that we have zero idea what any given market will do -a single stock, a single currency, a single real estate area or type. We acknowledge that any market can go up and down, and probably will, and that we rarely know when it's going to do what.

I'm usually biased toward selling, just because homes cost a lot to maintain -taxes, strata fees, maintenance, insurance- and those costs can go up significantly at any point, and an area's tenancy laws can put a landlord at too high a risk. I prefer index funds. But, some people on the forum love holding real estate. It's their only option for investing OR they scored great deals, love dealing with people, etc.

No one can know what condos in Calgary will or won't do. You're already interested in going that route, you can sell for a profit, you know how to invest the net well, and those three pieces are all you can know for sure. Buying or selling always brings the risk of losing out, but so does not buying, not investing, and not selling.

Thanks so much for these thoughts. It really is a crap shoot, hey? I didn't realize there were so few Calgary folks on here. Figured there would be a bigger population considering how popular MMM is now. Anyways, yes you've pointed out many of the risks were are concerned about, particularly a potential large repair fee. Nothing in particular, but these things tend to crop up on older buildings. We will make a profit, since my husband bought the condo over 15 years ago before the Calgary boom, but it is a really low time in the market, and it's just been ingrained in me that you never sell low. I guess I need to get over that though, because as soon as we get that money in our hands we can invest it at a much higher rate.

Anyways, thanks again for your reply. Much appreciated. I know so little about real estate so I really appreciate all opinions on the subject.

joonifloofeefloo

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Re: Thoughts on the Calgary real estate market?
« Reply #6 on: February 24, 2018, 02:16:52 PM »
It really is a crap shoot, hey?

Yep.

To be clear, sometimes an MMMer will select a single stock (e.g., one condo, shares in Apple, etc), but an MMMer will do that only with due diligence, and usually with a fraction of their available funds.

With the majority of our funds, we make sure to diversify, because every single one item is a crap shoot. So we generally invest in all companies, in all sectors, in all regions of the world simultaneously, with just a couple of bucks (so to speak) in each. Some of them will be decimated -but that will be irrelevant because we didn't put everything in there.

...as soon as we get that money in our hands we can invest it at a much higher rate.

As calculated over a 20-40 year term, yes, that's the MMM expectation. But the market may do wild things in the meantime. Don't count on high returns (even 4-6%) in the shorter term. The MMM way is about the long haul.

I highly recommend the book (by a Canadian!) The Millionaire Teacher (Second Edition) by Andrew Hallam. He sets out investment stuff so clearly, in a brief and humourous presentation.

Anyways, thanks again for your reply. Much appreciated. I know so little about real estate so I really appreciate all opinions on the subject.

You're very welcome :)

While no one here (whether residing in Calgary or not) can possibly know what will or won't happen to any one stock or market -including condos in Calgary- folks on the forum from around the world will happily help you with the math -learning how to do it, etc. So if you ever do want to post numbers and get that math help, definitely start a thread for exactly that.

kmart

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Re: Thoughts on the Calgary real estate market?
« Reply #7 on: February 25, 2018, 06:14:58 PM »
I too have a condo that I rent in Calgary and follow the market a decent amount. Mine was built in 2009 and I agree the market is over saturated for condos. It wasn't intended as a rental so the numbers aren't great for me. It was breaking even and since the 2015/16 downturn it negative cash flows a small amount. In my opinion the cash flows aren't there. If you can sell and get some money (gains) out of it, I'd do it. There are better investments out there. I'm looking at selling mine in the next 1-2 years. Luckily I have good renters so that helps.

But take that for what it's worth as I don't know the specifics of your exact location, financials, etc. I have rentals in other places that do way better. At the end of the day, do the research on your financials - what is it bringing in and let that be the guiding factor.

MMMdude

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Re: Thoughts on the Calgary real estate market?
« Reply #8 on: February 25, 2018, 09:42:45 PM »
I would agree with you there is limited upside in the condo market in both Calgary and Edmonton.  At that age, like you say it is ripe for a special assessment for something - it is unusual if you don't get whacked with one of those at that age.

A good rule of thumb is that the monthly rent you charge should not be less than 1% of the price of the property.  If you are getting less than that, then the numbers don't make sense financially as a rental property.  That is not purchase price but today's value....since money is fungible you can take that $ an invest elsewhere if it doesn't meet that criteria.  With a reit listed on TSX you would get a headache free 6-7% return every year plus capital appreciation plus dividend increases each year.

Very few properties in Alberta meet that 1% criteria....however that is also the case in Vancouver and Toronto but that was OK as price appreciation made up for that gap and then some.  Calgary just does not have that kind of outlook at the moment

tct

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Re: Thoughts on the Calgary real estate market?
« Reply #9 on: February 26, 2018, 09:56:20 AM »
I had to make a similar decision recently. (Different market, not Calgary). The question I kept asking myself, is what am I going to invest the proceeds of the sale in. If you're going to reinvest in real estate elsewhere, consider that you will lose a decent portion of the proceeds to real estate commissions, title fees, and taxes (unless doing something similar to a 1031 exchange in the U.S.).

Brokenreign

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Re: Thoughts on the Calgary real estate market?
« Reply #10 on: February 28, 2018, 12:38:40 PM »
The rent vs. buy is so skewed to renting in Calgary that I have a hard time seeing how one could ever make a satisfactory return being a landlord in the Calgary market. I know a ton of people who moved from condos to detached and are holding the condos "until the price recovers," (I presume that means to the highest assessment they ever received...) an unlikely scenario in light of the overbuilding and mass amounts of existing involuntary landlords in this city.

I rent a house in Inglewood (your preferred neighborhood) and I have a hard time seeing how the landlord could possibly be making any return.

I'm no expert on real estate but my opinion would be that there's more downside risk than upside potential, especially for a walk-up.

Good luck with your decision!