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Friday, October 8, 1989 — North Shore News — 85

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The expenses of
a

appre

LAST week we had a
look at the economics
of investing in rental
housing on the North
Shore.

We saw that if an investor
finances the entire purchase
price of the property he
would be looking an excess
of expenses over revenues
ranging from 1.5% of the
purchase price for West Van
apartments to 3.7% for

forth Van apartments. So
these rental properties
would represent a viable
investment opportunity only
if he foresees price increases
in these markets that are
greater than these percent-
age losses.
~. This week we are going
to survey rental housing
‘investment opportunities in
‘different-areas around
“greater Vancouver. The areas
chosen ‘are all more or less
within half an hour of the
North Shore so that it
would be feasible for an
. drivestor located here to
manage the. property herself. —
For t tential investment
roperties, we are going to
look 2t the purchase price, -
monthiy rent, mortgage
‘- payments, property taxes
and monthly maintenance
fees. In order to keep the
study manageable it will be
‘restricted.to one-bedroom
- @partinent ‘units.
The results of the survey
shown, in the accompa-
age 65) where
: ata West
fancouver (Ambleside) one-.-.
bedroom apartment would .
have a purchase price of
$145,000 and ‘wou!d rent
for $800 per month. These

revenucs would be offset by
mortgage payments of
$971, property taxes of $77
and maintenance charges of
$150 resulting in a monthly
loss of $398. Similar figures
are shown for North
Vancouver (Lower
Lonsdale) and for
Vancouver’s West End,
Kitsilano, Vancouver East,
Burnaby and Richmond.

It should be noted that.
these figures are not based
on a rigorous, scientific:
study, Rather they are the

result of perusing the classi-_
fied ads to estimate an aver-

age rental rate for cach area
and then looking at the
records of property sales for

_ this year to get an average «
‘selling price. So, while the

figures should not be taken
as gospel, I think they repre-
sent a pretty good guide to
the econoniics of investing
in rental properties around
the Vancouver area. ;
In estimating the month-
ly mortgage payments I
assumed that the investor
would be financing the
entire purchase price of the

: property in order to gener-

ate the maximum interest
expense deduction for

“4iicome tax purposes. The

mortgage payments are

‘based on a one-year-term,

EWS photoc Julie fverson

6.5% mortgayr: amortized
over 25 years.

There is a considerable
difference in the amount by
which annual expenses
exceed revenues for the
properties in the different
areas, ranging from $2,516
in Richmond to $7,069 in
the West End. However, as
a percentage of the purchase
price, the numbers are not
all that different, ranging
from 2.6% to 4.4%. In fact,
given that these figures are
estimates, the results are
really quite uniform and all
have in common the fact
that an investor would be
facing a negative cash flow
from all of these properties.

Whethe. any one of these

ropertics would be a good
investment depends on what

think will happen to

rices over the period of the
investment. For example if
you think that the price of
West Vancouver one bed-
room apartments is going to
increase by more that 3.3% a
year than that may be a
good investment for you.

- Whether it is would depend

on the alternative invest-
ment opgortunitics you
have, the transaction costs
involved in buying and sell-
ing the property and tax
considerations.

A real estate purchase can
be very highly leveraged and
therefore it may be 2 good
investment even if the net
profit as a percent of the
purchase price is very smail,
even in the range of 1% or
2%. To illustrate this, if you
had $25,000 to invest you
could place it in a GIC and

See Property page 68 -

‘IN North Vancouver, even the |
Valley Mall recentiy received a facelift courtesy ofa’

ADDRESS: 333 Wellington Drive

PO Rees re eveeneeonecnrcrsessaseceseesesone

LOT SIZE:

48 acre

~.
eerseovccvescence

NUMBER OF BEDROOMS: 6

Bneccercasovenrereasecenaenees

‘NUMBER OF FLOORS: 2

a AGE: 45 years

seenecesee

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ASKING PRICE: $585,000

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INTERIOR SIZE: 4020 SQ. FT.

_ baths,

bedreom

OPEN HOUSE: Sunday2-4pm-

PP EET EDLELUN Ow?
ae
TEPER ERE
st Ces

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mit posts are

parkiin

Spacious 4000 sq.ft. post: &
'. beam offers 6 bedrooms, 4.

separate 1 or 2.

'_ beautiful che
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Inlaw. ‘accom

sundrenched

Peper gce errs

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