All Forum Posts by: Sean Kollee

Square foot numbers are too variable. I once built a house with $10 k European refrigerators. So the square footage occupied by the fridge cost 1666 $ per ft. Basement slab pour and finish with polished concrete was done at a total cost of 16 $ per ft. Do I allocate the $6000 extra I spent on infloor heat into the price of the slab? Just gets confusing to attempt to do a budget by the foot. I would focus on a round number for each budget item from excavation, cribbing, framing, plumbing, finishing, windows etc and see what that all adds up to and adjust accordingly. Then you can divide that number by your floor area and see if your way out of line vs nearby comps.

If you are looking to invest in a smaller multi family property in Calgary, in my experience the cap rate and potential cash flows on those listed with the commercial brokers are awful at anywhere near the asking price.  Calgary may be the wrong jurisdiction for this type of investment.  

I was curious about a SW six plex and looked up the broker's proforma.  The document was misleading to the point I felt had it been a representation for a more regulated financial instrument such as a stock the broker licence would be jeopardized.   

Here are the common failings:

1. professional management is never factored into the equation 

2. vacancy drastically underestimated at 2.5% (this expectation is a farce in this market, keep in mind this means only 2 out of 72 rental months would be either not collected, owed, or lost due to vacancy)

3. cap ex drastically underestimated at $1200 per unit (this is on a 50 year old building...)

4. valuation of $200k per unit is used (dividing asking price by # of suites), far more than what each unit would retail for individually

5. cap rate is thereby overestimated at 4%, in my mind already far too low to justify any investment in this type of higher risk, high management effort, time consuming property.

Have fun with these proforma docs.  Post your favourite here so the community can ridicule it.

I imagine it's going to be Wild West open season for the framers, drywallers and roofers and slightly less so for the technical trades that are subject to more professional scrutiny. A challenge will be housing those rebuilding the housing and this will drive labour cost and rent through the roof. There won't be an apartment or camp site within 100 km that isn't packed for two years or more. The only possible restraining device here is the financial controls exerted by those with the money. The insurers won't allow the cash under the table mayhem to take place because in the end they are going to have to be accountable. The government will bungle payouts as it did during the last flood disaster where some well connected flood plain dwellers received up to $3 million ( yes 3 m of tax payer money) to sell their ruined house to the province, and others fought to get enough to gut and redo a basement and the government tried to say they could only compensate for the lowest grade vinyl or laminate rather than the hardwood and granite that was destroyed. So in summary building 2000 houses is going to draw contractors from everywhere. Half of what will be built will be built bad enough it will be rebuilt again once the owners move in and find workmanship to be haphazard at best, and the rest will be done to a professional standard. I'm thinking some of what was burned wasn't high quality housing to start (older trailer type stuff) and likely the housing stock will overall see a net benefit, but we will be paying higher insurance premiums forever. I doubt your going to see homes up Against the leading edge of the boreal forest armoured against future fires with metal roof, stucco, concrete etc. It'll be a vinyl, asphalt and chipboard bonanza and it'll take as much forest as was burnt to frame it all up again. Such is the way the province always has been, and will continue to do its business.

Sounds to me like your current residence is 'cash flow negative' by about 1100$ per month. You could turn that -1100 into something much better. If I was looking at a condo in that price range quite honestly I'd probably not bother and instead invest in a real estate income trust by making monthly contributions. Sure you can force a condo to cash flow by paying it off or using a big down payment but long term it seems like more tenant hassle/ condo grief than value. A single special assessment wipes out a year of cash flow pretty easily. I'd take a step back and evaluate your goal. Do you want to end up with a portfolio of grade b condo rentals spread throughout the city as you find deals over a period of years, knowing that type of real estate appreciates least? Or do you want to generate enough cash flow to allow you to quit your day job but be a full time landlord? Want to own a single house free and clear and have income from a suite? Hard to focus on a way forward here without a goal.

What is your living situation right now? It's hard to understand investing in a rental when you don't have a tax sheltered principal residence for yourself already. The easiest property to finance is your first property. Two through X is much harder. Beware over improving an r2 property as they trade for land value, if you go in that direction. For further insight into the particulars of Calgary zoning message someone that has bought and developed a lot of land. That would not be a realtor. They tend to have a derivative knowledge of real estate unlike actually investors that have learned lessons directly from the market.

I'm going to assume based on your living situation a house hack project would be better than a one off condo with marginal cash flow because Calgary prices are too high, condo fees, taxes etc doesn't leave much for an investor. Buy a house fix the basement and rent it while fixing the upstairs to live/rent to friends. Live free of cost and repeat with a second property once first is fully rented. If you have more time and skills get a place with a potential garage suite and build that. Or hire a company that can do that given you seem to have good credit.

I would be hard pressed to consider using borrowed money as a form of salary for myself.  The approach I have always taken is the owner gets paid last on these jobs, not first.  If you were to redirect a portion of a builder mortgage to yourself as payment, then at some point your going to have to pay back that money out of proceeds from a future project.  

I like the self build model because in my region I wouldn't have to pay the 5% government sales tax when the home is eventually sold (personal house = no sales tax).  If I was to build a new house and sell to a retail buyer the entire value of the house is subject to sales tax, not just the build costs (i.e. the government is applying sales tax to the land in addition to the new build).   And on a new build the sales tax can be 20-30k, that is a lot of potential profit to pay yourself out of.

I am looking for land to purchase from wholesalers that are able to contract suitable land via their own marketing efforts.  If someone has contracted a property I can use, I would make an offer on it.  Most of the stuff I buy is tear down status property, either condemned or soon to be.  I don't believe it a big stretch to think that the local wholesalers out there who are constantly looking for motivated sellers that don't want to use realtors to sell will be able to acquire this property, and pass it on to me for a reasonable fee.  I would say that given my experience hunting for property, there are not that many motivated sellers, but those that are in a motivated position likely have property that isn't turn key, can't be easily rented, and sells based on land value.  These sellers will not get a lot of retail interest in a recession.

If investors out there want to look on my behalf for property that I can make a multi family project out of that expands my network.  It can't be easy to be a wholesaler right now, so I am actually a cash buyer.  My challenge hasn't been building property and selling it, my problem often is finding something worth building on .  The city has created a situation of land scarcity, and I operate within the confines of that.  Recently I have made or am in the process of making a couple offers, so crossing my fingers on getting a decent multi family site, one in SW and one NW.  

Originally posted by @Gary Tsang:

Love the gantt chart but can't really see the words.  Any chance you could send me the mpp file?

 I have pdf I can send you of the file.  It was developed in smart sheet so you'd have to have that program to open the gannt chart.

Originally posted by @Jett Rao:

What part of Calgary was this in? Did you need to go with quartz countertops or would something cheaper have sufficed?

 Killarney area.  I haven't ever used a countertop surface other than quartz in my new build,  Formica does not enter the discussion, ever.  The agreement on this project was to replicate the standard of material upstairs in the basement.  I was lucky to get the countertop measured, cut and installed in two days, at the end I was calling in favours from guys that didn't actually owe me any favours to be done on time.  Next basement I do I suspect I will be adding a couple weeks for contingency