Edmonton Real Estate Investor: affordable housing in Edmonton

In our daily drives Todd and I count all the old houses being knocked down for the new mega houses constantly being built in our neighbourhood. Our south central location is close to a large greenspace, downtown and the airport. A perfect trifecta for Alberta's growing population.

My house is a 1950s 3 story A frame, one of the bigger original homes on the street. Otherwise, you see the bungalows that were easy to heat and build.

These bungalows are on the road to becoming scarce. More often than not when they sell they are torn down and not filled with a young family trying to save up for their dream home.

I personally love it. Of course I see the beauty in the old homes as I live in one myself, however, I can't help smile as I see the new home sales prices and do mental calculations as to how that new house will affect my home value.

Our neighbours perfected the balance of new and old by building up their bungalow. They kept the craftsmanship of the era but added the light (new windows), convenience and energy conservation of a modern home.

Edmonton, Alberta was ranked the third best place in the WORLD to live by Numbeo

What is Numbeo?
"Numbeo is the world’s largest database of user contributed data about cities and countries worldwide, especially living conditions: cost of living, housing indicators, health care systems, traffic, crime and pollution."

This story came to my attention not because it was on the front page of every Edmonton newspaper but because it wasn't. Edmonton Mayor Stephen Mandel was not impressed. Huffington post's article brought many amusing comments that typically broke out into a fight.

It's crowd sourced information so many have called the ranking unreliable. I live here and I've lived across Canada and in other countries. In my opinion based on my experiences Edmonton is not bad at all in fact it's pretty darn great.

Sure winter is long but if you embrace and get the gear you will have a great time. It's sunny all year round, great affordable housing and so much to do.

I mean you could always live in Vancouver and get an entry level home like this or in Montreal and not have a job - just saying.

I haven't done a This and That blog for a while. Here are 4 interesting news stories:

Young families pull up stake for a better life - These are the stories behind the numbers that we hear all the time. What does cost of living mean to real people? Or higher wages and housing affordability? Read real people stories here.

Western Metros likely to lead in 2012 and 2013 - "In light of the fact that unemployment rates in Regina (4.1%), Edmonton (5.4%), Saskatoon (5.4%), and Calgary (5.7%) have consistently averaged well below the national average (7.3%) over the past six months, it is not all that surprising that the Conference Board in Canada expects that economic growth in the largest metro areas in Alberta and Saskatchewan will continue to outpace activity in the rest of the country over the next 12 to 18 months.

It’s worth noting that in its latest (12/2011) Provincial Outlook, the Royal Bank of Canada also presented a relatively upbeat outlook for growth in those two provinces. This outlook is based primarily on the sustained rise in the global demand for commodities.

Topping the Conference Board’s list of the 27 metro areas is Saskatoon with a projected growth in 2012 of 4.0%, followed by Calgary (+3.6%), Edmonton (+3.4%) and Regina (+2.9%)."

Like the previous article higher employment rates lures people who want more than a condo and huge mortgage payments for their families. Read More Here

Back in Canada In need of home - "When we have a returning Canadian in a professional field who expects to be employed soon and has a minimum 20% down payment, because the mortgage does not need to be insured, the lender is able to exercise their own judgement,"

"If they have good credit history, 20% to 25% down - so more liquidity - the risk for the lender is much smaller than for a high-ratio mortgage. They may request you deposit six months' mortgage payments in an account and they will register a small lien within the bank. Those [funds] are a back-up security for the lender." Ayaz Bhanji, a mortgage broker with Mortgage Intelligence in Toronto

Our experience was 35% down for every property except for the ones where we could assume the mortgage. After about 25+ properties we also got atrocious mortgage rates, think 13.5%, about 7% higher than the norm.

living room of basement suite

For the past 2 years the City of Edmonton has offered a program to help improve the amount of affordable housing in Edmonton. The Cornerstone Project offers funding, up to 75% of $32,000 to be exact, to bring an existing suite to code or build a new basement or garden suite.

At first the program was a little lame. No funding for rentals houses had to be owner occupied and rent had to be below market average. Recently with a lot of money not going anywhere Edmonton has revised the program. Rentals are ok with market rent to a tenant with less than average income ie student etc.

So with over $6 million looking for suites to renovate we've decided to take the plunge and I'm going to chronicle the process for you here.

I've bought over 50 house but I've never bought a home. Unbelievable right? We bought our first home this month and decided to use the Cornerstone to put a suite in the basement. Even though we'll live here we'll improve the market value and make it a great rental for when we move onto our next place.

Step 1: The Inspection

So our first step was to call Cornerstones and book a inspection. A fire inspector and building inspector came out, went over the whole basement inside and out and made reports on the work that had to be done.

Including:

1. Drywall all ceilings and walls even in storage areas and under stairs
2. Ensure windows in bedrooms meet egress requirements. They also must not require special knowledge to open
3. Put hard-wired smoke alarms in suite, common areas and on the main floor
4. There should be a fan in the bathroom and proper venting in kitchen
5. Separate entrance must have easy access
6. Ceilings must be 96 inches minimum

The report also called for inspections of the hot water tank and that the furnace had property venting.

The next step PERMITS.

The Edmonton Real Estate Board reports that Edmonton market's key word would be stability. Although prices are the same as October 2009, meaning we've seen little appreciation in our investments, the market is moving and houses are selling. With many of our investments the fact the mortgage being paid is one of the three ways you profit. If one way falters you still have the other two:
1. Cashflow
2. Mortgage pay down (forced savings account)
3. Appreciation

There is no huge inventory like we saw last year. As the inventory decreases prices will increase. Probably not this winter but from spring 2011. So if you want to sell you're not going to get a price that is way out of line with the market but if you want to buy you can probably find some great deals. Everybody else stay tenanted and keep your property looking great!

There is something in the market for everyone great starter homes, investment properties and cash-flowing multi-family buildings. We're currently looking at multi-family units around Edmonton.

Click HERE to see some of the buildings we're looking at!

I own several properties and currently provide some affordable housing. I'd like the opportunity to provide more affordable housing by suiting some of my properties.

I tried to apply for a grant to put a suite into a property of mine but was summarily rejected because I am not an owner-occupant.

Why? Why? Why?

Our friend Tim summed it up nicely. People don't want their neighborhoods getting messed up with a bunch of rental properties with suites. Really who can more effectively manage suites a landlord with experience or a home-owner who will give it a shot and then learn the hard way about tenant issues?

Chances are the investor/landlord with 10-20-30-40 homes has more skill in operating a rental that an owner-occupier. This also paves the way for better communication and less disputes between lower income tenants and owners.

The grant should be expanded to allow owners who don't reside in the prospective houses a chance to "suite"up. We can avoid tent-city as a greater amount of affordable housing will be created.

A primary owner-occupant is limited to only one home to work with whereas an landlord who owns multiple property, has the ability to reach more people by providing more suites.

Am I seriously being punished for providing housing?

If I spend my own money to put in a suite and the risks associated with it, I should be fairly compensated for that risk. That may equate to a 1 bedroom being rented for $875 at market rent.

If I were to go the route of the grant I could reduce my costs and risk, and provide housing at a reduced rent - the same suite could be rented for $721 per month, thus filling the need for affordable housing.

I own many properties that qualify for the grant, image the impact I'd have on the community compared to one owner-occupier.