In the recent Vancouver real estate news, we see that a year has elapsed since the Vancouver couple, Thomas Hunt and Rodney Hynes, made a decision to mortgage their home to the maximum so that they can buy Brooklyn brownstone. The two currently reside in a Craftsman-style fixer-upper that is located on the east side. They took the gamble to mortgage 80% of their house in order to buy a three-unit building in Brooklyn for $725,000 in September 2012: http://www.richardmorrison.ca/homes/vancouver-east-condos/ They wanted to rent out the three units of the building once they obtained it, and use the money they got from that to cover the mortgage they had on the Vancouver home.
About a week ago, the couple sought help from a real estate agent from the newly established Bedford-Stuyvesant neighborhood. Just recently, the real estate agent sold the rundown property that is located close to theirs for $760,000: http://www.richardmorrison.ca/homes/vancouver-west-condos/ Thomas and Rodney wanted to know what their house would be appraised at. The real estate agent, through an email she sent to Mr. Hunt, said that she could list the house at $1.295 million. Mr. Hunt couldn’t believe this. He thought the listing price was a bit inflated, but the real estate agent said that the reason why she priced the house at the top of the market was as a result of the comparison she made with the house next door that sold at $750,000 and it still needs renovation that could cost about $400,000.
Another reason the real estate agent gave for pricing the house that way was because it was a three unit building which is scarce in that area, and therefore it is high demand with investors. It is up to this point that Thomas and Rodney realized that buying the house was the best investment they had ever made, even better than RSP mutual funds. It was an even better investment than their Vancouver home that they purchased for $268,000 in 2003 and spent $200,000 on renovating it. If they were to list it right now, it would probably go at over $900,000. If they chose to sell it together with their New York venture, they will make about $400,000 in a year’s time.
The Brooklyn building was in good condition, so they immediately rented all the three suites for $5,775 (US) per month. This amount covers their mortgage payments that total to $2,745(Cdn). They managed to get a locked in rate that is below 3% and they also have a basement rental suite in their Vancouver home.
About a year ago, Thomas and Rodney made their first gamble into the real estate market when they made a purchase from high-profile condo marketer, Bob Rennie, who said the couple had made a good move. But the couple had their fair share of naysayers, but that did not scare them from leveraging their Vancouver property to buy the New-York walk-up. People thought that Brooklyn real estate market was tame compared to Vancouver market. People thought that what they were doing was bad idea and difficult. Since it was the unknown, a lot of people didn’t see if they could make it especially that they were Canadians.
But Mr. Hunt and Rodney were confident that they would cover the expenses and as time went by, the market would go up. When you buy an investment property, the tenants will be paying your mortgage. That implies that they are buying your equity for you. That is what Mr. Hunt and Rodney knew, so they weren’t scared at all.
But they had challenges along the way. Initially, they thought they will pay $300 every month on renovations but they ended spending about $500 every month. They also pay quite a lot in in insurance and taxes, and approximately $2,000 a year for water alone. Before they purchased the house, they spend about a year researching, attending seminars on buying stateside, traveling to New York and scoping out neighbors. They spend a lot of money doing this with the aim of knowing the status of the market.
Generally, when it comes to Canadians taking advantage of the US economic downturn, most of them have had success. Their investment potential is the reason why Canadians represent about 25% of the foreign purchases in the United States of America as reported by American National Association of Realtors. Canadians are the biggest foreign buyers in the US.