ROBERT CROWE
RE/MAX Real Estate Services
410 - 650 West 41st Avenue
North Office Tower
Vancouver BC, V5Z 2M9
Canada
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Featured
Factoid:
The state with the lowest vacancy rate in the U.S. in the 3rd Quarter was California, at 1.9%.
Source: US Census Bureau
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About Robert Crowe
Robert Crowe specializes in helping owners of distant city condominiums make informed investment
decisions.
Robert lives in Vancouver British Columbia. He is an avid real estate investor and a licensed Realtor with Re/Max Real Estate Services.
More about Robert here.
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November 2009 Vol. 1 No. 1
Welcome!
This newly launched newsletter deals with a type of investment that many people overlook: Condo properties in cities other than their own. Each month I'll cover issues relevant to this growing and profitable niche.
All the best,
Robert Crowe
Vancouver Real Estate Specialist
P.S. If you're receiving this email, it's because you have a prior relationship with me. If you're somehow here by mistake, please accept my apologies. Just click the "Safe Unsubscribe" link at the bottom of this newsletter and we will remove you immediately and permanently from the list.
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5 Great Reasons to Invest in a Studio
When I was 24 and a single dad working long hours in an auto dealership service department, I used to dream of the freedom of having my own business and not having to wear neckties and suits to work every day to impress the boss. Today, many (many) years later and now working on my own, I tend to dress "casual Friday," seven days a week.
So last night, when I showed up all decked out at the door of a home seller who knows me well, he actually asked if I were on my way to the bank for a loan! The truth is, I'd been meeting with someone earlier whom I'd never met, and decided that I ought to default to looking the part of the successful Real Estate Agent.
Clearly, first impressions make a difference. In fact, that's why so many people completely ignore studio condos when considering an investment. They make a "bad impression," and so many people just walk right by.
That's too bad, because studios can also make great investments. I've bought two in the last five years - here's why:
- Studios grow quickly in value. With developers pumping out lots of bigger suites, demand at the higher end doesn't always keep up with supply. Studios, on the other hand, are often harder to come by, a fact that keeps prices rising.
For example, a 400-square-foot studio here in Vancouver was purchased in September 2004 for $165,000. Today, it would probably sell for about $280,000.
An 800-square-foot two bedroom sold for $350,000 that same year; today it might get $500,000. The Studio Suite went up 70%; the two bedroom just 42%.
- Studio rental rates are better. Again, it comes back to demand. Online rental postings for studios run $1100 - $1200, while two bedrooms suites are $1700 - $1900. It seems tenants are willing to pay a good price per square foot so as not to put up with roommates that eat their food and don't pay rent on time. The fact is, if they could afford almost $2000 a month themselves, they'd probably buy their own two bedroom condo.
- Studio condo board fees are lower. Condo Board fees for studios can be as much as half that of two bedrooms in the same complex. Fees are usually based on the unit entitlement of the suite relative to other suites in the building; the smaller the suite the smaller the unit entitlement.
This is particularly important if there is a pending major project requiring extra funding for the building. With a smaller suite, you'll pay a smaller share of the special levy. Just like a house, things come up from time-to-time that you don't expect and your entitlement will determine your share.
- Studio taxes are lower. Much lower. Taxes can really eat into the profit on a condo investment, so once again, the smaller the suite, the less the tax bite to your bottom line. Remember, we're looking for long term cash flow here.
- Studio repairs and maintenance are lower. As a landlord, I'm interested in simplicity. With a studio, there's simply less that can go wrong - one set of bathroom plumbing, few appliances, etc. And when a tenant moves out and it's time to paint or re-carpet, you'll spend about half as much on labor and materials to get the job done. I'm all for just painting 400 square feet instead of 800... how about you?
So there you have it. While your first impression might be, "Why would anyone want to live in a 400-square-foot apartment?," remember that you're the investor, not the tenant. Just because you don't want to live there, it doesn't mean it's not an attractive investment.
And hey, if you want to own more, you can do what I did and buy two studios for the price of one large suite - a move that gives you more flexibility and just as much absolute dollar up side.
Okay, time for me to take this suit and tie off and get back to casual Friday! |
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