A lot of wealth transfer from parents/grandparents who are down sizing or passed away. This cycle will continue to fuel local RE for years to come, add in immigrants and investors and guess where prices go.

$2-$3M may seem a lot but all they really need is 20% down which they can prob get from parents and then they can likely afford the rest off mortgage through personal/rental income

with all these homes being built with "rental income"..you can probably rent out the basement/lwh for $4-5k/month which garners ~$1M in mortgage...and theres a lot of ppl making 150k+ household income (you can see in the previous examples here on RS)...thats another ~$1M in mortgage obtained...so yea not surprised people are looking at the mid $2M mark if they have the 20% down...

are homes with coachhomes available at that price? many are older, not built with one or not zoned for it yet

20% is still like 500k

That's what I'm thinking too. Friends & Coworkers who grew up in Vancouver that are buying a SFH in the last few years are doing so through this wealth transfer.

Only one of them did it themselves through an equity buyout from a start-up.

depends where you look but yes..in east van you can get a brand new on standard lot for~$2.4-2.5M?...and they arent on any busy roads or anything

I was interested in a 45 year old home that had kind of a hack job basement suite reno with a 3-4 year old laneway home on a standard lot. Was listed at 1.8, sold for 2.3 within a week. And that was long before this current craziness, probably about 8 months ago

I think for a brand new build with a decent laneway in EV, 2.5 is likely a starting point

To put it into context here, there is currently almost 300 billion dollars worth of mortgage-free properties in Metro Vancouver within the 55+ age group. This figure has more than quadrupled in a little over a decade.

Wealth transfer has always and will continue to be within the RE market it's just both more apparent and astounding as it pushes prices up. The huge increases in equity in the last 20 years has allowed the older generations to gift large sums of money with money left over for a clear-title downsized property and ready cash for their golden years.

Yeah, that's how we're working it out for our build - we figure we can make $4k of rental income between the laneway and 1-2 suites in the basement which is basically $1m of the mortgage at current rates. Suddenly a $2.5m house in East Van isn't that difficult to deal with if you can come up with the cash up front. I've got $700k in equity in my current house so I'm left with just $800k to deal with which pretty easy.

That said, most of the East Van homes with laneways are garbage (bad layouts, bad quality, UGLY) which is why I'm aiming to build one myself. It'll run me a bit more (2.7-2.8m) and it'll be stressful but it'll be the "dream home" for the most part.

Spending 2.5m and needing to get $4-5K/month in rental income...

what's the point? So that you can have the luxury of picking who lives below you?

^
Kudos to you man if you can make it work, you're a better person than me, personally if I had 3 other groups of people living on my property I'd want to shoot myself... like your home isn't even your home anymore in my mind

If you’re spending the same on a mortgage as you would in a condo/TH what’s the difference? Especially if you’re building the house

Sound proofing will be better, can choose your tenants, build equity with other people paying down your mortgage, etc.

And living in a detached where you have that freedom to do what you want do your home/suites or never be obligated to spend a time on maintenance if you don’t want.

It’s not for everyone but personally I’d take that scenario over paying the same for a mortgage on a strata townhome with no land and shared common walls anyways

Only thing about this plan I'd have trouble with is dealing with the City of Van on the building permit process. You're more patient than I am!

Totally. Don't think I could bring myself to be landlord with how the rental market is now and the rules designed to favour tenants when things go sideways.

numbers alone if you put down $700k and you can get $50-60k a year in rental income that's like 7-8% ROI a year..only caveat is you need to reinvest it by paying down the mortgage with it and you need to rent about 1/3 of the space out to 2-3 ppl...while the plus side is you get a new house with a roof to live under for possibly the rest of your life, the ability to downsize the units you rent out (ie rent out 1 or 2 units instead of 3 in the future) and maybe just do it for like 15-20 years and then the whole house will be paid off

Also to note the poster said he had 700k down and would need 800k in mortgage...so without a renter and if he needs a house....$1.5m doesn’t get you very much in van/bby....that’s assuming he needs the qualities of a house

im not all about renting out myself but the laneway house has a separate roof (although admittedly on the same property though it can be closed off by fencing) and most people normally have at least one person living underneath them in the basement anyways...sooo its not too bad

i agree here...im always on the fence now if it's worth the risk/reward to have a tenant in case they try to play games with you but if all goes well and you can rent out one unit for even 10 years...that's a good kick in to the RRSP for early retirement...or even the ability to take some of the moneys each year and go travel

Maybe I'm confused, but how is it 7-8% ROI if your mortgage payments are going to be in the $7,200-$7,400 range?

I guess you can say that you are only paying $2400 - $3400 in rent/mortgage to live on that one floor, or main+upper, but you'll still have neighbours so I don't see how that's better than a strata property?

Yes, you can choose your own maintenance cycle, but with tenants you do have to fix those when things in the rental units break, plus you will always carry the risk of tenants leaving, or worse, not pay and refusing to leave.

I think that the only reason why people are willing to do this is because of the insane capital appreciation seen here in the past 20 years. If it was 0-2% per year like in normal markets, would people still put up with over-leveraging AND having to rent out 50% of their homes?

Another example of a scumbag realtor, appealing his own client's court win just so he can close on the commission... even though he's the one who was negligent on measuring the square footage :facepalm:

yea payments for him is going to be around the $7-8k/month range i'd imagine but most of it is going in to principal. His $1.8M mortgage lets say he'll pay about $20k interest a year....and half of that he can probably write off due to rental income so thats $10k/year in interest relevant to rental income...if he's getting say $55k/year in rental, $45k of that amount after interest will be contributed towards his capital which i guess puts his $700k ROI @ 6.5%/year

the strata vs house property will forever be a debatable argument..just a matter of if you want to be a landlord or not...however having the OPTION of renting out is enticing i'd say...like when the time comes you're fed up with it you can take over the space and turn it in to a man cave or inlaw suite or maybe have your kids roam there but you cant do that in a strata property...you'd have to sell and upsize and if its anything like today's market...good luck with that...in the end its the price you want to pay for control....

even if it doesnt appreciate and maintains its level...having ppl pay half of your mortgage while you live in a bit of luxury is nice to have albeit greedy but thats today's society

is sound across a wall really actually worse in strata properties?

when i lived in an older apt at most i would only hear the odd footstep upstairs, not even a peep from next doors

in a house like 15 years newer i hear EVERYTHING lol

Well there are some other considerations with the chief one being that my parents and my in-laws are in their 70s and we want to be able to take them in when the time is right. I still want my own private space so they could take the suites/laneway when the time is right and as they'd be downsizing they'd help pay down the mortgage while they live with us. When my kid grows up she can go live in one of the suites as well or when my wife and I get old we'll trade places. I want to build a multi generational house for us.

I considered other options like buying an old Van Special and renovating it but a proper down to the guts renovation is $350-500k and the Van Special still runs you $1.6m so it actually costs more out of pocket as it only has 1 rental suite (A boxy Van Special is about 2400-2600sf vs 3600sf of a new house/laneway. The way the zoning is setup nowadays (you can build more today than you used too) it makes a lot of sense to just go build/buy a new house with a laneway b/c the rental income covers so much of the mortgage (as long as you don't mind being a landlord).

Scenarios:

1200sf townhouse for $1-1.1m, no rental income
1600sf duplex for $1.4-1.5m, rent basement out for $1400
2400sf renovated Van special for $2m, rent basement out for $2k
3600sf new house with laneway for $2.5-2.7m, rent suites out for $4-5k

In the last scenario I get to live on the top 2 floors (1800sf) which is more space than any of the other options too.

It's kinda nuts the way it works out - it's almost a case of the rich getting richer here (I'm not actually rich since I have to pay Vancouver rates for real estate). I make a bunch of other people pay for something I bought and I get to keep it.

All this talk about a garage and a laneway... on a standard 33x122 lot, you might have to choose between one or the other. 7 years ago, I built a custom home and had the option to build a LWH but opted for a 2-car garage instead. No regret at all!

Edit: sure, you can do a laneway with a 1 car garage, but the garage will be extremely small and the LWH will have a terrible layout. Would you rent out the LWH, excluding the garage to keep for your own use?

Exactly -- as long as I'm still able to drive, I'd never choose a LWH over a garage.

Hold up. Where can you do $4-5/k of rental income?

Say you have a new build w laneway in east van.

1 br suite - $1k
2 br suite - $1.3k
Laneway - $1.7k
Total $4k and these are optimistic, reasonable non-crazy tenants.

What about income tax on that $4k a month?

Assuming you and your partner are making $200k/yr combined, be prepared to pay for a huge tax bill or spend $10-15k on RRSP contributions.

I'm only budgeting for $4k - someone else suggested it could be $5k and a new build that I visited a few weeks reported over $4k for their rentals and it was an undersized new build that was really shit. I think it's unusual for folks to get $5k/mo but not out of the question but I'm not budgeting for it. That said, if you're doing a custom build (hello front entrance for the basement!) and don't penny pinch you can get good tenants who will pay for quality.

As for tax - yeah it's declared but you also get to write off a significant portion of your interest and expenses against it. If you're really into writing it down you can also declare depreciation against your house - I didn't do it when I was renting out my condo but I know people who have done this and as long as you don't plan on selling it it can work well (even then, paying cap gains 40 years from now isn't deadly). As this house is being passed onto my kid (or kids) and I'm likely passing a pretty sizeable inheritance to her anyways I'm not too concerned with tossing her a big tax bill when I die.

Realistically I just need a garage big enough to store something Cayman/911 sized (maybe ND sized) so my dreams of a 12' wide garage are going to be just dreams. A tiny garage might just be fine if I really think about it.

I don't think rental income is taxed the same as regular income. It falls under a different category. He can also write off interest payments portioned by the rental area.

For example if he has 5000sqft, and he rents out 3000sqft, he can write off 60% of his interest payments. If his interest comes up to 2k a month, that means he can write off $1200 of that rental income.