Mid April and we finally have the warm enough weather to get the stucco on the wall. The crew has a number of days of work to get the full house done so let’s hope the spring like temperature sticks around.
Finally, a new Killarney Area Redevelopment Plan
EDIT - as of February 2021 the local area plan for the Westbrook group of communities is stalled dealing with the challenges of managing an engagement process during covid. The guidebook for great communities is moving along again and is set to hit council in March. Progress is slow but seems to be gaining momentum again.
EDIT - as of summer 2019 the arp process has been cancelled in favour of grouping communities together into district area plans. While this may be a good outcome the immediate planning needs of the community are still guided by the outdated ‘86 ARP, and that is very unfortunate)
The City has chosen to resource a select few area redevelopment plan updates, and Killarney was among the winners. You could argue that Killarney is among the inner city communities that has the greatest disconnect between the land use regulations and the demographic of the millennial buyer, who make up a large portion of Calgarians that would like to relocate to premium neighbourhoods.
I don't see this as a restoration project, because I want the new ARP to be a significant change to what currently exists. In some cases, we need to start from scratch, such as the 26 ave corridor, that desperately needs a redo. So much ill timed and disorganized development has taken place, much of it now seems to be a misallocation of precious resources. The ARP needed redone years ago, maybe a decade or two, but we were living with a hideously outdated 1986 document.
I am optimistic that the ARP will lead to profound improvement in the community and that many big ideas will be not just considered, but acted upon.
First community event takes place on April 24th.
Stucco begins sort of
Typical of this horrible winter and spring, outdoor work is suffering from weather related troubles. Scaffolding is going up and materials are on site. With a good forecast for the weekend perhaps we will see some stucco applied.
too much snow to stucco
Killarney r2 land market 2018 update
Are we finally seeing a mild pullback in the sky high valuations of Killarney development land? Anecdotal evidence does seem to suggest that builders are behaving a little more rationally lately (i.e less like idiots) than they were through the winter.
I suggested that $700k was just too high for land value and would lead to builders losing money or building at margins that make little sense. Occasional premium lots may still quickly sell, but the momentum clearly has settled down. The market has created a lot of supply out of those sellers who didn’t want to put product on the market during the recession. Perhaps next year it will escalate again?
Sellers reluctant to drop prices but if they need to sell and the builders are slowing land purchases then more price cuts are in order.
Rowhouse preparation for gas and electrical meters
the rowhouse project has now progressed to the stage where we need to get serious about the service installations. We’ve now prepared for gas meters and the six electrical bases where the utility provider will install the overhead wires and meters.
This work generally requires a fair bit of lead time, inspections and creation of accounts. I’ve taken care of the bulk of that and we can now call the providers to connect.
six electrical meters are due to be installed here. The service is overhead rather than underground from the garage. This is a much easier way to do it, though less clean looking.
dual masts are bolted to long smartboard planks that I’ve prepainted. What a relief to have warm enough weather to do some outside work in relative comfort.
Rowhouse spray foam
the monster concrete firewall at the rowhouse continues to be a costly feature as we detail the building pre-drywall.
Given the enormous heat loss and conductive property of the concrete some extra spray foam appears to be a sensible approach. If poorly insulated there is a likelihood that frost could creep into the building along the wall and later on thaw and create moisture issues.
lots of foam to keep the cold at bay. The other side of the wall is exposed to the elements and could be a trouble spot if left untreated.
New project development permit application is advertised
the Richmond project is now in advertising with a sign on the lawn. This is a really nice project stay tuned for more info.
looking forward to launching the next project
Stain match
Back at the Killarney semi detached project we are working on the final paint for the first house. The oak railing is on so we also had a gallon of custom tint stain made to attempt to match the hardwood floor. Looks good so far. With a bit more work complete we can start cleaning and readying the house for appliances.
the wiping stain coat the orangey feel of the oak very nicely to match the white oak hardwood
Budget basement project
We are tackling a basement project in a new suburban house for some family members. This will give us some interesting insight into what it actually costs to do a basement from scratch basically. A lot of trades and logistics are involved in these projects. I typically don't tackle any job with a construction budget less than $1/2 million. So doing a job and trying to squeeze everything into $20k is fun. I will post the final cost to do the work at the end.
Basement taping underway. We've done Framing, mechanical, vacuum, electrical, plumbing and a lot of cleanup work and logistics to get to this point. Plenty if permit fees too, the city made some nice profit on this job.
Endless winter
2018 has proved that snow management and removal isn't a strength of Calgary. While the main streets get taken care of the side streets and alleys are left to wait for a Chinook to melt. What happens in a year without any Chinooks?
well into April and still we need the jackhammer to clear out frozen sidewalks that refuse to melt.
Freestanding tub and filler
More premium finish components installed at the Killarney project master bath.
Fine tuning the tub filler
and they are tucked in and put back to bed
Custom shower door install
The master bathroom shower is a completely custom hand made piece of work involving many trades and materials. Cost of these can get fairly extravagant. Here is the final piece of the shower now installed at the Killarney project.
Garage slab prep and pour
the detached garage has been a major obstacle at the semi detached project. We couldn’t get the pad done in the fall, and with the cold and snow refusing to melt we had to thaw the ground with a heater, yet still it was too cold to pour. Today the crew decided to sneak in the pour and had it all troweled and set up by midday. We will cover it until it is time to frame the walls.
a recurring question is how much do these garages actually cost. I may add it all up and post it here once we are done.
Fire safety sprinklers at the rowhouse
the powers that be decided to require sprinklers at the rowhouse project (months after approving the building permit). Given the time constraints and need to proceed with inspections I went ahead with the install rather than pursue an alternate solution. Certainly over time we expect the city to demand more fire protection but realistically the city now added another $20k in cost to the building that arguably isn’t needed.
a lot of specialized components go into the sprinklers, all expensive.
Plumbing final underway
The plumber is back to tackle the finish work. This mostly includes the faucet trims and under cabinet drains. After this is done we can get on with some cleaning as the site is a hideous mess. Lots of cardboard and dust to deal with during the finish work.
Taps and toilets going in.
The rental pro forma - how can this calibre of financial information be distributed by professionals to the public?
An unexpected real estate advertisement appeared in my inbox the other day. It promised an amazing opportunity and attached some attractive sales brochure type information. I decided to take a look, because clearly anyone willing to prepare this material surely would have an interesting proposal for me to review.
In order to protect the names of the innocent (and guilty), I wont bother to post the entire document, but I will include a tidbit of some of the most egregiously horrible misinformation.
So to start, the amazing real estate opportunity to own your own rental property, as calculated by the sellers own (incorrect) figures, loses $944 each month (when it is rented and the tenants pay according to the lease). So at best, the owner would have to dig deep into her pocket and come up with the $944 each month to pay the mortgage. This sounds like a negative return doesn't it? No, after five years, the ROI is indicated at almost 15%!! That is good. Time to call your favourite realtor and write up an asking price offer!
Once you dig a little deeper, you will find that the math here is just terribly inaccurate. In fact it is so full of errors that you have to assume it is purposeful. Could anyone really be that wrong though? Could a realtor who is a professional in dealing with property as his full time career be so off on his numbers?
I will list a few real numbers below to show how I can irrefutably show the rental pro forma presented is just awful.
1. The downpayment cost is not calculated. The buyer needs $160k down to buy this deal. If that money was invested in a conservative 5% yielding investment, it would earn $666 per month.
2. The monthly loss based on rent vs expense, if this is even accurate, is already -$944. Once you lose the further $666 which is income you give up from the downpayment, that loss broadens now to $1610.
3. But this deal has a 15% five year return, how can that be when it loses $1610 each month? The supposed return is based on assumption of future appreciation and mortgage pay down, but this is calculated wrong as well.
4. The realtor suggest the property will be worth about $927k in five years, plus the mortgage will be $88k lower, so the return, after losing $59k over those same years still pencils out as positive $157k. I will show how wrong this is below:
- There actually is no mortgage pay down. The mortgage is just dropping because the owner is paying it herself from the negative cashflow of -$1610 x 60 payments = $96k. So the mortgage is $88k lower, but that cost $96k. That means the owner paid $96k to payoff $88k in debt, that sounds pretty bad to me (the difference is interest to the lender). Paying down your own debt is not profit. That would be like moving a dollar from your left pocket to your right pocket, and claiming it as profit.
- The appreciation is not assured - the property is already so over priced based on its rent to income ratio that is seems unlikely that further $127k of appreciation could occur. To realize this, the 2018 buyer would have to find a new buyer in five years that would view the property as even more valuable, despite the economics being even worse at that highly appreciated valuation. To even get to that five year resale horizon, the buyer would need to come up with $96k to feed the loan.
- Sales costs are not factored into the return - in five years, the sale commission would be significant and would wipe out a lot of the appreciation (which may not have even happened).
This property is a hideous black hole of an investment that could really hurt the buyer. I would urge no fledgling real estate investor to even consider the deal at the numbers shown. The realtor involved seems to know a little about real estate, but just enough to make him dangerous. If you are going to work with a realtor, take their advice, or accept their numbers as factual, you need to be extra careful and assume each number provided to be incorrect.
It is really troubling that this real estate profession is so often plagued by these borderline deceitful quasi professional looking information sheets. If this was a different type of investment brokerage, these documents would not be acceptable. Yet somehow, for what could be an individuals largest purchase of his or her life, the realtor somehow can become a trusted advisor, yet offer advice that is simply garbage.
There are ways for a person to educate themselves on rental property. I'd recommend the www.biggerpockets.com website. While it is US based, it has some great calculators to take a lot of the mistakes out of rent/buy decisions.
Take a look at the numbers here, this awful deal is presented as a winner. It is as far from a winner as I have witnessed.
Rowhouse stucco prep
The stucco prep can begin despite conditions unfavourable for applying the sand and cement mix. The tyvek and black paper layers also provide a significant amount of waterproofing for the building so we can eventually start interior insulation.
Railing install
The railing material is being installed at the Killarney project. We’ve got a continuous rail style with clips to fasten the glass to it. The carpentry involved in this is always a painstaking affair.
Measure more than twice to cut once on these installed.
Hardwood stair detail and final finishing material is next
At the Killarney project the hardwood stair nosing detail is complete. With the hardwood and tile done, that is the end of the flooring project. Next up is paint followed by finishing the baseboard and plumbing hardware. After that is all done and the dust is gone we can do the lighting. We’ve got some fun lights selected for the hanging fixtures as shown below
this will sit over the bathtub.
many final touches to the stairs are needed.
Congratulations to me - I have a builder licence
The province instituted a mandatory system to take money from builders in exchange for nothing. It is a pretty good deal for the government. They get to take a lot of money and offer zero value in return. Over time I am sure the government will ratchet up the cost and headache associated with retaining the licence. That is what a bureaucracy does over time, it scope creeps and and causes more grief for those under its influence.
Now that I have a licence to do what I was doing before, without a licence, and for free, I wonder if I am a 'better' builder. I could argue that I am the identical builder before and after the licence was issued but there is one key difference, I have $600 less each year to actually fix stuff that breaks. The next time I have to fix something, I will just dig deeper into my pocket to find more money rather than invest it in some productive activity such as building more or better houses.
I'd like to see at the end of the year how much money the government has confiscated during this process, and to what benefit, if any, the money has been used for. I am convinced the money will mainly go to some lucky bureaucrats in Edmonton who will graciously pocket the money while on vacation enjoying their paid time off. I'd wager after a year the licence has had zero benefit to anyone outside of those recipients of the fees.
I guess if you work 300 days per year you give the government an extra tooney each day. That is the Canadian way.