Welding up the decorative door feature

A few of my builder friends are also multitalented at seemingly all trade related activities. They are millwright by training and also weld and do all type of carpentry. I’ve wanted to ask them to do small fabrication jobs over the years and the economic downturn was a great opportunity to send them some work. As it turns out I was reminded once again how particular they are and how they like to use aluminum instead of steel due to its lighter weight. Here is a photo of the welding work pre powder coating.

Ready to to powdercoat.

New construction dog

A new hound to sit in the construction truck and provide some cuddles to the trades.

Deep servicing from the lane

At the lakeview project we were blessed with a rare lane accessible sewer hookup. This means no sidewalks to cut and no asphalt. The city then doesn’t charge the usual fees that can be very high for this type of work so a possible savings of $5000 for the client. Install was much less expensive than past projects as well so another $5000 is saved. I’m learning how much more fun it is to build spacious detached homes than small townhouses which are a hellish management marathon.

With the quick shoring set up the crew makes short work of a simple tie in.

Lots of tin

Here is another job not well suited to the diy’er. The mechanical guys are skilled and quick and can drop in a few furnaces in one day. Indoor work is progressing nicely despite the torrential rains. At this point we need the framers to return and do all the back framing and basement bulkheads and repairs from where their walls needed to be cut out for the duct runs. We are really close to being ready to start wiring.

Dual furnaces here. Each will be assigned a different level of the house and the basement will have radiant heat. Lots of air conditioning hookups to be made as well.

Best Killarney land deal since 2012?

Hmmm this a good value for the area. I’m jealous

Right place, right time. Not me. Attribute this to the pandemic and let’s see where this market goes.

Total disaster for seller. How to lose $1/4 million plus in a Calgary inner city land deal

UPDATE - this property sold in March 2021 for $600k. The painful loss on this property took place over 52 months. Adding up transaction costs, property taxes, demolition, design fees, and the time value of the funds involved is more than I can specifically detail but it is a huge number. Losing about $300k/52 months is about $6k per month as I speculate below. This property is a case study on how much more cautious we should be as Calgary real estate investors, and how new or aspiring market entrants can get harmed while being ‘helped’ by their realtor into a horrific land deal. I’m pretty sure a savvy builder snapped this lot up at a great price and will do well on building a new semi detached project on land in a good location. The transaction price is a number I would have been happy to pay back in 2016, and still would have today. The market is a powerful force but in real estate so often we see crazy outliers, deals that appear to make no sense, or prices so outlandish I assume, sometimes falsely, that the buyer is so sophisticated in his knowledge of future build value that the transaction price on the land is sensible. In this case, history has proven me to be correct. As investors we tend to think we are more stubborn or smarter than the market. Or we can wait out the market until a bad deal becomes profitable. How many of us could recover from this kind of demoralizing financial fiasco?. END

I wrote a post last October just around Halloween. It was a lengthy description of a slow moving financial debacle and another diatribe against realtors (who are truly terrible). Everything I mentioned there was correct but I was too generous on what I thought the land would sell for and of course the market has changed again. It is really sad to see now how much the losses are going to amount to on this one. It sold for $850k back in 2016 and is now dropped to $635k. That is a loss of $215k plus 3 years property tax ($15k) plus realtor fees when it does sell ($25k) and whatever the carrying cost was or opportunity cost. So $255k in loss of cash plus design fees they invested and intangibles. I’d still like to own this lot but I’m just not in a position to buy more land. I’ll talk to some investors but I don’t see them being super keen to acquire raw land today either. If I see this lot sell I will update the post and calculate the final tally of loss, as gruesome as it appears to be.

This is a debilitating loss. Only a deep pocketed buyer can purchase this for cash and that market is slow right now. I’d still love to own it but I’m not in a position to buy land now. 255000 of loss on this over 42 months is around $6000 a month to burn. Where will this end?

Understanding windows

The key indicator around here at least (being a really cold winter climate zone) is how well do the windows insulate. The window can be built differently but I’ve defaulted to triple pane only following some painful experimentation. For 90% of the year double pane will be ok (for Canadian made windows) but for that cold deep winter phase it just isn’t good enough. At that point any client will be really grateful the builder added triple pane windows and absorbed the cost at the time it was specified. This is impossible to retrofit later without major cost and trouble. The window is labelled for its energy performance by the manufacturer. The metric they use is the U factor which is a unit of watts per meter squared kelvin. This is heat loss and the lower the number the better the window. But we want it in imperial R value where a bigger number is better. So we convert metric to imperial by dividing by 5.678 and then take the inverse of that to get your R value. These windows work out to R 4.9. I’m guessing this is taken at the centre of glass and the frame may be less. Regardless this is a good spec. R5 is equivalent to 4 inches of wood or 1 inch of dense styrofoam.

The r4.9 window. Well worth the additional dollars purely based on interior comfort in winter.

Turning on the construction brain

Somebody has to be the construction brain. Absent someone smarter, the default is always me. Somehow I know or am supposed to know more than everyone else about every facet of the build. This clearly is impossible as I don’t have certification or experience in a dozen trades. Actually as a builder I have basically no formal training in building. There is no degree/ticket/guild/union needed to be a builder in Alberta though you do need to have the funds to pay to enrol in various programs and certifications. The premise of becoming a builder is you either succeed and figure out what you are doing or you bankrupt yourself in the process of figuring out how to do it while making many costly mistakes. I do think I’m a way better builder now than I was back in 2012 mainly based on a vast body of time spent in the field managing the jobs and improving processes. But there is always some new hurdle to overcome on every job, or often many hurdles both new and old. A key technique is to immunize yourself from the stresses of it all and focus on the quickest path to a solution. Here is an example of the construction brain at work.

Here we have a beam in the worst possible location for plumbing. We need a way to get the drain pipe from one side to the next or it will be hard to flush that toilet.

Hole chart provided by the manufacturer

At this point the construction brain must slowly operate. Find the beam profile and characteristics of size and span. Match it with the manufacturer specs on what is allowed and you may solve your problem. With all these files and specs on my phone plus a website provided by the manufacturer we can figure this out lying in bed. Our 4 inch diameter hole will allow passage of the 3 inch abs pipe so we can avoid an unsightly bulkhead or mechanical chase in a living room.

Saturday slab pour

Following the hydronic inspection approval I was able to get the pour set up for Saturday morning. This was a nice bonus because I’ve got more work planned to start Tuesday. In particular we have the plumbing starting and a wood delivery so all the basement walls can be framed out. With the windows arriving we will be at that early stage milestone called ‘lockup’ or ‘dried in’ which is great for building security and to keep the inside dry when the spring rains inevitably come.
The concrete was delivered via a line pump. No wheelbarrowing necessary. The remote control on the pump end discharges the mud very quickly and precisely and reduces some of that heavy labour. If we have a productive 3 weeks we will be at the insulation and drywall stage right on schedule.

Pumping it full and two finishers working.

Roofing - shingle to flat section

The roof was specified with a few difficult to shingle steep sections and a flat component in the middle. This was a lot of work and hard to do without a manlift. Nice result though. Another job well done by the hard working Albanian crew.

The flat section wraps under the shingle.

framed and ready to move on

My large custom detached build is rolling along nicely and given the pandemic situation I have been lavishing my full attention upon it. The framers have done a great job and basically wrapped up part 1 of the job. The basement is yet to start but all the interior walls are done and the roofers finished. At this point the spring rains can come and we will stay somewhat dry. We’ve always got a little back framing to do but for the most part all the interior partitions and rooms are defined. Framing is the backbone of the schedule and good framers make a tremendous difference to the pace of the build. At this point I can closely schedule plumbing, gas, Hvac, fireplaces, furnaces and electrical. This gets us to the main milestone of the pre drywall inspection.

A lot of work here. Broom clean and ready for the trades.

Hydronic pressure test and cost of install

I joined the hydronic install crew as many hands make that task way easier. Essentially we zip tie a bunch of hoses to the rebar and then pour the slab. What is interesting is how much the boutique home builders charge for this service vs what I actually install it for my clients. It appears the luxury home buying customers don’t mind paying a 300% markup on a radiant heating system. I think what they do is get a sales staff member upsell the system from a show home and they pay a huge commission. At $20000 there is a lot of money to be made in hydronic. Fortunately my custom clients just pay the install price and a management fee and after they move in the floor will be warm and cozy.

All rigged up and pressurized. Inspector has given the thumbs up so we can pour this one. And we aren’t billing the client as an extra cost this was in the budget from the first draft.

Lots of framing progress and more to come.

With the framing crew wrapping up another job and now able to focus all hands on my site we experienced the rare holy trinity of construction, good weather, skilled crew, and lots of materials. That means big progress and a roof to go on next week. My key tip for the aspiring builder is to keep up the momentum by finishing the basement plumbing and having that slab poured. This way by the time the framers run out of work above they can get the frost walls and partitions done before the next crews show up and it makes the job run so much smoother. Getting the slab done isn’t that easy because it takes two inspections and the hydronic roughin work adds a day in the middle. So a fair bit of prep work and supplies to deliver (gravel, rebar, styfroam, poly, pex, design work, permits). Costly slab work and tall basement concrete walls are yet another of the many reasons Canadian building costs a lot more than what you see on TV from American based renovation reality shows. I’ve got a schedule put together to really move this building along toward the drywall phase. It is just way easier to start a build like this in the spring. I need to somehow have all my builds start in April and none of them start in the fall.

This is the hardest wall segment of the build and is done in an afternoon. The perimeter is complete and all of the second floor partition walls. Roof will take a few days and we can haul a load to the dump and start the shingles and plumbing.

Realtor ineptitude, a case study, the 'out of town developer'

I’ve been considering a post over the past week on a topic, that, while it is a personal favourite of mine, is possibly not that appealing to my regular readers. Once again, the hideous incompetence of the ‘real estate professional’, emphasis added on the quotations around ‘professional’ is just so justified based on my observation of events. These guys are so terrible, so shockingly awful yet so immune to responsibility I look upon them, as someone who has such profoundly deep and enduring liabilities and responsibilities with a begrudging envy. What a wonderful world of the realtor, to screw up and harm your client so deeply, yet escape consequence and in fact likely be the beneficiary of professional fecklessness.

Here is a dangerous recipe. An out of town developer with financial resources + a slick talking salesman with a knowledge of nuanced development niche so thin it rivals the motivation of my teenager to tackle online learning assignments while unsupervised. That’s low! Mix this together and it = a toxic disconnect of compensation (for transaction) and outcome (for client).

My premise is the realtor learns just enough to be dangerous, to learn the lexicon of the craft (while building real transactional skills), and no more, by design. A first order principle of his own success installed in a fledgling realtor by a successful mentor-type broker/realtor is to remain suitably ignorant, above reproach and cloaked in innocence like a layer of realtor body armor. By learning more than what it is to be a client hazard, to actually become the trusted authority in the profession as he purports to be, the realtor then would have too much knowledge and this would lead to him acting at cross purpose to his true motivation, to transact. By knowing too much he’d be unable to present terrible opportunities to clients also sadly lacking in sophistry in the black box of infill development themselves, as golden nuggets. This would then mean less transactions. But we know the prime directive is to transact and there is no higher calling than to transact. Better to bathe in the allure of a transaction and to not know what you are talking about, then offer a credible, educated perspective, and transact less! The out of town developer? Well he is no more than the sucker who should have done his own diligence. Of course there are no certainties in this business and clearly the realtor, just a person who transacts couldn’t possibly have some liability for the pseudo knowledge he parrots while prospecting. The realtor was actually just there to help with the transaction, once the deal closes he will find a good sounding name on google and pass that off to the client as a ‘close personal member of his team’ to assist in what comes next.

And what does come next? Realization the fresh meat, the out of town developer was hand led into a transaction that held only a thin veneer of development opportunity. The reality of being the greater fool for significantly overpaying for something that can never be realized must be a devastating betrayal for someone from out of town, who reached out to a trusted professional to guide him in his business expansion. All the downside risk is now held and manifested as irrecoverable loss by the developer. The silver tongued realtor, suit wearing, import car driving, polishing up his transaction knowledge, well, he will be happy to re-list the property he just sold you. He’d be elated to transact that lot again, in fact he’ll continue to masquerade the false development potential of the property onto the next sucker, unfettered by any professional standard. What a great business!

Unhappy thoughts on high priced townhomes

There is a definitely a time and place for high priced luxury townhomes in certain desirable urban centres. Unfortunately that time is not now, and the place is not here. Toronto/Vancouver for sure. Not so much Calgary. That doesn’t stop builders from continuing to build them though. They don’t care what I think of their proforma. They don’t believe me when I tell them their ridiculously ambitious valuation is a fantasy. They don’t seem to grasp that the final product cost of a high end townhouse will be basically the same or similar enough as a semi detached product that offers many advantages.

here is my list of reasons not to do it

• cost per sq ft - the townhouse always costs more to build per sq ft that a comparable detached product and much of that additional cost is invisible or offers no value to the buyer.

• buyer preference - common walls are not your friend. How much will your proforma be undermined when the middle unit needs a big discount to sell?

• the city - way worse to deal with the city. You will get screwed, sorry I mean scrutinized way more heavily and have many costly processes to go through that inevitably suck time and money, again these offer no value to the buyer.

• Leverage can work against you - you need to sell 4,6,8,10 of these. That takes a long time so the investor is tied up in the project for a long time.

• condo fees suck - the condo fees are a source of buyer suspicion. 400$ a month on condo fees can cover $100k of financing. That means you could spend more on a detached house but the total monthly economic outlay is the same once you factor in the condo fee (or lack of).

• garage space - garages are nice and townhomes rarely accommodate larger vehicles. Sometimes they can but this is the exception.

• regardless of how high end the interior finish is the townhouse In this market is not as good for resale. There are so many new competing products that a five year old model will inevitably look dated and isn’t likely to resell at a premium.

• the rental market - the townhouse doesn’t rent for enough to make it a good investment. This may apply to any new build today but for sure it applies to the townhouse. See condo fees. A $700k townhouse will never rent for enough to justify the purchase price here. This may be because of our warped financial system that rewards owners with cheap loans or just that rents are too low and demand is low or nonexistent for $4500 per month leases.

• pets - people like pets too much. Townhouse not great for pets and outdoor space is much less suited to dog ownership

• property tax - the way our system values property the inner city townhouse dweller pays more than the owner of a detached suburban home in an area with little to no services or infrastructure. Hard to reconcile that imbalance when a buyer is deciding where to live.

this is my somewhat exhaustive list suggesting luxury new build townhouse projects aren’t a good bet. There are likely more reasons I’ve not mentioned. Townhomes just are not on my radar now (High end ones). The market is possibly better in the ultra high end for calgary townhomes. Those I have seen work at 1.5 million despite me thinking it was crazy and there’d be zero buyer pool. I consider a townhome high end if it crosses $600k for the purpose of this discussion in the Calgary inner city market. We can reevaluate this in a year or two and see where we are in the market.

The DOM tells the tale on this high end townhome.

Window well building

I have learned the hard way that window well building is best done before the backfill. This is especially true with the deeper window wells that are often specified today. For my projects I typically try and use the precast window wells but these have limited sizes. In this case you have to use the site built wood wells on precast brackets. These are solid and a large upgrade over the metal corrugated wells you can buy at the hardware store.

The window well is hanging on the wall and the brackets. Digging these out after the backfill would be a horrible job.

Starting is easier than finishing a construction project. But starting can have some hurdles to overcome as well

With the basement ready to pour on the lakeview job we can feel a bit of relief. Each excavation carries with it some risk. You can dig to the footing grade and encounter a lot of surprises. In some urban horror stories the builder has unearthed old garbage dumps, streams, and often soil that isn’t supportive of weight. This can require costly remedies like filling with many lifts of compacted gravel or screw piles. The lakeview project did avoid the worst of these outcomes. We had some areas of soil that were initially seeming to be a little wet and soft however at the finished grade we passed a bearing test. The old basement we removed was very deep and we had to fill in some areas with gravel on a geotextile fabric and a wider footing. This used another $1000 worth of concrete as well in unexpected volume. Now we can proceed with confidence that our basement will be solid for decades to come, just as crack free and reliable as the 60 year old basement we hauled away was.

Ready to pour

Another one done

The photographer came by for an early shoot of the remaining side of the killarney project. I like the way this one turned out, as I do for all my housing babies. I posted 10 of the new shots to Instagram as well where more people will see it. They can boost my ego by giving me some much needed ‘likes’.

I have plans to build these models again (with tweaks), whenever we get to actually start the parkdale job. I think this project is flexible to fit into any premium inner city location, but it can be a little too pricey for suboptimal sites where the values are a lot lower (which I don’t buy as a general rule). There may be too much uncertainty to go ahead and dig the basement for another project right away. The investment risk in land and building is large enough to deter me until such time as we get an economic recovery from this covid19 disaster. With the killarney project really wrapping up I will be turning my full attention to the lakeview custom home for the next 3/4 months, so I will remain fully employed (by myself) for a long while. By then I should have approved development permits for four new homes and I can shelve those until market conditions give me a little confidence that they will be saleable. A development permit is good for two years and is renewable so it is a good strategy to line up one ready to go without delay.

Finishing these houses is really exhausting and rewarding.

selling completed renovation projects during a pandemic

It appears we finished the townhouse renovation project (late unfortunately) and launched the MLS listing at the height of the viral shutdown that is gripping the entire planet. With the pause button hit on the global economy, livelihoods in peril, and governments hitting the print button on the bailout/money printing machine, can we actually expect to sell this house? Will any prospective buyers even want to go and see it? These are the questions we will find the answer to in the coming weeks. Until then, I expect little to no realtor traffic.

Let us take a deeper dive into the situation we have at hand at the renovation site;

1. The finished unit is priced below cost of production - that’s right, you couldn’t build it for what we are selling it for, complete with a $50k renovation. Attached two car garage is another amenity very hard to find in the inner city at twice the price.

2. Just the air conditioning and window covering/blind package account for 3% of the purchase price. That is a massive allocation to optional items. In a new build infill, as is the norm, we don’t include AC or blinds unless the buyer request it. These would account for about 1% of the purchase price of an inner city property.

3. Mortgages are available at almost unheard of low rates (if you have a job and can qualify). We may see people getting sub 2% loans?

4. Owning is actually cheaper than renting. This isn’t common in major cities today. With the high price of housing today, usually the rental income does not even cover the mortgage, not to mention upkeep, taxes, and capital expenses.

5. Massive government bailouts and money printing to avoid a deflationary collapse of the monetary system could eventually lead to increase in prices of hard assets and a rise in interest rates. That could make owning a property a great hedge against inflation and a way to lock in a shelter payment that will not increase over time.

6. Renovated homes that are purchased have no GST to be payed upon the sale. This is a %15k savings vs a new home. Compare this to the land transfer fees paid in Toronto for a buyer to purchase a property.

So I’ve now basically convinced myself to buy the townhouse and keep it. Unfortunately living in the ring road communities doesn’t work for me with all my infill builds coming up (or on hold?). Despite the crazy world we live in, I think this townhouse is going to sell.

New hardwood, new window coverings, new lights, new casing, baseboard, trim, paint, door hardware, appliances, cabinets, carpet, tile, countertops, sinks, faucets…

Enduring economic chaos

We will be tallying up the human and economic toll this covid 19 virus has taken for some time yet. But it appears the Alberta economy is in the midst of another imported disaster. What I predicted was going to be a good year as of January is looking a lot more difficult. Will the builders emerge from this stronger, or not at all? There are some big challenges ahead for the industry and a lot of pain before we can recover. I do think the builders can reboot much quicker than other sectors like hospitality because we have less overhead and we can ramp down to idle speed (or at least I can). The feds seem to be bailing out the mortgage industry first to prevent the financial system from imploding, but lower rates have stopped trickling down to the borrowers. There are clear liquidity concerns emerging for builders with excess inventory, and sellers who’d like to move their own property to buy one of my new ones. Too hard to imagine how this shakes out as we are nearer the beginning than the end of this.

When the Canadian dollar hits 68 cents USD it massively impoverishes us all. Imports will be way more expensive. That means inflation for essentials, yet the economic situation is deflationary. Worst of both worlds for Canada.