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buying in sky condos project Edmonton

Willyboy

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Aug 19, 2016
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Hello. I was just wondering if it would be good to buy one or more condos in the sky condos project in the new arena in Edmonton. They are expensive of course but the location is unbeatable as well.

What I would be concerned about is the 5 to 10 year appreciation potential and rental return and also the condo fees.

What are your thoughts?
 

Thomas Beyer

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LAND is gong up in value. Anything built upon it will depreciate in time.

Condos have less sq ft of land per $ invested than a mobile home park, an apartment building, an acreage or a single family home, even a TH. As such, appreciation potential will be WELL BELOW these asset classes. Especially in a large sprawling city like Edmonton which is not land constrained.

If you have $100,000 to invest the last thing to buy is a condo. I still own 2. Of all investments I have condos are THE worst performers. The only upside is buy-and-forget ie leverage of your time in a rental pooled condo. Both of these 2 condos are in a rental pool. I spend about 10 h a year on them, and after a refi many many years ago I have no $s invested so I keep them. I haven't bought any for 13 years.

Consider return on time and return on money !
 

Matt Crowley

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There is nothing really downtown Edmonton that is unbeatable in my opinion... infrastructure isn't there to create a urban-density-walkable-millennial-neighbourhood and not by a long shot, which is what I've seen in the renders for the Ice District. The only potentially usable walkable neighbourhood in Edmonton is on the other side of the river in Old Strathcona where the new LRT is not going. I guess the low-end cost is only $1,000 per cm, why build it where it can be utilized? ($1.4B for 14 km). Also, why does it cost Toronto $3,000 per cm? Just crazy. So that really caps the potential upside for some time. 104 street has one of the best farmers markets in the world (personally I think it is every bit as good as Lyon) but the entertainment district is essentially a casino and the arena. Even if they get a walkable grocer there is probably not enough demand to keep them (such things have happened in recent memory with downtown Edmonton grocers).

Secondly, there is a real question as to how many people in Edmonton actually want to live downtown... Mayfair, Hendrix, and new Edmonton downtown towers all struggling for tenants and at 40 - 60% occupied after a year of lease up. For one unit, not a big deal at all you will find a tenant. The mass consumption dream is still in the sprawl product which is readily available at very affordable prices with ample "sprawl" neighbourhoods occuring in all corners of the city.

That being said, you are certainly buying into a low point on condo prices. There may be a business case to be argued, but you are very macro-constrained from a returns point of view, as Thomas says, with condo purchases with no real way to increase your unit significantly above other units in the building.
 

DustinT

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Sep 17, 2017
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Went to the sky event today. Priced from 300k to 1million. How would one figure out if the high end rental market is in better shape then rental demand at the average prices?
 

Matt Crowley

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Kijiji. But it isn't.

Look at rents achieved by Mayfair or Hendrix as a proxy, then dig up what was paid for those units (Mayfair $425k - $450k average per suite), Hendrix not sold but refi at 4.25% cap. That is your value. What kind of returns can one expect with that valuation?

These are Class A assets with a substantially lower return profile, and much lower risk. Penthouse rentals won't carry their own costs.
 
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