Pick Your Poision

Let’s look at a real estate “package” that I don’t personally like, and then let’s look at three others.

At the end, you tell me which package you’d pick, if it were up to you…

One of the first emails in my inbox on Tuesday morning was from my colleague, who sent me a new listing for a property in Yorkville at the Four Seasons.

Her email simply said: “Isn’t this a bit under-priced?”

The property was about 2,000 square feet, and it was listed at $1.7 Million.

I kind of chuckled.  I mean, yes, the property was under-priced, but it was still $850/sqft!  Since when is $850/sqft considered “under-priced?”  Well, when it’s in Yorkville, that’s when!

Later that day, the listing was edited and the price reflected the property’s actual “value” at $3,700,000.  Oops!  Somebody mixed up the “1” key with the “3” key, and made us all think that a new condo at the Four Seasons was available at a paltry $850/sqft, when in reality, it was $1,850/sqft.

THAT’s more like it!  $1,850/sqft!

Throughout the day, I began to think about how many ways I would rather spend $3,700,000 than purchase a 2,000 square foot condo.  I figured there had to be an infinite number of permutations, and that trying to figure out all that out would drive me crazy.

Instead, I put together only three combinations, for sake of discussion, and I’d like to share those with you.

So here is the question:

Would you rather own a 2,000 square foot condo at Four Seasons for $3,700,000, or would you rather own one of the following “portfolios” of real estate?

I could name them A, B, and C, but instead, I’m going to name them after pizza toppings that I think go really well together.  Let me know which portfolio you’d take.

1) Chicken, Red Pepper, Roasted Garlic

Let’s not be greedy here.

This combination includes a great place to live, a great place to vacation, and an investment down the line.

First, we have a house in Chaplin Estates.  A 4-bedroom, 5-bathroom, red-brick house on a 38 x 135 foot lot.  It’s a 3-year-old, custom-built home, about 2,800 square feet above grade, and an awesome finished basement with 9-foot ceiling height and walk-out to the backyard.  The finishes are all upgraded, and the kitchen is awesome – Wolf range, massive centre island, and a huge family room off the kitchen that allows for a more formal living room at the front of the house.  The property is $1,700,000.

Second, we have acottage in Port Severn, Ontario. This is about 90 minutes north of Toronto, or quicker if you like the smell of burning rubber when you pull up to the front porch.  This isn’t just a “cottage,” but rather it’s ahouseup north.  It’s a 1 1/2 storey, ranch-bungalow style with 3-beds, 3-baths situated on 1.75 acres of land, with a great shoreline that could be sandy if only you put some work into cleaning up the rocks and zebra mussels.  The house is about 12-years-old, built anew, and features a games room, a boat house, guest house, and an 80-foot dock.  The property is $1,200,000.

Lastly, we have an investment property, to help pay the bills.  On Booth Avenue in Leslieville, there’s a duplex that used to be a single-family home.  The front foyer opens to two doors; one leads upstairs to a 2-bedroom, 1-bathroom apartment that has a new kitchen, and vaulted ceilings in the living/dining room, and the other door opens to a deceivingly large 4-bedroom unit, with two bedrooms on the main floor, and two bedrooms in the basement.  The rent for the second floor unit is $1,400 per month, and the rent for the 4-bedroom main/basement is currently $2,000 per month (four guys paying $500 each), but you know you could get more.  The house itself is a semi-detached, 2-storey, on a 22 x 120 foot lot with 1-car parking in the back.  The units are in excellent shape, and have been completely renovated by the previous owner.  You won’t need to put a penny into this place.  The property is $800,000.

2) Pepperoni, Bacon, Mushroom, Black Olives

Let’s get a little crazy here.

This is the portfolio for somebody who is thinking long-term, and believes in real estate as an investment.

First, we have the primary residence.  It’s a modest house on Galley Avenue in Roncesvalles – a 2 1/2 storey, 3-bed, 3-bath, with a finished basement, and really great principal room sizes.  The 3rd floor has the master bedroom with a deck, a 5-piece ensuite bathroom, and his/her closets that span the whole length of the house.  The basement makes a great man-cave or rec-room, and the backyard is big; the lot is 25 x 130.  The property is $950,000.

Second, we have an almost identical property on Garden Avenue, also in Roncesvalles, that is being rented out for $3,300 per month.  It’s a long term buy and hold, and its easy to keep an eye on, since it’s around the corner.  The property is $875,000.

Third, we have two condominiums; perhaps for the kids, if you’re an empty-nester who lives on Galley Avenue and has, oh, let’s say, twins who attend the University of Toronto.  One has a condo in Murano, and one has a condo in Burano.  Each is a 2-bed, 2-bath (the kids are spoiled!) with parking, and a great view.  The properties are $500,000 each.

Fourth, we have a bungalow in Scarborough on Fraserton Crescent at Brimley and Lawrence.  Wow, what incredible value!  A 2-bedroom, 2-bathroom house on a whopping 45 x 140 foot lot!  Believe it or not, this property is only $400,000.

Lastly, we have a 10-unit apartment building in Niagara Falls, Ontario.  The building is located in a mature community and the tenants are all retirees who have been there for many years.  The cap rate on the property is an impressive 8.5%, and the property is $475,000.

3) Goat Cheese, Spinach, Artichoke, Sun Dried Tomatoes

This portfolio really sees how far you can take $3,700,000.

First, we have the condo that you live in.  You’re fine where you are, and you’re not showy.  You live at 88 Broadway Avenue at Yonge/Eglinton in a $575,000 unit.

Second, we have a townhouse in Mimico that is about 5-years-old, but in fantastic shape!  It’s about 1,100 square feet – great value for out there; 2-beds, 2-baths, with a built-in 1-car garage.  The property is $425,000.

Third, we have an investment condo on Hollywood Avenue up at Yonge/Sheppard.  This area is a mecca for renters, and there is zero vacancy.  The building is 3-years-old, and your unit is a 640 square foot, 1-plus-den, 1-bath with parking that costs $315,000.

Fourth, we have a small commercial property on St. Clair West.  It’s a storefront on the main floor, with a 2-bed, 1-bath apartment upstairs.  The main floor brings in $1,500 per month and is rented by a bicycle shop, and the second floor rents for $1,000.  The property is not in great shape, but it’s serviceable.  It’s not a money-pit, but you have to keep a constant eye on it.  The property is $500,000.

Fifth, we have a 1-bedroom, 1-bathroom condo at 2 Gladstone Avenue in the Queen West area, appropriately named by genius marketers as “2Gladstone.”  The property is $300,000.

Sixth, we have a house in a new development in Ajax.  It’s a 4-bedroom, 4-bathroom house, brand-spanking-new, in a somewhat lifeless and desolate sub-division that was bought mostly by speculators, although there are a few moving trucks.  The property is $425,000.

Seventh, we have a package of houses in Bradford, Ontario that come together, like it or not!  There are three houses – one is a 2-bed, 2-bath bungalow, one is a 3-bed, 2-bath 2-storey house, and the other is a 3-bed, 2-bath semi-detached house.  They’re $239,000, $268,000, and $287,000 for a total of $794,000.

Eighth, we have a piece of vacant land in Kitchener, Ontario that used to be home to an automotive shop.  It’s 70 x 180 feet, and costs $180,000.

Lastly, we have a run-down shack on the main drag in Wasaga Beach, Ontario.  It’s currently being squatted in by vagrants, and it’s about as useable as the vacant land in Kitchener.  The taxes are reasonably low, so long as there’s nothing there but a urine-soaked structure.  The property is $186,000.

.

So there you have it!

Three real estate packages, and four if you count the $3,700,000 condo at the Four Seasons that started this discussion.

Each package is as…….delicious as the next, and each comes with extra cheese and extra sauce…

Maybe some of you will surprise me and say that you’d take the $3.7M condo at Four Seasons, but something tells me the feedback will be mixed.

And at the risk of playing spoiler, I’d the take chicken, red pepper, and roasted garlic package, which happens to be my favorite pizza.

BTW – who the heck orders anchovies?  Is that for real?

17 Comments

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  1. moonbeam! says:

    David — for someone getting married in June, that Chaplin estates house looks great.. if it exists!

  2. AsianSensation says:

    #1. Less risk and maintenance with some room for appreciation.

    Also, I hate olives and goat cheese.

  3. Daniel says:

    It looks like everybody missed the point here. We could all design our own portfolio if we had $3,700,000, but David wanted us to pick from the three above. I’d pick option#1 (whatever pizza that was) since I feel it’s the most balanced between life and investing. The house sounds great, the cottage offers a nice retreat, and the duplex provides some income. Cool topic!

    1. DavidP says:

      Finneee. If it all has to go to property then I’d take the $3.7 million condo. At that financial level I really hope I wouldn’t need a Leslieville duplex to pay the bills.

    2. Devore says:

      I think the point is the absurdity of this $3.7M condo.

  4. DavidP says:

    I’d do a sub-$1 million house somewhere subway adjacent, $400k home near Niagara-on-the-Lake as a country home with fantastic theatre options and wine or Prince Edward County for wine and beaches, and $2.3 million invested…maybe tax havened…or if I already had other investments it’d just be play money to have some niceties like a driver or flying only first class.

  5. Devore says:

    I vote for a boat and a life of leisure traveling the world.

    Sorry, not ambitious enough?

  6. lui says:

    of course those who can afford the $3 million condo is not going to be one of those “handyman” owners…probably a oversea buyer.Camrost Felcorp is the builder of this project correct so judging from their other projects its going be terrible for the fit and finish.

    1. Not Proud Owner says:

      You are correct, Fit and Finish is always terrible with Camrost Felcorp. Terrible company to deal with too, don’t care an inch about the people, the living conditions, etc. I would advise anyone to stay away from this builder!

  7. ABB says:

    Take the $3.7M and invest half in a residential REIT such as Boardwalk, and half in a commercial REIT like Dundee. Then you profit from thousands of tenants (commercial and residential) in hundreds of properties across the country.

    1. Ralph Cramdown says:

      “No Dad…, Dad…. No…. Dad…. I didn’t lose the family fortune betting it all on one number… I bet it on TWO numbers…. Dad?”

      1. Dragon says:

        Your answer lifts the intclligenee of the debate.

    2. Bojangles says:

      Terrible idea. Valuations of these REITS are currently riduculous, cap rates are way too low.

      You’ll be top ticking the market.

  8. Ralph Cramdown says:

    This all looks like pretty small ball to me. One of the joys of being able to swing a $3.7M line is not having to deal with all the penny-ante Donny Trumps who bid up the prices of smaller investment properties, and here you’re putting together packages of high overhead, low return real estate. Illegal rooming houses? Dilapidated St. Clair W. properties that didn’t get bought out for redevelopment during this condo boom and will have to be maintained until the next one? Uninsurable properties with squatters (does the realtor know a reliable arsonist?) And of course we can all spot the property that your fabulous new tenant is going to turn into a grow op.

    The ten units in Niagara Falls would be worth a cursory look at the numbers. In the meantime, the real estate portion of my portfolio is diversified across hundreds of properties in various market segments and countries, professionally managed by 12 different teams, not overly leveraged and producing nicely. Taxation is straightforward enough that I don’t suffer expensive accountant’s bills. Instead of collecting cheques, taping N4s to doors and fixing the aftermath of flooded dishwashers, I’ve got time to post on this blog!

    1. Alex says:

      Tell us more!:-)

    2. Camila says:

      Ralph, who said criticism is the highest form of flattery?

      1. Ralph Cramdown says:

        Beats me. The quote has apparently been stolen so many times that its original author has been lost to history.

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