Increase of 2nd, 3rd, 4th mortgages out-pacing 1st mortgages ? | Page 2 | Mortgages | Discussion forum

Norman1 said
The developers or investors aren't out to win the bidding on the houses at any price. The purchase price has to make sense in the context of the rent from the resulting two units.

If the developer was that one mentioned, who was planning to create a new rental units out of the basements, then the highest bid would likely be about $74,000 more than would make sense for the rent from the resulting two units.  

I foresee this particular block eventually being developed into high or low rise units, with the house being torn down, so a developer would be interested for the longer term. Like the individual buyer, he has his acceptable price point and, in normal times, that would be the deciding factor.

However, you may be assuming too much rationality in this process. The competition for houses is so fierce in the area right now that even a developer doesn't necessarily win the bidding war even when conditions otherwise seem suitable. All the offers, and there were quite a few, were above asking price, which was a fair one. Both the developer and the owner-occupier are looking at what they imagine will happen down the road in terms of the value and utility of the property. They are both guessing.

Quickly did some checking of homes and what they sold for in Hamilton mountain...
Houses that could be duplexed were simply sold where the "cashflow positive" at around 25%-30% downpayment based on 2 rents.. ie 750+, irresepective of location.
Anything that sold for less was probably because the "future apartments" needed work.

Many newer homes (circa 1990+) simply didn't go for more money even if they were way nicer because the homes could not be divided into 2 apartments !!

So previous "starter homes" are now simply priced as buying 2 semi's, and thus out of reach for many young people.

So the problem is simply be a LACK OF RENTAL accommodations. Developers simply not interested in developing "rental housing" (Due to rent controls?) !!