And then they'll say they never saw it coming

Almost all the 'institutional liars' claim that they never saw the financial crisis coming. In the Canadian context, we were told that there won't be any recession. Prior to that, circa 2007, there was not even a brief mention of a housing bubble anywhere, except at places like this blog.

3 years later, with 5 % reduction in GDP, over half a million jobs lost, real estate values falling by over 10 to 15% from the peak, it seems people seemed to have learnt nothing. 'Real estate investing' is back in vogue and a lot of 'investors' want a piece of the action. Here's an ad in local Calgary classified for a 50 year old apartment building:

Year Built
1957 (est)
Construction
Wood frame
Suite Mix
4 One Bedroom Suites 600 sf +/-
4 Two Bedroom Suites 700 sf +/-
8 Suites Total 5,200 sf +/-
Appliances
8 refrigerators, 8 stoves, 1 washing machine,
1 dryer
Rental Rate Range
One Bedroom - $750 - $875
Two Bedroom - $875 - $950
Comments
• Clean building New roof
• Historically low vacancy

Annual Rent $82,500

Laundry $ 1,800

Gross Income $84,300

Less: Vacancy (1%) $ 843

TOTAL $83,457

EXPENSES

Taxes $ 5,902

Insurance $ 2,400

Utilities $ 7,026

Caretaker $ 2,400

R & M $ 4,800

Misc. $ 1,000

TOTAL $23,528

Net Income $59,929

Price $1,600,000

A cap rate of less than 3.75 per cent with very aggressive occupancy assumptions for a 53 year old wooden building in a boom/bust city of Calgary. Sorry, I forgot we had mastered the business cycle. I won't be surprised if CMHC underwrote the mortgage for this type of loan to a 'smart investor'.

Back in the days of 'Alberta Advantage' a property like this would sell for no more than 30 to 40k per unit.

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