Profit Centre #5

A lot of that is driven simply by image.

When I moved here from the Prairies, it was interesting to discover how different the houses were here: far greater emphasis on exterior look, far less on practicality. 

I moved here just as a new 100-lot subdivision was being developed, and was one of the first to build in it. I think my plan (having been designed by myself, with my prairie mindset) was practical and efficient, but still fit into the neighbourhood. At least, it passed the design controls.

As homes were being built in that subdivision, I walked through nearly every one. I was stunned, to say the least, by the lack of interest in practicality. In fact, I began to wonder whether some of those designers considered practicality an infringement on design, a detraction from creativity.

Over the next years I also learned that, “the more gables facing the street, the better.” Then it moved on to “the steeper the pitch of those gables, the better.”

For a long period of time it was “the bigger the house, the better,” too. It’s still that for some, but not so widespread anymore. Things keep evolving. 

But, I think it’s more than affordability. It’s also a changing perspective, with a greater emphasis on lifestyle–who wants to spend so much time house-cleaning and doing yard work? It’s also about caring for our footprint on the planet. And it’s attributable to smaller families, too.

Yet, I was intrigued–and surprised–at the extremely long line-ups waiting to get into the “tiny homes” at last weekend’s Home Show at BC Place. As my friend and I stood in the very long line waiting to inspect the first of three such homes, we chatted with the proprietor, who indicated how shocked and challenged both they and Show organizers also were, with their popularity.It’s amazing how much you can squeeze into a tiny space if you’re super efficient.

But all three displays had two comfortable queen-sized bedrooms/lofts, enough kitchen space, nice appliances, an adequate bathroom and shower, etc.  They meet RV specs and are certified under CCA standards for RV’s.

As we chatted, we suggested that these differed only a little from your old-style trailer park mobile homes. Except in image. Put one of these on a pad in a mobile home park and you’ll be “the rich kid on the block.”

They certainly are affordable, though, the bigger issue being to find an adequately zoned lot on which to place them (you don’t really want these in a mobile home park!). But, more and more, municipalities are taking these ideas into account in their community plans. Lots are increasingly available, though not so much within the cities.

For a single person, or even a couple using one of these as a “second home,” they just may be ideal. 

And when a bad neighbour moves into the neighbourhood, you can pull up stakes and move on.

Efficiency, flexibility, reducing the human footprint, image!

What’s not to like about these?

When you buy a property and fully mortgage it, up to 95% (but more likely 80 – 90%) is someone else’s money, usually the bank’s money. Only a small portion is your own investment.

Yet, when that property grows in equity, through appreciation and mortgage write-down, who gets all the benefit? You!–the one who has very little invested in the property.

Let’s look at one small example: You buy a property for $300,000, putting down 10%, or $30,000, and mortgage the rest. At an appreciation rate of only 4% annually and a 25-year mortgage amortization, the equity in the property after year five is $133,378. And it’s all yours! Your $30,000 initial investment has multiplied by 4.45 times, or almost 35% per year, compounded.

Where else can you get that kind of return? Where else can you even get a lender to loan you up to 90% of the value of your investment?

Real estate can be extremely profitable because of the high leverage value it provides for your money.