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Investment is a term that refers to the money used to buy capital assets, including real capital assets such as land, houses and buildings. Real capital assets are a special type of consumer goods, in that they are not consumed instantaneously but, rather, they are used for accumulating future wealth. In fact, since this type of assets are non-productive by nature, their sole purpose to exist serves the accumulation of capital.

Clearly, without investment the accumulation of capital would be at a standstill, since one’s personal capital stock would gradually wear out. This is, in fact, one of the axioms of economics, since for economic growth to occur, new investment must be sufficient not only to add to the capital stock, but also to replace what amount of capital stock is wearing out. Hence, for investment to generate growth, the rate of capital accumulation must be always over and above the current rate of inflation, to make economic sense. Furthermore, the more money that is saved, i.e. that is not spent on consumption, the more money is available for investment.

Investment operates as a function and as a direct and proximate cause and effect - of the equilibrium between income and interest rates. An increase in income will encourage higher investment, whereas a higher interest rate will discourage investment as it becomes costlier to borrow money. Even if an investor does not need financing and chooses to use his own funds, the interest rate represents one measure of the opportunity cost associated with the choice of investing those funds rather than putting them out to different uses.

Cost of opportunity is best described as the benefit or benefits forgone by investing capital stock in a certain way as opposed to the best alternative way. Given the innate scarcity of resources of investors, that is the limitation of capital available to them, investors will invariably try to maximize growth by, among other things, reducing costs. Suppose that an investor is willing to increase his investment so as to increase the accumulation of wealth. The investor will have to divert resources away from other purposes, to acquire a real or other capital asset. Therefore, the opportunity cost that the investor must bear is the loss of the gain(s) he would have received by investing the money elsewhere in the most valuable alternative.

Opportunity cost need not be assessed in monetary terms but, rather, it can be assessed in terms of anything that is of value to the person or persons doing the investing. The consideration of opportunity cost is one of the key differences between the concepts of economic cost and those of accounting cost. Assessing opportunity cost over a scale of values to investors is fundamental to assessing the true cost of any course of action. In the case where there is no explicit accounting or monetary cost (price) attached to a course of action, ignoring opportunity cost may produce the illusion that the benefits derived out of a certain course of action cost nothing at all. The unseen opportunity cost then becomes the hidden cost of that course of action

It is important to note that opportunity cost is not the sum of all available alternatives, but it is instead the benefit that could have been derived by opting only for the best alternative. Thus, the opportunity cost to a real estate investor might be the benefit he forwent by not investing his capital into stocks, or in a different property, or not at all (as in the case of an investment resulting in a capital loss, for example). Although opportunity cost needs not to be expressed in monetary terms, the following practical example perhaps best describes the cost of opportunity to be borne by a typical real estate market participant.

Let’s assume that an investor is given the choice to buy one of three rental properties offered for sale. Property A costs $600,000 and yields a net annual rate of return of 7 percent. Property B is priced at $700,000 and has a net yield of 7.5 percent per annum. Property C is offered at $650,000 with a yearly capitalization rate of 7.75 percent. Our investor has $200,000 of his own for the down-payment, and qualifies to purchase any one of the foregoing three properties. Whatever he buys, his best option is to finance the deal with a 3-year term closed mortgage. The $200,000 are invested in a term deposit bearing interest paid semi-annually at the rate of 4 percent per year and accruing to the benefit of the investor . The investor decides to put in an offer to purchase Property C.

The factor in the determination of the hidden cost of opportunity in the foregoing example is that had the investor opted not to purchase any rental property and, in fact, had he decided not to do anything at all with his money, the term deposit would have yielded 12 percent in three years’ the length of the term of the mortgage he is about to take on. By electing to go ahead with the purchase, he is now going to invest his $200,000 at the new net rate of return of 7.75 percent per year, equivalent to 23.25 percent in three years. Since $200,000 amounts to 30.77 percent approximately of the purchase price, the net yield attributable to the down-payment is going to be (23.25 x 30.77%) = 7.15 percent, so that his cost of opportunity spread out over three years will be 12 - 7.15 = 4.85 percent.

Hence, our clever investor will target a purchase price of a maximum of $618,475, say $618,000, to recover $31,525 over and above the standard negotiating discount, which is equivalent to the 4.85 percent opportunity cost on the purchase price of the acquisition (in this example assumed to be $650,000 - the asking price, for the sake of simplicity) spread out over three years.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

As the Yankee Dollar continues to slide and the Loonie breaks the 90-US cent barrier for the first time since 1977, all of a sudden everything that is American from MacDonald’s hamburgers to real estate looks darn cheap to Canadian eyes.

The $US/$CAD Noon Rate hit 0.9032 on May 5, 2006 as reported by the Bank of Canada, and the Loonie is predicted to equal the Greenback by close to year’s end. There are essentially four major key reasons for the recent surge of the Canadian Dollar vis-a-vis its American counterpart:

• A substantial increase in demand for Canadian commodities, most notably oil and precious metals, from the United States.
• A rising participation of American interests in the exploration and development of Canada’s natural reserves, and a subsequent increased demand for shares in Canadian companies.
• A steady increase in Canadian interest rates, which are moving at a faster pace than the corresponding increases of the Feds, and which in turn attract foreign investors.
• Financial leverage, which is higher in Canada than in the U.S.

This last point deserves a closer scrutiny, as it is directly related to real estate, my field of expertise and practice. Financial leverage takes the form of borrowing money and reinvesting it in hopes to earn a greater rate of return than the cost of interest. Leverage allows greater potential return for the investor than otherwise would have been available. Because real capital appreciation has been constantly more remarked in Canada than in the United States these past few years, it turns out that leverage is stronger in Canada than in the U.S., meaning the spread between real capital appreciation and cost of borrowing is higher in Canada. And this notwithstanding the fact that mortgage rates in Canada are typically nominally higher than in the States and that, in fact, wages in Canada are typically nominally lower.

The last time the Canadian Dollar was at par with the American Dollar was in 1976, just before the election in Quebec of the separatist government of Rene Levesque (1922 - 1987). Following that election, the Loonie began a long downfall, greased by weakening commodity prices and rising government deficits and domestic debt. The slide culminated in the record low of 62 cents U.S. for one Canadian Dollar in January, 2002.

The current exchange rate, therefore, represents a huge increase with drastic consequences on both sides of the border. For instance, a house priced at U.S.$350,000 would convert in CAD$564,500 approximately using the U.S.$1.00=CAD$0.62 exchange rate of 2002. The same U.S.$350,000 residential property costs a mere CAD $387,500 using today’s U.S.$1.00=CAD$0.9032. That’s a difference of CAD$177,000 in a little more than four years or, to put it differently, a price depreciation of approximately 31.35 percent in four years, or 7.838 percent p.a.

It sure beats the yield of treasury bonds, both in Canada and in the United States!

It is even easier to see how appealing has American real estate become for Canadian investors if we look, for instance, at the average rental property that would sell across the border from where I am. In 2002, rental properties would sell for an average US$80,000 in Washington State, or CAD$129,000 using the 0.62 cents conversion rate of that time. Now the same rentals sell for an average US$115,000, or CAD$127,300 approximately using the 0.9032 rate. Even though they have appreciated in value and are, therefore, more expensive for Americans, they have become actually less expensive for Canadians.

Interestingly enough, the Loonie has not been rising rapidly against other key currencies like the Euro and the Yen. A fact, this, which underscores that Canada and the United States have become mutual major trading partners, setting aside disputes and differences of opinion in the matter of salmon fishing and lumber subsidies of years past. In fact, the Canadian Board of Trade reports that over 70 percent of the manufactured goods produced in Canada are destined for the American markets, as opposed to only 25 percent in 1980. And Uncle Sam has increased his stake in Canadian holdings by 55 percent in the same period, with the latest acquisition being the purchase in December, 2005 of the entire stock of Terasen Gas, the exclusive distributor of natural gas in British Columbia and Alberta, by Kinder-Morgan LP of Austin, Texas.

There are, to be sure, some economic downsides that attach to an equal conversion rate, mostly because the two economies are significantly different. Not only is the American GDP (US$13.049 trillion) approximately 15 times larger than the Canadian (US$880 billion) - the very economic philosophies of the two countries are diametrically opposed. America’s capitalism is based on consumption and gives priority to consumerism, that is spending as opposed to saving. Canada, on the other hand, gives precedent to saving, so that Canadians are cash and equity richer, even in the instances when they actually make less money. Which, at the end of the day, makes Canada a much more stable environment.

This goes a long way to explain why the American economy is far more susceptible to interest rates variations: with a domestic debt load nearly double, the economic ripples caused by shifts in cost of lending travel twice as far in the U.S. than in Canada. A fact, this, that is also reflected in the weakness of the Greenback vis-a`-vis the Loonie.

So therefore, Canadian companies stand to lose competitiveness in Trade from a situation of exchange equality or near equality, since manufacturers North of the 49th parallel have to reduce productions costs and, at the same time, apply leverage on the economy of scales to increase productivity, in order to remain competitive in American markets. But, on the other hand, an increased international demand for the Greenback caused by a surge in demand for American real estate products by Canadian investors may cause a corresponding surge in domestic interest rates, which in Finance may cause a further imbalance in the US ‘debt service ratio’ - the ratio of the mortgage payments to disposable income, already at a whopping 47 percent in the United States.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

The most sophisticated way of establishing rank order so far devised by humans is by means of wealth, in all its manifestations. To be sure, there are many other activities endeavoured by mankind such as warfare, politics, organised religion, bureaucracy, sport, artistic fame, entertainment, and even who wears the trousers in marriage but the quest for wealth has the most potential for either widespread prosperity or disaster. Humans have even dedicated an entire discipline to the study of the origin and interaction of wealth and abundance with their opposites, poverty and scarcity: the Science of Economics.

Economics, therefore, is best studied by watching what happens to wealth. And the economic discipline best suited to watch wealth, in Capitalism, is that where wealth is primarily created and consumed on a daily basis: Real Estate. This is so, because real estate location and selection - particularly when it comes to residential units - are the main social markers of status. Real Estate is more important, far more important for establishing rank within society than the other competing field where wealth is created and consumed: the Stock Market. One can own the largest single package of IBM’s shares, and still the impact on his peers will not be as dramatic as the one of living ostentatiously in a multi-million dollar mansion.

Moreover it can be added that although establishing rank order by means of wealth manifestations is common to all societies everywhere on the planet, in North America specifically this peculiarity unique to the human progeny has taken a somewhat overzealous connotation, by combining the twin concepts of the saga of the self-made man or woman and the fantasy of home ownership. America’s love affair with houses is the principal indicator of our cultural idolatries.

This concept is indeed fully and clearly conceptualized by Prof. Marjorie Garber, the Director of the Humanities Center at Harvard University, in her book entitled Sex and Real Estate: Why We Love Houses. From the opening paragraph her thesis is clear: real estate has become a relational substitute in the lives of many Americans. She begins, “What do college students talk about with their roommates? Sex. Twenty years later, what do they talk about with their friends and associates? Real estate. And with the same gleam in the eyes. Real estate today has become a form of yuppie pornography”.

The connection between sex and real estate, two fields otherwise light-years apart, is made to the extent that they both serve and satisfy status rank to its best fulfillment through wealth. This is indicated and summarized by a somewhat blunt quotation of Aristotle Onassis, the Greek shipping magnate who married two of the most famous women in the modern world - Maria Callas, the opera diva, and Jacqueline Kennedy, the widow of US President John F. Kennedy - who died in 1975, when he said “There is no point in being rich unless you can have sex with beautiful women.” So when we are talking about the male urge for status rank, or the female urge for a dependable partner who will give her financial security and good progeny, we are really talking about two facets of the same concept: wealth. On the other hand, as humans tend to equate values, when it comes to housing and real estate, the equation is:

achievement + independence + comfort + prosperity + accomplishment + success = wealth

There is so much money around, and buyers want to flaunt it. They will swear and they will protest and say they do not want to show off, but they do. They want a house that makes a clear, undeniable statement that ‘I am rich’, ‘I have prosperity’ and ‘I have style’. Architectural styles of new constructions are changing and evolving, with the ever increasing round looks of exteriors that reflect feminine sensuality and the use of glazed windows and conspicuous steel beams - male machismo at its best. On the inside, the skillful blend of colors, woods and design elements promotes feminine harmony, warmth and balance with char green, sand, white, red, black, dark brown and all colors of nature at the top of the line whereas, if contemplating a hardwood floor, mahogany is the wood of choice since it enriches the environment by rendering a sense of abundance, and slate flooring and polished concrete walls help create a natural masculine feeling, especially if combined and contrasted with the glacial looks of stainless steel appliances.

The link between sex and real estate is the catalyst to emotional engagement, as important in our social interactions of status and rank as it is in our manifestations of wealth.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

The most sophisticated way of establishing rank order so far devised by humans is by means of wealth, in all its manifestations. To be sure, there are many other activities endeavoured by mankind such as warfare, politics, organised religion, bureaucracy, sport, artistic fame, entertainment, and even who wears the trousers in marriage but the quest for wealth has the most potential for either widespread prosperity or disaster. Humans have even dedicated an entire discipline to the study of the origin and interaction of wealth and abundance with their opposites, poverty and scarcity: the Science of Economics.

Economics, therefore, is best studied by watching what happens to wealth. And the economic discipline best suited to watch wealth, in Capitalism, is that where wealth is primarily created and consumed on a daily basis: Real Estate. This is so, because real estate location and selection - particularly when it comes to residential units - are the main social markers of status. Real Estate is more important, far more important for establishing rank within society than the other competing field where wealth is created and consumed: the Stock Market. One can own the largest single package of IBM’s shares, and still the impact on his peers will not be as dramatic as the one of living ostentatiously in a multi-million dollar mansion.

Moreover it can be added that although establishing rank order by means of wealth manifestations is common to all societies everywhere on the planet, in North America specifically this peculiarity unique to the human progeny has taken a somewhat overzealous connotation, by combining the twin concepts of the saga of the self-made man or woman and the fantasy of home ownership. America’s love affair with houses is the principal indicator of our cultural idolatries.

This concept is indeed fully and clearly conceptualized by Prof. Marjorie Garber, the Director of the Humanities Center at Harvard University, in her book entitled Sex and Real Estate: Why We Love Houses. From the opening paragraph her thesis is clear: real estate has become a relational substitute in the lives of many Americans. She begins, “What do college students talk about with their roommates? Sex. Twenty years later, what do they talk about with their friends and associates? Real estate. And with the same gleam in the eyes. Real estate today has become a form of yuppie pornography”.

The connection between sex and real estate, two fields otherwise light-years apart, is made to the extent that they both serve and satisfy status rank to its best fulfillment through wealth. This is indicated and summarized by a somewhat blunt quotation of Aristotle Onassis, the Greek shipping magnate who married two of the most famous women in the modern world - Maria Callas, the opera diva, and Jacqueline Kennedy, the widow of US President John F. Kennedy - who died in 1975, when he said “There is no point in being rich unless you can have sex with beautiful women.” So when we are talking about the male urge for status rank, or the female urge for a dependable partner who will give her financial security and good progeny, we are really talking about two facets of the same concept: wealth. On the other hand, as humans tend to equate values, when it comes to housing and real estate, the equation is:

achievement + independence + comfort + prosperity + accomplishment + success = wealth

There is so much money around, and buyers want to flaunt it. They will swear and they will protest and say they do not want to show off, but they do. They want a house that makes a clear, undeniable statement that ‘I am rich’, ‘I have prosperity’ and ‘I have style’. Architectural styles of new constructions are changing and evolving, with the ever increasing round looks of exteriors that reflect feminine sensuality and the use of glazed windows and conspicuous steel beams - male machismo at its best. On the inside, the skillful blend of colors, woods and design elements promotes feminine harmony, warmth and balance with char green, sand, white, red, black, dark brown and all colors of nature at the top of the line whereas, if contemplating a hardwood floor, mahogany is the wood of choice since it enriches the environment by rendering a sense of abundance, and slate flooring and polished concrete walls help create a natural masculine feeling, especially if combined and contrasted with the glacial looks of stainless steel appliances.

The link between sex and real estate is the catalyst to emotional engagement, as important in our social interactions of status and rank as it is in our manifestations of wealth.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

Vancouver, BC is the largest city in the province of British Columbia and the third largest city in Canada. It is surrounded by water on three sides and is nestled alongside the Coast Mountain Range.

In addition to a spectacular natural scenery and a bustling metropolitan core as well as boasting one of the mildest climates in Canada, Vancouver records one of the heaviest rainfalls in the world. Typical rainfall monthly patterns average 169 mm each in November and December and 135 mm in February and March. In Vancouver anything can happen to you, but dying of thirst is not one such thing. Vancouver, furthermore, holds one other record, although this one is very seldom publicized on tourism websites: it is the leaky condo capital of Canada.

To be fair to my hometown, Vancouver is not by any means the only place in the world to have experienced this kind of problem. Toronto and Winnipeg have suffered of the same calamity, and so have Chicago and London, England. The problem here, however, is that a lot has been said and very little done to correct building envelopes imperfections common to so many high-rises, until the aggregate estimated cost of repairs to leaky condos has exceeded CAD $1 billion. Engineering, now, has come to the rescue changing things finally for the better with a new advance in building envelope construction and repairs. It is called Rainscreen Technology.

Most of the high-rise towers have been built using face-sealed outer wall assemblies. Developers refer to “cladding” as the material or component of the wall assembly that forms the outer surface of the wall which is, thus, exposed to the full force of the environment. Face-sealed outer wall assemblies have invariably relied on a strategy for rain penetration control based on the elimination of holes through the cladding. As face-sealed walls are designed and engineered to deal with exterior moisture, in the form of rain, by sealing the exterior of the wall and preventing water from penetrating past the face of the cladding, if water does penetrate past the cladding it cannot readily drain out of the wall and remains, therefore, stagnant within the assembly. Here water can damage moisture sensitive material and components. It is, therefore, essential to insure that no water penetrates the outer cladding.

The water management strategy created by face-sealed outer wall assemblies can work in certain conditions where the wall is in a protected location and receives little exposure to wetting. However, as we have so disgracefully learned first-hand here in Greater Vancouver, in most situations face-sealed walls do not perform well. This is so because it is extremely difficult to fully seal the exterior cladding and ensure that no water will enter. The increased exposure experienced by high-rise buildings further limits performance expectations for this type of wall.

In contrast, rainscreen walls manage water in a different fashion. The exterior cladding is still intended to deflect most of the water that contacts the wall. However, a cavity is provided behind the cladding. If water does penetrate the cladding it reaches the cavity and cannot move further into the wall assembly. Instead water in the cavity will drain down on the inside face of the cladding or on the waterproof membrane at the other side of the cavity, and it will be deflected out of the assembly at a cross-cavity flashing. In practice the cavity acts as a capillary break to remove the capability of water to stagnate inside walls. The end and most important result of all this is that with rainscreen walls it is not essential that the outer cladding be completely sealed. Imperfections are acceptable, and this will surely make a lot of developers happy and a great many condo owners even happier.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

Europe is pitiful, these days - economically speaking, that is.

The European Union is far from the position of strength politicians only a few years ago were portraying it would be. The socialist welfarism of the recent students riots in France, Italy’s shift to the left, Britain’s Tony Blair under siege and a still comatose German Panzer Economies all signal that Europe is in economic decline. It certainly does not appear that Western Europe can now afford what it is politically committed to do, and certainly not so within a decade or two as it regards health care and pensions for the elderly. The hope is to turn the most populous former Eastern European countries: Poland, Bulgaria, Hungary and Romania - into large self-sustaining consumers markets, and that may one day happen but certainly not in the foreseeable future. The economies of the West and the East are too far apart to be integrated. Even Germany has considerable problems assimilating the former East Germany, and this notwithstanding all the billions of Euros that the ‘Deutsche Gesellschaft’ has poured into the East already. Not to mention the Union’s energy dependence on the flimsies of the Ukraine and Russia, an entirely separate matter all in and by itself.

The recent French riots in particular underscore the increasingly untenable system of job security at the expense of entrepreneurship, and that the grounds are set for a collision between expectations and economic reality. And whereas certain niches can certainly be found for international real estate investors, especially in countries like Bulgaria, the implied economic risks that must be assumed far outweigh, for the time being, the profits that can be reaped.

In China the economic achievements are huge, but so are the problems. President Clinton, in one of his last speeches, said that 200 million people in China were lifted from absolute poverty from 1978 to about 1999. That’s equivalent to about two-thirds of the entire population of the United States in twenty years. But, at the same time, the factors of economic instability are many and worry the leadership. These factors include a financial and banking system that is basically bankrupt, with bad loans-out greater than the real net reserves of the entire banking system.

But, perhaps even more importantly, there is a great imbalance of wealth between the thirty-five percent of the population that lives in the cities and the sixty-five percent inhabiting the countryside. If one is lucky enough to be born in a city - and registered as a city dweller - it is easier to get into university. In the city, one can work at all the large companies and government agencies. Conversely, those who are registered as rural persons are subjected to very severe restrictions on where they can live and work. And this is actually the biggest human rights problem in China today. There is a majority of this population of 1.3 billion people that are, by law, second-class citizens. And unless the Chinese leadership comes to terms with this reality, this social injustice is a ticking time-bomb that one day will explode, also in the faces of those foreign venturers that invest in China.

Since capitalism is, by definition, a system in which the means of production are predominantly privately owned and operated for profit, and which operates in the absence of government coercion or constraint on the production, distribution, or consumption of goods and services, the whole of Islam, most of Africa and all South America with the notable exception of Chile are entirely cut out. This includes wealthy countries like the United Arab Emirates and especially Dubai, where the real estate boom of recent years has been plagued by slavery, stories of construction workers not being paid for months on end, and excessive working hours all of which have led to the rioting early in the year, as upset workers damaged cars, buildings, and construction equipment. Again, investment niches can be found anywhere, but risk far outweighs profitability.

Everything taken into account, therefore, real estate markets in the United States and Canada are still the two safest havens for secure investments. The production of real estate output depends essentially on the accumulation of capital. This is so because the propensity to invest depends on expectations of future profitability and on the present perceptions of market risk. If the present perception of market risk increases sharply, capital will exit more and more from the sphere of real estate production. What drives the accumulation process, therefore, is the perpetual search for more surplus value - that is the amount of the increase in the value of capital upon investment, i.e. the yield regardless of source or form.

North America’s real estate markets offer this surplus value, both in the short and long run, coupled by political security and financial stability, and thus position themselves as the destination of choice of all those who want to reap the profits of investment while, at the same time, minimizing the socio-economic risks of investing.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

Condominiums have been in the news in recent years, sometimes for the wrong reasons.

In British Columbia, thousands of people have lost millions of dollars in equity because they bought condos that turned out to be leaky. The situation became so serious that the Provincial Government launched an inquiry, which ultimately came up with a compensation package for distraught property owners. And those property owners were really in distress. The members of the Barrett Commission, in charge of the Government inquiry, stated that they had never encountered anything like the passion and rage of people who felt their homes had been violated and their finances shattered - by water. It turned out that the construction techniques, which work well in California and Arizona, do not work equally well in the soggy weather of Canada’s West Coast, no matter how nice all those wooden exteriors look.

On the other hand in Toronto, in the post-September 11 real estate boom, condos were again big news as they came to dominate new home sales in the built-up urban areas. According to the Greater Toronto Home Builders Association, fully 80 percent of all sales in the 416 area code were condos, while the numbers were reversed in the 905 suburban area, where 80 percent of all sales were non-strata freeholds. This is of great interest, since condos have accounted traditionally for just under 30 percent of the market, with one notable exception: before the real estate collapse of 1989.

To be precise, a non-strata freehold interest in land is one in which the titleholder owns ‘everything’ - from lot line to lot line, whether it is a detached house, side-by-side duplex or even townhome. He owns the grass, driveway, bricks, shingles, windows and walkway. Not so with the condo, where what it is own goes from the inner one-half of a wall to the inner one-half of the opposite wall, and floor to ceiling as well. The condo owner, furthermore, shares in the ownership of everything else in the development with all the other owners, including outer structure, parking garage, elevators, landscaping, windows and roof.

Condos can also come in different varieties, not just as apartment buildings. There are condo lofts, condo townhouses, condo commercial units and rural communities with acres of common grounds. Typically some of the common features that everybody owns are set aside for the exclusive use of individual owners, such as balconies or backyards, lockers and parking spaces. Condos are bought, sold and mortgaged just like regular non-strata freehold interests, but the owner only insures the contents of the unit, while the strata corporation carries insurance on the physical structure itself. Condo owners pay a regular monthly fee for common expenses such as outside maintenance, ongoing repairs, landscaping and utilities for common areas, as well as a contribution to a reserve fund to be used in emergency situations.

Like homes, condos come in all price ranges and can be a great way for first-time purchasers to get into real estate, moving from rental tenancy to ownership in a small apartment unit. At the other hand of the scale, aging Baby Boomers are selling off their mansions, which require lots of care and attention, and move into luxury condominiums which offer a more liberating lifestyle as well as added security.

Indeed, there are distinctive advantages to purchasing a condominium. For example, there is no outside maintenance to worry about - no grass to mow, snow to shovel, roof to patch or driveway to seal. All this work is arranged and contracted out by the strata corporation. This means, one can have an exceptionally carefree lifestyle, knowing that someone else is looking after the chores.

Also appealing is the stable nature of the ongoing costs of ownership. With a single-family detached house one just simply never knows when the furnace is going to quit or, worse, the hot water tank is going to give up and flood the basement. With the condo, the predetermined monthly fee takes care of everything. Furthermore, speaking of money, it costs far less to find a nice condo residence in a demand neighbourhood than a single detached house in the same location.

Another big plus for people who like big swimming pools, exercise rooms, libraries or even art galleries is that condo developments often come with such amenities built right in. When everyone contributes through their monthly fees, some impressive things can be achieved.

So therefore, is condo life ideal for everyone? Definitely not.

Some people absolutely despise the loss of personal freedom that condominium lifestyle invariably brings about. Because one does not fully own the unit he lives in, one cannot control or even change it without collective agreement. This means making no exterior improvements or even internal renovations in some cases. There can be a great deal of rules and bylaws, and they can change at the whim of the majority of the property owners, who may not share the same vision or who may collectively decide that major renovations or improvements are required. The owners may decide that additional money may be collected on top of the monthly fees, and the strata corporation can place a lien on a unit if the owner refuses to pay up.

There have been instances in deluxe developments where prospective purchasers have had to be sponsored by existing condo owners, and then had their own personal finances and habits examined to be eligible for admission!

Less dramatic, but equally important, are the possible restrictions that can be imposed on ownership of a dog or cat. Also privacy is drastically reduced, compared with a single-family house. Then there is the value of the unit itself to consider, entirely dependent on how much a similar unit has sold, even on a different floor.

So therefore, condo ownership is an entirely different ballgame, which does not suit everyone. A careful scrutiny of the development in which the condo is being purchased always help, but in ultimate analysis what counts is the capability of the purchaser to adapt to an entirely different lifestyle.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com

The number of marijuana grow-ops and drug seizures has dramatically increased over the last few years.

There are many other serious community consequences associated with these crimes. Marijuana grow-ops are continuously linked to property crimes and crimes of violence. In addition to finding stolen property inside these homes, Police have investigated several home invasions where thieves have broken into grow houses to steal the marijuana crop being produced. Some recent home invasions involved innocent families that had moved into a previous grow-op house or were living close to one and were mistakenly victimized. It is important, therefore, to spot a grow-op and report any suspicious activity to the authorities.

The following are characteristics of typical grow-op houses, many effects of which can still be visible after the house has been vacated:

• Suspects do not appear to regularly attend jobs but drive expensive vehicles.
• There are dark coverings over some of the windows to prevent the escape of bright hydroponic lights.
• Rooms in the house or outbuildings seem to be illuminated all the time.
• There is heavy condensation on the windows. Absence of frost or snow on the roof when other houses have frost or snow. Or growers put fans in the window to increase air circulation that blows the curtains around.
• There may be an unusual number of roof vents, or unusual amounts of steam coming from vents in cold weather.
• A variety of extra measures have been taken to protect the house, i.e. new fencing, guard dogs, bars on the windows etc. Entry is exclusively through the automatic garage doors. Residents are hardly ever seen out of their cars.
• There is a strange odor emanating from the house (pungent and skunky).
• Sounds of electrical humming, fans or trickling water. There are also construction noises associated to accommodate a marijuana production facility.
• There is unusual or modified wiring on the exterior of the house.
• The hydro meter can be seen spinning unusually fast. Growers have most of their lights on for at least 12 - 18 hours at a time.
• Localized power surges or browning - neighborhood residences or units experience unexplained power surges or decrease of power that dims lights and slows down appliance use, with the return of normal power flow about 12 hours later.
• Residents avoid all contacts with neighbors.
• Children’s toys and bikes are left outside but there are no children seen at the residence.
• Quantities of growing equipment and supplies are seen to be taken into the house, shed or garage, yet there are no flowers or garden at the house. Often these supplies are purchased in winter.
• There are pots, soil, hoses and nutrients scattered around the property.
• The house can appear to be vacant, the yard is not well-tended, and flyers are accumulating at the door. Residents are seldom seen (garbage is rarely put out to the curb).
• There are hoses running from doors or windows on the exterior of the house.
• Instances of visitors parking down the street and walking to the house. There is excessive vehicle and/or pedestrian traffic day or night at unusual hours.
• The occupants appear to have moved in at night.
• It is never possible to see activity at the house but there is lots of garbage.

written by Luigi Frascati
Real Estate Agent based in Vancouver, British Columbia. He He holds a Bachelor Degree in Economics and maintains a weblog entitled to the Real Estate Chronicle at realestatechronicle.blogspot.com