Category Archives: Blog

Four Ways a Depreciation Report Can Benefit Property Owners and Investors in British Columbia

Posted on by

Depreciation reports are essential for property owners and investors in the province of British Columbia. These reports estimate a property’s current value based on its age, condition, and other factors. This information can be helpful for a variety of purposes, including:

Tax planning: In British Columbia, property owners are required to pay property taxes based on the assessed value of their property. A depreciation report can help property owners estimate the current value of their property, which can be helpful for tax planning purposes.

Investment analysis: For investors, a depreciation report can provide valuable insights into the potential return on investment for a particular property. By understanding the current value of a property, investors can make more informed decisions about whether to buy, sell, or hold onto a specific investment.

Maintenance and repair planning: A depreciation report can help property owners identify their potential maintenance and repair needs. By identifying these needs early on, property owners can budget for necessary repairs and maintain the value of their property over time.

Insurance coverage: A depreciation report can also help property owners determine the appropriate level of insurance coverage for their property. By understanding the current value of a property, owners can ensure that they have sufficient coverage in the event of damage or loss.

In conclusion, depreciation reports can be a valuable tool for property owners and investors in British Columbia. These reports can help with tax planning, investment analysis, maintenance and repair planning, and insurance coverage, among other things. If you are a property owner or investor in British Columbia, consider getting a depreciation report to help you make more informed decisions about your property.

Strata Council’s Must Address Insurance Coverage Confusion?

Posted on by

Strata Council’s need to work with the insurance industry, governments and their members to bring clarity to the ongoing confusion with regard to what is the right amount of insurance members need to purchase. Members need to start asking questions of the industry.

Now that my strata’s insurance is increased and its deductible has increased do we need to increase our own insurance?

What is the right amount  much of insurance I need as an individual unit lot owner?

Should we have a special assessment to raise the contingency reserve fund to match the deductible amount, over and above the funds specified by the strata’s depreciation report?

What is the BC Government doing to assist with the confusion and lack of clarity ?

As a landlord renting a strata unit, what is the right amount of coverage and, what coverage does a landlord require a tenant to obtain?

When a member has a negative event  occur, they need to have the proper advice upfront to ensure they are properly covered. They will face stigma, shame, and the terrible inconvenience as the different insurance fight each other to determine blame and who will pay to remediate the event. Not only does this situation create additional stress for the strata owner, costs go through become exorbitantly high and it takes way longer to fix.

With  approximately 1.5 million people in the lower mainland living in strata’s it is high time that Industry, Strata Council’s, members and the BC Government come together to reduce the risk, stress, and confusion of responsibility strata living. Too many people are living in a real estate structure without fully understanding their responsibilities and risks.

It’s high time that the many strata owners in the lower mainland demanded that this confusion be addressed. The sooner this happens the insecurity and risk can be identified so that most people say that strata living is a joy versus a nightmare.

Source: CBC Report BC Insurance Nightmare

Impact on Owning a Strata Investment Property in Vancouver

Posted on by

Recently, I came across  this interesting article. As cities struggle to address the housing affordability crisis in Vancouver and the surrounding area. “The city of Vancouver is raising their Empty Homes Tax (EHT) in each of the next three years; it will rise from the current 1.0% to 1.25% in 2020 with provision for further 0.25 percentage point increases in 2021 and 2022.”

As governments struggle to make housing more affordable in the lower mainland the message from the City of Vancouver is clear. Pay more for carrying an investment or place it in to the rental pool to address the high demand for rental units.

Like any regulation, this tax will bring more rental units into the market place as condo owners will not want to incur higher costs on a non-generating asset. The downside for the landlord is they will need to be more involved in the management of the strata’s common property and bylaws.

Good property management companies can help, but that does increase the overall investment cost. They do a great job obtaining market rents, and manage the property in line with the BC Strata act that use a follow the Strata Act and use Depreciation Reports to protect your property’s value into the future. Ultimately there will be more work and cost to investing in the condo market in Vancouver.

Read more about the property tax increase at Canadian Real Estate Wealth.

 

 

Why Do I Need a Depreciation Report?

Posted on by

Why are depreciation reports important?

Depreciation reports or reserve fund studies are needed by Strata’s in BC to help strata boards determine if they have enough capital in their reserve fund to manage their common assets in the long term. Owners of strata units are 100% responsible for the inside of their condos’ and partially responsible for the common property. Common property refers to the foyer, parking lots, swimming pools, elevators, and the building exterior. Typically,  your strata fees cover both operating funds like cleaning the hall ways and elevators, but they should also be used for replacing the elevator once it has reached the end of its usable life. According to a recent Huffington Post article, about 75% of strata’s in BC don’t have a depreciation report. Without a depreciation report you don’t know if the strata has the adequate funding to cover the long term needs. A current depreciation report give you the ability to do long term planning so that you have:

1. Asset Protection – Your property has the funds a sufficient contingency fund will have higher values because you have adequate capital to maintain the common property. Moreover, it will reduce the stress of having to unforeseen special assessments for your strata members.

2. Lower Operating Costs – When you replace building components at the right time you reduce your maintenance cost because you don’t pay the high cost of emergency repairs.

3. BC Strata Regulations – The regulation mandates that your strata has a thirty-year depreciation report, and that it is updated every three years.

Moreover, new purchasers of condos can request a depreciation report from strata boards as a part of their purchase process. It may be wise for strata boards to begin to invest a depreciation report so that they can demonstrate they are committed to managing the common asset in the long term as well as the short term.

Depreciation reports may be one important aspect that buyers will need before they consider buying a condo in your strata complex. Looking at the Capital Reserve Fund and it’s ability to cover upcoming costs is an important consideration before purchasing a condo. Get informed, request your strata get a depreciation report.

What is a Depreciation Report?

Posted on by

What is a depreciation report?

A depreciation report is a capital reserve fund study that helps strata’s plan for the long term. Even though it is mandated by BC strata regulations, it  is a great idea because it gives you:
•    The estimated 30-year funding required for renewals and repairs of the Strata’s capital assets.
•    A 30-year schedule of capital renewals.
•    A complete list of common property assets along with associated capital renewal projections.
•    Three financial models based on the expenditures identified for replacement of the Strata’s major common property assets, as required by BC Strata Property Act.
While many strata don’t currently have a depreciation report it becomes more important for them to get one. Having the information in a depreciation report helps the strata board manage their long term repair and  replacement of their common property assets.

CMHC post suggests BC Depreciation Report are useful to evaluate property risk

Posted on by

BC Depreciation reports are becoming an increasingly important document in BC very active real estate market. As interest rate rise home affordability becomes more challenging. This challenge directs first time buyers to the condo resale market where many disclosure documents are required during the sale of a strata unit. For high ratio mortgages that requires CMHC insurance it is requested that the most recent depreciation report ( if it exists) must be included as part of the disclosure.

https://www.cmhc-schl.gc.ca/en/co/buho/cobugu/cobugu_007b.cfm

A depreciation report is used to calculate the potential risk in a property transaction. The risk quantified in a BC depreciation report outlines the common property assets, their expected life and their replacement costs. Knowing this information before you buy into a strata is useful for buyers and sellers.

Please contact RSK Strata Advisors for further information.