A hidden gem of value in Edmonton’s real estate market.
Edmonton’s real estate market isn’t always the most exciting or earth shattering topic. Overshadowed by the news headlines of Vancouver and Toronto, Edmonton is always hanging around in the background as an affordable and somewhat predictable option. For a city boasting the University of Alberta, an amazing river valley, and multiple different industries - you’d think more people would be jumping on board.
As previously mentioned Edmonton is very affordable considering its size and population, and there are many solid choices in the city and surrounding areas when it comes to purchasing real estate. However, there is one aspect and sweet spot that really catches my eye. There are parts of the city where you can purchase a great home in a great neighborhood that has an added bonus. That special bonus is this: the dirt that the house sits on is almost worth as much as the house and dirt combined. When you think about that it is a pretty wild concept.
Here is a personal example. I bought a property in late 2016 for $382,000 in a mature neighbourhood. It was purchased because it was a very solid and updated home in a great spot. Fast forward four years to later in 2020 and a dated property about 5 or 6 houses down went up for sale, on the exact same sized lot as my house. It ended up selling for $315,000 to a builder. That builder tore down the exisiting house, built two half duplexes, and sold both sides of it.
So what does this matter? Well, that told me that a builder could consider the lot value for my property to be about $315,000 around that time.
So I bought a place for $382,000 with a solid house on it, but the lot alone is worth $315,000.
$382,000 - $315,000 = $67,000
Depending how you look at it one could argue that the actual value that I paid for the structures / house is only $67,000. And that the other $315,000 was for the dirt - because somebody else just paid that price for the same sized piece of dirt a few houses down.
If you were to price out a home with a builder I can guarantee you’ll be paying a lot more than $67,000 to build your home. To me there is a ridiculous amount of value in opportunities like this, and these opportunities are all over certain areas in Edmonton. I didn’t even have this planned out when purchasing this property, my partner and I simply liked the house and location. However, imagine shopping for a home with this in mind and finding a place you love on a desirable lot. The safety net you can have knowing that builders will be after your lot in the future is amazing!
And the cool thing is the longer you hold on to the property the less properties like yours start to exist. In these sought after mature neighborhoods infill builders are constantly busy knocking down the old war time bungalows and building new duplexes and skinny homes. It doesn't take long before the infills start to outnumber the original properties.
The really interesting part is that many of these older original homes are still perfectly good. The well maintained properties still have a long life ahead of them. It is not like you have to buy an old decrepit home for this to be the case, many solid options will have this kind of value built in. Neighborhoods that are close to the university, downtown core, and river valley can be great places to see opportunities like these. Neighborhoods like Bonnie Doon, Strathearn, or King Edward Park see lots of this. As well as spots like Grovenor and North Glenora on the other side of the river. There are plenty of neighborhoods that have this built in value and a quick trick to find them is to see which locations these infill builders are currently doing projects. Wherever they’re building will probably be one of those neighborhoods with built in lot value.
If you plan on buying in the near future and you like this concept please consider it. Talk to a real estate agent like myself to help discuss potential options and get pointed in the right direction. Buying a piece of real estate is a large decision - so why not get some built in value by making a smart purchase.