The Chase: an investor finds the perfect money-making east end property
The Buyer: Jeff Reed, the 40-year-old owner of the real estate investment firm Priority Management.
The Story: Reed is no stranger to the real estate market— he makes his living renovating and renting houses, and he’s taken on four such projects in the past 18 months alone. He likes the east end because there are still plenty of affordable pockets in rapidly gentrifying neighbourhoods. The housing stock is old, so his business concentrates on major overhauls, which can scare off most amateurs. For project number five, he was looking for something he could really sink his tools into: a place with a low basement to excavate, a bungalow to pop a second storey onto or a badly configured space in need of gutting. He set his purchase budget at $500,000, planning to spend about $200,000 on renovations. The idea was to make a great home for somebody else—and a tidy profit for himself and his investors.
OPTION 1Main Street (near Danforth). Listed at $399,000.
This six-bedroom semi close to the Main subway station had been damaged by a basement fire in February 2011, but it had good bones—exactly the kind of place Reed was looking for. However, because the house was technically uninhabitable—it had no working bathroom or kitchen—the bank refused to finance it, so he had to pass. He still hopes to find other investors and return with an offer.
OPTION 2Hamilton Street (near Broadview and Queen). Listed at $699,900.
Reed’s agent, Andrei Angelkovski, showed him this 2,500-square-foot eight-plex of tiny, rundown bachelors. Reed figured he could quickly revamp the apartments and raise the rent. But a second viewing revealed faulty wiring throughout (he’d have had to open up all the walls), and the asking price was already beyond his budget. He decided the extra costs would eat into his profit too much, and he walked.
THE BUYWheeler Avenue (near Queen and Woodbine). Listed at $439,900, sold for $387,500.
This unusual, 1,000-square-foot, two-bedroom basement-less house in the Beach caught Reed’s eye immediately. It had been on the market for a month, and the owner already had a new place. Reed asked her how low she would go. Desperate, she said $400,000, which he offered on the spot. The seller’s agent balked, hoping another offer would materialize. One did, briefly, but when it fell through the seller got back in touch with Reed, saying she’d take the $400,000 after all. He countered at $385,000. She demanded a face-saving $2,500 more, and the place was his. Reed is in the process of adding a third floor. He plans to rent out the new, 1,450-square-foot house, furnished, for about $5,000 a month, and sell it in a few years.
(Image: Reed by John Cullen)
. Listed at $399,000.
This six-bedroom semi close to the Main subway station had been damaged by a basement fire in February 2011, but it had good bones—exactly the kind of place Reed was looking for. However, because the house was technically uninhabitable—it had no working bathroom or kitchen—the bank refused to finance it, so he had to pass. He still hopes to find other investors and return with an offer.
OPTION 2
Hamilton Street (near Broadview and Queen). Listed at $699,900.
Reed’s agent, Andrei Angelkovski, showed him this 2,500-square-foot eight-plex of tiny, rundown bachelors. Reed figured he could quickly revamp the apartments and raise the rent. But a second viewing revealed faulty wiring throughout (he’d have had to open up all the walls), and the asking price was already beyond his budget. He decided the extra costs would eat into his profit too much, and he walked.
THE BUY
Wheeler Avenue (near Queen and Woodbine). Listed at $439,900, sold for $387,500.
This unusual, 1,000-square-foot, two-bedroom basement-less house in the Beach caught Reed’s eye immediately. It had been on the market for a month, and the owner already had a new place. Reed asked her how low she would go. Desperate, she said $400,000, which he offered on the spot. The seller’s agent balked, hoping another offer would materialize. One did, briefly, but when it fell through the seller got back in touch with Reed, saying she’d take the $400,000 after all. He countered at $385,000. She demanded a face-saving $2,500 more, and the place was his. Reed is in the process of adding a third floor. He plans to rent out the new, 1,450-square-foot house, furnished, for about $5,000 a month, and sell it in a few years.
(Image: Reed by John Cullen)){kind=link}
I have got t love when a realtor screws his client out of money by a bad decision then gets to collect his 5% regardless when the owner had to give in to the buyer’s low ball offer. The buyer is crazy to think he can rent a 1450 sq/ft house in the beaches for $5000/month!
Today’s ‘real estate agents’ are worse than used car salesmen. The east-end is a complete overpriced joke.
Douchebag McReed will get $2500 max/month for this place once it’s done. Add property taxes and insurance and he’ll be lucky to break even unless he put a giant downpayment on it. And when the market crashes in the next 12 months, he might break even.
Why are Toronto Life doing a feature on a parasite?
Even if that house was sitting right smack in the middle of the best and hottest spot in Toronto furnished, there’s no way it’s worth $5000/mo.
Disgusted. The article on the wheeler house ? Do you guys seriously not have anything better to write about ?
Pathetic TL, realtors and scum investors like this dude hwo thinks he can milk some renter for $5000 per month after milking the seller and the realtor milking the seller! WTF was this all about ?!! MADNESS!!!
Great buy at that price. Guy got a good deal, even with his unrealistic 5k a month projection. Haters gonna hate.
You can hate Reed and the sellers agent all you want but ultimately the seller is responsible for her own actions or lack thereof. How stupid do you have to be to tell a prospective buyer how low you will go? I’m sure her agent wanted to smack her for giving Reed a number. She could have gone with her gut and told her agent to piss off and taken the $400K that was initially offered (given that she was already in a new home and obviously feeling the crunch). She also didn’t have to take $387,500, she could have rented out the house herself rather than selling for less than what she wanted. People need to realize they don’t have to do what their agents tell them to do; agents are there to provide advice, you have to do your homework on the market in your area and ultimately go with what makes you comfortable. The seller backed herself into a corner and then was willing to take whatever was thrown at her, that’s her own fault.
The $5000/month is possible if he splits the house into liveable sections. I encountered a “basement apartment” (it was disgusting) in the Bayview Village area that was being rented by university students, and the pool of their rent was probably up there, too.
It has been under renovation for 4 months. Original brick walls were discovered on the main floor from 1895… The same age as the ceiling joists that will give it the look of an original hard loft conversion- very similar to the Distillery District. Several families have been interested in buying it, but it will likely be rented as a 3 bdrm, 3 bthrm with a 3rd floor master bdrm and ensuite and a huge 3rd floor deck overlooking the back yard. A large addition was put out the back. It will be available in May.
Seems like there is a lot of jealousy out there…. It’s good see someone making the most of a buyers market.
Anonymous posters slagging Jeff without knowing him. Completely reprehensible. Jeff is one of the nicest guys I’ve ever met and is tapped into a great network of who need furnished rentals. Slagging him without knowing his model or him personal is completely ignorant.
I love how the general concensus about agents is that they’re all scum. Like any profession there are some in the industry that have little to no integrity; however, to make blanket statements like the ones above is just plain ignorant. Get your facts straight people re: commissions and market demand/conditions before making public statements. You are the ones who ultimately look foolish!
Jeff Reed is clearly an educated and knowledgeable investor who has done his research and numbers. Do you people seriously think someone in his shoes would make the story public if he didn’t know what he was doing?? Jeff is creating a very unique and quality product where there is a demand. I look forward to a follow up article with the outcome!!
Well Said Brian Persaud and Holly! I completely agree. I am shocked to hear all the Haters on this forum. Keep up the great work Jeff Reed!
I agree it would be completely ignorant to slag off Jeff without knowing him. However this didn’t stop Jeff from outing the seller of the Wheeler house. “desperate” “face saving”, that’s not nice either, and before you say Jeff didn’t write the article, he must have given this information to the journalist. No-one asked for her permission to run this blatant advertisement, No-one contacted her and asked is it ok if we run an article that will out your personal finances Toronto wide for all to see! Come on, I don’t care how much Jeff is going to charge for rent, that’s between Jeff and his potential renters, just like the sale of the house should have been between Jeff and the seller. Give a thought to the seller here, no matter what you think of her setting the price, she didn’t ask for this to be public information. Or to be ridiculed by strangers for it either.
Nice work Jeff. For all the haters: Nobody is getting ripped off. You owe a debt of gratitude to real estate investors who have the know-how and guts to take a junky house and turn it into a gorgeous house. The property Jeff is renovating will be a jewel of then neighbourhood for two generations. Perhaps at some point another careless owner will let it slide into disrepair, and then another guy like Jeff will come along and make money fixing the problem. GROW UP, and move to Soviet Russia if you have a problem with people making money for a valuable service.
Jeff Reed you rock. Love the model ! You will have to teach us Toronto market soon !
Jeff has helped someone in a tight spot by buying a hard to sell home in the Beaches. He took on a significant risk with the purchase of a house that is well over 100 years old with a patchwork of poorly done renovations. No Home Inspector is able to tell a purchaser what is going on behind drywall, plaster or underground. For example, unexpectedly an underground stream was found on the property which added significantly to the cost of constructing the foundation for the addition. The Beaches is a hot area for short term furnished rentals to both the thriving Movie and TV industries and the Corporate market especially homes suited to families. In my experience $5K per month for this type of short term, furnished rental is a reasonable expectation. We need more people in this city like Jeff who are willing to take risks in order to improve our neighbourhoods and hopefully make a well deserved profit!
Great deal on the house. Would like to have seen the in-process look of the renovations though. The rent seems on the high side, so would like to know how that made out as well.
While most commenters are right on the “5k a month rent is nuts” commentary, 387 5$ for a 2-bed at Queen and Woodbine? That’s a reasonable price. Neither a steal or a rip-off.
The most money is made in the ugliest houses. One person sees trash, the other (Jeff in this case) treasure !
Jeff knows what he is doing.
Short term rentals go for $2500 to $3000 a week in Calgary and on Vancouver Island!!!! I should know, I have rented them. A place is worth what renters will pay not the other way around. Try to find a quality short term furnished rental in Toronto for a wedding or family reunion, good luck! It sounds like a few people out there definitely either have a jealous steak or have been burned due to their own stupidity or gullibility. Keep up the good work Jeff.
I just bought a bank foreclosure on Vancouver Island. Is that taking advantage of someones misfortune? Get a life you crtitics.
Signed UD
nobody forced the seller to sell. why does anyone “assume” that Jeff took advantage of her? Why do we feel that we have the right to judge without knowing all of the facts? A newspaper article does not cover all of the facts. After all, contract was between Jeff and seller.
Nice work Zippy!
Keep up the good work Jeff! You definitely deserve more credit for your work as many people don’t realize the amount of work that goes into renovating a home and dealing with tenants after the completion. Majority will just focus on the your initial purchase price and the sale price after the renovation and ignore all the sweat equity that goes into the property in between. Congrats to your success! Look forward to your next property make-over.
Jeff great sense on what makes money & the courage to do it~! I have sellers who need & want to sell ~ they would be happy for someone sometimes to take it off their hands (they will decide on the price they want or need, not me or anyone else). It is Jeff’s ability to turn trash into profit that we should celebrate & I truly feel taking a property off someones hands is a blessing what if the Sellers couldn’t sell and ran out of time and money? They would be in a far worse place than losing a few thousand dollars. I have been there losing money on a house but I needed to sell, now I help others Sell when they need or want to. All the best Jeff & everyone who Buys or Sells Real Estate ~!!!
I am appalled at all the negative and derogatory remarks on this forum?! Who is posting these ignorant comments? If you don’t know who you are speaking about and/or what you are speaking about keep your comments either to yourself or clean at the very least! This home will easily rent between $4200-$5500 + utilities once complete in this neighbourhood. There is no question about that. If you need to value your home for rent, speak to an experienced landlord/investor like myself. That’s what Jeff Reed did. He investigated every aspect of this project. He is a seasoned and exceptional investor who knows exactly what he is doing. This home is definitely a gem and a sound and wise investment. You go Jeff!
If you want to see the after here are some links to some of the media coverage of the house! And for all those “haters”, at the peak he received almost $8000 in rent for a short-term furnished rental per month!
http://life.nationalpost.com/2012/08/14/former-1880s-bungalow-has-reno-history-and-old-boots-found-in-the-rafters/
http://www.priority-management.ca/index.php/component/content/article/78-content/153-crew-magazine-sept-2012