The Amazons decided the holiday was just too nice to do more logarithms, and announced they’d be catching rays au naturel on bunker’s heli pad. The pulchritude is blinding. Disabled as I am, then, plus temporarily incapable of rational thought, I’ll turn this pathetic blog over to others. Besides, I can’t make this stuff up. — Garth
In Calgary the myth that “it’s different here” still lives.
Yesterday, I told my realtor that I was going to continue renting for another year and see how things play out. He thinks I am crazy. I sent him a link to your blog – he didn’t have time to read it. Too busy selling houses here, I guess. I explained that I think house prices are going to drop but he disagrees with me. I reminded him that he has been a realtor in Calgary for 20+ years and that he should be able to see what comes next – and actually, I resent him trying to sell me a house when he must know what happens after the boom.
His new argument is that because the government is going to encourage people on EI to relocate to provinces where there are jobs (Alberta, presumably) THAT will keep house prices and sales up here in Calgary. People on EI have down payments for a house? People on EI have the ability to make a large mortgage payment? WTF?? Also, he has no clue who the OSFI are and no idea about the possibility that people may have to bring their mortgages into line when the interest rates go up. Oh yeah – I forgot to mention that he thinks that interest rates will “probably” go up. Probably??
About a month ago he showed me a house that he thought was perfect for me. “It’s not going to last long – this one is going to go quickly. You could come in here, put some money into it and flip it. There is a lot of upside here.” Are you crazy, I asked?? I discussed rising interest rates, household debt, everything I could think of. His response? “It’s different here, honey. We have oil.” He called me honey. I’m 46. That same house is still on the market and just took a $10,000 haircut. He asked me again if I wanted to buy that house. Lots of upside there he still maintains even though “no one wants to buy it because of the street it is on”.
I fired him. – Joanne
Cowtown houses now average over $500,000, which is curious for an equine version of Mississauga. The city is geographically featureless, massively suburban, arrogantly self-possessed and arguably our most American city. The myth that oil equals high real estate values has been repeatedly disproven but never disbelieved. Condo investing has been a disaster, and the fools buying now at levels equaling those of 2007 will learn what history is all about. You made the right choice, hon. — Garth
Hey Garth! Reading your blog daily, waiting for a real estate correction. Given everything I’ve seen I’m sure we’re very close. Your last post touched on something I have some experience with – fractional ownership of properties with family members. My hubby owns a condo in Whistler with his sister, they bought about ten years ago when she suckered him into thinking this was a “great investment!” (He didn’t know me then, if he did, believe I would have hit him over the head with a frying pan before letting him go through with this bad investment.) Here are the numbers:
- The condo cost about $225k. It’s in a rental pool, meaning the property management company takes 40% of every dollar earned. The condo owner is on the hook for everything-strata fees, hydro, property taxes, maintenance, updating the suite etc. Oh, and a mortgage.
- Every single year since they’ve owned it, they’ve lost about $10k per year. I did some quick calculations and came up with the strata fees, property taxes and property management fees take up 94% of their revenues. So, even when they don’t have a mortgage on this sucker, they are guaranteed to lose money, or make pennies.
- Currently, the thing is worth about what they paid for it, ten years ago. If they’re lucky. Property in Whistler doesn’t look so hot these days, despite his sister telling me for years she was going to be a millionaire after the Olympics. (Ya, right). I haven’t heard this lately from her. I wonder why.
- The other kicker? They don’t ski. When we go to Whistler, we’re not even allowed to stay in the condo (she’s the majority owner), because it takes away from the potential rental pool revenue. Ya, I’m a bit bitter about this damn investment, hubby’s trying to get out of it, as I’ve been throwing these numbers at him for ages. He just says “Uh huh” and looks pretty glum.
So my point in….never EVER should anyone ever invest in real estate with a family member. It’s bad news. I’ve come to the conclusion that the only person you should buy real estate with is your spouse. At least then if you get divorced you can sell and split the proceeds. With other family members, it can be a horror story if you want to sell, you’ll have to convince them to cough up the cash and buy you out. Good luck with that!!! — Dian
Families are screwed up enough without adding in an investment component. Almost always, deals like this are done without being properly papered, and in a way you’d never enter into if the partner was, say, your proctologist. That means there’s no clear and pre-determined way to get out when things go south (and they always do). People related to you are no different from others. Expect the worse. And pray for Whistler. — Garth
Hi Garth, love the site! My wife and I are selling our Ottawa home and we had a request to do a vendor take back mortgage. To me it seems like a good idea but I was wondering if you could crunch the numbers and maybe turn a blog post out of it.
The details: We bought at 420,000 with 220,000 down. So we are at 200,000 for our mortgage. We haven’t lived here long so we still have roughly 200,000 owing.
The buyer agreed to purchase for 400,000 with 120,000 down. We would then give a 280,000 VTB mortgage @ 3% interest.
He is a business owner and thus the difficulty for him in getting a mortgage. He claims he could pay 5,000 per month; seeing his shop and how busy he is I believe him.
What do you think? What are the risks and benefits here? I’m a little confused about where the money comes from and where the ownership and liability rest so any enlightenment would be great! – Kevin
Kev. Dude. Are you nuts? You’re selling for less than you bought (so much for that strategy), and handing over your house to some guy who can’t qualify for a mortgage when banks are handing them out to retrievers. And for financing this high-risk loan you’re willing to collect a puny 3% on your investment which, after inflation and taxes (it’s taxed as income), will constitute a loss. Do you understand that if he lives there for a while and stops paying that you can’t just seize the property? You’d have to pay big legal fees for a power of sale action that could last for months and months – and could end up in a suit against you. The. Answer. Is. No.
Well, time for oiling. — Garth