The chaste renter

So Oliver was at a Christmas party in his Victoria hood. “I heard two of the women saying that they are committed to putting in a hot tub, and other lavish additions rather than buy down their mortgages or pay down their debts, just because,” he writes me. “They are caricatures of themselves, poster children for ‘house porn’. They have massive mortgages on massive houses. They are dancing on the Titanic and don’t even know it, or want to.”

This goes to a point on that list of ten things which will happen this year, published New Year’s Day (because this blog has no life). Most people are about to walk into the jaws of change – destructively creative change – and haven’t a clue. They confuse real estate with security, investing with risk and debt with wealth. They’ll soon learn it’s not what you can carry that counts, but what carries you.

“You are completely right when you say most people just don’t get it,” Oliver muses. “Although I’ve explained it to my friends warning them till I’m blue in the face, they don’t believe it. I feel like P.T. Barnum.  There’s one born every minute.”

Well, Olly, let’s give this one final try before we abandon humanity. Here is a simple illustration of why owning a hunk of dirt may not always a better proposition than renting one. Porn aside, of course.

Let’s start with a million dollars. For that you can buy a semi-renovated piece of crap Vancouver Special, or a new house on a 25-foot-wide lot in North Toronto made of pressed corn flakes, glue-imbued studs, face brick and, of course, granite c-tops and a Wolf stove.

Or, you can rent either of these places for about $4,000 a month, or $48,000 a year. Which is likely to be the better deal financially, over the next five years? A horny homeowner would say there’s no contest – why throw you money away on rent and have nothing to show for it after five years? But is that just the hormones talking?

Well, let’s buy the house for cash. Of course, it does not cost $1 million because of closing costs which add at least 2% to the purchase price (and remember in Toronto there is double land transfer tax to cough up). That takes a minimum of $20,000. Plus if we sell this place after the five year period, that transaction will also have a price – roughly 5% for realtor commission (excluding legals and moving). There’s another $50,000 you’ll never get back.

Now let’s be generous and assume that between January 2012 and the winter of 2017 real estate values in Canada stagnate – you are able to sell for exactly what you paid. That, by the way, is unlikely to happen given a weak economy, record household debt, higher rates, demographics and tighter credit. But just to be fair, we’ll ignore the real estate correction.

So during the five years you have also shelled out money for property taxes and insurance (we won’t count utilities, home improvements or featherings you’ll never get back, like window coverings). This will average about $10,000 a year ($7,000 for taxes and three grand for insurance on a $1 million home), or $50,000 over five years.

Okay, so buying and selling cost $70,000, while occupancy costs (not faced by a renter) add another $50,000. That’s $120,000 over five years, or $2,000 a month – hey, just half the cost of renting!

But from an accounting point of view, the $1 million you started with has been diminished by your transaction and occupancy costs. You really have just $880,000 left.

So let’s rent the sucker instead. The million bucks will not be spent acquiring ownership, but invested instead. And we’ll invest it with great caution and conservativisim, in true Canadian milquetoast spirit. We will put three-quarters of it in the stable perpetual preferred shares of major Canadian banks and insurers paying a fixed dividend. The other quarter will be split between highly-rated corporate investment grade bonds and large REITs. The yield will be at least 5%.

Rent of $4,000 a month ends up being $240,000 over five years. But there are no property taxes no pay. No building insurance. No closing costs moving in. No transactional fees moving out.

Meanwhile the million dollars generates $50,000 a year in returns. Because the lion’s share of that is in the form of dividends, allowing you to collect the dividend tax credit, taxes are minimal, giving a net of about $42,500 (depending on income). Over five years, that’s  $212,500 in investment earnings which, natch, you apply to the rent.

So sixty months later the cost of living has been $27,500, or $458 a month.

And you have basically all of the $1 million left. The financial advantage of renting over owning turns out to be huge.

And what of the risk?

Yes, rising interest rates will affect the capital value of the fixed-income assets, but it’s not rocket science to sell before bank rate changes and repurchase at lower prices subsequently. In any case, the yield continues unabated. With real estate, however, a homeowner’s powerless to hedge against the eroding equity that a market correction brings, thanks to the same changes in interest rates. I know which position I’d rather be in.

Give it another shot, Oliver. Take a whiz into the tempest of public opinion. But don’t hold your breath (or stand downwind). It’s nigh unto hopeless.

I hear porn does that to you.

202 comments ↓

#1 Randy on 01.02.12 at 7:34 pm

First !!

#2 Loon on 01.02.12 at 7:38 pm

Whoa 2012 hooter alert ! Nice find G Tizzle.

#3 Ken on 01.02.12 at 7:41 pm

First!!!

#4 Ken on 01.02.12 at 7:42 pm

nice yon yons Garth.

#5 Huan Pablo #1 on 01.02.12 at 7:46 pm

FIRST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#6 Chris L. on 01.02.12 at 7:51 pm

Where does someone get 1 million to invest? People that buy a mil house….don’t have it!

Garth, do you think people are rational?

Only circumstance will stop people. I’ve read the black swan, tipping point, fooled by randomness, why most things fail… good reads.

#7 prairie gal on 01.02.12 at 7:51 pm

I work with a self-professed HGTV addict who, along with her husband, spent about $700,000 for a 2400 sf house in Harbour Landing, a new windswept suburb of regina, right next to the airport. Insanity!

#8 pjwlk on 01.02.12 at 8:02 pm

I can’t imagine many people having a million dollars to spare for investment while they rent.

#9 george on 01.02.12 at 8:02 pm

fu fu fu furst??

#10 U-The Man on 01.02.12 at 8:03 pm

Let the sheeple keep buying houses at highly inflated prices so that I can keep collecting high safe yields(relative to inflation) from bank preferred shares. The banks love lending to anybody with a pulse provided CMHC insurance guarantees the loan. I love investing in Canadian banks.

#11 MGTF on 01.02.12 at 8:20 pm

Thank you Garth for spelling out not only the RE risk but also the simple investment plan.

#12 Trailer Park Boys on 01.02.12 at 8:23 pm

physrraasstttttt !

#13 Nancy on 01.02.12 at 8:31 pm

Your calculations never include the possibility that investments can and will also tank. I’m with you that real estate is going to go down, sooner rather than later, but I’m skeptical with your implication that the alternative investments you list are guaranteed safe, they are not. When real estate takes a big dip, so does other stuff, even the boring safe stuff.

Wrong. There is no correlation between house prices and fixed income yields or capital values. — Garth

#14 I'm stupid on 01.02.12 at 8:38 pm

Garth I must agree with #6 Chris L on this one. The reason people take these monter mortgages is because they have no money. If they had to actually give up 1 mil of their own money I can bet you they would reconsider. Money that actually belongs to you is real, money that is borrowed is just like a dream today and a nightmare tomorrow. Too bad nobody thinks of tomorrow. The majority are like alcoholics, they feel great while drinking and never consider the morning hangover.

#15 InvestorsFriend (Shawn Allen) on 01.02.12 at 8:46 pm

HIGHER INTEREST RATES ARE GRAVITATIONAL DOWNWARD FORCE ON ALL INVESTMENTS

In the Words of Warren Buffett, Fortune Magazine November 22, 1999

…we need first to look at one of the two important variables that affect investment results: interest rates. These act on financial valuations the way gravity acts on matter: The higher the rate, the greater the downward pull. That’s because the rates of return that investors need from any kind of investment are directly tied to the risk-free rate that they can earn from government securities. So if the government rate rises, the prices of all other investments must adjust downward, to a level that brings their expected rates of return into line. Conversely, if government interest rates fall, the move pushes the prices of all other investments upward. The basic proposition is this: What an investor should pay today for a dollar to be received tomorrow can only be determined by first looking at the risk-free interest rate.

Consequently, every time the risk-free rate moves by one basis point–by 0.01%–the value of every investment in the country changes. People can see this easily in the case of bonds, whose value is normally affected only by interest rates. In the case of equities or real estate or farms or whatever, other very important variables are almost always at work, and that means the effect of interest rate changes is usually obscured. Nonetheless, the effect–like the invisible pull of gravity–is constantly there.

Warren Buffett Fortune Magazine, November 22, 1999

http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/

#16 Nostradamus Le Mad Vlad on 01.02.12 at 8:49 pm


Top notch post, Garth.

“. . . destructively creative change . . . And you have $1 million left.” — Change of the best kind! Never mind those numbnutted dickheads who focus on RE as their only savior.

Investments which pay you to own them, and the feds. (CRA) help you as well! Having a positive incoming cash flow, even if one already owns — that makes the owning part worthwhile.

“But there are no property taxes no pay. No building insurance. No closing costs moving in. No transactional fees moving out.” — And no lawyer’s or notaries fees either. Yyyeeeesss! KISS — Keep It Simple, Stupid!
*
Killing Me Softly The US$; and 1:10 clip “We are going to kill the dollar’; Expiry Date “The Newest scam Money Junkies Use to Get People Back into Debt Partnering with Debt Collection Agencies issuing credit cards.” Don’t let them suck you in; 3:44 clip Eurover in 2012? Prof. Murray Sabrin The US Fed is silencing Ron Paul, which explains why Tim Geithner was / is running the WH; Onoheat “. . . details of the savage cuts being prepared are coming to the surface.” F’s budget is in March, non? Mitt Romney He is a good liar and cheat, just as dubya and Obomba are.
*
Ron Paul goes viral and is picking up steam, NH Paper rips Paul
and 2:22 clip m$m bias against R. Paul; Drone Fleet “All the money that drone system cost and they use off-the-shelf operating systems?” (wrh.com); Scapegoats “Iran is not the real target.”, but Romney and Obomba agree — Keep pressurizing Iran; Open Festering Sores “Homelessness in the US is now rampant, and is now being criminalized by various cities and police departments around the country.”; Testing Iran fires missiles during war games; 12:29 clip Gaza wasn’t a war, it was a massacre; Voter Fraud No different than banxters; Invading Iran is akin to invading China and Russia.

#17 S on 01.02.12 at 8:51 pm

Easy to borrow a mil to buy real estate. Not quite so with stocks, bonds etc. (Why?) Those who have a million or more have it for a reason and are (probably) too shrewd to put it into RE these days anyway. The advice on this post is valid. However those that can apply it don’t need it. Those that need it cannot apply it.

#18 NoName on 01.02.12 at 8:58 pm

Garth maybe you should make a spreadsheet, it would be easier to comperhend two scenario side by side for some…

Feel free. — Garth

#19 Westernman on 01.02.12 at 9:15 pm

Prairie Gal,
700,000.00 for a house in REGINA?
I wouldn’t give 700,000.00 for the entire city of Regina… or the whole province of Sask. for that matter…

#20 R.I.P. Bill of Rights 1789-2011 on 01.02.12 at 9:15 pm

To BrainSail (from last post):

Yes, Obama did say that “his administration” would not start arresting American citizens and sendin’ them off to Gitmo–hab. corpus in absentia.

This does not mean that it isn’t now A LAW; or, that subsequent “administrations” would not use it in this way.

Plus, Obama could simply be lying. He has lied many times to the American people.

Don’t be naive: don’t be fooled into thinking governmental “promises” ultimately supercede the “right of law”.

Geesh, you think people would actually be able to historically remember Germany and the horrors of WWII.

#21 R.I.P. Bill of Rights 1789-2011 on 01.02.12 at 9:19 pm

BrainSail:

This is the equivalent of saying:

“Gee, Hitler just signed a law into existence that strips Jewish people of their property, rights, and freedom, but DON’T WORRY–he won’t use it against them…he promised.”

#22 Timing is Everything on 01.02.12 at 9:22 pm

#7 prairie gal

Let me guess…60×120 lot. One can buy a quarter with all the fixin’s for under $300k…with cash crop. Less than an hour to Regina. An hour is a ‘lite’ commute in S. Ontario (Bowmanville), as I understand it. ‘Insane’ pretty much says it all.

http://tinyurl.com/7bxg2jy

All of the prairies are windswept.

#23 Cow Man on 01.02.12 at 9:27 pm

Senator Garth:

“The Lonely Renter” blog entry should be required, full discloser reading, witnessed by a lawyer, as read by all home buyers. Great Legisation idea.

#24 Alan on 01.02.12 at 9:29 pm

Right plan would be to buy the house for cash then take out a mortgage and use that cash to buy the income generating stocks and bonds. 100% tax deductible. Now your talking.

Let’s crawl before we trot. — Garth

#25 nonplused on 01.02.12 at 9:35 pm

Nice vacation pic of Garth on the beach with some of his Amazon security team always close by. Did you shave to avoid being recognised, Garth?

#26 Montrealer on 01.02.12 at 9:41 pm

I’d love to invest 1Mil… while I could borrow it to buy a house with almost zero down, there is no way I could borrow it for investing…
That makes it quite impossible to actually do even though the numbers work.

So cut it in half and run the same numbers. Sheesh. — Garth

#27 Seven Stars and Orion on 01.02.12 at 9:47 pm

My wife brightened when I mused about avoiding this blog for a resolution.
Sorry babe, man’s gotta get his blog on!
Garth, is your new book shipping this quarter? I want to pre-order a pallet-full for gifts next Christmas.

#28 NYCer on 01.02.12 at 9:52 pm

Garth, if interest rates go up, you have been saying fixed-income prices will fall. Do you also mean preferreds of say banks shares?

How much can they fall given a 25bp rise?

All fixed income is rate-sensitive. But a quarter point rise in the face of great demand for preferreds is hardly worrisome. — Garth

#29 terces on 01.02.12 at 9:54 pm

Post #15 “HIGHER INTEREST RATES ARE GRAVITATIONAL DOWNWARD FORCE ON ALL INVESTMENTS

In the Words of Warren Buffett, Fortune Magazine November 22, 1999”

Yes Investors Friend you are right that interest rates are inverse to values – be they values of preferreds or REITS, cap rates on commercial property, or any other of the income producing investments that are being heavily touted these days.

That is why the advice to take the money and put it into these vehicles is very risky.

At the end of the year, the return on your portfolio is the return you get from dividends etc, plus or minus the gain in the value of the instrument.

To suggest that the only thing that counts is the dividend or interest is only part of the equation.

When interest rates rise, these income producing investment vehicles must compete with the investors ability to earn a higher yield from a secure investment such as a GIC. The only way that REITS, and dividend producing investments can pay a higher percentage income is for them to drop in value.

For example, cap rates for a very safe multi-tenant industrial building have gone from a high of about 11%in the early 90’s to about 6.5% today. That means that a building with $100,000 in net rent has gone from a value of $900,000 in 1990 to a value of about $1,500,000 today. The cap rate is at risk of reverting back to a higher amount as interest rates rise. So without any other change in rents or anything else to the property, if you buy such a property today for $1.5M it is at risk of falling to $900,000.

And the kicker – REITS own this type of property and they are at the same level of risk as anyone else owning these properties.

Sure the income could stay at $100,000, but if your value drops by $600,000 what is the sense??

It is very dangerouse to get into the income trap, where you believe that income is the only factor while the value of the original investment is at risk of falling.

Which is why I addressed risk. You have missed (or ignored) the main point: liquid investments can be managed to mitigate or eliminate this risk. Real estate is a sitting duck. — Garth

#30 Timing is Everything on 01.02.12 at 9:55 pm

#19 Westernman

How’s the turd buffing going? Still at it I see.

#31 terces on 01.02.12 at 9:58 pm

My post #27 is not a argument against Garths premise for real estate. I absolutely believe it is a very good thing to stay away from right now, be it residential, commercial, REITS or whatever. Their time will come, but not now.

#32 Spiltbongwater on 01.02.12 at 10:04 pm

I have played 2 rounds of golf already this year. Joys of living in the best place on earth.

#33 Herb on 01.02.12 at 10:23 pm

Is that you wearing the pink life preserver, Beach Girl?

#34 Cowboy_aka_My_View on 01.02.12 at 10:24 pm

You need insurance regardless if you rent or own.

You don’t insure the building (the landlord does). Contents insurance is dirt cheap. Care for a nit? — Garth

#35 Gord In Vancouver on 01.02.12 at 10:25 pm

Thanks, Garth.

Oliver should email this link to his brainwashed Victoria buddies:

http://www.cbc.ca/news/canada/british-columbia/story/2011/12/30/bc-2012-cost-of-living-increases.html

#36 Elmer on 01.02.12 at 10:32 pm

There are 2 flaws with your argument:

1) If you had a million bucks, you’d be crazy to put it all down. You’d put 20% down and mortgage the rest at record-low rates, and you could still have 800k left over to invest, yielding you 40k a year in dividends. Would that cover your mortgage payments? You bet your patootie it would.

2) What kind of boob buys a house and sells it in 5 years? What if you hold it for 20 years? 30? 40? The buyer comes out way ahead of the renter.

(1) You’d also have $800,000 of debt. (2) People move on average every five years. What kind of boob are you? — Garth

#37 Timing is Everything on 01.02.12 at 10:34 pm

‘Toronto issues extreme cold weather alert’

“The forecast calls for a high of only –11 C on Tuesday” – CBC

OMG…Call in the army!

http://tinyurl.com/82sajyk

Seriously?

#38 Terra No-more on 01.02.12 at 10:34 pm

Not a Canadian pic then.. looks old – the Lada’s and the Speedo’s give it away. Good Lord what young fella would be seen dead in a Speedo in public these days? Back then when I was young we wore them all the time, thought nothing of it. But today society is more obese and guilt-ridden. Or perhaps the male phallus has suffered social shrinkage? Anyway back to the point. That’s Oliver to the left and he’s an un-attractive proposition to the two aversive and buxom young RE lusters.

2012 more labour unrest, the trough for any residual unionized manufacturing jobs. Not a good place to be – the picket line if you’ve mortgages to pay.

#39 McExpat on 01.02.12 at 10:44 pm

Who has $1 million to invest. We do. Moved back to Canada this summer from many years overseas and are gobsmacked at the state of “unreal” estate in pretty much every corner of this country. Our friends cannot believe we are renting. We cannot believe they think we should part with our savings in this market. We’ll be sitting tight and so happy to rent our 3500sq foot house for a pittance and pay no property tax. Unfortunately it doesn’t have granite counter tops…I can barely survive.

#40 Uh Oh Canada on 01.02.12 at 10:46 pm

Great post, Garth. Just one question though, do you also rent? Inquiring minds want to know.

If real estate constitutes 30% or less of your net worth, who cares? — Garth

#41 waiting on 01.02.12 at 10:49 pm

Hi Garth,
From a Vancouver perspective, you’ve been too easy on us with your numbers. You’d have a hard time finding a sfh of any type on the west side under a million, (east van only.) Todays mls listings show the only thing on the west side under a million is one property on leased land on the Musqueam reserve, (also 2 house boats downtown under a million – ha) I’m currently renting a 1200 sf 3 bedroom Van Special for under $1600 – it’s a nice break from taxes, reno’s, and upkeep. I put the money from the sale of my house (8 months ago) in a high (ha again) interest savings account while I develop a plan for investing it. (I have to read your book first.) In the mean time, the interest is paying the rent.

#42 Harlee on 01.02.12 at 10:50 pm

#19
Ha ha ha ,that’s okay “W”…Keep your $700,000 then. Saskatchewan really doesn’t need your money. Keep it nice and safe under that big haystack in your backyard like the miserable miser you probably are. We’ll do just fine here without you.

#43 East Van on 01.02.12 at 10:52 pm

If you invested 1 million in the S&P on Jan 1st 2000, you would have today the million bucks plus enough to by a large double double at Timmies. You could not afford Starbucks.

You would have done much better with the Vancouver special.

Who would own an index for 12 years? Try addressing what I posted on. This blog is getting pathetic again. — Garth

#44 Phil on 01.02.12 at 10:54 pm

I buy insurance and I rent.

#45 Aaron - Melbourne on 01.02.12 at 10:55 pm

For those in Melbourne I recommend seeing this performance.

I went twice – the songs are hysterically funny and rather acerbic.

http://www.theage.com.au/entertainment/theatre/real-estate-fascination-under-the-hammer-20120102-1pi97.html

#46 truth hammer on 01.02.12 at 10:59 pm

Finally some sense….shutting down the Liberal propaganda mouthpiece CBC :)

http://news.nationalpost.com/2011/12/30/downsized-cbc-remains-key-goal-for-tories-in-2012-heritage-minister-james-moore/

The media attack on the opposition during the pre-elightenment era was deplorable…even for the unusually low Canadian standard of hamstrung journalism. The CBC is learning that after having attacked the Conservative values of Canadians inreturn for unaccounted budgets and GG seats is over. Good riddance !!!!

Now..it should be made illegal to post ‘news’ which is actually advertising….unless full disclosure is made on the masthead of every page. That way Canadians can know exactly who is doing the most lying….and decide issues and ‘values’ for themselves. We shouldn’t be bombarded by government advertising ( when government departments are Canadas biggest advertiser by dollar value) unless people know who and why the propagandists are.

The bad old days of Liberal social engineeering should be subject to a national inquiry….

Canada…..love it or leave it.

#47 Phil on 01.02.12 at 11:11 pm

@Westernman, I like the cut of your jib.

#48 Polk on 01.02.12 at 11:11 pm

Why do we always use 5 years as an example? Why not 10,15 or 20?

Selling in 5 years definitely makes no sense and I hope not many people are doing that. In the long run, say 10 or 15 years, the RE market must correct itself and start appreciating again, no?

Canadians move on average every five years. — Garth

#49 Tim on 01.02.12 at 11:13 pm

You must be doing something with photoshop…

#50 Onthesidelines on 01.02.12 at 11:15 pm

Garth’s reply to Terces#29: Which is why I addressed risk. You have missed (or ignored) the main point: liquid investments can be managed to mitigate or eliminate this risk. Real estate is a sitting duck. Learn more. — Garth

Actually you have not addressed the risk of either REITs of Preferreds. Rather, you started out denying that there is any risk in such investments and, when confronted with the fact that there is alwyas a risk premium, have completely downplayed it.

Other than snide remarks, no intelligent answer from you on how the low volume of trades in preferreds might be problematic when it’s time to sell. Neither have you addressed the issue that REITs callapsed vertically along with everything else when the markets crashed. Who cares if REITs are easier to to sell than houses when their prices, like the prices of stocks, can move massive amounts in a short period of time.

How many people got out of their positions during the last crash before losing 20%? That’s four years worth of your 5% dividends down the tube.

Actually I did address downsides. Liquid investments can be managed for risk within minutes. Real estate cannot. In fact, being illiquid and usually highly leveraged, housing is far more dangerous. BTW, there is high liquidity with bank preferreds, and nobody who did not sell REITs (or preferreds) in 2008-9 lost money. But REITs and preferreds kept churning out income, which also mitigated temporary capital declines. Your arguments are tired and alarmist. — Garth

#51 Angela on 01.02.12 at 11:24 pm

#27 Seven Stars and Orion: You’re not the only one who considered quitting the RE blog circuit. I pondered what a renter-porn-free 2012 might be like…

#52 thinktank on 01.02.12 at 11:25 pm

Hey Garth … bang on post … your math really makes people scratch their head in dis-belief Im sure (or at least I would hope) – you cant argue the facts. Having said that … I agree whole heartedly with #14 “Im stupid” .. from my experience, most who purchase million dollar homes and carry a mortgage simply DONT have the 1 million cash hence the mortgage and the monthly payments – those who can … probably know better which is why they HAVE the 1 million dollars and the ability to apply their capital to a balanced potfolio as you suggest. Reality check … this advice appiles to my guess (and this is without ANY facts to back it up) … less than 1% of purchasing homeowners. Now.. in your favour … everything is relative – if you can make DUMB investments with 1 million cash, then your percentages would certainly apply to the masses who are looking in the $350,00 – $650,000 price range. Point being – everything is relative – great post Garth .

#53 gtrz4peace on 01.02.12 at 11:27 pm

#36 Truth Hammer you are actually full of BS. Universal healthcare, social justice and quality programming which the CBC at least used to be — these are the things that ATTRACT people to Canada, and other civilized countries that understand that when everyone does OK, the rich still do very, very well. If you are going to bash “Liberal Social Justice” and things like access to health care, I have some land in South Carolina or Alabama to sell you. Really cheap, bring your own health insurance.

#54 This is Wonderland on 01.02.12 at 11:37 pm

Proof there is no common sense left.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11361995&PidKey=-626465090

One house on a postage size lot with one car garage no living room and the 5th bedroom is in the basement. Well at least the 1 ½ hrs drive to Toronto in back to back jaw grinding traffic will be worth the price.

#55 This is Wonderland on 01.02.12 at 11:41 pm

by the way. That girl is going to end up with series back problems; I’m sure that why that nice man is carrying her groceries for her.

#56 Island Girl on 01.03.12 at 12:03 am

Garth, it’s post’s like these that I like to send on to family members who still have their heads in the clouds when I try and talk reason when it comes to buying property. I swear they put their heads in the sand as soon as I suggest that renting might be better. I have one friend who is confident that the house prices in cowtown in their price range (they just bought) are at the lowest they will get and that they will only increase in value over the next five years and that because Alberta is an oil and gas province they will be immune from any corrections. I tried to point out that Texas is an oil and gas state and that it made no difference there but it fell on deaf ears.

We’re not in a position to start investing right now but we’re plowing ahead in paying off all the debt we incurred with our last move. We want to nail it before interests rates rise.

As for the posters that said that renters need to buy insurance too and that people don’t move every five years. I can personally say that I hardly know a single person that has lived in the same home for more than 7 years (and those people were us) and renters need insurance but they don’t HAVE to get insurance. As a home owner, insurance is required (at least when a mortgage is involved) and sure not having insurance as a renter can really bite, it’s not half as bad as owning, flat out, a home with no insurance and then losing the whole thing to fire. That’s a lot of wasted money…

#57 Grampa Hindsight on 01.03.12 at 12:05 am

# 25 NONPULSED Nice vacation pic of Garth on the beach with some of his Amazon security team always close by. Did you shave to avoid being recognised, Garth?

That is absolutely hilarious !!!!

#58 ZRH2YVR on 01.03.12 at 12:26 am

#8 – re: Rent with $1 million invested.

That’s our situation and have been there for a long time. This is a typical way for many people around the world to live especially in other countries (like Switzerland where I came from). It is strange however because it is dificult to comprehend that a Canadian could accumulate $1 million in financial assets (and say $100,000s of furniture and other assets) but not have bought a house – because we are not pre-programmed to be that way.

I can tell you it was almost impossibler to find renter contents insurance where your contents are in the 250,000 range. (Thank-you Chubb !!!)

#59 gary on 01.03.12 at 12:36 am

hey garth when is your next book due out ?

#60 Westernman on 01.03.12 at 12:40 am

Harlee,
Ahhhh, good ol’ Harlee, still trying to convince people of the joys of living in the frozen, surreal godforsaken tundra of Sask.
I repeat my earlier statement that anyone who shells out 700 grand to live ANYWHERE in that hellhole known as Sask. is not only delusional but in fact retarded… oh wait, that explains what you see crawling around that province… and you too harlee.

#61 Devore on 01.03.12 at 12:42 am

#48 Polk

In the long run, say 10 or 15 years, the RE market must correct itself and start appreciating again, no?

Of course it “must”. Lets ask the Japanese, shall we?

When you leverage yourself 20:1 to buy real estate, and then multiplying your gains, you are not accounting for one thing, and that is risk. Risk-adjusted returns matter. If the risk is high relative to the returns, you are effectively gambling that tomorrow will look like today. Everyone’s a winner, as long as the ball keeps landing on red.

#62 ZRH2YVR on 01.03.12 at 12:43 am

There has been some confusion in the blog with many of the comments saying that people just don’t have $1 million to go and buy a house so it’s not a good comparison.

However – – in Garth’s example, there was a cost of $120,000 to own the house. However – this example had no cost of interest – which is a large and very real cost when you own and borrow.

Let’s flip the example around. If a renter pays $4,000 per month but has no assets, to buy the house, they would have to borrow $1 million. Let’s be really nice and assume you can get 3.25% money for 5 years. This would place a cost of approx $32,500 per year (ignore the small principal reductions) or another $162,500 in costs. Add this to the $120,000 we already talked about above and this is a total cost of $282,500 for 5 years or $4,700 per month. Compared to the $4,000 in rent, it is more expensive – AND – you are taking the risk of the capital value – which is likely to fall. This is really simple math and in a world of real estate prices that do not go up – why would anyone buy – at the current price levels?

One other thought – content insurance is actually not cheap if you have lots of assets. Insurance companies are not used to insuring wealthy renters so it is tough to find a policy that will cover you if you have nice things and it is expensive. Renters are generally in a high risk category but usuall have very little. So if you have a lot and are a renter in Canada – the premium will be fairly steep.

#63 vreaa on 01.03.12 at 1:00 am

Chart of Greater Vancouver Average SFH Prices 1977-2011

With technical analysis discussion, for those who care.

http://wp.me/pcq1o-3uT

#64 Arse on 01.03.12 at 1:01 am

Very informative blog entry by Garth.

#65 Fan in Van on 01.03.12 at 1:04 am

#53 gtrz4peace — Well said. Truth hammer sounds like one of those nutjobs down south I see on the news at Tea Party rallies. I want to know what he’s smoking that makes him think the Harper agenda IN ANY WAY represents the will and values of a majority of Canadians.

#66 TurnerNation on 01.03.12 at 1:08 am

This hectoring, persnickety weblog is like a
diuretic for your portfolio! Liquidity is the watchword.

#67 zilch_a_million on 01.03.12 at 1:24 am

Dr. Garth
Above calculations are only good for a person who has 1 mil in cash, but if somebody is buying a house with 20% down and does not have plan to sell it in next 10 years, he should buy it. He will sure accumulate some equity in next 10 yrs.
Too bad that you have too many assumptions in above post. Anyway I regard this blog as a service you are giving to people for free, and your efforts are much appreciated.

#68 Will on 01.03.12 at 1:27 am

So, does anyone have any practical advice for finding a decent property to rent? We’re looking for a detached house in the Lower Mainland and most of the stuff listed on craigslist seems to be well past its prime…

#69 Nostradamus Le Mad Vlad on 01.03.12 at 1:38 am


#37 Timing is Everything — “Seriously?” — What a bunch of godforsaken wimps!

#38 Terra No-more — “Or perhaps the male phallus has suffered social shrinkage?” — See link further on re: Sperm. You may be on to something!
*
Help! An arrogant politico from Germany (which uses the Euro) says the UK (which doesn’t) must contribute to helping the EZone out; Increases There were a whole bunch of hikes in BC today, such as here; Falling Wages The rich get richer; Gas Prices High here? Assume the position and think of England! Plus Europe cannot save Euro (mebbe that’s why the US Fed are bailing them out and why Germany has told the UK to help out); Leaders say 2012 worse than 2011; Saving How to save 10K pounds a year by single mom; Chinese buying Yahoo!?

2011 was the year the middle class died; Qatar and Russia Plenty of LNG; Decline of Mfg. And that’s a good thing? Along with Eurozone Mfg. falls; Auto Sales slump in Portugal, Spain.
*
Milky Way Not the chocolate bar, but a nice selection of pix taken with an ordinary digital camera; Nuke Surveillance atop Himalayas; Santorum most corrupt politico in ’06; CNN corrupt as well? “Are you listening CNN, (202) 898-7900?”; China vs. the West China is right. Their politics may suck, but are slightly better than the corrupt west; Globalization of War Nice pic of all the flags; April 2012 Battle of Migron; Electric Currents create Sun’s magnetic fields.

Sperm can be grown outside the body, so men are redundant! Super Volcano ready to blow in Germany? Dead herrings, falling birds and super ‘canos. What’s next? 38:13 clip Nuke Russian roulette; Rockin’ Ronnie Back in Iowa, and Victory? “The turnout had Paul’s supporters crowing.”; Must be doing something right to attract this type of notoriety; Project Hammer involves the destruction of Russia, and the Bush family runs it; Link in “The Earth is expected to ride through multiple CMEs between December 28 and 31 after the Sun created a huge solar flare on Christmas day.”

#70 hey Westernman on 01.03.12 at 1:47 am

Have you ever noticed that people need to be somewhere else just as you’re getting to know them?

Or their phone rings, and they have to excuse themselves (there’s an app for that, btw).

I’m kinda figuring you haven’t picked up on these clues that basically people just don’t wanna talk to you.

trying to help you out here man.

#71 Frank Dean on 01.03.12 at 2:06 am

“Yes, rising interest rates will affect the capital value of the fixed-income assets, but it’s not rocket science to sell before bank rate changes and repurchase at lower prices subsequently.”

The market anticipates bank rate changes, and thus prices change before the bank rate actually changes. Garth is claiming that it’s easy to beat the market and act before anticipated changes get built into prices. Garth has repeatedly anticipated an increase in the Bank of Canada rate, and has been mistaken, for perfectly understandable reasons.

One of them is that it’s not easy! It’s much harder than rocket science.

#72 Lookinin on 01.03.12 at 2:08 am

So cut it in half and run the same numbers. Sheesh. — Garth
=============
☹ How can you educate some people? You’re too funny, Garth. I love this blog! ✌

#73 Harlee on 01.03.12 at 2:10 am

Somtime in this new year we’re all going to have to examine W’s pathological hatred for such a nice,unassuming province like good old Saskatchewan. The province did rather good financially in 2011. Could it be that W is scared of success? Maybe it’s some deep rooted insecurity brought on when W’s mother (born in North Battleford but raised in Swift Current)abandoned him in the Alberta haystack (the one he still calls home)? Maybe his hatred manifested itself when his wife ran off with a good-looking stud from Moose Jaw . It could be that he has a fetish for mountains and therefore has a fear and loathing for wide-open spaces.Well, all I know it’s getting late here and I won’t waste anymore time on questions that would be better left to psychiatrists to figure out . Maybe some of the bloggers here would like to offer their opinion ? Oh well, if not that’s okay. No use giving an attack dog more attention than what it deserves.

#74 John Prine on 01.03.12 at 2:44 am

Three grand for insurance on a 1 million dollar home? Is that Ontario? with all coverage on a $600,000 home, the most we ever paid is $890 and that included $150 in riders on two bikes.

#75 Jane24 on 01.03.12 at 3:11 am

No-one needs a huge one million house. We raised three kids in 1400 sq ft and kept it and now have the perfect sized retirement home. We learned early in our marriage that big houses equals big bills so down-sized.

Small but gem-like is what you need to aim for, all your home comforts but tiny monthly bills. Remember that space can be multi-purpse. Our middle reception room is our office, guest room and TV room combined, you just use the same space for different things at different times.

And yes we have the required million.

Daffodils now in bloom in Southern England, I love Spring.

#76 Mr Buyer on 01.03.12 at 3:37 am

#46 truth hammer… So the Liberals are to blame for the present state of affairs. Interesting thought. Look forward to 2 decades of Liberal rule starting next election. Remember the present Conservative Prime minister is an Economist and has led us deep into this Real Estate Bubble (get used to this statement. The Liberals just have to repeat it like a million times in the run up to the next election. Nothing more needs to be said) and ensuing fallout.

#77 Blue Hammer aka Cookie Monster on 01.03.12 at 3:38 am

but their bottoms are fine and the guy behind them ‘s stomach is to big but his boobs are perfect size!

#78 Cristian on 01.03.12 at 3:42 am

The calculation is sound. However I have one problem with it.
Almost nobody buys a house with cash paid in full.
The vast majority get a mortgage. One can get 1 mil. mortgage, but where does one get 1 mil to invest?
In other words, for the regular person it is easier to get 1 mil to buy a house than to get 1 mil to invest.
So the calculation, however sound, does not apply to real life.
So, what would be the scenario if we compare a buyer who gets a 1 mil mortgage with a renter who gets 1 mil… where? Is the bank going to lend that amount of money to anyone to invest?
Maybe I’m missing something here…

#79 Last on 01.03.12 at 4:54 am

13, 26, and 50 you guys miss the point, yes interest rates affect fixed income, but only if you sell!!!!!

Haven”t you ever heard of buy and hold???????

Your buying RIETs and preferreds for income not for capital gains. As Garth told me personally preferreds are like little engines that continually show off income. Who cares is the price declines a bit. Better yet the yield increases increasing your profits.

Garth I share your frustration here on this point, people just don”t get it.

#80 Herb on 01.03.12 at 6:05 am

#46 Truth Hammer,

I used to question your handle, but it is quite appropriate: you do try to beat the truth to death.

If you actually believe the propaganda BS you post, does stupid hurt?

#81 Jas G. on 01.03.12 at 6:18 am

Garth, you always forget to mention this one precious advice: Don’t marry a high-maintenance person. Hahaha.

Otherwise, you are awesome! I am addicted to this blog.

#82 Onemorething on 01.03.12 at 6:53 am

North Toronto made of pressed corn flakes, glue-imbued studs, face brick and, of course, granite c-tops and a Wolf stove.

Garth, you had me at pressed corn flakes!

Priceless!

#83 Valkyrie on 01.03.12 at 7:51 am

$700,000 for house near the airport in Regina? At least they can watch the planes that they only wish they could afford to be on if they hadn’t been so….I can’t think of the words……

#84 Gimme a break on 01.03.12 at 7:54 am

#8 pjwlk – “I can’t imagine many people having a million dollars to spare for investment while they rent.”

I have several million to invest BECAUSE I rent. There are many of us in your midst. You just don’t notice us because you assume we are all destitute and pitiful.

#85 DonDWest on 01.03.12 at 7:59 am

Does anyone find it ironic that banks are more than willing to loan me a million to buy a house; yet won’t loan me a million to invest in their own shares?

Something is rotten in the state of. . .

#86 Canuck Abroad on 01.03.12 at 8:06 am

67 / Zilch said –
Above calculations are only good for a person who has 1 mil in cash, but if somebody is buying a house with 20% down and does not have plan to sell it in next 10 years, he should buy it. He will sure accumulate some equity in next 10 yrs.
*****
Not true that he will be better off, and not true that he should automatically buy it. To work that out you should try out the excellent buy vs rent interactive which was posted by somebody a few days ago:

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Put in some realistic numbers using the crazy house prices today and you can see that even with a 20% downpayment, with cost to buy so high today and rents as cheap as they are, in many cases you will not recover the cost of buying even over 30 years (never mind 10).

Who cares if you have built up some equity if you are still worse off?

#87 Bobby on 01.03.12 at 8:22 am

Garth, I have to admire your patience. It is like teaching basic math to idiots. Like yourself, only 30% of my net worth is in real estate. Many of my investments are with a mutual fund company that has been voted the best in Canada. For example, a # 1 rated Bond fund with an MER of .59%. Beat that!
I live in Victoria and expect the home prices to fall.
Many of the homes I have been looking at have been taken off the market and are now sitting empty.
No, prices will not rise!

#88 maxx on 01.03.12 at 9:10 am

……in true Canadian milquetoast spirit….LOL! Strikes me that the obverse of the milquetoast spirit is headlong full-bore capitulation into real estate.

BTW, at those prices, are those pressed cornflakes at least non-GMO?

Garth Turner’s prose: brilliant. His advice: priceless.

#89 R2D2 on 01.03.12 at 9:15 am

American Dream, EH … What a effin’ rip

http://dailyreckoning.com/us-poverty-stats-where-the-feds-are-at-fault/

1. corporate balance sheets are fat with cash

2. unemployed wait 100+ days for cheques

3. ‘harper government’ highest spending gov’t EVER

4. DELETED

#90 TurnerNation on 01.03.12 at 9:20 am

Welcome to 2012. You no longer hold a job or even a career. Instead, your job is an MBA project in “Rationalizing our costs in a Global Economy”.

AKA bringing First World wages in line with Second and Third World.

Are you a Radiologist, lab technician, tax preparer, or skilled machine operator or fabricator? Goodbye. You will be outsouced.

Train for your new position:
“What would you like in your coffee sir?”
“Is that for here or to go”?

Keep waving the FOX/Sun TV flag while our mind-contoller leaders swear they are “helping bring jobs to working familes”.

Next up: Harpo will find a way to slash healthcare and CPP. He’s on the record as stating Canada is a “socialist state”. That must change.

Welcome to dogma, religion, and might. Welcome to the Dark Ages. All hail the King.

#91 househornyhousewife on 01.03.12 at 9:22 am

Garth,

1. When you are calculating the cost of purchasing a property, since when do you include the cost of selling said property down the road ? Huh ?! Separate transactions in my book, especially since the second transaction may or may not happen.

2. I didn’t know that rentals came with curtains, appliances etc.. I am quite sure that this cost will exist whether you are renting or buying.

3. Occupancy costs such as property taxes and building insurance DO exist for the renter. They are simply included in the monthly rent. Last time I checked, landlords are business people and not philanthropists. Same goes for utilities .. these exist for both the owner and the renter last time I checked (when you say not to mention these things, you really shouldn’t).

4. Renters still have to shell out renter’s insurance .. that is, if they want to be insured. If they don’t, then neither do property owners (although the bank usually has something to say about that).

Don’t get me wrong, Garth, I totally agree that from a strictly financial standpoint, renting trumps buying. I am quite sure that there can be no debate on this point. If you purchase a property, you will shell out more than if you rent it. Of course you will .. this is what the benefit of owning the property costs. Not only that, after five years of paying a mortgage, you STILL have nothing to show for it because the bank took off with most of those mortgage payments .. haven’t any of these idiots ever seen an amortization schedule ?! A mortgage is essentially a rent to own agreement with the bank.

However, on the other side of the coin:

1. Your landlord can raise the rent over the same five year period and depending on what province you live in and the types of rent controls that are in place, this can be pretty steep.

2. Your landlord has the right to come in and make “improvements” to your personal abode, whenever and however, he wants .. as long as he gives you proper notice. You want inconvenience ? This is a HUGE one that many renters detest.

3. If you yourself want to change anything in the place .. let’s say that awful parquet floor or those damned pink tiles in the bathroom or whatever, you have to a) get the landlord’s permission and b) spend money to update someone else’s property … giving them the option of then raising the rent on you (believe me, I have actually seen this happen).

Let’s face it, most landlords don’t shell out major cash to install the best bathroom fixtures or high quality wooden cupboards so you are basically stuck with rental grade interior decorating and often very dated stuff … when I didn’t have much money, I gladly put up with this (I had more important priorities then) but now that I own, I relish the infinitely better quality of the surroundings in my home.

Garth, if you want to knock some sense into those debt pigs, it is not the sane and logical financial argument that you must tackle … most young people have already gone down that road and it is too unglamorous to have to face so they would rather not face it. It is rather my last three points that you have to tackle .. especially the last two for it is these very last two points that make those fools spend money they do not have.

Why not paint a picture of someone who does own their own property but who can afford it. Talk about people who buy property and who live within their means. You know, people who first a) save their money for a downpayment then b) buy a modest home which they can pay off within a reasonable amount of time (say 10 years so they don’t pay a fortune in interest to the bank) then c) when they can afford it and after having fixed the important issues, make those renovations that they have always wanted to make in order to update and enjoy. All this, while at the same time saving for their retirement so that at age 65 they can leave their jobs, live in a paid off house and have regular income to live, travel, shop etc. without having to get up at 6 am and head off to work.

I think the kids will be more amenable to hearing this story rather than the rent for the rest of your life scenario.

If you want to hit them with another financial argument, then tell them how expensive having children costs and what they could do with the income that they don’t have to spend on their offspring … there’s another financial argument that’s undebatable but that is difficult to win. While I am looking for a nicer home (after paying off my current one in about 8 years), I am having a ball watching my colleagues and friends shell out wads of cash on tuition fees and living expenses for their offspring.

HHHW

#92 TurnerNation on 01.03.12 at 9:35 am

Here we go: a Harley limo!

Travelling in style.

http://tinyurl.com/7hsttll

#93 TurnerNation on 01.03.12 at 9:45 am

#46truth hammer on 01.02.12 at 10:59 pm

We can learn from South America. The first thing doen by a regime is control over media. First imprisoned, tortured, and assasinated are Professors, intellectuals journalists, priests. Basically, anyone who helps to educate and unite people is a threat to the regime.

We don’t need know stinking intellectuals, only snappy sound bytes:

“We know he has WMD
He’s killing his own people!
We come are liberators not a conquerers
They will throw flowers at our feet, their children will sing songs of praise.”

Perhaps we should outlaw unions and return child labour to good standing in Canada. And take away womens’ right to vote. The good old days eh?

Welcome to the dark ages. Dogma, religion, and might.

#94 OttawaRenter on 01.03.12 at 9:58 am

I get the math. The problem is finding a SFH to rent in Ottawa. There a are lot I could buy (but won’t as they are overpriced), but not many for rent. The few SFHs offered for rent are geared towards students, and have appliances from the ’70’s and shabby carpet, and are priced high, because they expect 5 or more students to split the rent. I fear if I want to get out of my horrible neighborhood, I will be forced to buy…

Also Garth, don’t stop posting on investments; you get more comments about real estate because people are more ignorant about investments, and fear your wrath if they post stupid stuff. And its easier to BS real estate stats (isn’t that why were are in the current situation, after all?)

#95 housedoc on 01.03.12 at 9:59 am

I think I figured out today’s pic.
No matter the size of your assets, beware the cunningly disinterested old fat guy who wants a piece.

#96 Canuck Abroad on 01.03.12 at 9:59 am

91 / HHHW –
1. When you are calculating the cost of purchasing a property, since when do you include the cost of selling said property down the road ? Huh ?!
****
I’ll take a stab at that one. The reason you have to include the selling costs is because until you sell, your gains are nothing but paper (i.i imaginary) – they don’t actually exist. Only SELLING crystalizes your gains (or losses).

So all your neighbours blowing smoke about how much money they have made off their “investment” have actually done no such thing until and unless they SELL. Hence the inclusion of selling costs in the analysis.

#97 Mike Rotch on 01.03.12 at 10:04 am

“Canadians move on average every five years. — Garth ”

I’ll pick nits too:

If you factor in the whole population, I absolutely believe this value. As a young renter, I once moved 3 times in a 16 month period, and every year or two was typical for the rest of my time. Dopes like me skew the statistics though.

For this point, one needs to look at the average stay among the illustrious and blessed 70% group of “owners”.

If you block the renter group, and discard them from the calculation, what does the average stay looks like?

My anecdotal “evidence” – I’ve been in my neighbourhood of owned SFHs for five years, and we have not even come close to one full turnover…..I figure at the present rate we’re tracking a 15 year average stay.

Anyway, this is all academic…..Without actually calculating it, I figure renting will still show better than buying on a 10 to 15 year horizon. Particularly if you budget for a roof, a furnace, new appliances, or any number of the big ticket expenditures you might get socked with if you stay for that long. I know I’d be happier if the landlord was going to be stuck with the bills for those.

Love that Oakville masterpiece for $639K. You’d have to really love Oakville!

#98 disciple on 01.03.12 at 10:24 am

#84 Gimme a break… yes, gimme a break. Although it’s hard for some not to gloat, but…especially in these tough times, next time post something more useful, perhaps? For Example…How can we all be like you?

#87 Bobby… that’s a good MER, but you could easily do better with an ETF… mutual funds are so yesterday… and bond funds (unless they are short-term floaters) are sure to be losers moving forward… better to be primarily in equities in 2012…

#91 HHHW… you relish the wrong things, woman. Your colleagues with children are actually living, but what you’re doing, I know not…and this isn’t 1975 btw…if people are borrowing 80%+ to buy houses, they aren’t likely planning on paying them off in 10 years anyways, that’s ridiculous, especially at these prices. Your comments demonstrate complete blindness to the reality of the current situation… I wonder…is this intentional on your part? I had been an owner for over 15 years, but thanks to Garth, I’ve understood the sheer madness afoot, and cashed out. I suggest everyone do the same…

#99 Devil's Advocate on 01.03.12 at 10:34 am

#220Not so smug any more but a lot richer on 01.02.12 at 10:03 pm
@ Alex Smith: “People have been predicting a Vancouver real estate crash every year. Sometime in the next decade prices may go down 10% and all those prophets will claim they were right!”

Check the historical charts, Alex. Those who have been predicting price drops in Vancouver have already been proven right. Prices tumbled in Vancouver in 2008/2009. The only thing that reversed that decline was a drop in interest rates to an all time low.

It is plain wrong to state that prices here have never fallen in the last few years.

Check the charts again for December 2011 and you’ll see that prices dropped over 10% in the last quarter of 2011.

Vancouver property owners have an incredibly selective memory. I was like that too until I sold last year and started checking the facts before leaping into buying again.

No… in fact it is plain wrong to state that prices have fallen based on a quarters statistics alone. A quarter does not a year make nor a year an economic cycle for that matter especially not this particular cycle. To suggest a 10% drop in a single quarter is a reckless supposition. It just does not happen that way. And we know it did NOT happen.

We are three and four years into this economic “correction” and over that whole time the housing market in most Canadian markets has be flat and stable in terms of both volumes and pricing after a quick and sure capitulation in 2008. Three years is a pretty long time in terms of economic cycles.

I think what Alex was suggesting is that Vancouver is in a good place now three years after and, while it may over the course of the next decade drop, when it does drop it will not be so much what the doomers and gloomers had hoped for but they will no doubt hop on that band wagon and beat their own drum saying “I told you so” even though there is not story to have been told.

It is not Vancouver property owners who have an incredibly selective memory. Selective memories are pretty much rampant everywhere and certainly most prevalent amongst the posters on this “pathetic” blog.

#100 Beach Girl on 01.03.12 at 10:58 am

#33 Herb on 01.02.12 at 10:23 pm

Is that you wearing the pink life preserver, Beach Girl?

___

Ah Herb, unfortunately that is not me, I am more on the lines of Mary Tyler Moore, Jane Fonda, but not that old. Is that you picking up beer cans in a plastic bag? I appreciate entrepreneurism.

___

I have never understood why people want to own a McMansion overlooking a large mortgage. Life is to be lived, have fun, laugh. Not constant stress if Daddy or Mommy loses their jobs.

And these poor deluded souls are driving 8 thousand miles a week to get where?

_____

#78 Cristian on 01.03.12 at 3:42 am

The calculation is sound. However I have one problem with it.
Almost nobody buys a house with cash paid in full.

____

I do, on a principle residence. Definitely not on rental properties. But one takes their personal line of credit which is around 2 1/2 per cent and pays interest only which is tax deductible.

If I borrow 100,000 in 2012, that money certainly won’t be worth 100,000 in 2022.

Might be dead anyway. Won’t be worrying about furnishing a McMansion. LOL.

#101 malkoo - calculation on 01.03.12 at 11:24 am

Own
Price 1,000,000
Downpament 20% 200,000
closing cost 20000
Property tax / year 7000
yearly intrest towards mortgage (4% ) with 30yrs amort. 30000
Principle for a year 14000
Monthly mortgage payment + tax 3800+600 = $4400
===========
now If we invest 227000 one time + 30000 a year for 5 years gives us = 272000 profit ( 6%) or $4500/ moth income you can rent the same house easily with less than 4000/ month

#102 Herb on 01.03.12 at 11:28 am

#100 Beach Girl,

“Is that you picking up beer cans in a plastic bag?”

Sadly, no. He’s too young and good loking to be me. And I’m not an entrepreneur either.

BG: I’ve seen Herb. He’s a hunk. — Garth

#103 Brandon on 01.03.12 at 11:31 am

#36 Elmer,

In 2011 I purchased 45 year old home from the original owner. I paid $212,000 for it. The owner paid $18,000 to have it built. Pretty sweet gain, eh? Not so fast! $18,000 in 1965 is the same as $125,000 today. Add in the fact that the owner had a new roof (probably a few over 45 years), 3 year old windows, renovated kitchen, renovated bathroom, 5 year old appliances, a new furnace, and 45 years of property tax … Just how did this buyer come out ahead?

#104 Deano on 01.03.12 at 11:46 am

R.I.P. Bill of Rights…who signed the first Patriot Act?

It’s funny how so many people said nothing after 9/11 when this stuff all started…but now that a black Democrat does the same thing (which, don’t get me wrong, is awful) there seems to be lots of people coming out of the wood work.

Garth has an excellent blog on real estate and financial matters. Let’s not spoil it.

#105 Cory on 01.03.12 at 12:07 pm

#91 HHHW

I have enjoyed reading all your post in the past, however knocking down having children and laughing at your friends for struggling to pay their kids tuition is just plain bizzare.

I think you may need counselling.

#106 Living in AB on 01.03.12 at 12:14 pm

I guess your blog makes sense for those who are cash rich. But lets consider me as an example. Monthly Costs to own a house (monthly): $1700 Mortgage (375k mortgage @ 3.49 5 yr fixed) , 250 taxes, and lets say 75 for maintencance. Something similiar to rent $2500. I put down around $100k on a $475k house. So, a return of 7% on the 100k is about $583 a month vs. savings of $475 of owning vs. renting. But factor in taxes and id say i come out on top with owning.

I guess if a 15% correction comes I’m kinda screwed, but things are different here (where I live ;).)

If the bulk of your net worth is in that one house you’ve taken on much risk. Hopefully you have other liquid assets invested in order to hedge it. — Garth

#107 sue on 01.03.12 at 1:01 pm

HHHW

I am saving for my son’s tuition and am thankful I have a son to save for. I would gladly shell out for everything from diapers to tuition to experience the love of a child. You sound bitter.

#108 neo on 01.03.12 at 1:03 pm

http://www.youtube.com/watch?v=01-2pNCZiNk

#109 zero dollars to invest on 01.03.12 at 1:09 pm

I have been renting for the last 10 years the same home. When I first moved in the house next door sold for $283,000.00. The same house sold last year for $960,000.00. Your argument that the $283,000.00 could be invested, etc. Well, I did not have $283,000.00 to invest. Instead, if I had put (beg, borrowed or steal) a downpayment, which at the time could have been $0, and paid a mortgage greater than, equal to, or not, I would be better off today. For us schmucks that do not have money to invest, a home is our only investment since we have to pay rent for a roof over our heads.

#110 Not 1st on 01.03.12 at 1:28 pm

Re: comments about sask.

I don’t know how to classify the province and its cities. Garth calls them 2nd tier and they probably are, but they are growing nicely now and the province is building wealth. But 700k in Regina or skatchatoon is a little nuts.

#111 Snowboid on 01.03.12 at 1:31 pm

#91 househornyhousewife on 01.03.12 at 9:22 am…

Cost of selling – you better figure on this if you are upgrading in 8 years as you indicate

Maybe things back east are different than the far west, so here is what a rental looks like in the Okanagan:

* Our rental comes with curtains, appliances, etc etc including washer/dryer
* Because RE prices are insanely high, our landlord is indeed a philanthropist, to the tune of over $ 1000 a month
* We don’t pay all the utilities, some are covered by the owners’ taxes and strata fees
* Our renters’ insurance is mandatory as part of strata rules, as is the owners’ (to cover improvements and liability)

Your next points…

* Landlords will set rent at what the market will bear, ours would have to double before it would make sense to buy – that could take awhile
* Improvements cause both renters and buyers a huge inconvenience
* Simple solution if you hate the place – don’t rent it to begin with

Our rental, although a bit dated, is high quality – 1800 sq ft. Oak, marble and granite throughout the place. Newer european kitchen appliances. Heated tile floors in bathrooms and halls. Jacuzzi and separate walk-in shower in master bath. Floor to ceiling windows in living and dining. 600 sq ft deck. Oak wetbar in living area.

Absolutely nothing in the place looks ‘rental’ grade.

I agree with your points about debt and saving. We followed the same general theme, paid off our homes within 10-13 years, and raised two children (what do you have against them anyway?), retired debt-free at 55 and have a reasonable income to maintain a half-decent retirement lifestyle.

We did own a primary residence, and could afford it – but sold the place and invested most of the proceeds. We will never regret getting off Fantasy Island.

While we still have about 20% of our net worth in RE (winter home), renting in the Okanagan will continue to pay for itself for the next few years.

Is it really that different back east?

#112 refinow on 01.03.12 at 1:37 pm

Garth swing the preverbial pendulum to the extreme in both cases..

This isn’t rocket science… If house prices are about to go down, better to rent.

If housing prices stay the same and your time line is 5 years, better to rent. Over a 30 year period of time, better to buy…

The fact of the matter is that we have been on a 20 year period of time when housing prices did nothing but go up… Everybody made money buying a house…

However the times are about to change to a scenerio not many of us remember or can even fathom, that the value of your house might go down… And if they go down to 15 -30% it is really easy to understand the benefits of renting…

#113 DM in C on 01.03.12 at 2:04 pm

#99 – “Selective memories are pretty much rampant everywhere and certainly most prevalent amongst the posters on this “pathetic” blog.”

Indeed. You being the most offensive offender. You’ve ‘selectively’ and quite vocally quit this blog numerous times, but conveniently seem to forget whenever you need attention.

Hopefully my response to your ramblings is attention enough to fulfill that need yet again.

#114 Smokin' Jane on 01.03.12 at 2:09 pm

I know a lady who “bought” a condo in harbour landing and even before she got to move in the paint on some walls was already cracking and the condo was having sewage issues. She was already having headaches trying to get the developers to fix the f*$ckups. The insanity in Regina is ridiculous.

… But look at this young happy couple. They don’t mind the “little negative things”

“Every day when we’re driving on Gordon Road, we’ll see a new retail place have their lights on and … that’s exciting. I think anything new in Regina is good, (especially when) it’s right in my backyard and I can just walk there.”

http://www.leaderpost.com/business/Harbour+Landing/5919182/story.html#ixzz1iQ5TwQyD

Regina is a very boring city so yeah… a new five guys greasy burgers and fries, Lowe’s, and The Bulk Barn are definitely awesome attractions. So glad I got out of there…

#115 poco on 01.03.12 at 2:13 pm

#63 vreaa on 01.03.12 at 1:00 am
Chart of Greater Vancouver Average SFH Prices 1977-2011
With technical analysis discussion, for those who care.
http://wp.me/pcq1o-3uT
____________________________________________
many of us do care–read your blog every day–thanks

#116 Westernman on 01.03.12 at 2:16 pm

hey westernman @ #70,
No, as a matter of fact – I’m the one who has to unplug his phone because of people requesting my presence at parties and other social functions…not to mention my animal appeal to the ladies… this happens when you have CHARACTER and PERSONALITY…
I’m sure you wouldn’t know anything about those things though…

#117 Westernman on 01.03.12 at 2:20 pm

Fan in Van,
Well, harper managed to get elected – what? Twice I think… someone in Canada must think he reflects their values – unless it was just a counting error both times.
Maybe you are the one who is on the margins…. hmmmm?

#118 Roial1 on 01.03.12 at 2:29 pm

#46truth hammer on 01.02.12 at 10:59 pm

Now..it should be made illegal to post ‘news’ which is actually advertising….unless full disclosure is made on the masthead of every page. That way Canadians can know exactly who is doing the most lying….and decide issues and ‘values’ for themselves. We shouldn’t be bombarded by government advertising ( when government departments are Canadas biggest advertiser by dollar value) unless people know who and why the propagandists are.

Oh Ya!
Especially in the so called “MSM” since it all belongs to the far right “wing nuts”.
Don’t believe me? Look up the ownership[ of ALL the media in Canada. (Except the CBC And they are right leaning as the torys do controle the purse strings don’t they?)
The myth of left leaning Media is just that a red herring as All outlets are just a tiny bit left of Rupert Murdock.
(And he is so far right that someone like Gengus Kan has to duck!)

#119 Blacksheep on 01.03.12 at 2:30 pm

Deano # 103,

“R.I.P. Bill of Rights…who signed the first Patriot Act?

It’s funny how so many people said nothing after 9/11 when this stuff all started…but now that a black Democrat does the same thing (which, don’t get me wrong, is awful) there seems to be lots of people coming out of the wood work. ”
——————————————————————
Don’t take the bait, Deano.

Black vs White, Democrat vs Republican, even sports team “A” vs sports team “B”.

All designed to distract and divide and all, irrelevant.

Many people are speaking out now that were sleeping circa 9/11, due an increased awareness of the “system”.

The masses are waking to see things as actually ARE, not as they were TOLD, from birth, it to be.

See post # 104 from yesterday for info, as I don’t want abuse Garth’s leniency.

take care,
Blacksheep

#120 Roial1 on 01.03.12 at 2:46 pm

#91househornyhousewife on 01.03.12 at 9:22 am
3. Occupancy costs such as property taxes and building insurance DO exist for the renter. They are simply included in the monthly rent. Last time I checked, landlords are business people and not philanthropists. Same goes for utilities .. these exist for both the owner and the renter last time I checked (when you say not to mention these things, you really shouldn’t).

As a landlord I can tell you that you don’t know S–T!
The market sets the rent not the landloard.
If the local market says $700 per month and your costs are $750 you better swallow the difference or you will NOT be collecting ANY rent. A MUCH harder on the pocket situation.

#121 Westernman on 01.03.12 at 2:59 pm

Not 1st,
You state you are not sure how to classify Sask. and it’s villages ( exscuse me – ahem – cities ).
Allow me to assist you… number 1 – Garth says they are 2nd tier… he’s just being a gracious host – they are barely, and I do mean barely, 3rd tier.
All you need to know about the place is this – in the last 50 years ( thats a half century for all you cognitively challenged Sask. residents ) the province has only added 125 thousand people! In 50 years!
There is BARELY 1 million people in the whole province…
In conclusion it is blindingly obvious that NO ONE wants to live there… could there be a reason for this?
Think about it…

#122 Timbo on 01.03.12 at 3:07 pm

http://www.informationclearinghouse.info/article29647.htm

no corruption here folks..move along…nothing to see ..unless you want to be sick?!

thank god there is no corruption in Canada by our real estate gorilla’s in the corner.

#123 Waterloo Resident on 01.03.12 at 3:11 pm

Garth, are you drunk on the eggnog?
Nobody has $1 Million in cash just sitting around, everyone BORROWS the cash.

What you should have done in your calculations was to assume that the house buyer puts down $50,000 in cash (5%) and borrows the rest, that is much more realistic.

Now if that same person puts down his $50,000 into the stock / bond market, well, that’s next to nothing in equity and similarly he will earn next to nothing. HIS IS NOT INVESTING $1 MILLION, he’s investing only $50,000. Now crunch those numbers up and renting is not nearly as good a proposition as it might seem.

#124 Form Man on 01.03.12 at 3:15 pm

westernman

actually I enjoyed a Christmas away from the computer. Skiing, hockey, quality family time. I doubt you have much knowledge of that sort of thing.
You have provided a hint of which country you would rather inhabit…..apparently it is the U.S….. Odd, considering the U.S, has a ‘liberal’ president, and Canada has a ‘conservative’ prime minister. Perhaps you are politically confused……or simply incapable of rational thought ( which would make you a conservative ). If you are looking for anymore political guidance, feel free to ask.

Devil’s Advocate
I note you carefully ignored my question of yesterday……still trying to untwist the pretzel you have tied yourself in, with your constant self contradictions ?

#125 Westernman on 01.03.12 at 3:22 pm

Form man,
Guidance from you? You must moonlight as a comedian ,chump.
Did you play some Croquet and sup tee over the ” Festive Season ” as well?
Your post was the usual tripe but you did clear up one thing – you don’t have a clue what the difference between a conservative and a liberal is…

#126 Waterloo Resident on 01.03.12 at 3:29 pm

The average investor / home-buyer has about $50,000 saved up. This is how they view the world:

1) use the $50,000 as 5% down on a $1 Million dollar house. If the house goes up 20% then we GAIN $ 200,000 !!! THAT’S 4 TIMES WHAT WE INVESTED , WOW !!!

2) if for some reason the house sinks in value, well, we just declare bankruptcy and walk, all we lose is $50,000.

3) if we invest our $50,000 on stocks and they go up 20%, then we gain only a measly $10,000; not even enough to bother with !!! Buying a house gives the investor the opportunity to earn 20-TIME GREATER A GAIN on the same money !

So tell me, why would any sane person buy anything other than a house?

#127 Davey Boy on 01.03.12 at 3:30 pm

Garth, always enjoy your blog. I am fortunate to have over a million invested and have it managed by a reputable investment firm. It’s very diversified and performs exactly as you’ve said.

I think the problem is that people that don’t have that kind of money to invest don’t see first hand what you are trying to convey, thus the skepticism.

By the way currently own a house, my ex will probably end up with that and the contents. I will be quite content to rent and keep my diversified portfolio. It’s actually freeing not to have a lot of material possessions.

#128 Bailing in BC on 01.03.12 at 4:01 pm

#108 zero dollars to invest

Obviously buying the house ten years ago for $283,000 (before the bubble) would have been a great investment. I think however a more useful question is whether it would be wise for a person to purchase the same house now for $960,000. It’s a bit like saying I had no money to gamble so I didn’t bet, but now that I see that the ball landed on red 13 I realise that I should have borrowed $10k from a loan shark and put it on red 13. Perhaps now I will go borrow $100k and put it on red 13 to make up for my losses.

#129 Breakdown on 01.03.12 at 4:01 pm

I actually subscribe to the ideal that renting is financially superior to owning, I do own (mortgage a home, I’m 33 and have greater than 50% equity in it) a couple of factors (assumptions missing from these “calculations.”

1.) No contents insurance for the renter, surely if you have $1,000,000 cash, you also have some valuables to protect. Also lost is the discounts that you’ll get on your auto insurance, etc. Those do add, but they are also somewhat petty.

2.) The author indicates that the markets will climb, yet real estate will fall, which is why we’re going to invest (those two don’t usually coincide in that manner, but we’ll give the benefit of the doubt to the writer and call it a market correction).

3.) We’ll invest the money in banks (usually safe, but please consider the fools that are in over their heads on their mortgages.

4.) Absolutely no year-over-year rent increases, absolutely possible, but still an assumption.

5.) This is the big one. A safe 5% ROI in this day and age.

I don’t feel that this exists, because of demand and supply for money . . . simply put.

Wouldn’t the truly intelligent or savy investor, buy the house. Put $200,000 down and mortgage the remaining $800,000 if this were the case??? A safe variable mortgage rate to use would be 3%.

You buy the house, and pay the mortgage each month. Your Investment will net you approx. $3333 per month. And you mortgage the house for 31 years, just reinvesting the investment money directly into mortgage payments.

After 5 years, you’re still out the $120,000 as detailed in the article, but you’ll have $85K more equity in your home as well.

After 7 years. Much of the $120,000 is still fixed, it’ll increase to $150,000 with property taxes and insurance maybe, but you’ll be sitting on $133,000 in house equity at that point.

Sound good??? Probably unreasonable – right? My thoughts exactly!! Safe investment in a GIC would be more similar to 3% . . . . I would use that number. Only thing is that it might be enough to tip the scales so that buying outright is a better idea.

You would do well to read more closely. I did not say markets would rise nor real estate would fall. My comments were based on a static situation for both. No rent increases were factored in for the same reason as no property tax hikes. As for the banks, their mortgage portfolios are protected by the taxpayers. And as for your incredulity at a secure 5% investment return, it simply underscores your inexperience or lack of knowledge. Come better armed next time. — Garth

#130 Louise on 01.03.12 at 4:12 pm

#73 Harlee I think you have hit the nail on the head regarding W. He does sound like a rather inadequate little fellow, indeed and his wife probably did leave him for a Sask. guy. I expect his second wife will also leave him as well for the same reason and hopefully for someone from another province so he does not have to bore everyone on this forum with his Sask. hate trip.

#131 The InvestorsFriend on 01.03.12 at 4:26 pm

WHAT PERCENT OF ASSETS IN REAL ESTATE?

The relevant question is not what is the percent of your net worth in real estate. It is what is the percent of your assets in real estate.

Waterloo Resident at 122 recognises that a $million dollar house is a million dollar investment no matter what your equity is.

But as many have pointed out most young people face a choice of virtually no assets, or borrow a half million or whatever and take a chance on the house.

How many homeowners can say that their assets are less than 50% in real estate. Not many, under age 55 I suspect.

#132 Form Man on 01.03.12 at 4:44 pm

#124 westernman

ok. enlighten me. Harper is a ________
Obama is a _________
perhaps the answers will elude you as they do require a minimum level of reading comprehension

#133 Onemorething on 01.03.12 at 4:50 pm

#85 DonDWest on 01.03.12 at 7:59 am

Does anyone find it ironic that banks are more than willing to loan me a million to buy a house; yet won’t loan me a million to invest in their own shares?

Something is rotten in the state of. . .

YUP, rotten to the core and the taxpayer on the hook for government backed mortgages!

#134 househornyhousewife on 01.03.12 at 4:54 pm

Hi guys,

My apologies to those of you who took insult regarding my comment about having children. The comment was not meant to say that everyone who has children is a sucker. Rather that many people do not take the financial aspect into account when they decide to have children and later must pay the price. Like owning a house, having children is not profitable from a purely monetary perspective.

Also, the reason I am now laughing at my brethren who decided to take the plunge is because when I decided not to have children, those same individuals severely criticized me as being selfish and non conformist. I felt quite the opposite and followed my heart. I now not only have more money in my pocket but I get to watch those same people realize what it is truly like to raise another human being. It is expensive both financially and emotionally and one must truly want to have children for the right reasons (many, unfortunately, do not). I am definitely not bitter about my decision and those who know me would wholeheartedly agree with this.

And for those landlord philanthropists out there, good for you. Choosing to loose money on your investment in order to better the condition of your fellow man is admirable. You are right, I don’t understand since as an investor in a business that is not making money, I would choose to sell and get out rather than continue to loose money. I would think that if you are not covering your occupancy costs with your revenues and you are in the rental business, things aren’t going very well. Doesn’t sound like a great time to be a landlord where you guys are.

Oh and folks, paying off your house in under 10 years is not a fantasy and is indeed possible. The key is to buy something you can truly afford (not what the bank says you can afford). If the cheapest house where you work costs a million bucks and you earn $100K per year then you cannot afford to buy it so you can either rent a place (preferably from one of those landlord philanthropists) or move to a place where you can afford a house. The average price of a house in Québec is $250,000.00. This means that even if you earn 80% less than you would elsewhere, you would still come out ahead. It’s all relative is it not ?

HHHW

#135 Steven Rowlandson on 01.03.12 at 5:14 pm

“They are caricatures of themselves, poster children for ‘house porn’. They have massive mortgages on massive houses. They are dancing on the Titanic and don’t even know it, or want to.”

Well Garth that is so true! There are alot of people who just don’t want to hear the truth or know about problems especially the ones that are about to bite them in the south end. Their faith in the system as they know it is more or less unshakeable.
It might take something between the 1930s and the end of the world to make people smarten up FWIW.

#136 Beach Girl on 01.03.12 at 5:17 pm

#106 sue on 01.03.12 at 1:01 pm

regarding HHHW

Sue is…

I am saving for my son’s tuition and am thankful I have a son to save for. I would gladly shell out for everything from diapers to tuition to experience the love of a child. You sound bitter.
___

Give HHW a break.

Kids are evil. Have 2 idiots. Have paid for one education and paying for the other. They tell me they love me, makes me even more nervous.

They did a survey a long time ago, and asked people if they would do it over again if they had the chance. 60% said no.

I do not regret having them, but it isn’t all roses. I guess I am content I had them, because you would always wonder if you missed out. You didn’t.

The fact I elected for being put totally out and having C-sections in a private hospital makes me despise them less. WOW, those drugs were good. I told the youngest he is only here for the morphine.

___

And Herb, I might set my cap on you at a later date, as the GURU would not lie to me.

But shock of all shocks, doesn’t the intended show up at 3:30 with one of his employees and shovel me out.

The chicken wings are on for tomorrow.

Wish me luck.

#137 The Original Dave on 01.03.12 at 5:18 pm

108 zero dollars to invest

Obviously buying the house ten years ago for $283,000 (before the bubble) would have been a great investment. I think however a more useful question is whether it would be wise for a person to purchase the same house now for $960,000. It’s a bit like saying I had no money to gamble so I didn’t bet, but now that I see that the ball landed on red 13 I realise that I should have borrowed $10k from a loan shark and put it on red 13. Perhaps now I will go borrow $100k and put it on red 13 to make up for my losses.

———————

amazing!

#138 John Prine on 01.03.12 at 5:22 pm

Just watched the noon news and saw the lockout story with the Caterpillar workers in London. The management wants to cut the wages from approximately $35.00 per hour to $16.50. If this isn’t a loud signal about getting rid of the middle class…….. With nobody earning money there is nobody to spend, how will this affect real estate in Ontario’s working communities? So short sighted! I feel sorry for those affected. Corporate greed at it’s worst, be interesting to see what Kevin O’Leary has to say about it tonight, he should be happy.

#139 jess on 01.03.12 at 5:22 pm

Timbo
“the American Legislative Exchange Council – alec

=

Bearer shares
…anonymous and therefore useful for money-laundering, tax evasion, and other corrupt practices. Bearer shares have been banned by most jurisdictions, but their use is allowed under section 779 of the UK Companies Act 2006. This is one of the reasons why we consider the UK a secrecy jurisdiction.”

http://www.lesoir.be/sports/football/2011-12-31/60-millions-de-francs-belges-de-commission-pour-lucien-d-onofrio-887317.php

===
…get rid of that coaches corner that would save a few bucks

#140 Beach Girl on 01.03.12 at 5:26 pm

While on gross subjects, why do sweaty, ugly, fat people insist on televising the birth of a new set of morons. Really don’t get that.

We know your grandparents were brother and sister.

Or you have the largest female opening on planet earth. And you are so proud. Just plain icky to me.

I had my hair done, a pedicure and nails done. I looked fantastic darling…

A year later some plastic surgery, looked nearly like new.

#141 expat_engineer on 01.03.12 at 5:37 pm

# 102 Brandon

he came out ahead because he put only 1800 down. the rest was lent to him by the bank.

So his 1800 is now worth 212,000.
You cant leverage any investment like you can a house.
No one will lend you any money to lever up and buy shares.

But to lever up now to buy a house is suicide. There is no way for the system to add add debt like it has over the past 30 years.

The Age of deleveraging is upon us.

#142 Cato on 01.03.12 at 5:41 pm

In this economic environment anyone under 35 (or even 40) needs to be renting. Most lack the job security to hold a mortgage, they just don’t realize it until its to late. The only time it makes sense for a young person to make a mortgage commitment is during an economic expansion, in all other times its better to rent for the sake of mobility.

In my social circle I can think of a few families being destroyed by their homes. Work dried up locally forcing the men to look to the oil patch for employment. One has a baby with another on the way, he’s gone for 2 weeks at a time. The other has young teens & he’s gone for 3 months at a time. Neither can get out from under their underwater mortgages so they’re stuck, the situation is destroying their marriages.

These little mistakes in life carry consequences. Many Canadians are just starting to wake up to this nightmare and its just getting worse.

#143 Not 1st on 01.03.12 at 5:41 pm

#120 Westernman

Westerman, i have heard all the sask bashing there is after I moved away and the only thing I can attribute the need to insult a place you know nothing about is more rooted in your own short comings, ego, insecurities and some misguided need to make yourself superior to the rest. Its really sad you have to find an obscure blog like this to pump up your fantasy.

#144 Westernman on 01.03.12 at 5:42 pm

Form Man,
I could enlighten you but you first have to prove to me you are worth my time…
Louise… where to start with you… first off let me say that I do the leaving in the relationships…moving on to better things.
There will be no ” second ” wife, as some of us are smart enough to learn our lesson’s the first time…and you are a fine example of why there will be no second wife.

#145 JR on 01.03.12 at 5:59 pm

It’s unfortunate that our society in canada focuses on finance and real estate rather than family and children.

#146 Westernman on 01.03.12 at 6:22 pm

Not 1st,
Not too bright are you? What are you? Took a couple of psyche courses at a junior college and now you are Sigmund Freud?
Repeat after me kid, there is no Sask. bashing going on – just an accurate description of one of the most avoided dung holes on Earth – Saskatchewan.
Prove me wrong… I dare you to make a coherent argument in favour of living in the most backward place in Canada.

#147 Easternman on 01.03.12 at 6:54 pm

hi Westernman.

that is all.

#148 Form Man on 01.03.12 at 7:02 pm

#142 westernman

holy cow buddy ! what is this anger toward women you keep displaying ? this irrational lashing out at others is the sign of some pretty deep unresolved issues.
Some of those ‘hardworking, resourceful, people’ you speak of, made Saskatchewan their home, and they like it. Good for them. We live in a free country. No one is forced to live anywhere.
Also I must compliment you on a flawless record of
of avoiding responding to any/all comments that clearly destoy your silly assertions.
you are an angry, bigoted, ill informed, misogynist
what a hero

#149 Devore on 01.03.12 at 7:03 pm

#90 TurnerNation

He’s on the record as stating Canada is a “socialist state”.

On record stating facts? Oh the horror. You guys are hilarious.

This blog goes unreadable every time anyone mentions politics.

#150 Timing is Everything on 01.03.12 at 7:08 pm

Beach Girl

Hey B.G., you should pretend you like sex rather than pretending you know how to cook. Things will be ‘cooking’ in no time.

“You get two birds stoned at once.” – Ricky ‘Trailer Park Boys’

#151 Devore on 01.03.12 at 7:12 pm

#91 househornyhousewife

1. When you are calculating the cost of purchasing a property, since when do you include the cost of selling said property down the road ? Huh ?

No, it should not be included, but will eventually. And never sell? Huh? That’s what, 1% of the population?

2. I didn’t know that rentals came with curtains, appliances etc.. I am quite sure that this cost will exist whether you are renting or buying.

Owners spend far more on “dressing up” the house than renters. Throw in renovations too, most of which depreciate very quickly and are never recovered.

3. Occupancy costs such as property taxes and building insurance DO exist for the renter. They are simply included in the monthly rent.

They are borne by the owner. In the own vs buy calculation, they cannot be assigned to the renter. Even worse for the “investor”, property taxes on non-owner-occupied residences are higher in most cities.

4. Renters still have to shell out renter’s insurance .. that is, if they want to be insured.

Everyone wants to be insured. But renters only insure contents, owners need to insure the structure too. For example, condo and apartment insurance is virtually identical, because the condo structure is insured through the maintenance fees. It contravenes your mortgage terms if you have no insurance, and you cannot operate a business (landlording) without insurance either.

#152 Pat on 01.03.12 at 7:19 pm

@ #133 househornyhousewife

Yes, raising children is very costly and tiresome, and yet none of my acquaintances seem to regret having them.

If you had children you’d know that they tend to become more important/valuable than anything else in your life.

#153 Hicksville Alberta on 01.03.12 at 7:20 pm

#145 Westernman

It’s pretty obvious from your rantings that the most backward place in Canada is in your mind and your surroundings as the shallow ignorance you continue to demonstrate to all has to have come from some deep seated backwards shithole.

Might i suggest you spend some time with Beach Girl so maybe between the two of you there may devolve a solution to your narcissist social personality disorders.

#154 Marshy on 01.03.12 at 7:21 pm

Westernman,

In no particular order …. some reasons for living in the most backward place in Canada

hot economy
abundent resources
clean air
job opportunities
pristine lakes
you don’t live here

Signing off from Dung Hole SK

#155 Harlee on 01.03.12 at 7:24 pm

Not 1st and Louise. Thanks for stepping in and trying to find out what is bugging “W” so much. I,more than anyone who posts here,would really like to know what his attack on Saskatchewan really stems from. Worst is when he goes after someone and calls them names or attacks their intelligence for disagreeing with him. It could be that he has some real mental problems,or that he’s simply a bully that gets off on abusing others.I’ve had to deal with such individuals in my life before and rather simply hating them,I always end feeling rather sorry for them too. They think they’ve got the power and are in charge,but all they really do is hurt others and make themselves look like “assholes”. I have no idea why Garth is allowing so many of W’s to post go through, but in my opinion it really brings down the whole tone of the site. Someone might disagree with InvestorFriend or BPOE ,or whoever else, who posts here on a regular basis and those posters probably expect their opinions to be challenged and usually respond in a fairly intelligent style.Smoking Man,for all of his nonense, is pretty entertaining.So is Disciple. Posts ,like what Westernman has been posting lately are, in my opinion, garbage.

#156 Herb on 01.03.12 at 7:26 pm

#135 Beach Giro,

of course our Guruu would not lie to you, but being a good businessman, he doesn’t mention things like best-before dates.

If the intended showed up with help to dig you out, he’s hooked, line and sinker. You will have far more luck than the chickens whose wings you are going to nosh tomorrow.

#157 Devore on 01.03.12 at 7:26 pm

#98 disciple

if people are borrowing 80%+ to buy houses, they aren’t likely planning on paying them off in 10 years anyways, that’s ridiculous, especially at these prices.

Bingo. No one who needs to borrow so much money, who managed to save so little over all these years, will be paying off in 10 years. Remember that the debt service ratio is calculated over the mortgage amortization period, and, with rising costs of everything (except iPads I guess) and stagnant wages, most will be very hard pressed to throw in more.

#158 Herb on 01.03.12 at 7:28 pm

Sorry, Beach Girl, someone put the “o” too close to the “l” on my keyboard for my clumsy fingers.

#159 Westernman on 01.03.12 at 7:32 pm

Hicksville Alberta,
Spend time with beach Girl? Don’t threaten me, boy!
Harlee, your true colors coming shining through in clear and unmistakeable fascist fashion don’t they?
If you don’t agree with someone’s viewpoint they should be banned, eh? Shades of 1938 Batman!

#160 Canadian Watchdog on 01.03.12 at 7:40 pm

Garth,

Would be great to get your thoughts on this paper regarding Canada’s education system and student debt. I do believe this will play a substantial role in the mid-to-long term housing market.

http://www.cfs-fcee.ca/downloads/CFS-2011-Public_Education_for_the_Public_Good-EN.pdf

#161 kim on 01.03.12 at 7:40 pm

RE is overvalued. I know people who bought a couple of years ago and still cant afford the bills. She has told me her house plus debts heloc are more then what the home is worth. She didnt say but I think they used their Heloc to pay bills since there are no renos done to her place. RE in Canada is a house of cards.

#162 Timing is Everything on 01.03.12 at 7:44 pm

#146 Easternman

Probably.

#163 jess on 01.03.12 at 7:50 pm

..imagine if humans became sterile and faced outbreaks of resistant tb. etc. westernman land would become no man’s land in no time.

#164 Devore on 01.03.12 at 7:56 pm

#110 Snowboid

* Because RE prices are insanely high, our landlord is indeed a philanthropist, to the tune of over $ 1000 a month

Everywhere real estate is high and rents (relatively) low (Vancouver, Kelowna, Victoria, Toronto) there is a non-trivial amount of cash-flow negative landlords. If they are not philanthropists, as HHHW suggests, why don’t they just raise rents?

The condo I owned, as every responsible adult should, so I was told, cost just under $2200 (mortgage, strata fee, property tax), even without the special assessment because the strata fees are way too low. This was with a responsible 20/25 mortgage. Same units (nicer, actually, because I was supposed to add sweat equity and pride of ownership) in the same building routinely rent for $1400-$1500.

I’m now out, with nearly all my money, and happily renting.

#165 Deano on 01.03.12 at 8:02 pm

#118…I’m not taking bait….you were picking up what I was putting down….they’re called the Demipulican party for a reason.

All jest aside, the current crop of GOP’ers are a special brand of crazy. See Newt “Let’s Repeal Child Labour Law” Gingrich.

The trouble is, politics are getting dragged into a crazier place than they were. This doesn’t bode well for my well being, or probably yours. I’m not a doomer mind you, just wary.

#166 Harlee on 01.03.12 at 8:08 pm

#153 Marshy
Ha ha, pretty good list.
Now,on MY list ,in addition to “Hot Economy”,I might add: Hot Women (that’s another subject for another blog,not this one which we all know is about housing and the economy) and….
Hot Weather (okay..,so it hasn’t been exactly “hot”,but a hell of alot warmer than usual. Temp was around +5 today,and did I mention that it was sunny in Saskatoon today ? It felt nice. Yet another reason for more Torontoians to move here ;-)

#167 Nostradamus Le Mad Vlad on 01.03.12 at 8:09 pm


Ahhhh, ’tis a fine day here on the wierd side. Are the bond / stock markets still going nutty?
*
Regular Office Hours is what Detroit’s police keeps; 6:01 clip “She’s referring to the $170 billion handed to AIG. Now watch Geithner squirm as he tries to evade her.”; How To Forge A Signature They are quite good at it; High Child Poverty Rates 25 states; Pension Funds Collapsing “It is time for the corporate media to admit what the rest of us already know. The mortgage-backed securities fraud is the biggest financial swindle in history, and the people of the world will be suffering the after-effects for decades to come.” wrh.com.
*
Destabilization Worked in Libya, now Syria; 14:18 clip Faking it, or how the m$m lies thru its’ teeth to build negative vibes against Iran; 4:28 clip Ron Paul is making headway; Pakistan Militants fighting NATO now (good); Nine Ways to boost immune systems; Lying Empire That’s all the west can do — lie; Cholesterol Drugs Another means of poisoning; 10:08 clip Halliburton (Dick Cheney) charged with selling nuke technology to Iran, and Romney – Blackwater connection; Leaked Trade wars against other countries who don’t support Monsanto (Canada does); Dictatorships “Governments in the 21st century have not been kind to journalists and truth-tellers.”; Top Contributors to Romney’s and Paul’s campaigns; Junk Food is highly addictive.

#168 Devore on 01.03.12 at 8:14 pm

#137 John Prine

Price arbitrage. Most of your consumer goods come cheap from China, only logical some of your jobs move there are well, no? Can’t have your cake and eat it too. You’ve been very happy with the outcome of the first one (the spending spree and accumulation of consumer goods speaks for that), and as surely as day follows night, the second part is coming too. Perhaps Caterpillar, being an international company, realizes, correctly, that most of its future growth will come from the countries the jobs are going to, and not Canada?

#169 Darlene on 01.03.12 at 8:16 pm

Westernman on 01.03.12 at 5:42 pm

There will be no ” second ” wife

***************

Just in case you change your mind, this made me think of you.

http://www.youtube.com/watch?v=Irym1ZLxAhY&feature=relmfu

#170 steve on 01.03.12 at 8:27 pm

Garth, here is the best calcultor i have found on the web.

http://www.khanacademy.org/video/renting-vs–buying–detailed-analysis?playlist=Finance

go to the link he then gives you the calculator.
you need to make slight adjustment to the spread sheet to make sure you do not deduct interest from income as the do in the United States. if you do that this caluculator is perfect

#171 Breakdown on 01.03.12 at 8:33 pm

Garth,

Thanks for addressing some of my concerns and comments. I’m still left with a huge lingering question. My question isn’t buy or rent. And the question is buried in my comments.

Let’s assume that a person such as myself is hell-bent on owning, this is like living in Toronto and electing to have a car in my opinion. It’s a lifestyle choice, rather than one being dictated by finances.

I’m 4 years into a 215K mortgage, and now sitting with 150K left to pay @ 3%. Should I refinance (free of charge) to pay the 150K off in 20-25 years? Then take the excess money and invest or continue beating this mortgage to death??? Let’s assume for sake of arguement that selling the home is NOT an option. I’m one of the disciplined ones. I’m not about to buy a hottub when there’s a few extra bucks in my account.

This is the question that I’m a little lost on as someone who’s not even a novice investor. Mortgage interest rates are so low, that this type of thing seems to be the most logical in my opinion. In the 80’s, I’m sure that I’d be on the way to the crazy house for the suggestion, but now???

No astute person puts all their net worth in one asset. — Garth

#172 jess on 01.03.12 at 8:35 pm

Tuesday, January 03, 2012

..”Judge Mike McGrath Montana’s century-old ban on corporate spending in elections has been restored by a 5-2 vote of the state Supreme Court, bucking the Citizens United ruling from two years ago by the U.S. Supreme Court.

Since 1912, Montana had prohibited corporations from contributing to political candidates and committees under the Corrupt Practices Act. But following the Citizens United decision, which threw out federal limits on corporate and union campaign spending, a conservative group filed suit in Montana to contest the state’s ban on corporate donations.

A lower court sided with Western Tradition Partnership’s lawsuit and tossed the Corrupt Practices Act. The ruling prompted an appeal by state Attorney General Steve Bullock, who personally appeared before the state Supreme Court to successfully argue the merits of the state’s case and won restoration of the law….

Chief Justice Mike McGrath presented a lively history of Montana’s fight against corporate interference with elections, in particular the Anaconda Copper Mining Company, which, prior to the Corrupt Practices Act, “controlled 90% of the press in the state and a majority of the legislature.” It continued to maintain “controlling ownership of all but one of Montana’s major newspapers until 1959.”

http://www.allgov.com/Controversies/ViewNews/Montana_Reaffirms_Ban_on_Corporate_Election_Spending__Sets_up_Clash_with_Citizens_United_Ruling_120103

http://www.historyisaweapon.com/defcon1/zinnbaron11.html

#173 TurnerNation on 01.03.12 at 8:41 pm

Watch out Lavalife we have GarthLife.com – the premier online dating site for real-estate minded Boomers.

Slogan: “The most fun you can have with the orange guy’s shorts on”.

#174 Smoking Man on 01.03.12 at 8:59 pm

154 Harlee on 01.03.12 at 7:24 pm

Don’t expect many posts for a while Im writing a book.

It’s called Nothing. or How to Not succeed. or not a self welp book.

I will not correct the grammer or spelling why bow to the system. It would mean that I accept what teachers do. If they don’t understand screw em.

all the truths of life and business reveiled.

as an insert all the f-n grammer nazis can tabulate all the mistakes.

Something along those lines.

#175 TurnerNation on 01.03.12 at 9:21 pm

#148Devore on 01.03.12 at 7:03 pm

Besides health care – which every First World country offers to its citizens (save USA) – how is Canada a socialist state?
What handouts can I expect to receive? Where do I sign up?

#176 Keeping the Faith on 01.03.12 at 9:29 pm

Great post Garth, as always.

Unfortunately the bloggers that followed have been pathetic, utterly pathetic.

Must be the weight of all that holiday debt hanging over their heads that is bringing down the conversation.

Stress kills.
Debt stress kills slower.

#177 prairie gal on 01.03.12 at 9:43 pm

Truth be told I have lived in many cities and regions across Canada and internationally and Regina is low on the list for overall quality of life – its good as a place to make a living right now but I definitely have an exit strategy. Its certainly not worth $700k, which was my original point.

Over the years you realize that its not so much where you are but what you make of your time there. Regina, like any place, is only as boring as you make it. its the people that matter in places like those because there are less distractions.

#178 jess on 01.03.12 at 9:50 pm

…and these are probably the same humans who cry out they pay to much in taxes

Swiss bankers charged in $1.2 billion tax fraud
By James O’Toole @CNNMoney January 3, 2012: 6:36 PM ET

Swiss bankers charged in $1.2 billion tax fraud – Jan. 3, 2012money.cnn.com/2012/01/03/news/swiss_bankers_charged/You +1’d this publicly. Undo
2 hours ago – … taxpayers hide more than $1.2 billion from the Internal Revenue Service, the U.S. Attorney’s Office in Manhattan announced Tuesday.

#179 Devore on 01.03.12 at 9:51 pm

#174 TurnerNation

Besides health care – which every First World country offers to its citizens (save USA) – how is Canada a socialist state?

The legion of government programs and regulations touching every aspect of your life. 20% of workers are employed by government. Over 50% of local (city and provincial) public budgets go to salaries, so much for “capital investment”. What do you call that?

Look, it’s not even up for debate, only nuts like you argue about it.

#180 Nemesis on 01.03.12 at 9:54 pm

“No astute person puts all their net worth in one asset.” — Hon. GT

In certain regards, I couldn’t agree more heartily, OldPol! Having tried it once and been rewarded with a GoatToastingRoyale…

The ring is a constant reminder (worn on the other hand these days; for two reasons: truth in advertisng – re: slightly shopworn and, “NeverAgain!”).

Well, there it is… or as ‘Henry Harrison’ would have said, “So. Here we are. Where are we?” Or alternatively, an old AlmaMater, “Live & Learn” (a minor transposition – but at least I spared you the Latin translation).

#181 Bottoms_Up on 01.03.12 at 9:58 pm

#94 OttawaRenter on 01.03.12 at 9:58 am
———————————————-
The rents for SFHs in Ottawa are high because the effin’ prices are high. Yes there is lots of student housing (stay away from those areas!), but the nicer SFH rentals are geared toward professionals.

But in what profession can one afford $3000/mo in rent? At 30% of income, that family would have to be netting $10,000/mo…so basically one would have to be a medical doctor or lawyer or CEO, or both spouses would need to be high-level managers.

The prices definitely don’t make sense, especially since it was -30 oC here today.

#182 KW T800 on 01.03.12 at 10:03 pm

I have been looking at buying a used fifth wheel travel trailer and living in that. Lots of little RV parks that have long term places to rent they have internet etc cheap pad rent.

Don’t like my neighbours hook up to the truck and move. It doesn’t get that cold out West so you can live in a RV trailer full time. Single guy what the hell you have your own place no land lords to deal with.

I know many have done it then bought a house and wished they never bought a house and wishing for the RV trailer.

Going to get ugly out there with the price of realestate falling fast. Most people are getting worried already, most jobs are not guaranteed. Anybody in the house construction trades are becoming un-employeed at a fast pace. They are all in debt to their eye balls because they were making good money so they bought themselves a house.

The house construction boom is over especially in the rural parts of British Columbia where I live. The first time in most of these contractors careers they face the chance of going bankrupt.

#183 Bottoms_Up on 01.03.12 at 10:06 pm

#170 Breakdown on 01.03.12 at 8:33 pm
————————————————
You raise an interesting point, pay off the mortgage quicker and guarantee yourself a 3% return (or higher, given that rates are likely going up), or put your money into financial assets.

I do think you need to listen to Garth on this one…it’s not that hard to beat 3% with financial assets, while taking little risk.

For example, I earned 3% in 6 months just by buying shares in a solid company and selling covered calls (the covered calls gave me the 3% return; dividends are extra on top of that (~1.5%), but, yes, I am exposed to stock price fluctuations up and down). However, if you’re in it for the long haul, and since you’re considering a 20-25 yr mortgage you are definitely in it for the long haul, and if you can beat your own emotions and not sell when prices are down, you can do well with this and other types of investment strategies.

And, don’t forget to diversify.

#184 This is Wonderland on 01.03.12 at 10:06 pm

This house sold a couple of months ago for over 600 thousand it’s located in a nice clean and quite subdivision, today it’s being rented out as a boarding house. It would be interesting to see how many homes in Oakville are being converted for multiple rentals like this one. Can anyone tell me if this is legal?

http://www.rentershotline.ca/rentalBoxView.php

#185 Bottoms_Up on 01.03.12 at 10:10 pm

#160 kim on 01.03.12 at 7:40 pm
————————————————-
Prices are definitely unsustainable in a lot of places. In a nice area near Ottawa I’ve seen 10% price drops in asking prices, and houses still aren’t moving. Anecdotal yes, but possibly the tip of the iceberg. I think in Ottawa a lot of people are waiting to seeing what the next budget brings….

#186 Bottoms_Up on 01.03.12 at 10:17 pm

#151 Pat on 01.03.12 at 7:19 pm
——————————————–
If it’s true HHHW didn’t have kids based purely on a cost-benefit analysis, I truly feel sorry for her. Kids are more expensive than real estate (lol), but you can’t put a price on their innocence, joy, and excitement for life…they really do add another dimension of wealth to the family.

#187 Easternman on 01.03.12 at 10:18 pm

I hear Saskatchewan is the place to be these days.

Isn’t that in the West?

i.m. puzzled

#188 Bottoms_Up on 01.03.12 at 10:23 pm

#135 Beach Girl on 01.03.12 at 5:17 pm
———————————————-
Ever wonder if your kids turned out the way they did because of you?

#189 steve on 01.03.12 at 10:55 pm

i find a good way to value a home is to take what you feel is the true rental value of the house and multiply it by 250.
(based in 3.5% rate 5 year mortgage rate)

#190 Valkyrie on 01.03.12 at 11:22 pm

#185
but you can’t put a price on their innocence, joy, and excitement for life…they really do add another dimension of wealth to the family.

Get a dog.

#191 TurnerNation on 01.03.12 at 11:29 pm

#178Devore on 01.03.12 at 9:51 pm

Your insults change nothing,

I’m all for cutting city waste. From time to time we hear horror stories of 6-figure city managers doing nothing all day. In toronto the new mayor (boss hogg) is rasing taxes, cutting libraries, recreation programs, downtown transit (during a condo boom), and museums and so on.
So what do we get out of it? Nothing, but higher taxes and reduced benefit. Our infractructue continue to crumble, with many ancient sewer lines barely holding together, transit rolling stock circa 1970-80, and pot holes.
This is all a big circle jerk scam, pardon the saying.

Meanwhile he’s allowing the overfed police (best paid in Canada, gold plated OT, pensions, benefits, vacations, sick days etc) .a budget increase this year! This as crime is generally dropping.
So what do we get: more speed traps.

#192 Roial1 on 01.04.12 at 12:38 am

#174 TurnerNation on 01.03.12 at 9:21 pm

how is Canada a socialist state?
What handouts can I expect to receive? Where do I sign up?

Thats a simple to answer question.

First you incorporate. After that Borow several million $.
Then apply to Gov. ca.
At this point youv’e got it made.
The neo-cons will give you a blank check drawn on the CDN people.
Ask any high ranking banker or corperate leader.

#193 Roial1 on 01.04.12 at 12:47 am

#186Easternman on 01.03.12 at 10:18 pm
I hear Saskatchewan is the place to be these days.

Isn’t that in the West?

i.m. puzzled

Only if you live east of it.

To me anything east of the Salish Sea is ——-Well, East.
(“Salish Sea”. New name for Straights of Georga)

#194 Brad on 01.04.12 at 3:00 am

Well, that photo has confirmed that I am officially a dirty old man. I just couldn’t stop staring!

#195 disciple on 01.04.12 at 10:09 am

Keep an eye on Datawind. It buys IC’s from Conexant (out of Cali), both private companies for now… Future looks really bright to me… billions yet to enter the digital age. This is not a time for protectionism. Harper and the old crony establishment must go. Go Canada!

#196 Breakdown on 01.04.12 at 10:31 am

Bottom’s Up,

The current plan is to be mortgage-free @ 43 (9 years from now), and NOT 25 years from now.

If I revise the mortgage to be 20 years rather than 9 years left; I will have the opportunity to invest more than the poultry amount that I put into RRSP’s.

The current pace has me paying off the mortgage in June of 2021. While accumulating $21,835 in interest in that time period. Or by cutting my payments roughly in half, I would complete the mortgage in August 2032 and pay $50,058 in interest. Basically I need to make over $20,000 in dividends, interest, etc, etc over a decade on the back of $700/month in 10 years to make this remotely worthwhile.

#197 Breakdown on 01.04.12 at 11:03 am

Last post should say over $30,000 in dividends, interest, etc over a 10 year period on the back of $700/month, typo.

#198 Alex B on 01.04.12 at 1:35 pm

Garth I dig the post, but wish you wouldn’t always fall back on comparing investments in the market with the same money you could buy a house cash, in this case 1million bucks! I guess this applies to people who own houses outright, and are looking to sell, rent and invest, but a lot of us are just trying to figure out housing in a long term sense, what is our potential risk over 20yrs? you can be honest, its ok, the market is still going to correct, people are still in too deep, but toss us some real world, working stiff #’s who have a 10% down payment and looking to make that rent money work, long term, not flippers, not vancouver crazy prices, what is the comparison of waiting for a few years compared to now? Thanks as always for your great content! Also your new years post was brilliant, nice job!

#199 reasonfirst on 01.04.12 at 5:53 pm

I like the one on the right – does that make me a contrarian?

#200 mel in victoria on 01.04.12 at 9:41 pm

Van RE = Bre X= deGuzman swan dive..

Kelowna RE is 1/2 half way to ground!!

#201 Couple With $1M To Invest – “Moved back to Canada this summer and are gobsmacked at the state of “unreal” estate in every corner of this country. Our friends cannot believe we are renting. We cannot believe they think we should part with o on 01.06.12 at 10:03 am

[…] “Who has $1 million to invest?.. We do. Moved back to Canada this summer from many years overseas and are gobsmacked at the state of “unreal” estate in pretty much every corner of this country. Our friends cannot believe we are renting. We cannot believe they think we should part with our savings in this market. We’ll be sitting tight and so happy to rent our 3500sq foot house for a pittance and pay no property tax. Unfortunately it doesn’t have granite counter tops…I can barely survive.” – McExpat at greaterfool.ca 2 Jan 2012 10:44pm […]

#202 tictac on 01.06.12 at 1:01 pm

Canadians move on average every five years. — Garth

Ah, the good old “average” argument.
How often do owners move? A lot less frequently