Throwing it away

When TD Canada Trust did its annual condo poll (results just published) there were three things worth noting.  Two you will find amusing. The third requires two changes of underwear, a sedative, three scotches and a major roll in the hay to restore mental balance. Of course, you can just skip the poll results and the rest of this blog, and go directly to the cure.

First the amusing stuff. Why do people buy condos, which make up the hottest part of the new housing market? In equal amounts (about a third), the box people say it’s because condos are “good investments” and owning one, “is cheaper than paying rent.”

It’s easy to understand how the horny young ones can fall for such a line. Mortgage rates are dirt cheap, and when kids compare the cost of carrying $350,000 with a VRM and a 30-year am ($1,437 a month) with rent for a one-bedroom pad ($1,650) it looks to them like a no-brainer. Especially when their idiot parents are yapping at them about ‘throwing money away on rent’ and ‘paying somebody else’s mortgage.’

Of course, what’s not mentioned is that after making five years of mortgage payments (spending $88,000) they’d still owe $311,000 – which means they threw away $50,000 in bank interest. But even that does not tell the entire story of why house lust and young flesh are not a healthy match.

“Keep my name out of this,” the mortgage broker said in an email some hours ago. “But I thought you’d find this interesting.” Maybe you will, too. It his own calculation of the actual cost of buying a $350,000 condo, assuming it’s sold three years later for the same price.

Purchase Price                                                         $350,000

5% Down Payment  – 17,500
CMHC Premium 2.95% of $332,500  – 9,808.75
Pst on CMHC Fee  – 784.70
Legal Fees to Purchase – 1,700
Land Transfer Tax – 3,225.00
3 years of Mortgage payments  $1437.24 X 36 – 51,740.64
3 years Tax Payments ($4000 per year) – 12,000
3 years of Condo Fees  ($200 month) – 7,200

Just to own it for 3 years                                  $119,259.09
Monthly cost                                                   $3,312.75

Now if you had to sell it after 3 years…

Real Estate Fee  (5% of $350,000) – 17,500
HST on RE Fees – 2,275
Legal Fees – 700
Mortgage Penalty – 11,564
Discharge Fee – 350

Total selling costs – $32,389

Total Carrying costs                                        $151,648.09
Monthly                                                        $4,212.44

Cost to rent the same place (monthly)                $1,650

In this example, over three years the tenant pays $59,000 in rent, while the owner pays $151,648 in occupancy costs (and this does not include the lost opportunity cost from not investing the down payment). The renter comes out with no equity. The owner achieves $39,000 in equity, but pays $32,389 to sell – for a gain of $6,611. So, the renter ends up saving bigtime. So much for pissing your money away on rent. Mom was wrong.

As for a condo being a good investment, forget it. The days of fat appreciation – at least in places like Calgary, Toronto, Vancouver and Victoria – are behind us. Lots of condomaniacs in the West are already underwater compared to what they paid in 2008, or even 2010. And in Toronto, with a tidal wave of 23,000 units hitting the market this year and 148 towers under construction, supply will drown demand. Add to that the glass wall factor (windows fail in a decade or two, leading to massive repair bills), escalating fees and property taxes, and you can see this is a bad idea. Renters, of course, pay no strata or condo charges, no property levies, no special assessments and can move when the stove gets dirty.

But all this is mere foreplay.

The bank’s big survey also found this: “Four-in-five condo buyers in Toronto (81%) say they worry about being able to afford their mortgage payments.”

This will not end well.

214 comments ↓

#1 TurnerNation on 04.19.12 at 9:19 pm

Received a call from the Red bank. We’re offering you a line of credit said they. At a good rate. I bit. At what rate? Prime plus 4 and change. Without missing a beat I retorted That’s not a good rate. Conversation ended. Not one rebuttal was offered.

#2 FTP - First Time Poster on 04.19.12 at 9:22 pm

A great infographic showing the derivatives market and the risk it poses to the global economy:

http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

#3 U-The Man on 04.19.12 at 9:29 pm

I liked the hot babe picture more. Bidding war news is the story in the media, The spin is that its a good thing if you want the dream house you must be willing to overpay.

#4 JohnG on 04.19.12 at 9:30 pm

FIRST thing I’d like to say is that I’ve compared selling now and renting to just staying put. My numbers indicate staying put is best, assuming no major cash outlay (big assumption). Even selling and renting back my current digs doesn’t work out, unless the correction is much worse than anyone is imagining. Napkin math: say I’m market valued at $300. Rent will no doubt be $15K/year min, so in 2 years (max time I have left in the house due to space) there goes $30K. Compared to a 10% correction, it’s a draw, but the security of ownership is worth something. And in the worst case, there is always a way to make the “space” issue work.

I do feel “burned” as a saved this past decade+, but on the other hand I know that staying in the same house, the one we could comfortably handle, has given me so many options that house-poor would not have. That’s worth something!

With kids the renting option is not as attractive, as the stability is important. But I have learned as I watch the “big house” market that once I buy, I better hope I keep that thing for a long long time, because I’ve watched some properties sit for over a year (here in Winnipeg). Lots of activity <300, some stuff up to 500, but after that the game is different. I'm sure there is a pie chart somewhere with the activity by segment. Proceed with caution.

J

#5 Stinky the Fish on 04.19.12 at 9:35 pm

Nice post.

Growing up I was one of those wee lads that thought buying a home was the best idea. And it was back in the day – you never saw such diversions of income and house prices. But it’s come to a point where it’s so engrained in the minds of people, that they can never see that where all their money is stashed (granite countertops and stainless steel) is going on the chopping block. There will be a lot of disappointed individuals out there. I wish I had a video recorder for everyone of them… I can always go on youtube and watch the subprime people who bought houses in United States…. That’s somewhat comedic.

More sad news from the music industry, Justin Bieber was found alive in his apartment earlier today.

#6 Lucky on 04.19.12 at 9:35 pm

250 K on 800 000 investment (two condos, in Calgary)

I am not complaining :-)

#7 disciple on 04.19.12 at 9:37 pm

Mortgage penalties have soared through the roof! 11K?

#8 Toronto_CA on 04.19.12 at 9:40 pm

To be fair, you should include the Ontario Land Transfer Tax Credit for first time buyers and the First Time Home Buyer’s Federal Credit which slightly offset some of the costs of buying but don’t impact your overall conclusion (I think this example would be for first time buyers of condos who don’t rent).

That last statement is rather chilling about making payments. I too am wondering who is going to absorb all these 148 new constructions in the GTA, especially once the market goes from bubble to flat (or pops).

Great post.

#9 Nemesis on 04.19.12 at 9:42 pm

” two changes of underwear, a sedative, three scotches and a major roll in the hay”…

It’s time for fictive fun, OldChap…

The shame of it! Wasting prose like that on NonFiction.

They’ll take your HogAway, you know.

The ‘PreCrime’ LiteraryPolice.

#10 T.O. Bubble Boy on 04.19.12 at 9:45 pm

This will make Garth cringe: how to invest $500k in a savings account.

http://www.theglobeandmail.com/globe-investor/investor-education/investor-clinic/help-i-have-half-a-million-dollars-and-i-dont-know-where-to-put-it/article2408156/

Insane advice. — Garth

#11 Renting In The GTA on 04.19.12 at 9:48 pm

I try explaining renting over buying to my colleagues a couple times a month…

I FAIL everytime…

I suck…

#12 Maxamillion on 04.19.12 at 9:48 pm

This will not end well for sure.

“This chart shows why so many folks over the years were having to tap their equity to keep up with the Jones’.”

https://twitter.com/#!/CoryLVenable/status/192986904923344896/photo/1

#13 dr.dr. on 04.19.12 at 9:48 pm

Who the hell only pays $200 a month in condo fees.

#14 Steve on 04.19.12 at 9:48 pm

Clearly, as often stated here, this will indeed not end well. The hard part of all of this, at least for me, is not getting my head around all the parameters, but rather trying to correctly ascertain what the sum total of the whole mess actually means.

Just before being put onto this blog, we bought a detached SFH NE of GTA. It was a good buy, if one is buying at all (on the market a while, price reductions, etc., – signs that even Garth agrees are evidence indicating RE opportunity) but we did not have in our minds all the factors which will clearly lead to a drop in prices and the following flat market. We still think it was a good buy (same model listed now at 128% of what we paid) and there have been no ugly surprises now that we have possession. There is work to be done, but it is significantly cosmetic – not equity sucking major renos.

We were also fortunate that rates dropped to 2.99 at just the right time (had a long close) and we will likely own in outright in 10 years. That rate, and the planned 10 years to pay it off, also mean we mitigate that ugly wealth sucking interest problem metioned in today’s blog.

Still, we bought at what may well be the beginning of a difficult time. There are factors that Garth all too often details that will eventually overcome the ones that are presently holding back that bursting of the bubble, at least in the GTA. Today’s example of the difference in the cost of renting vs owning indicates we are going to see a shift to more preference in renting, as does the similar shift that occurred in the USA when their market crashed.

So, after all that rambling, we get to my specific request to Garth: Is there somewhere in this weblog that the factors on both sides – sustain vs burst – are laid out in one place? Where do we peek into the crystal ball to figure out the timing and severity?

Thanks for the thoughtful insights, day in and day out!

#15 Nostradamus Le Mad Vlad on 04.19.12 at 9:51 pm


“Throwing it away and a major roll in the hay to restore mental balance.” — Solid fiscal advice!

“Why do people buy condos, when their idiot parents are yapping at them about ‘throwing money away on rent’ and ‘paying somebody else’s mortgage.” — Because they are the uninitiated ones, not having a clue about the reality of life and thus, spend vast amounts of money on losing investments. This can’t be helped and will be rectified in future lifecycles.
*
#192 Been There Done That on 04.19.12 at 6:54 pm — Noted and thanks!

#199 Nemesis on 04.19.12 at 7:45 pm — Hi Nemesis. Thanks for the clip (seen it).

We do live in interesting times, not only because these infernal, illegal wars waged by the west, but the fiscal crap, lying, stealing and cheating that’s rampant among the western govts.

For instance, Jason Kenney announced today that Cdns. who don’t take lower paying jobs to supplement their EI benefts, will lose those benefits.

The UK has already bought that legislation in (forced slave labor), so we’re just copycats. Obomba would do the same thing in the US, but chooses to let illegals flood in, guaranteeing a lot more votes for him in November.

No matter what, the cycles will change and life will be quite different in two or three decades’ time than it is now, esp. as the Chinese are already in the process of re-designing and re-building a lot of the US infrastructure.

#200 jess on 04.19.12 at 7:45 pm — Hell, if the IMF needs more moolah, they can always beg the Rothschilds for some of their US$500 trillion or more!

#16 Toronto_CA on 04.19.12 at 9:52 pm

Also, the renter would be able to invest his ~$20k in downpayment + closing costs that he didn’t pay in a REIT ETF or some preferred share ETF and earn ~4% or so after taxes for 3 years, that’s not tons but another $3k ish for the renter. There is opportunity cost in spending the downpayment and closing costs on a house instead of investing it.

#17 Gokou on 04.19.12 at 9:53 pm

JohnG #4, how about prop tax and strata fee that must set you back for another $10k over 2 yrs?

#18 Oil Patch Factor on 04.19.12 at 9:53 pm

Great post. Looking at a few more years of renting from this perspective is not so bad.

I graduated engineering in 2008 and am the only one out of my group of colleagues that does not own a house. Kicker is that I earn more than double any of their salaries.

Any discussion about real estate in Alberta produces the exact same mob mentality comments. ‘Now is a great time to buy’ or ‘Buy now before prices rise’ and my favorite, ‘We’re looking at buying a second house for income’.

It seems the media has so much influence in our lives that normal intelligent people forget to think for themselves. Scary.

None of my friends design bridges so you are all free to drive over bridges in Alberta still…

#19 thinker on 04.19.12 at 9:54 pm

That math is simply wrong

Forget all the downpayment/equity, one time payments.

it costs me 3k per 100k, so my “interest costs” are 10.5k in financing the money, say 0% down. Taxes and Fees, call 7k, so it costs about 18k a year in real on going fee’s

The rent is 1650* 12 = 19,800$

you are losing a touch more in rent. All the other costs, CMHC, Land Transfer, Sell fee, etc and be used over any time period, so using 3 years is not conservative, because you are using a large mtg penelty fee. A punter would not setup that type of mtg. I can assume 5y, 20y etc and have assumptions about rent increases, rate increases etc…

owning is winning a little Garth, mom is right for now

You are not much of a thinker. — Garth

#20 Gokou on 04.19.12 at 9:56 pm

Got a call from someone from “platinum group” today. E guy told me that i signed up on their mailing list few *years* back expressing interest in property investment. (they are some kind of property management / sourcing company in vancouver… Think ozzie jurock.) I have no idea whether i did in fact signed up, but am wondering why they decide to call me now? They have some dead stock to offload here in yvr?

#21 eagle eyes on 04.19.12 at 9:57 pm

The figures are very skewed to make this argument more powerful.

1. first time homebuyers will save on the property transfer tax of $3225.00
2. put more money down to avoid CMHC fees of $10592.00 (this is the big saver)
3. don’t use the putz who will charge you $700 more in legal fees. You can get it for $900-1000.
4. You’ll get a homeowner’s grant of $580 per year on your property taxes if it’s your principal residence.
5. If it’s your personal residence and you aren’t speculating, most likely you won’t be selling in 3 years. You won’t be paying a discharge fee to get out of your mortgage.

Now, if the figures are still in favor of renting, then do. But if you want to buy and live there for 10 years then go ahead.

P.S. Would you include your downpayment as an expense?

Who lives in a one-bedroom condo for 10 years? You still lose. — Garth

#22 Bill Gable on 04.19.12 at 9:58 pm

Walking along Pacific Avenue in the West End here in Dumbcouver, and here is a Redevelopment application for 600 new condos. Traffic is already a joke in this one horse burg, and there are way too many, sure to fail, all glass towers – and yet there we are – 600 more to add to what I call the sucker pool.
Today, after listening to the continuing hammering above us, as an owner that tried, without permits, to combine three condos into one – then decided that since that was a no go, the workers are noisily rebuilding all three condos, as cheaply as possible. Day after day it goes on. Today I phoned the City of Vancouver and told them what was going on.
We shall see what goes on next.

There are a lot of folks that have more money than brains, and a whole bunch of people that have been house horny and greedy are going to get theirs.

I call it being “Turnerized”. Today’s post should be handed to every moron standing in kine to buy a 500 k shoebox, that won’t be finished for three ir four years.

Think of the number of people that could be saved from economic ruin.

Great post, again today.

Pay attention – or you are going to be on the breadline and paying your future to a Bank.

Last warning – before the tsunami.

#23 LH on 04.19.12 at 10:00 pm

SFH >>> Condos
especially in C01 and C02
there is simply zero new supply
alas the 99% is being priced out

#24 steve on 04.19.12 at 10:01 pm

while i love your site Garth …the reality is people will and keep buying real-estate …..over inflated or not ..
i don’t agree with these crazy prices …but buyers buy and no one puts a gun to their head ..

They’ll also continue to eat at Burger King and buy Kias. I can’t fix stupid. — Garth

#25 Djb on 04.19.12 at 10:07 pm

No one ever does the math.

#26 Bam Bam on 04.19.12 at 10:09 pm

Just signed a new lease on a 1 bedroom condo in Toronto – $1200/month. Brand new. 1 bedroom units in the building are currently selling for just under 300k. I can’t understand what these “investors” are thinking when they buy a condo and then rent it out for negative cashflow. Why do they want to subsidize my living costs? I expect rents to be even lower a year from now when I renegotiate my rent.

#27 thinker on 04.19.12 at 10:11 pm

Enjoy your blog Garth, but that math is a stretch. Others are showing other credits that I didn’t even include. The power of the discussion is very valid in the timeframe, at some point the folks will get married and need space, they will become landlords or need to sell. A temporary situation deserves a premium, so renting should command more to give that flexibility by the owner.

Again, these people are gainfully employed, until that situation changes, expect more boxes in the sky.

#28 jerry on 04.19.12 at 10:15 pm

Money road talked about ways in which the government might create ways to access boomer savings account and wealth transfers. Just wondering if the Ontario NDP plan to tax incomes over $500K is the beginning of things to come? A decent retirement portfolio with over $500k in registered assets gets cashed out in lump sum at date of death. With no roll over to a spouse, suddenly the dead guy just made over $500k.

#29 Chuck on 04.19.12 at 10:16 pm

The last calculation looks incorrect. You calculated the cost to sell twice (once in ‘Total Carrying costs’ and once when calculating gains). So the real gains are 39,000. And the renters advantage is just around $13,500 (not 46,000). So for the condo owner to break even, they’d just need their property value to rise just under 4%, anything over that and it’s a win for the owner. But these number are totally wrong anyway because, you’re comparing 3 years vs 5 years. Was the condo owner living in his parent’s basement the last 2 years?

The calculation for 5 years is:

Purchase Price $350,000

5% Down Payment – 17,500
CMHC Premium 2.95% of $332,500 – 9,808.75
Pst on CMHC Fee – 784.70
Legal Fees to Purchase – 1,700
Land Transfer Tax – 3,225.00
5 years of Mortgage payments $1437.24 X 60 – 86234.40
5 years Tax Payments ($4000 per year) – 20,000
5 years of Condo Fees ($200 month) – 12,000

Just to own it for 5 years $151,252.85
Monthly cost $2,520.88

Now if you had to sell it after 5 years…

Real Estate Fee (5% of $350,000) – 17,500
HST on RE Fees – 2,275
Legal Fees – 700
Mortgage Penalty – None
Discharge Fee – None

Total selling costs – $20,475

Total Carrying costs $171727.85
Monthly $2862.13

Cost to rent the same place (monthly) $1,650

Costs – equity = $132727.85

So, the renter ends up saving about $33727 over 5 years.

Owner needs about 10% capital gain over 5 years, or 2% per year, to break even. Assumptions being that the variable rate doesn’t go up and that values don’t drop.

#30 Makavelli on 04.19.12 at 10:17 pm

Mortgage penalty is 3 months interest. $11k might be for Garth’s house.

Penalty is IRD. — Garth

#31 Market Bull on 04.19.12 at 10:17 pm

Latest TREB quarterly condo report: April 18, 2012.

“TREB reported 5,027 condominium apartment transactions in the first quarter of 2012. This result was up by two per cent in comparison to the first quarter of 2011.”

“The average selling price for condominium apartments in the first quarter of 2012 was $334,952 – up by 3.7 per cent from $322,857 in the first quarter of 2011.”

#32 Calgary girl on 04.19.12 at 10:32 pm

And let’s not forget that renting affords you the ability to move easily to change jobs (or to go to one if you lost your current job). In this era of uncertain employment, that is worth a lot!

#33 thinker on 04.19.12 at 10:35 pm

Keep in mind, in Canada you are going to be slapped for saving. Yes, if you are a good saver, the government cuts your social payments. The easily just transfer the liability from government balance sheet to yours. So if you instead forced money into a house or non-rrsp type investments (yes you get a tax saving now) but you get ripped off later when you are to old to figure out just how much SLC or MFC are raping you on the forced annuity. Once the that payment is made, the government will cut back. Always better to pay house or invest outside tax shelter in Canada or find a way to overtime remove RRSP cash out and into something else. Start to pull out the 5k each a year in your late 40’s, you want an empty RRSP at 65 and full taxable trust. Trust me.

You sound like another old guy who doesn’t want to pay income tax. — Garth

#34 mel in victoria on 04.19.12 at 10:37 pm

This morning , Bill Good, pathetically politically correct early morning host of CKNW ,a back water radio station in Vancouver B.C.,was interviewing a self proclaimed expert in everything financial ,a Mr Michael Levis…good friend of one Michael Campbell, brother of recently discredited and deposed Premier of this province, Gordo Campbell , and for the few moments I listened, they were talking about RE. ( wow what a run on sentence…)..

Mr Good along with his buddy Levis were both critical of Diane Francis’ recent article in which she suggested there were some real issues with foreign RE buyers and both were very much opposed to any restrictions on foreign RE purchases in Canada, (read Vancouver) ..and were especially critical of countries which had done so. And actually called them racist!!

This is the same Bill Good who 6-7 years ago whined constantly on that radio station about the high RE prices in Vancouver ( they’re 30% higher now!) and lamented that his children would never be able to afford even a modest home in that city!! He’s not only happy now but almost ecstatic that RE prices in his ‘hood are out of sight and rising!! So what’s changed?

#35 Big Al New on 04.19.12 at 10:47 pm

Ok I take offense with that, there is nothing wrong with Kias and Burger King, especially on whopper Wednesday.

#36 furst on 04.19.12 at 10:50 pm

THURTY FURST!!!!

#37 Ryan Perich on 04.19.12 at 10:57 pm

Mortgage penalty is 3 months interest. $11k might be for Garth’s house.

Penalty is IRD. — Garth

to be more clear, IRD = interest rate differential. in your parent’s and grandparent’s time it was 3 months interest. now the lenders are there to RAPE you without kissing you first, and they’ve been doing it for almost 10 years.

IRD = % interest rate difference x # of months x amount owing. it’s big, BIG dollars if you have 1-2 years left and you sell before the term is up. and $11,000 is not even close to the max you’ll see.

#38 Dan on 04.19.12 at 11:00 pm

#29:. Garth, for someone who has a mortgage at around 3% the penalty in 3 -5 years should be 3 months of interest instead of IRD as we expect interest rates to be higher in the future, right ? We asked a mortgage guy at the bank to calculate the IRD assuming a 5% rate later and based on his formula the result was negative hence the 3 months interest would apply. Please let me know if i am wrong and why.

#39 Network Admin on 04.19.12 at 11:11 pm

This is a similar calculation for a condo in Toronto purchased in 2008 and sold in 2011.

Purchase Price (2008) – $165,000
Purchase-related costs – $2,800 (this was before Toronto increased the tax)
Sold in 3 years and 5 months (2011) – $179,500
Total selling costs – $8,900
Mortgage interest – $10,200
Tax Payments – $4,572
Condo Fees – $18,155
Lost opportunity (assuming 5% return) – $7,500
Total expenses $37,600
Total expenses (monthly) $920

Cost to rent the same place (monthly) $1,100
Cost to rent the same place $45,000

So, after 3 years and 5 months we are $7,000 ahead.

#40 Pound Puppy on 04.19.12 at 11:11 pm

Amazing 1 bedroom/ 2 Bath 1100 square foot Penthouse Downtown Montreal with 360 degree view of Water, Mountain and Downtown skyline. Ceiling to floor windows, wrap around terrace , 24 hour doorman, indoor pool, all utilites included and the coveted 2 Under ground parking spots ….grandfathered lease just went up by the legal max per year to $1493… I am lovin it!!!

#41 Smoking Man on 04.19.12 at 11:13 pm

Garth. Your not factoring something. When was the last time you rented?

Their is a premiun for not having low lifes as nabour, not everyone gets a Kramer.

So you wana live next door to a hen den, a brother gangster, or maybe alkida.

The herd wants status they are buying the feeling of success.

I realy should finish my book. Wink

#42 Vlad Mad De Nostradamus on 04.19.12 at 11:15 pm

House price rises in Perth Australia (at the centre of the mining boom) have been driven for over decade by a system that favours auctions as the preferred method of house sales, and a tax system that allows real estate investors to deduct from their income taxes any costs associated with real estate purchases as an investment. Quite simply a limit in house prices was finally reached where too few could afford the inflated prices of family homes in the biggest cities, and a broad rejection of the auction system. The Australian media report the central bank rate cut as a reaction to falling demand for houses (mortgage rates are double those in Canada), and not a general downturn in the economy. If you take out of the economic prognostication house prices and sales, with an unemployment rate of 5%, the Aussies are still out-performing Canada.

#43 Riding the Pine on 04.19.12 at 11:19 pm

This will make Garth cringe: how to invest $500k in a savings account.

http://www.theglobeandmail.com/globe-investor/investor-education/investor-clinic/help-i-have-half-a-million-dollars-and-i-dont-know-where-to-put-it/article2408156/

Insane advice. — Garth

Really? I must be missing something. I too will be looking to park cash ($320K) for the short term (1-2 years) in about 2 weeks. What are the options out there to be totally liquid at low risk and make more than 2.5%?

Seriously…Help! The best I could find was a Sentry fund that paid dividends with about a 4.2% annual return….liquid after 3 months.

While I did recently sell (betting RE was topped out), I’m not prepared to bet long term (~5 years) and tie up my cash.

This amazes me. — Garth

#44 };-) aka DA on 04.19.12 at 11:20 pm

…And in British Columbia

Purchase Price = $350,000.00
5% Down Payment = $17,500.00
CMHC same 2.95% of $332,500 = $9,808.75
HST on CMHC Fee = $1,177.05
Legal Fees to Purchase = $1,000 est.
Property Purchase Tax (1% of the first $200K and 2% of the balance, exemptions may be available)= $5,000
3 years Mortgage payments (same) = $51,740.64
3 years Property Tax Payments ($1,500 est per mth net after homeowner rebates) = $4,500.00
3 years of Strata Fees (same) = $7,200.00

Paid out over 3 Years = $97,926.45

Savings by living in British Columbia rather than living in Ontario = $21,332.55

Now if you had to sell it after 3 years for the same price you bought it for

Real Estate Fees (7% on the first $100K and 3.0% on balance) = $14,500.00
HST on Real Estate Fees (12%) = $1,740.00
Legal Fees = $1,000.00 est
Mortgage Penalty (same) = 11,564.00
Discharge Fee (same) = $350.00

Total Paid out to sell = $29,154

Savings by living in British Columbia rather than living in Ontario = $3,235.00

LOL

How about that!!! Not only is B.C. the best place on earth it is also less expensive than Ontario the center of the universe.

};-)

#45 The Thing in the Basement on 04.19.12 at 11:23 pm

21 Bill G – the strata corp can say no if he doesnt have his permits. Section 70

http://www.bclaws.ca/EPLibraries/bclaws_new/document/LOC/freeside/–%20S%20–/Strata%20Property%20Act%20SBC%201998%20c.%2043/00_Act/98043_05.xml#section70

Also, recall reading from another poster that the glass walls in Van condos would not be susceptible to failure if constructed a certain way. He used Wall Centre as a “how it’s done” example.

And as far as the traffic goes, there is a push from the
Vancouver development community to increase density
downtown and next to transit as a way to decrease
traffic.

Just some counterpoints for your consideration.

#46 Form Man on 04.19.12 at 11:24 pm

good post Garth

#222 yesterday The thing

True words my friend

#209 yesterday eaglebay

Don’t show any sympathy toward DA. When he senses it, he turns on you, like a bad dog.

#47 Canadian Watchdog on 04.19.12 at 11:25 pm

Greater Vancouver Q1 Sales Stats http://i42.tinypic.com/2ciys0.png

Have a good look Toronto. You’re only 3-6 months behind.

#48 The Thing in the Basement on 04.19.12 at 11:27 pm

Penalty is IRD. — Garth

There is no IRD if the rates are higher – which is what you have been saying will be the case in three years.

#49 Jane24 on 04.19.12 at 11:31 pm

Garth

Re your condo rent/purchase example, where would you find condo fees of only $200 a month. Try $500 a month, much more realistic.

#50 Smoking Man on 04.19.12 at 11:33 pm

Broad casting from senica casino in niagara falls NY checking out back page for some fun. Having a good night for a change.

Canadian fantacy sellers are why hotter than buffalo go awayers. In fact they are down right gross.

Brings a new meaning to: O Canada I stand on gaurd for thee

I’m in the zone. Not too much but enought.

Was playing black jake with several gay men. Those dudes are a riot. Who would have known.

Western man don’t get your tizzy in a not. I would never switch teams. But me and wifey got invited to a party and we are going. Best I keep my wild rose tatoo hidden

#51 Snowboid on 04.19.12 at 11:34 pm

Every time we looked at buying in the Okanagan versus renting we would use that nifty calculator at the NY Times site – http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Based on putting ten percent down (and adding all the advanced settings), not a single place we looked at in the last year would make sense to buy.

Maybe that will change, but for the time being renting a condo is consistently better than buying.

#52 whiteshoes on 04.19.12 at 11:43 pm

#44 Basement Thing

Wall Centre is having its big windows replaced-

http://vreaa.wordpress.com/2011/05/15/wall-centre-leaking-100k-special-assessment-per-condo/

Thats certainly ‘how its done’ but not a very good way to do it…

whiteshoes

#53 Devore on 04.19.12 at 11:51 pm

3 years of Condo Fees ($200 month) – 7,200

I thought we were buying a 1 bedroom condo here, not a broom closet. And $1650 to rent a 1 bedroom? Way to skew the numbers, but renting still wins.

#54 Carlyle on 04.19.12 at 11:51 pm

#25 Bam Bam on 04.19.12 at 10:09 pm
Just signed a new lease on a 1 bedroom condo in Toronto – $1200/month. Brand new. 1 bedroom units in the building are currently selling for just under 300k. I can’t understand what these “investors” are thinking when they buy a condo and then rent it out for negative cashflow. Why do they want to subsidize my living costs? I expect rents to be even lower a year from now when I renegotiate my rent.

——-

Where are you renting exactly? (crossroads). I’m paying 1500 a month at spadina and front area (cityplace) but looking for a better deal.

#55 Smoking Man on 04.20.12 at 12:00 am

This amazes me–garth

Why?

12 43. Union station. Lakeshore west Track 6 and 5

Nothing suprises me.

On yeterdays blog all the RE agent bashing was funny.

What that realy means is –I swallowed the cool aid teacher feed me.

I wana have a risk free life getting a tax farm slave wage for my time and – I wana live like a millionare.

Bubble heads no risk no reward. Think of those guys in ww1. Leave the trench and attack. They did most got shot and died on the spot.

What do you have to lose buy potching the customer list and setting up shop accros the street

Never been easier

#56 };-) aka DA on 04.20.12 at 12:02 am

#223 AACI Okanagan on 04.19.12 at 10:58 pm
And before I part I would like to know AAIC Okanagan why it is an appraiser so often asks me what the accepted offer price was on the home? Is it there job not to ask what it was but determine, with a 5% error either way what is should have been
I was ready to respond to your question when I read this and this tells me all I need to know about you. In every appraisal we are asked to analysis the sale price by the bank. We are also suppose to obtain a copy of the purchase and sale agreement so we can see if there is anything amiss. Very rarely do we have to call the realtor to get the sale price as it is given to us by the bank. You should know this. The bank always takes the value of the appraiser and not the realtor, go figure.. btw, drop by my office and I will show you some stats that should at least open you blinders. I love schooling you..

Hang on now…
So you are telling me that you aren’t influenced at all by the agreed to purchase and sale amount? Right of course you are not influenced by that price “a ready willing and able buyer is prepared to pay a ready willing and able seller, neither being under undue influence to buy or sell” Your industries own, and rightful, definition of market value ;-) Of course you would not be influenced by that “most recent sale”.

But yes there could be something amiss so you need to see the contract to be sure there is not. That you are now stepping into and area were you might be misrepresenting yourself as having qualification to render a legal opinion we will ignore as maybe you are a lawyer too.

But on the banks always taking the value of the appraiser and not the realtor maybe you speak too soon. In most foreclosures I know of the banks ask that the REALTOR provide a detailed market analysis of the property and the recommended price. Now I know they often approach an appraiser earlier on in that game but ultimately they rely on the REALTOR and why is it they do so? Because the REALTOR is much more in tune with the market than an appraiser. An appraiser is a good safety line after the sale but not a very good navigator toward achieving a sale.

And in fairness to you AAIC Okanagan, more often when an appraiser calls me it is not to ask the purchase and sale price of a home I helped a client buy or sell but rather the details of a comparable he/she is using in his/her analysis. Next to that they are calling to gain access to that home I had listed and sold which they are appraising and almost always ask what it sold for. Must be a trick if you already know what the price was from the bank. In any event it really is neither here nor there as my point is you lack the “feel” for the market. You are an academic observer, not a participant. You are a reporter not a doer. Like a fine cobbler knows his craft and leathers, like a seamstress her intricate stitches and fabrics (pardon the sexist typecasting) a REALTOR knows aspects of their market as foreign to you as the ritual of head butting amongst football players is to John G. Young.

You can not know the market because you follow it AAIC Okanagan you don’t make it you follow it and followers never lead.

#57 Nostradamus Le Mad Vlad on 04.20.12 at 12:16 am


Railroad profits good but Unemployment still there; Nemesis — Global growth still reliant on Asia, but if BRICS have their way, things will be entirely different; Pay cutbacks and public sectors hit; Ford Investing in China, not here; Iran Further sales to Europe? Cdn. RE Hire an aent? Apple Silence is not golden, and iPhones not selling; No Housing Recovery until 2020, if then; Spain’s fall from grace; The Rockefellers Secooond to the Rothschilds.

Scared Richless; The Chinese Elite; Fast Tracking Argentina; Obomba’s Mistake? Not necessarily, as Soros admires China’s govt., and China – Iraq – Iran get on well (link in); Chart Of The Day Bernanke’s right. The US is walking on very thin ice, and The Mother of all Derivatives; France – Germany rift widens. It will be interesting to see how the outcome of France’s election affects this; US Congress Restrictin Americans’ rights. Why? See this; Doublespeak; IMF, G20 etc. Bunch of whacknuts; Eurozone Easier walking in molasses.
*
1:18 clip How not to drive; Chocolate Much more interesting than money; French Election (not Connection), and Notice that DSK is not his opponent; New Style Yachts Better than before; The Next Pope will be the 266th, and the last according to the prophecies of St. Malachi; Bugatti Factory; Missing Dark matter around the sun.

#58 Suede on 04.20.12 at 12:23 am

Hey Doomers, you get a new show.

http://channel.nationalgeographic.com/channel/doomsday-preppers/

Now back to the Pauly D Project…

#59 };-) aka DA on 04.20.12 at 1:03 am

#212 Form Man on 04.19.12 at 9:24 pm
#198 DA
The main reason people are buying ‘more house’ is because of emergency low interest rates. Buyers tend to max out all the mortgage they can. Developers encourage it, because there is good markup in extras ( not unlike with vehicles ). The developers are more than happy to accomodate, I can assure you. The problem now is that too many people have become buyers ( because the qualifying criteria is too easy ) and the interest rates have no where to go but up. If you believe that Kelowna or Canada is poised for a housing resurgence, you are smoking far too much BC bud……..

Good points for the most part with the exception of your thinking I believe Kelowna or Canada is poised for a housing resurgence – I do not. Nor do I believe though that we are poised for any kind of collapse or significant correction – we have long passed that fork in the road. I’m not saying it couldn’t happen. In terms of the likelihood that we will falter or gain I would have to say, given a choice of only the two, we would be more inclined to falter. But those are not the only choices. A third choice, the one I believe most likely, is that we will steady the course as we have these past four years for another four years neither up nor down but a lot of little bumps along the way as we set about fixing things. The bumps will be represent challenges for some and opportunities for others. We will have to learn to “work” again in a manner that adds value as there will be few rewards for speculation and just rewards for investment be the investment monetary or manpower. And there ain’t nothin’ wrong with that realistic and sustainable outlook.

#213 Form Man on 04.19.12 at 9:27 pm
#209 eaglebay
There are optimists, pessimists, and realists. I am the latter, and that has allowed me to build a construction business that this year will gross in excess of 20 million dollars. I doubt I would be as successful if I were as deluded as DA

I suspect you measure success by a different yardstick than I.

#60 Makavelli on 04.20.12 at 1:04 am

You sound like another old guy who doesn’t want to pay income tax. — Garth
————————————

If I could avoid paying tax, I’d do whatever it takes to not pay. Politicians rob the citizens on our country in all ways possible. Politian are shady for example Glen Clark. He has criminal ties to bosses from Asian gangs. And that Basi guy on the Island was a political that got busted for moving heroin around the country. If you can make money under the table, that’s good. Tax is too high and that’s why families struggle. If tax was less, families can afford slightly higher home prices.

#61 Subterranian on 04.20.12 at 1:50 am

#44 The Thing in the Basement on 04.19.12 at 11:23 pm

Also, recall reading from another poster that the glass walls in Van condos would not be susceptible to failure if constructed a certain way. He used Wall Centre as a “how it’s done” example.
———————

Apparently, the Wall Centre windows are going to be a disaster for the owners.

http://www.cbc.ca/news/canada/british-columbia/story/2011/05/13/bc-wall-centre-windows.html

#62 Bilbo Bloggins on 04.20.12 at 2:02 am

Jesus Garth, stop pointing out this shit.
If all the spekkers clued in, the rest of us “poor” renters won’t have any more subsidized shiny condos to rent.

#63 Orion on 04.20.12 at 2:37 am

#13 dr.dr.
Pardon me for living, but how about $107 for 826 s.f. one-bedroom bought new 3 years ago

#13 dr.dr
Pardon me for living, but how about $107 for 3-year-old 826 s.f. ivable one-bedroom? Nowhere near centre of universe of course.

#64 Ralph Cramdown on 04.20.12 at 5:01 am

The numbers can be played with, but the conclusion is the same: In real estate, transaction fees will kill you. That’s why realtors (your largest expense) in Toronto are howling about the land transfer tax (usually your second largest expense). Don’t worry, says [email protected], you can roll that CMHC fee into the mortgage!

Ask this: How many months at my projected appreciation do I have to hold the place just to net my realtor selling fees?

There’s a reason the industry is all keen on the property ladder: Fees! And governments have gotten in on the act with transfer taxes (unpopular with a few) to keep from raising property taxes (unpopular with many). Unless you’re doing major improvements to a property, the fewer times you trade, the more you save.

#65 househornyhousewife on 04.20.12 at 5:46 am

Garth,

Even though I have finally purchased my next property and I am very satisfied with what we paid for it (although admittedly we had to wait for over two years to find the ideal place at the right price), I am still transfixed by your blog.

It’s kind of like watching a horror movie with unbelievable twists and turns and you cannot leave until you see what comes next.

What you describe is quite unbelievable. There cannot be that many young people with $50,000.00 deposits (never mind the downpayments even) to put down in a bidding war. Nor can there be that many that can afford a $350,000.00 condo as opposed to renting it for less. There just can’t be ! When I was in my twenties and early thirties the very idea of doing such a thing wasn’t even in my radar. It was only when my husband and I were settled with secure income and some savings to put towards a downpayment that we could even THINK of buying a house … and we paid $260,000.00 for it back in 2003.

What you describe is simply unbelievable and ANYONE who would willingly be a part of it should really have their head examined.

I still believe that the current generation of twenty and thirty somethings is lost but that we have to begin to train the later generations in school about proper budgeting and savings. I absolutely do not know why this has never made the school curriculum … health courses would be a good idea too (not just gym but nutrition and how to prepare healthy food etc..) because obesity, along with debt, is also on the rise. What I currently see is our friends and colleagues buying cars and apartments for their “children” and these same children then grow up to think that stuff is easy to get .. they honestly have never learned to save for that thing that they want. Then when a bank manager with devil horns tells them that they can have it all and pay for it later (anyone know the story of Faustus ?) … well what the hell do you expect them to do ?!

HHHW

#66 John on 04.20.12 at 6:19 am

Since this is an iceberg tip fest, look at what an entire population did under a central banking “debt saturation strategy”. It just one number.

Irish external debt per capita: $478,087

That tiny iceberg tip isn’t just connected to the Toronto central banking scam, it’s screwed into it. And global warming ( the real version) aint goin’ anywhere.

The same “no talk” rule of the little ( comparatively) “Canadian” banking fraud in Toronto, applies to the whole iceberg. And to all of the icebergs in Waterworld.

“External debt per capita: $478,087 ahead” realizes the non-expert passenger. “Full steam ahead” shouts the captain of the Titanic.

I think those condos are being handled by “Canadian” banks. Anyone realize what that means? These same banks are in no way national, simply due to the no-holds barred, no-way-back riverboat derivatives gambling scheme.

The complaint is legit. Straight up. It’s great to keep hammering down the “big lie” on “home” ownership through a network of international speculative casinos.

The whole story is even better.

#67 John on 04.20.12 at 6:33 am

Househornyhousewife bellyflop:

“Even though I have finally purchased my next property and I am very satisfied with what we paid for it”
——————-

There’s a small possibility that the person writing this did it intentionally as a joke, but probably not. Look at the play of “I” and “we”.

That’s the culture in Canada. De-balled, emasculated and filled with invisible isolated men, not at all leaders of their households. No women could EVER respect a man like this, and no central banker does either.

Here’s the sickest part of all. My obvious, measured and direct comment would be considered “sexist” in Toronto. It might even be considered outrageous.

That’s how far things have gone in depolarized TO. The women are getting a horrible deal up there.

#68 Guy1 on 04.20.12 at 6:58 am

Garth, I have been taking note of your arguments on how fear and greed drive real estate and how people’s ability to discern what is valuable in life and what is not gets skewed and limited by whatever and whoever spews out the most gripping advertisement (however distorted that ad may be). What is an illusion and what is reality? What does the average person truly need and want on a daily level… what makes us happy? Obviously, people like good food, sex, music, movies, the outdoors, time with loved ones, time off, an enjoyable job(s), laughing with friends, posting something on facebook, looking at a good blog… and the list goes on and on… but as you’ve suggested most of the things that bring us well-being have nothing to do with real estate… or even much money. And, if we carefully divided the average Canadian’s day into parts, we’d find that the bulk of Canadians (including the ‘better-off’… like too many I know) do more or less the same things… But, as you’ve so earnestly pointed out, we have these masquerading magicians in the real estate circus who are juggling and jumbling people’s thoughts whilst pitching illusions as reality. If only the property virgins had minds of a cultural anthropologist, they would have relative comparisons to what actually equates with lifelong well-being and forgo what our property-obsessed culture tells them to think. A house is a house is a house… most are made of wood, plaster, and rest on dirt… it’s only because we collectively, in some form of group think or another, attribute value to certain appearances/imagery that we then artificially boost the price of a given property in a given area… and that’s why there are now ‘property-something’ couples, wondering how they can raise kids, looking exhausted and stressed sucking up to their bosses under the pressure of beaucoup de debt living in pricey but ‘gentrifying’ higher crime areas of Toronto and Vancouver… WHILE… WHILE… the least expensive house in ALLLL of Canada sits on the market in what I know to be a quiet and relatively inoffensive spot (that is when you truly, truly tear away the layers upon layers of illusions and weigh up the costs and benefits of ALL that is and will be key in life):

http://www.realtor.ca/propertyDetails.aspx?propertyId=11733349&PidKey=177184484

At a lower price than most used cars, the above near-give away house is located in Springhill, Nova Scotia which is the home town of the folksy Canadian icon/musician Anne Murray… and so yes, yes, I know it’s not that great! ha, ha, ha, but it’s also not that bad either (definitely not great – hey, it’s Canada’s cheapest SF home – but my point is that most Canadians should have the perceptual capacity to collectively see way past the many more, far, far, far pricier and disastrously ugly properties that people are buying in i.e., Toronto… incidentally, you can see the little century Springhill house if you type the address into Google street view and click one step north and look to the left). Indeed, people have been so heavily conditioned to believe in the almighty culturally-idealised version of the real estate ‘product’ that they can no longer properly differentiate between the product and the cost of it. And, this is all why the aforementioned house sits in RELATIVELY peaceful, greener pastures while property virgins looking to raise a family in Toronto enter bidding wars to place themselves in monumental debt for some house that brings in that sweet smell of apple blossoms, fresh air and sound of the birds emanating from the eighteen lanes of the 401.

#69 TurnerNation on 04.20.12 at 7:27 am

The Squamish Sasquatch strikes again:

http://vancouvercondo.info/2012/03/squamish-and-the-haunted-sales-centers.html

Squamish and the Haunted Sales Centers

Nothing like the view from the ground. Clockbike posted this roundup of what’s happening just north of Vancouver:

Squamish resident here. I would like to tell you all a spooky story, grab your marshmallows and gather round, I’ll point my bear flashlight up at my face to create dramatic effect. I call this story: “The Haunted Sales Centers.”

It is ~2005, in a rainy windy city, upon the water. There lied the Squamish Oceanfront Development. A plan to create a residential neighborhood with marina, small industrial jobs love and flowers. Fast forward to today: the district is now $6.57 Million in debt. Source PDF.

Surely we have accomplished something magnificent for our downtown core, this is a story of the results of 7 years of hard work.

#70 Kevin on 04.20.12 at 7:51 am

Doesn’t this assume that EVERY rental unit is cash-flow-negative? Is that true? I find it hard to believe that EVERY SINGLE landlord out there is losing money every month on their “investment” property. Surely some are charging rent higher than their monthly carrying costs, no?

Of course not every unit is cash-flow negative. But most new-build condos? Absolutely. — Garth

#71 Kevin on 04.20.12 at 7:55 am

“Renters, of course, pay no strata or condo charges, no property levies, no special assessments”

Of course they do. These charges are rolled into the rent. Again, as I asked in my previous comment, why wouldn’t the landlord pass these costs on to the renter? Who are all these landlords out there who are buying investment condos so they can charge less than the carrying costs in rent? Why would anyone do that long-term? Why wouldn’t they charge enough rent to at least break-even?

I’m not denying that there are some “investment property” owners out there who got a little too excited, paid a little too much, or didn’t factor in all the peripheral monthly expenses when deciding what rent to charge. But surely they’re the minority of landlords, aren’t they? Aren’t most landlords making a monthly profit from renting out their units?

“why wouldn’t the landlord pass these costs on to the renter?” You can’t be that dumb. In an urban area where renters can choose among dozens, even hundreds of units, rents are market-driven. — Garth

#72 TomOfMilton on 04.20.12 at 7:58 am

RE: #4 JohnG on 04.19.12 at 9:30 pm

I’m in a similar place and just wanted to mention a few things that influenced me to sell and rent. (Conditions wave today…rental tomorrow)
– We live in a paid off condo townhome…and the condo thing has us not too pleased at being able to sell in future
– When we did our napkin math we weighed the taxes and condo fees ($500 together) and added on approx $750 a month we would get on a 3% investment on the $250K we would get for the house
– We know we are going to buy a different house in the future…so not having to juggle the sale of another is an advantage
– Rent for a home near our kids school and comfortable with features slightly better than the home we owned is $1600…so you can see we pay a little more per month than we are by staying ($1250 fees +investement income)

So the napkin math wasn’t the biggest factor…but the knowledge of where condos are headed and where housing prices are likely headed…and the freedom to choose wisely when we get back into the market…probably 3 years from now. In our area that extra rent might be the amount house price fell.
The kids picked out their bedroom from the new place and are not so happy to leave their friends in the townhomes…but are happy with the new digs.

It was nice to get a number of ideas on the things we weren’t thinking of…one of them was income or captial gains tax on the invested money. I plan to speak to Garth once we reach the closing date.

Not sure what you might get out of this. Hope it helps.
Each their own decision. I WAS fun to put on the Lease Application under payment obligations: NONE $0 No Debt. :)

#73 Time to leave Canada for a better life on 04.20.12 at 8:04 am

#53 Carlyle

Cityplace is where my cousin who’s stupid bought a 650sq condo for $390k. Not sure how big your place is but at 390k plus taxes and condo fees and everything else she will be paying alot more. Condos are very cash flow negative…In fact nothing in Toronto is cash flow positive. The spin doctors call it new math like they did during the dot.com. The housing ponzi in Canada is mind blowing and I hope many people end up living in their cars like it happened to Americans. Canadians need to suffer.

#74 Mackie on 04.20.12 at 8:13 am

They’ll also continue to eat at Burger King and buy Kias. I can’t fix stupid. — Garth

Now that’s good. lol

#75 Smoking Man on 04.20.12 at 8:20 am

Why I love senica. Dj is piping floyed all night. Carzy diamond mixed with ring a ling a ling on the slot. Only thing missing is apple bobbing under the bj table

Ok time to go night night

#76 Stephen on 04.20.12 at 8:21 am

Garth, your flippant comment to “Riding the Pine” (“This amazes me”) ticks me off. It suggests that people are idiots for not knowing what to do with cash for 1-2 years. The stated requirement was to park the cash somewhere where it could be accessible on demand, while at the same time generating the maximum return, with no possibility of losing any of the original amount. There are half a dozen ways to safely park the cash, but none that pay more than about 2.5% annually, and even that is optimistic. You can make more with preferreds, dividend funds, balanced funds, diversified portfolios, etc, but all of those can shrink drastically on any given day. There isn’t an investment portfolio anywhere, not even yours, that can be guaranteed not to lose value over a 1-2 year period. So if the primary requirement is to be able to retrieve ALL of the cash on demand in the next year or two, there is no way to earn more than a couple of percent annually. Your 3 word response suggests that you know better. So why not share it, instead of ridiculing the person who simply asked an honest question.

My response was neither flippant nor ridiculing just, as it inferred, incredulous. There are many options for investing such a sum over two years that provide both security and liquidity and a return far in excess of the pittance a GIC or HISA offers. What is amazing is the inability of people to research these assets or the reluctance to hire somebody to accomplish it for them. Another example of how costly cheap is. — Garth

#77 CJOttawa on 04.20.12 at 8:34 am

That “$1,650/mo” figure for a 1-bedroom apartment is high, I feel.

Going rate in Ottawa: $850-$1000 for a NICE, 1-bedroom apartment, give or take.

We lucked in a VERY nice, renovated, 2-bedroom in the ByWard Market – for $920/mo. (4-units in building, other tenants here for 20 years +, quiet, clean). In unit laundry, open concept kitchen/dining/living, two balconies.

Folks, you just don’t have to pay that much for a roof over your head.

#78 Ultraman on 04.20.12 at 8:35 am

#70 Kevin says “These charges are rolled into the rent. ”

An owner will always try to get the most the market will support for his rental unit. Regardless of his charges. They may or may not be covered.

#79 Market Bull on 04.20.12 at 8:48 am

Buying and owning real estate takes some effort and committment. Like marriage.

At the current 70% home ownership rate in Canada, housing is apparently beating first marriages by at least 20%.

Canadians love their homes.

They will lose the spouse before they lose the house.

#80 CJOttawa on 04.20.12 at 8:50 am

I forgot to mention: there are several condos directly across the road from our $920/mo, 700sq foot apartment.

$500,000+++ each, slightly larger (call it “50% larger” to be generous)

Condo fees and property taxes on those condos EXCEED OUR MONTHLY RENT.

Read that again.

Even if someone GAVE us one of those condos, we’d be paying more in tax and condo fees than we do in rent. (never mind the $500k+++ tied up in an non-performing, possibly about the depreciate asset class)

Thanks, we’ll keep our awesome apartment – stainless steel appliances, double balconies, custom paint and window treatments and all. (it has a very nice “condo” feel to it)

#81 fancy_pants on 04.20.12 at 9:05 am

fuel for MC to continue wagging the finger with no action:
http://www.cbc.ca/news/business/story/2012/04/20/biz-inflation-canada.html

#82 steev on 04.20.12 at 9:13 am

#69 Kevin

Landlords won’t be cash flow negative if they own the place outright…but their returns are a pittance after taxes and inflation.

I’ll use a real world example to illustrate this. I just went looking for a new apartment, during my search I found a condo listed for $550K, it has $550 in monthly condo fees, rents for $2,200 a month, and taxes run about 0.8% in Toronto right now.

If I rent the place I’m out $26,400 per year in rent…ouch.

If I buy the place with 20% down at 3.50% interest and assume I could have earned 1% on my money elsewhere, then I’m out $27,500.

So basically landlord Steve would be paying tenant Steve $1,100 per year to live there. I didn’t even get into insurance, or maintenance on the place which puts landlord Steve further in the hole. In this example Iandlord Steve had zero closing costs, and zero land transfer tax somehow and was a responsible borrower who didn’t lean on the CMHC, these factors would have substantially increased the size of his loan in practise. Meanwhile tenant Steve has no risk on his money, all his money is liquid, and he can up and move at any time with no closing costs and relatively little hassle, and he doesn’t have to put aside $20,000/year against the principle of the condo. He can invest that money if he’s responsible, or use it to go on a cruise if he’s not (editor’s note: not a recommended strategy for wealth building), or if he loses his job he doesn’t have to come up with it, and if he gets canned just finding the rent money will be hard enough. In this example tenant Steve was only making 1% on his down payment, but realistically he can earn much more with less risk than the condo in a balanced portfolio if only because it is diversified, although he will need the stones to withstand some market volatility. Even after a few years when landlord Steve gets to a positive cash flow after paying down enough principle, not only will it be a pitiful amount…its taxable. If he owned the place outright he makes only $15,400. That’s a large number objectively but that’s a feeble return of only 2.8% on his money, and it’s before tax. He could have gotten that with much less risk somewhere else, where at least part of it would be tax sheltered in his RRSP and/or TFSA, and he wouldn’t have to put up with tenant Steve painting the place fluorescent green when he’s not looking. I hear that guy is a shady character.

#83 Linda Pearson on 04.20.12 at 9:21 am

#66John on 04.20.12 at 6:33 am
My obvious, measured and direct comment would be considered “sexist” in Toronto. It might even be considered outrageous.

Nah, just antediluvian, obsolete, prehistoric. Does it never occur to you that the female may contribute 50% or more to the purchase cost of a home? Or even that, in this case, HHHW may have been in a hurry when she interchanged the two pronouns? Stop with this hobby-horse of yours; you are a Luddite.

#84 Dean on 04.20.12 at 9:23 am

Missed in the entire comparison is the fact the BOTH renting and owning are ridiculous considering the average income of people.

What Carney is really worried about is the money tap for the economy getting turned off when people realize they can’t afford the crap that they’ve filled the homes that they also can’t afford (even if they rent). It is at that point the google search “Can you sell granite counter tops on Kijijj?” starts trending.

#85 Smoking Man on 04.20.12 at 9:25 am

DELETED

#86 Adviser on 04.20.12 at 9:35 am

Eagle Eyes,

4. You’ll get a homeowner’s grant of $580 per year on your property taxes if it’s your principal residence.

I believe this is only for low income seniors, unless there is a grant that I didn’t know about?

#87 Rates on 04.20.12 at 9:37 am

http://www.theglobeandmail.com/report-on-business/economy/inflation-rate-drops-to-19-in-march/article2408676/

Does this change your guarantee that interest rates will move up before the end of the year?

Of course rates will increase. — Garth

#88 Randy on 04.20.12 at 9:39 am

Taxes are way too low in Toronto and don’t reflect reality…Property taxes in Toronto should be doubled….

#89 Fred on 04.20.12 at 9:43 am

Garth, is the math correct in your example? When I add up the cost numbers, I get $103959.09, which is $15,300 less than the $119,259.09 that you show.

That makes the monthly cost $103959.09 / 36 = $2887.75, and the total carrying costs $136348.09 and the monthly carrying cost 136348.09/36 = $3787.45.

Now on this: In this example, over five years the tenant pays $99,000 in rent, while the owner pays $151,648 in occupancy costs (and this does not include the lost opportunity cost from not investing the down payment). The renter comes out with no equity. The owner achieves $39,000 in equity, but pays $32,389 to sell – for a gain of $6,611. So, the renter ends up saving about $46,000..

You seem to have moved on to a five year example from a three year example. Either way, I can’t reconcile your figures. Here’s what I get for five years:

In this example, over five years the tenant pays $99,000 in rent, while the owner pays $151,253 in occupancy costs (and this does not include the lost opportunity cost from not investing the down payment). The renter comes out with no equity. The owner achieves $35,826* in equity, but pays $32,389 to sell – for a gain of $3,437. So, the renter ends up saving about $48,816**.

* I assumed mortgage is at 3.22% to make payments $1437/mo as you have them. A mortgage calculator tells me that over five years the principal paid is $35826.

** 151,253 – 3,437 – 99000 = 48816

Now of course, scrolling back up, I see that Chuck #28 has already crunched the numbers. But I don’t feel bad since one always learns better by doing it oneself :). Chuck has removed the mortgage penalty whereas I haven’t. If it’s a five year mortgage that’s fair I suppose, but your sales timing has to be good. I suppose the penalty is small if you’re close to the end of the term. What about a ten year term though? Chuck has also removed the discharge fee, but I have a feeling maybe it still needs to be paid? In any case it’s a “mere” $350. Chuck also has a gain in equity of $39,000 but I get only $35,826. (Am I missing something? I think the gain in equity is the same as your principal repayments since the condo’s sales price = purchase price).

In any case, the renter saves a lot of dosh over five years, unless the condo price keeps going up and up.

Typo. S/b 3 years, as the example stated. — Garth

#90 Canuck Abroad on 04.20.12 at 9:50 am

It’s not just condos where there are deals to be had. In the desolate nether regions of Ontario near to the hi-falootin’ address of Wasaga Beach (now there’s cachet!) you can rent a brand new 3 bed house for $1350/month or buy it for prices “starting at” $305k. You all can do the maths on that one. Hope it’s really well built for that kind of money (snark). No condo fees, but unless you are a retiree, you’re looking at a LOT of money on petrol commuting to any sort of job.

Here’s the rental ad:
http://www.realtor.ca/propertyDetails.aspx?propertyId=11748923&PidKey=-365078032

And here’s the sales price (it’s the “heathcote”)
http://www.newinhomes.com/ontario/stayner-development-2200/index.html

#91 AG Sage on 04.20.12 at 9:56 am

Regarding previous comment thread:

California: no recourse
Texas: full recourse

In which state did the banks issue stupider mortgages?
California, by a long long shot.

Recourse is not an insurance policy for the mortgage financial system.

#92 The Thing in the Basement on 04.20.12 at 9:58 am

60 Sub – hmmm interesting. I wish I could remember the original post better. Perhaps Wall centre was a “how not to do it” example.

#93 disciple on 04.20.12 at 10:02 am

Speaking of throwing stuff away. How about your illusions? Christina Applegate has found work with her old friend Jodie Foster in politics Down Under…

http://xdisciple.blogspot.ca/2012/04/jodie-foster-is-julia-gillard-christina.html

#94 Ralph Cramdown on 04.20.12 at 10:06 am

An owner will always try to get the most the market will support for his rental unit. Regardless of his charges. They may or may not be covered.

…Right up until the time he decides to sell the building. Then he and his agent will tell you that the tenants are paying significantly below market, as he’s just been a softie, but YOU could make so much more!

#95 45north on 04.20.12 at 10:09 am

traveling on the 401, my wife stops at the “en route” gas stations, I prefer to go off the 401 and stop at a place where you’re a customer. I see young men with their daughters going into the men’s washroom because they have no one to mind their daughters.

Bill Gable: Today, after listening to the continuing hammering above us, as an owner that tried, without permits, to combine three condos into one – then decided that since that was a no go, the workers are noisily rebuilding all three condos, as cheaply as possible.

pretty funny

#96 Just(not)AnotherSheeple on 04.20.12 at 10:13 am

Re #77 Market Bull

Buying and owning real estate takes some effort and committment. Like marriage.
At the current 70% home ownership rate in Canada, housing is apparently beating first marriages by at least 20%.
They will lose the spouse before they lose the house.
====================================

What will happen if they lose the house – are they able to keep the spouse (not sure if this is “good” or “bad”)

I have friends – she was RE agent and he was in the construction. They started from a nice single family house they had and at one point owned 11 properties – some of them multifamily small buildings. They were multimillionaires, traveling the world… and when the SHF they lost all, the last being the family home and then they split and he moved to another city hopeful to start over again…
This being in the states and it wont happen here because we are so different…

#97 rw on 04.20.12 at 10:26 am

http://motherjones.com/kevin-drum/2012/04/chart-day-great-recession-still-nowhere-near-over

#98 Inglorious Investor on 04.20.12 at 10:27 am

Buying a residence and then selling it only a few years later is almost never a smart financial move. Comparing the costs of renting to ownership based on moving out after only five years is somewhat biased. But the point is well taken.

Right now may not be a good time to buy a house because real estate inflation has largely outpaced official CPI inflation by multiples. The long-term is for RE inflation to only slightly outpace actual CPI inflation (keeping in mind that government CPI numbers are, shall we say, “massaged.”

But one aspect of home ownership that is rarely discussed is the effect of inflation. Inflation helps home owners and hurts renters.

During periods of high inflation, homeowners see the nominal value of their homes rise, while the real value of their mortgage declines. During a period of high inflation, if you can lock in for a longer term, say ten years, you can really see your debt burden decrease in real terms while your house appreciates greatly in price (and therefore acts as an inflation hedge).

Renters on the other hand, are faced with rising rents, with typically no inflation hedge to offset the falling value of the currency, except maybe rising incomes. But how well has that been working the last ten years or so?

Stocks can be a good inflation hedge, especially stocks with dividends. But how many renters actually invest large sums, that they would have otherwise put toward a house, into stocks. And bonds? Inflation literally destroys bonds.

In short, there is no absolute right or wrong. It depends on many, many factors. But if you think we will get high inflation, you may want to rethink home ownership, as long as you plan to stay put for a while, and especially if you plan to live in the US. Toronto? I don’t know if anything makes much sense in Toronto these days, let alone real estate.

Inflation is 2% currently (was 2.6% last month) and the allowable rent increase in Ontario for 2012 is 3.1%. Given increases in heating and insurance alone, I’d say the renters are winning. — Garth

#99 Kilby on 04.20.12 at 10:32 am

I don’t understand why these condo strata fees discussed here are so high. Our older 2 bedroom/2 parking space in Victoria on Foul Bay Rd is $276 per month and our rental in a new waterfront building in Vancouver (bought for $540,000) is only $200 including a gym membership, is Ontario more expensive for these as well as taxes?

#100 Ralph Cramdown on 04.20.12 at 10:40 am

California: no recourse
Texas: full recourse

Texas is a bit of a special case — there’s conservative maximum LTVs in the state constitution, believe it or not.

#101 John G. Young on 04.20.12 at 10:40 am

#81 Linda Pearson on 04.20.12 at 9:21 am

Totally agree.

#66 John on 04.20.12 at 6:33 am

“The women are getting a horrible deal up there.”

Why don’t you let the women decide that?

Oh, I know why, never mind…

#102 Bolo2k12 on 04.20.12 at 10:45 am

@ #11 Renting in the GTA

You don’t suck. Your colleagues do.
Tell them to grow a set.

#103 Steevo on 04.20.12 at 10:52 am

LOL! “Nonprime” LOL! “below prime” LOL!

http://business.financialpost.com/2012/04/20/canadas-big-banks-flee-nonprime-market-amid-signs-of-housing-downturn/

#104 Jimmy on 04.20.12 at 10:59 am

Hey Garth. Who are these guys?

TORONTO — A new report says home prices in Ontario will continue to rise through 2014 thanks to steady economic growth and low interest rates.

Credit union Central1 forecasts that the annual average price for previously owned homes will rise 3.4 per cent this year to $378,700.

It also expects 2013 to see a further increase of four per cent to an annual average price of $393,000, followed by a slower increase of 2.6 per cent in 2014.

Central1 says in a report released Friday that it’s very unlikely there will be a sudden severe drop in home prices in Ontario without some sort of shock.

It says there’s no sign that interest rates will shoot up rapidly or that a huge number of homes will be put up for sale, two factors that could shock the market.

Central1 says even cuts to government spending won’t be severe enough to set back home prices over the next couple of years.

The credit union expects steady economic growth and low interest rates will result in 204,400 units of previously owned homes being sold in Ontario this year — about 5,500 more than in its previous forecast.

The number of home resales is expected to be even higher next year, at 207,200 units sold through the MLS service.

#105 };-) aka DA on 04.20.12 at 11:01 am

Inflation is 2% currently (was 2.6% last month) and the allowable rent increase in Ontario for 2012 is 3.1%. Given increases in heating and insurance alone, I’d say the renters are winning. — Garth

I tend to agree more with #97 Inglorious Investor Garth.

And anyone who does not know how to legally and ethically increase the rent to that renter or evict them that they may increase it to another in order to cover their costs and make being a landlord worth the while ought not be a landlord in the first place.

That would obviously not include you. — Garth

#106 R1200Ci on 04.20.12 at 11:09 am

This ultimately goes back to correlation between rent versus real property market value. (Which you get from either the MLS or your City’s property tax database)
So a condo worth $200,000 (in smaller cities) renting for $1300 ($15,600/year) has a yearly GRM (gross rent multiplier) of 12.8 and one worth $400,000 renting for $1600 is 20.8 (higher being better of course)
The ultimate rent-versus-buy calculator I’ve ever found is from the New York Times:

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

This calculator is cool because it takes into account most things you can think of (inflation, return on your original deposit, closing costs, tax etc…) and offers the flexibility to tweak the variable parameters important to speculators: Interest rates – rent increases over time – and properties increase as well…

My personal rule of thumbs is that if you find a GRM of 15 and up, you’re better off renting. But that also depends on your personal rate of return and what you can do with your cash…

I think this was discussed before… what was Garth’s GRM threshold again?

#107 };-) aka DA on 04.20.12 at 11:11 am

How do you do what I suggested in my previous post?

Well… that, among other things, is why they pay me the BIG bucks. While there is plenty I am happy to share, sorry but that’s a clients only area. As you can well imagine it’s a very useful, and thus valuable, tool of knowledge.

#108 bigrider on 04.20.12 at 11:14 am

Garth , whats wrong with Kias ?

They make excellent planters. — Garth

#109 daystar on 04.20.12 at 11:27 am

#81 Linda Pearson on 04.20.12 at 9:21 am

http://en.wikipedia.org/wiki/Luddite

Ah yes, machine smashers who felt threatened by progress. It didn’t end well for them.

We should stop for a moment, reflect and ask why. The debasing and diminishing to gain the sense of superiority, wouldn’t one have to emotionally disconnect themselves first to successfully continue with such a phisod?

People believe their own lies if they repeat them enough, the self conditioned brainwashing leading to the distorted reality and diminished logic that’s occurred isn’t a causal effect to difficult to phathom but why the lies to begin with… is it abuse? Neglect? Where else does insecurity come from…

Mabye lil’ Johnny had it rough and, suffering from low self esteem from early negative experiences needs to reinflate in whatever way he can. Perhaps he’s a victim and that hobby horse may be all he has in this world.

It’s ironic. Some of us don’t have the luxury of owning or even renting a home. Note the toy some end up with at the end of this link:

http://www.youtube.com/watch?v=J2EEIeM7Zuk&feature=relmfu

#110 earlybird on 04.20.12 at 11:28 am

This site brings lots of joy and giggles to my day as I watch angry, chaotic people driving their HELOCmobiles to their J O B to pay for shelter….just a roof over your head, RENTING or OWNERSHIP! This is causing general misery to people all around the table, all walks of life, and all age groups. When most of people’s income flows to housing, there is not much left for spending and expanding our economy.
The mortage example has 5 yrs renter payments instead of 3 (ooops), when deducted, the loss is greater….but we get the point!
I thought in 2002-03 that home prices were overvalued, now they have flown past fundamentals, and are all spectulation, emotion and innocent newbies. I wish I could tell first timers(at this point in the real estate cyle) that quality of life is paramount, dont put all your time and money into 1 venture because that’s how it was done in the past, you havent lived long enough to see the full economic real estate picture. Prices will not double again, if they do, then we have bigger problems.

#64 I remember when saving up a few grand, (literally) for a down payment was huge and daunting, never mind 50 000! Its mind blowing that finance isnt taught in schools, sadly which leads to another generation of Greater Fools……

BTW…lovin the Smoking Man…..havent had a morning cocktail in years…your making it look good!

#111 Amazon on 04.20.12 at 11:28 am

I am not sure why people keep saying (i.e. #40 Smoking Man) that people buy houses to avoid having “low lifes as nabour, not everyone gets a Kramer”. OK, quoting SM is probably not my brightest idea, but it is early. If you rent and a neighbour turns out to be a sh!thead, you give 30 days notice and move. Try that when you own! OWNING A HOME DOES NOT GUARANTEE THAT YOU WILL HAVE GOOD NEIGHBOURS!!!! In fact your castle becomes a prison. Having money does not automatically make you a better person or neighbour and recent studies indicate the wealthy have the market cornered on a$$holeness! No offense to the nice folks, wealthy or not.

#112 Inglorious Investor on 04.20.12 at 11:32 am

“Inflation is 2% currently (was 2.6% last month) and the allowable rent increase in Ontario for 2012 is 3.1%. Given increases in heating and insurance alone, I’d say the renters are winning. — Garth”

No doubt that right now a very strong case can be made that it’s advantage: renters–especially in Toronto or Vancouver. My point is that inflation is probably the single greatest factor that gets ignored by the average person vis-a-vis investments. Most people think only in nominal terms, to their detriment.

During the ’70’s for instance, a whole generation of home owners came out way ahead because high inflation greatly eroded their mortgages while home prices and wages went up. They literally got richer, but didn’t know why. While renters missed out on home ownership and suffered rising rents.

(I think we all know that now is a very risky time to be buying a house, unless its value won’t significantly impact your net worth one way or the other and you can manage the operating costs and debt device no matter what happens to interest rates. I’d hate to be faced with the choice of buying or renting today, and I really feel for those young people just starting out on their own and who need a place to live.)

The question is, what will inflation be like in the years ahead? Actually, more importantly, the real question is: what will your purchasing power be like in the years ahead? First of all, CPI is flawed as a metric. By some measures, real inflation is running at around 6%, not 2%. (The long-term average, annual home appreciation would also support this.)

Secondly, while the costs of services and utilities are rising (actually, this was the first year in about ten that my home insurance did NOT increase) the single greatest cost of home ownership by far for most people is the mortgage. Therefore having inflation erode the real value of your mortgage can more than off-set the increases in utilities and taxes.

But you to be sure, you have to run the numbers––ALL of the numbers. And throw in a good measure of assumptions. But hey, ALL investing is like that.

#113 TimV on 04.20.12 at 11:32 am

In practical terms, having rented for about 10 years, my rent increase has typically been below inflation, and never above guideline (it is fairly easy for a large landlord to get permission for an above-guideline increase, when they want).

Note that the guideline increase is set based on landlord costs such as heating, etc — so even if the guideline is above inflation, it likely means that the same home ownership costs (heating, etc) are also above inflation. The days of Toronto rents jumping as quickly as possible (that would be back when I was an undergrad student) are long (and mercifully) over.

#114 Hoser on 04.20.12 at 11:39 am

My condo fees are $157/month.
Not all condos are glass towers with expensive amenities.

#115 John G. Young on 04.20.12 at 11:44 am

#77 Stephen on 04.20.12 at 8:21 am

“Riding the pine” was looking for free investment advice. People pay financial advisors — of which Garth is one — for that.

Once again, this shouldn’t have to be explained.

#116 SEAN on 04.20.12 at 11:45 am

Hey Garth, in your response to #77, you used “inferred” instead of “implied.” I’ve always wanted to say that!

The implied inference was imbued. — Garth

#117 Anonymouse on 04.20.12 at 11:52 am

By claiming that the IRD applies in your example you’re implying you think interest rates will be lower in 3 years. If rates are higher, then the penalty is “only” 3 months interest.

#118 };-) aka DA on 04.20.12 at 11:54 am

“That would obviously not include you.” — Garth

Which part – the” increasing rent legally and ethically” or thaswe “ought not be a landlord in the first place”?

Without a reasonable return to the landlord on their investment there will soon be few rentals to choose from. Be it a fed up landlord who eventually sells or one who tries to hold on and is eventually foreclosed on without a reasonable return the supply of rental housing will eventually dry up. As it the supply of available rentals depletes in the face of a constant or possibly increasing supply of renters (thanks to your persistent advice to rent instead of own Garth) the supply/demand quotient will cause rents to increase.

The problem today is that it is very difficult to acquire a property at today’s prices that can be rented at today’s prevailing rental rates such that it makes any economic sense.

So one or a combination of things MUST happen 1.) real estate prices must fall, 2.) rental rates must rise or 3.) some combination of #1 and #2. I’m betting on #3 with an emphasis on #2 more than #1.

And this is why I am such a Garth fan, no one is doing quite so much as Garth to improve the lot of the landlord as he advises wannabe homeowners that it is more financial prudent to rent instead. Not to mention the homeowners he frightens into selling to preserve their equity in a falling market and the Blog Dawgs reinforcing that by lamenting that prices are going down well beyond even Garths predictions. We need more frightened puppies willing to drop their prices. It’s workin’ thanks in no small part due to this blog – most aptly named “Greater Fool”. Question is; who’s the fool?

};-)

The not being ethical part. — Garth

#119 zeeman1 on 04.20.12 at 12:02 pm

#13 Dr.Dr.

I only pay $228/month in condo fees, live in a nice clean building with a gym and a dog park in the middle of downtown TO and we even have a decent gym.

If I lived 5 minutes south close to Lakeshore in a similar building my fees would be double.

#120 Do your homework on 04.20.12 at 12:05 pm

RE: allowable rent increase in Ontario for 2012 is 3.1%

The rent control limitations are often cited, yet always neglect to mention the important exception to this rule – this is only applicable to the older rental stock, first occupied prior to November 1, 1991 (source: http://news.ontario.ca/mah/en/2011/07/the-2012-rent-increase-guideline-1.html).
Thus, landlords of anything built in the last 20 years are free to increase their rent however they want if demand allows it.

#121 NCYer on 04.20.12 at 12:13 pm

Garth is right on this one. Especially re: the rent increase allowable etc. My landloard wanted to increase my rent just $30, less than 2% of my current rent. Even though rents for my unit now are about $100 more per month than what I am currently paying. Agent said “you don’t have to say yes, you can say no” and I said NO to the rent increase. I get to stay and pay about $100 less than the going rate and got no rate increase when they were legally allowed up to 3.1% (approx $45 increase).

Why did they accept? No idea but apparently I am a good tenant and they would rather me stay longer than leave.

#122 Canadian Watchdog on 04.20.12 at 12:13 pm

#113 Inglorious Investor

What we’re experiencing is not what occurred in the 70’s. It’s worse.

#123 AprilNewwest on 04.20.12 at 12:15 pm

#115 Hoser – Do your condo fees include heat and hot water? Most that do are usually higher than what your paying. I have friends who live in older concrete towers with around 1000 sq ft and some pay just over $300 per mth incl of heat and hot water,some a bit higher. I also know that condo fees can be outrageous for some. This is in the Lowermainland BC.

#124 };-) aka DA on 04.20.12 at 12:26 pm

The not being ethical part. — Garth

Why thank you…. hey wait a minute! Is that the sarcasm font you used there? };-)

#125 refinow on 04.20.12 at 12:32 pm

118… You are dead wrong. The 5 Big Banks have you so brainwashed its not funny.

Everyone thinks all the Bank’s have exactly the same mathmatical equation for IRD…

Not the case.

TD BMO CIBC RBC SCOTIA all got together and slipped a tiny little change in their mortgage IRD calculations that have ramped up penalties even if rates remain the same or even go up a little.

The $11,000 was an Actual TD Mortgage penalty quoted for an existing client of mine on a $300K mortgage . Not fabricated in the least.

#126 Raging Ranter on 04.20.12 at 12:37 pm

Kevin: why wouldn’t the landlord pass these costs on to the renter?”

Garth: You can’t be that dumb.

Oh yes he can. Kevin and many others. I’ve been scoffed at many times when I state that I’m paying $800 per month less to rent my house than I would if I bought it, once insurance, taxes & condo fees are included.

“Well then you’re landlord is losing $800 per month or your lying!!” is the reply I usually get. Silly buggers view everything in light of TODAY’S prices. In fact, my landlord, like many landlords, bought the place 20 years ago, for less than 1/3 the price it would sell for today. Therefore, she can make plenty of money charging me the market rate for rent. And I can save plenty of money by not buying a similar place at today’s absurd prices.

This is called a Pareto-efficient transaction. It’s basically a transaction from which BOTH PARTIES benefit. The Kevins of this world have trouble grasping the concept. Schooled as they are in the world of house-flipping and real estate porn, they can’t accept that not every free-market transaction is zero-sum.

#127 Like Better Pics on 04.20.12 at 12:43 pm

re: previously made comments on today’s pic: Ya garth, more hot women pics please. what do you think brings us here daily? Surely you dont think its for the dialog….

#128 Raging Ranter on 04.20.12 at 12:46 pm

And then there’s aka DA, whoever that is. He thinks that rents must necessarily follow housing prices higher. He forgets that while banks are more than happy to lend you money to buy, they will not give you a mortgage to rent. Therefore, rents will rise ONLY as far as people can afford to pay out of their incomes, and not a penny higher. Home prices, on the other hand, will rise as long as the banks are willing to increase the amounts they lend. Rents are driven by the market. (Rent controls may distort the market, but do not change this reality.) Housing prices are driven by credit availability.

#129 daystar on 04.20.12 at 12:51 pm

http://money.ca.msn.com/investing/deirdre-mcmurdy/will-the-roof-cave-in-on-torontos-condo-market

Will the roof cave in on T.O.’s condo market? The informed scribe with MSN thinks an acorn should do it.

#130 GPC on 04.20.12 at 12:53 pm

From an article in today’s Financial Post:

“I don’t think there is any sign anywhere from people on the ground in Canada that foresees the bubble,” said Soloway. Economists predicting a collapse in Canada “have been wrong for years; my prediction is that they’re going to be permanently wrong.”

Gerald Soloway
Chariman & CEO
Home Capital
Toronto Based Mortgage Lender

People on the ground? Oh, you mean greedy sellers and RE agents? I wonder, how can anything in the financial world be labelled permanent?

I am certainly reassured that the head of a subprime lending company dismisses the “economists” and that nothing is going to happen to the real estate market and we certainly are not in a real estate bubble!

Mr. Soloway your prediction is on the public record now.

We will be remember.

#131 SKRenter on 04.20.12 at 12:56 pm

Garth,

Ontario Housing forecast from Central1 – they have a differing opinion then the feds, not surprising, but may be worth a look, comment:

http://www.central1.com/publications/economics/pdf/ea/ea%202012_ont02.pdf

#132 Steve on 04.20.12 at 1:01 pm

IRD – check your fine print people! IRD may be calculated using the POSTED rate from when you got your mortgage, not the actual (disounted) rate that you are paying…

The banks can squeeze out a couple of more points this way.

#133 JRoss on 04.20.12 at 1:02 pm

DA,

“Without a reasonable return to the landlord on their investment there will soon be few rentals to choose from”

You really don’t understand much do you?

If landlords can not get a reasonable return, fewer people will want to be landlords. Demand to purchase rental properties will wane and prices will drop.

Rents are determined in aggregate by what people can pay (ie incomes), not by what someone has paid to buy the house. You have your price/rent causality reversed, smart guy.

Rents did not rise to support valuations in major centres in the US. They will not rise to support valuations in a sleepy little resort town with an enormous inventory overhang.

In fact they will fall, as amateur accidental landlords flood the market with units they refuse to sell at a loss, choosing death by a thousand cuts until they finally accept the inevitable, or are foreclosed.

“who’s the fool?”

Don’t make it so easy.

#134 Riding the Pine on 04.20.12 at 1:08 pm

#77 Stephen

Thanks for your back up.
Wow, I simply was looking for some educated comments on my situation. Contrary to Garth’s assumption, I will be speaking to 2 investment professionals from large firms, and as a LAYMAN (we can’t all be experts in everything), wanted to go into these discussions with some knowledge of my own.

I commented because Garth alluded to the “insane advice” of getting 2.1% return on safely parking liquid cash for the short term.
(#10 T.O. Bubble Boy)
I’ll at least share my knowledge of what I learn from my hired professionals next week…no charge or brass.

Garth – perhaps you could explain the classical orders of an architectural cornice. (hint: also a three word answer ;)

***************
What is amazing is the inability of people to research these assets or the reluctance to hire somebody to accomplish it for them. Another example of how costly cheap is. — Garth

#135 JRoss on 04.20.12 at 1:08 pm

“And anyone who does not know how to legally and ethically increase the rent to that renter or evict them that they may increase it”

Taking advantage of folks who are unaware of their rights is somthing you brag about? Seriously?

Though you may know of a loophole by which you think (I suspect you have been lucky that no one has yet sued your miserable ass) you can do this legally, there is no circumstance under which you can claim this is ethical.

You are a gigantic douche.

#136 Coraline on 04.20.12 at 1:15 pm

#31 MarketBull

Latest TREB quarterly condo report: April 18, 2012.
“TREB reported 5,027 condominium apartment transactions in the first quarter of 2012. This result was up by two per cent in comparison to the first quarter of 2011.”

“The average selling price for condominium apartments in the first quarter of 2012 was $334,952 – up by 3.7 per cent from $322,857 in the first quarter of 2011.”

Me, I liked the part where sales to active listings fell to 4%, the lowest since the crash and before that, since 2005.

#137 Investx on 04.20.12 at 1:21 pm

Garth, you make your point well of the high cost to purchasing a condo in the 5% down payment scenario. Do we know how common this is? You give the impression that it is the overwhelming majority, if not virtually all.

The last 4 people I know that recently bought a condo all put down a payment of at least 25%, thereby eliminating most the fees you’ve outlined.

Are there official stats of purchases made according to down payment amounts?

#138 T.O. Bubble Boy on 04.20.12 at 1:25 pm

To all of the posters claiming that rents will skyrocket… you can still get a 1-bdrm in the same apartment building near Yonge & Eglinton in Toronto that I rented 12+ years ago for THE EXACT SAME RENT (just over $1000/month).

That’s right: more than 12 years have passed, and rents haven’t moved. Can’t say the same for much else in Toronto.

#139 T.O. Bubble Boy on 04.20.12 at 1:27 pm

If you’ve got $1.2M handy to buy a house, why not consider one where the pool is on the ceiling:

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=11824450&PidKey=-1476312004

photos are here: http://www.realtor.ca/PropertyPhotos.aspx?propertyID=11824450&PhotoNum=9

Apparently the $59k in realtor commissions for this place wasn’t enough to hire someone who could hold the camera the right way.

#140 Bill Gable on 04.20.12 at 1:31 pm

Re: Bill Good and CKNW – it is Michael LEVY and he is a gold and bullion dealer by trade.
Say no more.

#141 Ben on 04.20.12 at 1:36 pm

These are the kinds of job emails I get in Canada.

16.50$/hr

http://www.careerbuilder.co.in/INTL/JobSeeker/Jobs/JobDetails.aspx?sc_extcmp=JS_JobAlert_Title&ipath=PSSGTC64P&lr=cbnv&psa=1&Job_DID=JHL6WC62J3W3VLLDPJQ

Canada one of the most expensive places on earth and pay minimum wage for a degree.
Go take a hike, i’m making $50 an hour in the U.S. and paying a 1/4 the amount to live.

#142 Not 1st on 04.20.12 at 1:47 pm

Why do people not put value on the most important asset of all – your freedom. We indebt ourselves to institutions so we can buy stupid crap we don’t need and end up throwing out into a landfill anyway.

#143 Skewed on 04.20.12 at 1:48 pm

While I think this is a good example of Renting Vs Buying I think the key to your point is Mortgage Penality Payment.

Unless they were really forced to sell I think you would try to time this better so as not to incur such a massive penalty.

#144 Mr. Anderson on 04.20.12 at 2:00 pm

#74 time to leave Canada for a better life

Leave already.

#145 AACI Okanagan on 04.20.12 at 2:10 pm

#57 };-) aka DA on 04.20.12 at 12:02 am

Hang on now…
So you are telling me that you aren’t influenced at all by the agreed to purchase and sale amount? Right of course you are not influenced by that price “a ready willing and able buyer is prepared to pay a ready willing and able seller, neither being under undue influence to buy or sell” Your industries own, and rightful, definition of market value ;-) Of course you would not be influenced by that “most recent sale”.

But yes there could be something amiss so you need to see the contract to be sure there is not. That you are now stepping into and area were you might be misrepresenting yourself as having qualification to render a legal opinion we will ignore as maybe you are a lawyer too.

DA, season realtors know what we do when it comes to doing an appraisal on a property that is selling, your remark just cements my thought that you are just one of these realtors taking up space. Last time, hopefully you will get it this time.

We are asked to analysis contracts for many reasons. Vendor take back? what is included in the sale price? any special concessions in the contract? does the sale appear to be an arms length transaction? etc.. I can give you an example of one last week where a property was selling for $430,000 and all the furniture was included, they had the furniture down as $15,000. Banks do not mortgage furniture. So the true selling price of the home was $415,000. Our clients are the banks, not the purchaser or the vendor, we have to look after the banks best interest, just like you have to look after your clients best interest. The majority of the sales are fine, it is that small percentage that can get us in hot water so that is why we do it or are suppose to do it.

Are we influenced by the selling price you ask? Absolutely if the sale price is reasonable. If we cannot support the sale price, then usually the deal goes side ways. If we don’t know the selling price and we come in let’s say $5000 below it what usually happens to the deal? The purchaser has to put more down or you have to start the negotiations all over again. Guess who is the first person to call us when that happens? The realtor! Appraisers have to come up with a black and white number in what we believe the property will sell for in this market place. We don’t have the liberty of giving the vendor a range like you guys do. Next time you are doing a CMA try giving an exact number in which you think it will sell for instead of a range. Our aim is to be bang on, however that is next to impossible all the time so that is why if we use the 5% margin for properties we appraise that sell after the fact. You know as well as I do, that if we are even a few thousand dollars below a potential deal, it may send that deal sideways.

Stop with the nonsense that the bank will take what a realtor says the price of a property is, no lending institution in Canada will secure a mortgage on a property based on a realtors CMA.. NONE PERIOD. Foreclosures are not in the hands of the banks, they are in the hands of their lawyers, again, a season realtor would know the difference.

You are absolutely right, we follow the market. We don’t make the market, but neither do you, buyers and sellers make the market. We have advantages over realtors with some of our tools we use, and realtors have an advantage over us in that they are in tune more to what purchasers are seeking and feeling. That is why I have a strong relationship with many top selling realtors. I personally like to know what is going on from their end and they like to know what I am seen in the market place. I agree with what you said a while back, that appraisers should experience what it is like to sell real estate (i have), and I think realtors should be taught how to give a proper CMA and learn the three approaches to value, just not skim through it like your six month course does. Bottom line DA is that you need us,( to keep deals together) and we need you to keep selling so we can have a data to arrive at values.

I rarely use the mls stats to back up what i am saying, the reason being is that one can spin those stats to support what ever they are saying. You have to know how to dissect those stats to really get a grip on what is happening.

All the best DA, I hope you have great year selling.

#146 Ralph Cramdown on 04.20.12 at 2:19 pm

Without a reasonable return to the landlord on their investment there will soon be few rentals to choose from.

You’re forgetting about mortgage helper basement suites (how many owners even know what cap rate or NOI means?) and people holding rental condos anticipating capital gains (how many of them care?).

New build rentals in tony midtown Toronto:
http://urbantoronto.ca/news/2011/11/redevelopment-310-320-tweedsmuir-over-10-years-making

#147 truth hammer on 04.20.12 at 2:24 pm

Raising your kids amidst the glorious vision of Bob Rennies ‘our neighbourhood’ condo aftermath. Boy, when reality bites, it bites hard. I don’t feel sorry for a single sucker who fell for the ad campaign that sought to rein in as many suckers as it did to live in the notorious DTES of Vancrapper. In spite of the area being a war zone…ask any cop….and now this poor sucker who fell for the advertising….thatthe idea of raising kids in a sewer is probably not condusive to their overall growth as citizens……who do they have as roll models….the mayor who lets this happen to his mommy and daddy? Can you imagine the talk around the dinner table that these little sponges are taking up?

http://fullcomment.nationalpost.com/2012/04/20/mike-comrie-raising-kids-amid-the-hookers-junkies-and-drunks-of-vancouvers-worst-neighbourhood/

What kind of an idiot would buy a cat box condo in the middle of the worlds most notorious drug bazzarr and think that they were doing the right thing. The power of persuasion and greed……really something to consider when buying into todays greed and advertising driven market.

#148 Smells on 04.20.12 at 2:35 pm

HAHAHAHAH –

Garth – point taken with your example but the numbers and assumptions are a joke. IRD will not be used if interest hikes occurs as you speculate, making a mortgage assumption attractive which could eliminate the penalty entirely.

Also, real estate agents are useless and you can sell the property yourself. Take away rebates for first time homebuyers – larger downpayments and a 25 year am and your example smells.

#149 penpal on 04.20.12 at 2:40 pm

Wonder how this Cdn RE bubble continues?

Simple really;

1) Canadians by and large cannot do math

2) Canadians by and large cannot think critically

3) Canadian by and large rely on inherently conflicted RE agents and the CRA which are notoriously truth challenged and have few scruples (DA’s and BPOE’s postings confirm these tendencies)

#150 Investx on 04.20.12 at 2:40 pm

#26 – Bam Bam:
“Just signed a new lease on a 1 bedroom condo in Toronto – $1200/month. Brand new. 1 bedroom units in the building are currently selling for just under 300k. I can’t understand what these “investors” are thinking when they buy a condo and then rent it out for negative cashflow. Why do they want to subsidize my living costs?”
– – – – – – – – – – – –

Are you privy to the details of the buyer’s purchase? Do you know for a fact that it’s being rented out to you for negative cashflow? Or are you making an assumption?

#151 Kale on 04.20.12 at 2:44 pm

Thought the rental discussion was interesting. The reason the rent is less than the carrying costs is often because the buyer screwed up, and it’s better to rent it at market than leave it empty, and hope appreciation makes you a winner in the end (no longer very likely).

Had a co-worker buy a pre-build in the lovely Falls in Victoria. He’s a genius you see and was planning to assign it before it was built for a cool 100k or whatever. Also owned an old 4 bedroom house that you wouldn’t care if it fell down that rented out cash flow positive while he rented with 2 girls in a house (less fun than it sounds).

Turns out there’s a no assignments clause in the contract until the developer gets them all sold, and those familiar with the project know it took them years after completion and a number of price cuts to get rid of the last dozen units.

He moved to Vancouver to make more money and sold the cash flow positive house. The condo he paid north of 500k for is apparised at 360k and I hear they can’t get water damage insurance because the waterfall was leaking into the building. So he rents it out, fetches around 1600/month I think, likely about half of his carrying cost, and he ‘can’t afford’ to sell it.

#152 penpal on 04.20.12 at 2:46 pm

@ # 115 Hoser

And I can buy a car for $1,000.

(Not saying it’s a good car, but it is a car)

Your condo fee info means nothing without context.

#153 Toronto_CA on 04.20.12 at 3:02 pm

“The last 4 people I know that recently bought a condo all put down a payment of at least 25%, thereby eliminating most the fees you’ve outlined.”

Hmm most late 20s/early30s people I know that bought a GTA condo drained their meager RRSPs using the double taxation of the Home Buyer’s Plan to make most of their closing costs and a meager downpayment. Anecdotal evidence is weak. Coming up with a 25% downpayment on a $350-400k condo or house isn’t feasible for most first time buyers, even with $25k each of HBP RRSP money.

#154 J.I.M. on 04.20.12 at 3:06 pm

Here’s a thought.
Your rent are determined by what YOU are ready , willing and able to pay.
Your purchase price is determined by what SOMEONE ELSE (ie. your bank, backstopped by the CMHC, and low interest rate policies) is willing to pay

#155 Debtfree on 04.20.12 at 3:06 pm

interesting perspective .
http://www.wealthwire.com/news/economy/3047

#156 Bolo2k12 on 04.20.12 at 3:08 pm

Moneyville article from todat on Toronto Real Estate.
Don’t know what these guys are smoking, but I’d like some.

http://www.moneyville.ca/article/1165183–toronto-real-estate-cooling-nah?bn=1

#157 };-) aka DA on 04.20.12 at 3:26 pm

#134JRoss on 04.20.12 at 1:02 pm

You really think so? Well, good luck with that.

#136JRoss on 04.20.12 at 1:08 pm

The way it is done is not at all “taking advantage of folks who are unaware of their rights” as it is disclosed to them in its entirety before they enter into the first residential tenancy agreement – entirely and completely. In fact we use the Provincial Residential Tenancy Offices own forms. So how could there be anything deceitful? These are the forms designed by the government which typically favours on the side of the tenant in a dispute. They (the tenants) agree in advance. It is ENTIRELY ethical and completely within the tenants own unilateral discretion to accept or reject it before the fact. Most agree, some do not. Those who do not you don’t want as tenants anyway. Kinda like a BRA (Buyer Representation Agreement) };-)

Brag about it? Not nearly with as much apparent glee and disregard as the renters on this Blog brag about taking advantage of Landlords. Again the way in which it is done is completely ethical and respectful. So yes I do think that is something to brag about as it truly is a win/win proposition.

};-)

#158 Longterm on 04.20.12 at 3:29 pm

72 Kevin

Clearly mate you aren’t a landlord. You sent your rent at what the market will bear, your carrying costs be damned. If it was a simple as buying unit at any cost and with all ancillary costs [condo fees, property tax, maintenance etc] and simply tallying this up, adding a nice fat profit margin and then telling tenants what the rent will be then everyone would be going it a raking in the dough. This isn’t the case by a long shot.

Case in point. I had three rentals in Cowtown, sold two in 2007 and kept one. In 1999 when I bought the first two at $106K and $108K – three bed townhouses – the market rent ($925 and $950 per month) just covered all the carrying costs with a $50 surplus easily swallowed by annual maintenance. In 2007 when I sold for $240k and $270 respectively, the rents the market could bear were only $1000 per unit. Had the buyer of these units tried to rent them [maybe they did, I don’t knwo] they’d have taken a huge monthly bath]. The other unit is a front back duples, 3 beds a side. In 2000 I bought it for $200k exactly. Rents were $750 a side, just covering the carrying costs. It is now worth somewhere between $350-$420k. Rents are now $1025 and $1075 a side and with a new mortgage and not much principal left I have a nice monthly surplus. However if I sold it for say $360k, unless a new buyer put down a huge amount, the place would bearly clear a profit, might even lose. How overvalued is property in Calgary vis-a-vis rents? Put it this way, I’ve not seen a good positive yield residential property since 2002 and I keep and active look out with several realtors sendign me listings.

So again if it was as easy as buying, tallying up the costs and telling the renter what they will pay, I’d have 100 units by now. The market determines rents and this coupled with the price of property determines yield. Nothing you can do about it.

bought in

#159 Two-thirds on 04.20.12 at 3:45 pm

“They’ll also continue to eat at Burger King and buy Kias. I can’t fix stupid. — Garth”

Although I do not own a Kia, I must say some experts find them increasingly good, to wit:

http://www.ajac.ca/web/ccoty/previous_byyear.asp

“Best new family car over and under $30K”

Check out how many Korean cars are winners in their own category, that should tell you something about these vehicles.

Just a light comment for a (TGI) Friday.

#160 new_era on 04.20.12 at 3:45 pm

Garth. Your not factoring something. When was the last time you rented?

Their is a premiun for not having low lifes as nabour, not everyone gets a Kramer.

So you wana live next door to a hen den, a brother gangster, or maybe alkida.

The herd wants status they are buying the feeling of success.

===============================
Smoking man in case you haven’t noticed a huge amount of the condos being sold in vancouver are speculators who will not be living in it, but rather renting the place out.

big difference between renting and living. If you don’t like your neighbours you can move as a renter.

If you own and don’t like your neighbour then you F^*^cked.

My neighbough had freak’in stinkin horses and a pool. In the summer they were out there screaming their lungs out at 3:00am in the morning. I had to call the cops on them at least 3 times every summer.
BTW I was a house owner with (all paid for)

Another house I owned (all paid for) was one next to a school. The neighbours rents to these freakin drug dealers next the school and they were doing business like usual at 2:00am in the morning. With kids which would play their loud music and burn rubber. All the neighbours got together and couldn’t do a freakin thing.
The owner of the house didn’t give a hoot.

so smoking man, don’t sell me that BS. Cause I’ve walked the talk.
BTW I can name 6 of my friends who HATE!!! their neighbour, but they are locked in for live. They just have to adjust and get by.

When your renting you expect some incovinences, but
your realize it not a long time commitment and you have control of changing things.

#161 VICTORIA TEA PARTY on 04.20.12 at 3:47 pm

A LOT OF BALLS, THEY’RE IN THE AIR…

and where they’ll land, we know not where!

The IMF, the Organization of the Unglued and the Unnerved, given their recent propensity to try and solve all of our economic woes by increasing debts everywhere, but EVEN after all that STILL NOTHING GETS BETTER (!)

INSANITY RULES IN WASHINGTON

A great heaving mass of “intellectual capital” meets this weekend in DC to come up with what? Why another 400 mill of US fantasy-bucks to solve what? Why nothing because 400 mill won’t by a Starbucks lattee on the Champs Elysees. This “economic” brainstrust calls this amount of loot a “bazooka” and “firepower” to protect a new “firewall.”

You know what, all you guys and gals: “YOU’RE FIRED!”

DEVELOPING WORLD TRUMPS THE REST

I was watching Bloomberg a short while earlier today and a stunning report that shows only nine countries’ stock markets are ahead YTD from 2011! They are all in the Mideast, Southeast Asia, Pakistan (for crying out loud!), Peru ([email protected]#) and Mexico!! WTF!

No Canada, US, EU, UK, China, Japan, Brazil, Russia.

This all adds up to zip as far as any hope for a pending world-wide economic recovery this year; more like an economic denouement, especially after the Socialists have their way with a prickly France after next Sunday after which, sometime in May, Germany will be told to take a hike.

AFTER THAT…

When the Edifice-complex that is Euroland finally keels over into a thick helping of French poutine then the US will be next on the list of has-been economic entities, after which China will “make a stand” and retreat into yet another inner empire of mutual salvation (think heading for the woods with lots of squirrel guns and wild-meat recipes on a “Noah’s-style Ark” basis).

And Mr. Carney, Goldman Sachs Man in Ottawa will do exactly what?

Nothing, likely, because he’ll utter the following: “to tighten monetary policy at this time” will put Canada’s “fragile” economic recovery at risk.”

And the real estate beat will go on, UNTIL IT DOESN’T!

#162 Andrew on 04.20.12 at 3:49 pm

$200/month for condo fees? Generally the only place you will find condo fees this low is in condominium townhouses. High rise condos have much higher condo fees, $500-800/month is much more typical.

In Toronto condo investors are losing money even with very low interest rates. Two things must happen:

– Rents go up a lot. A condo that rents for $1500/month and costs $300000 probably needs the rent to go up to $2500/month before the landlord makes a profit. Basically this would mean that Toronto becomes like Manhattan, and no one can afford to live in downtown Toronto anymore, and everyone is forced out to less expensive condos in the suburbs. Although Toronto is a rapidly growing city, this seems like an unlikely scenario.
– Condo prices go down. Probably a much more likely scenario due to all the supply that has been built recently.

#163 Tyredandboard on 04.20.12 at 3:52 pm

@22 Bill Gable

“Today, after listening to the continuing hammering above us, as an owner that tried, without permits, to combine three condos into one – then decided that since that was a no go, the workers are noisily rebuilding all three condos, as cheaply as possible. Day after day it goes on.”

I LOL at this side story, please keep us posted =}

#164 Throwing it away — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate - Alternative News London Ontario - Daily news, sports, entertainment, business, travel, homes and auto sections containing features of interest particul on 04.20.12 at 3:53 pm

[…] via Throwing it away — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estat…. […]

#165 John G. Young on 04.20.12 at 3:54 pm

#135 Riding the Pine on 04.20.12 at 1:08 pm

“Wow, I simply was looking for some educated comments on my situation. Contrary to Garth’s assumption, I will be speaking to 2 investment professionals from large firms…”

When I reread your initial post I saw that you had indeed posted a general enquiry, not one to Garth in particular. The incorrect assumption was mine, and for that I apologize.
My comment would have been more appropriately directed to Stephen, who in post #77 said, “Your 3 word response suggests that you know better. So why not share it…” To me that comment smacks of entitlement, especially when such information is readily available, including but not limited to this blog’s archived posts.

Good luck with your investing.

#166 Hoser on 04.20.12 at 4:02 pm

>> @ # 115 Hoser
And I can buy a car for $1,000.
(Not saying it’s a good car, but it is a car)
Your condo fee info means nothing without context.

Fair enough. Two bedroom condo in a residential area where the houses across the street go for around 350K. The condo is worth about 200K.

Condo fee does not include heat and hydro. Basically, it covers common costs such as exterior maintenance, insurance, landscaping/snow removal, etc.

#167 DonDWest on 04.20.12 at 4:16 pm

“Wonder how this Cdn RE bubble continues?”

Allow me – here is a conversation I just had with my baby boomer mother on the phone.

“Mom, you shouldn’t shove all your retirement funds in GIC’s and RRSP’s, it’s a bad idea.”

“Son, the financial advisor I routinely visit has a college degree – you don’t.”

“Anyways, I was reading some articles on the Internet. The Canadian economy is looking shaky. High debts, low interest rates, a housing bubble, expensive social programs for retirees, etc.”

“Son, I just watched Global TV. They say the economy is fine. Stop being a pessimist! You’re not reading and watching silly articles and videos on the Internet are you? If you had a proper education, you would have been taught the value in gathering information from a reliable source, such as the mainstream media corporations. After all, they have college degrees and are highly qualified – you don’t have a college degree. Besides, there’s no housing bubble, have you seen those low interest rates? Even you can afford a house.”

“Doubtful, houses have never been so unaffordable. Back at your time the average house was only 2 to 3 times the average income; now it’s up to 8 times.”

“Have you spoken to a mortgage broker? This is your problem son, you don’t have an MBA like a qualified mortgage broker, you need to leave this stuff to the professionals.”

“Mother, I would appreciate it if you would treat me like a human being and with respect instead of being so condescending.”

“And I would appreciate it if you didn’t waste my time taking financial advice from an uneducated 30 year old.”

*I immediately hang up*; just a typical day “communicating” with the family.

#168 Steven Rowlandson on 04.20.12 at 4:32 pm

Check out the American that quit money/ currency.

http://www.bbc.co.uk/news/magazine-17762033
No phone bills,no taxes, no rent, no mortgages, no car insurance. It sounds pretty damned good as long as you can find food and shelter and some thing interesting to do.

#169 Van grrl on 04.20.12 at 4:34 pm

#84 Linda

“You are a Luddite” :) Yeah, that John is a fun guy, we had a go a couple days ago…

This from the Bank of Canada today. Good thing they are able to point out the obvious, yeesh:

“In a special section within the report, the bank estimated that Canadians are borrowing on rising home values to an unsustainable degree.

Home equity lines of credit and mortgage refinancing has grown from about $8 billion in 2001 to $64 billion in 2010, with about half of that “equity extraction” going into consumption or to pay off other debt.

‘Home equity extracted through additional borrowing cannot fund higher consumption indefinitely.'”

#170 Van grrl on 04.20.12 at 4:39 pm

John G Young:

Remember, John also decides WHO the women are, and who is a woman trying to be/act like a man etc. hehehe…

#171 GTA bubble H on 04.20.12 at 5:05 pm

# 47 Canadian Watchdog

You elude to the fact sales is an indicator of eventual price decline, however in the GTA during most of 2010 you will find that sales decrease and an increase in either inventory or new listings or both. Yet the price continues to climb.

#172 Tim on 04.20.12 at 5:08 pm

You’ve left out one minor detail- special assessments lol
A majority of people I know who own condos in the Lower Mainland have leaks or similar problems

#173 Arshes on 04.20.12 at 5:29 pm

#19 thinker on 04.19.12 at 9:54 pm
That math is simply wrong

Forget all the downpayment/equity, one time payments.

it costs me 3k per 100k, so my “interest costs” are 10.5k in financing the money, say 0% down. Taxes and Fees, call 7k, so it costs about 18k a year in real on going fee’s
__________________________________________

Umm your math is wrong, you have to take into consideration the principal portion in the mortgage payments you make. Why ? Because if you dont your end up double counting the principal portion in the sell portion of the calculation.

#174 Investx on 04.20.12 at 5:41 pm

Toronto_CA:

“The last 4 people I know that recently bought a condo all put down a payment of at least 25%, thereby eliminating most the fees you’ve outlined.”

Hmm most late 20s/early30s people I know that bought a GTA condo drained their meager RRSPs using the double taxation of the Home Buyer’s Plan to make most of their closing costs and a meager downpayment. Anecdotal evidence is weak. Coming up with a 25% downpayment on a $350-400k condo or house isn’t feasible for most first time buyers, even with $25k each of HBP RRSP money.
———————————————————

I agree anecdotal evidence is weak, that’s why I asked Garth for stats to support his point.

I made no point to prove. The post simply shows how 5% down is financial oblivion. — Garth

#175 Arshes on 04.20.12 at 5:43 pm

Looking at all these Rent versus Calculations people have is soohave so annoying. You have to look at it from a cashflow anaylsis. Ie: Actual funds going out and actual funds going in.

All this “Principal portion in Mortgage Payments dont count as a expense” or “I sold it more than i purchased it for so I’m ahead of renter” crap is dumb. Reminds me of when i used to work as a Accountant and people used to try to do thier own books.

BTW Unless you can think outside the box or studied Finance you wont get Garths computations. But if you did your smarter than the avg person and Kudos to you.

#176 U-The Man on 04.20.12 at 5:49 pm

#71
Doesn’t this assume that EVERY rental unit is cash-flow-negative? Is that true? I find it hard to believe that EVERY SINGLE landlord out there is losing money every month on their “investment” property. Surely some are charging rent higher than their monthly carrying costs, no?

Two things, rent increases are controlled in Ontario, landlords cannot arbitrarly increase rents.
Those units purchased years ago at lower prices are cash flow positive if you use the amount of the initial investment, but relative to the present market value of the unit and the oppotunity cost lost of that value, they are still cash flow negative relative to alternate market investments.

#177 johnny5z on 04.20.12 at 5:54 pm

Reading the blog comments today, I believe that some of the readers don’t know that Greater Fool is a term of art. In the real estate business it is the person who buys the real estate from you, thinking that they will make money from holding it. Real estate can be like a boat.

#178 Arshes on 04.20.12 at 5:59 pm

#72 Kevin on 04.20.12 at 7:55 am
“Renters, of course, pay no strata or condo charges, no property levies, no special assessments”

Of course they do. These charges are rolled into the rent. Again, as I asked in my previous comment, why wouldn’t the landlord pass these costs on to the renter? Who are all these landlords out there who are buying investment condos so they can charge less than the carrying costs in rent? Why would anyone do that long-term? Why wouldn’t they charge enough rent to at least break-even?
——————————————————–
Check out landlordrescue.ca about the difficulties of being a landlord. How much rent a landlord can collect if dependant on how much a renter will pay, I was looking for a place to rent, recently, and if you overcharge it just languishes on the market for months. Money that most landlords can afford, so they take a cut in rents or suffer for months.

#179 JRoss on 04.20.12 at 6:06 pm

DA,

“You really think so? Well, good luck with that.”

Gripping analysis. Tell me, what did rents do in the US? Particularly in the resort communities?

“Most agree, some do not. Those who do not you don’t want as tenants anyway.”

I see. You do it “up front”. Those who are desperate agree to your exploitive terms. Those who are aware enough of their rights to tell you to go f*&* yourself are of course the type you avoid. Can’t have anyone forcing you to adhere to the actual intent of the act, can we.

But its is all fine because they signed, just like the BRA.

That you can utter the word ‘ethical’ without it stinging you lips is a wonder.

#180 Investx on 04.20.12 at 6:07 pm

Just when you think the Toronto condo market is unsustainable, you see facts like these that reflect the contrary. Who knows what to think.

” the market absorption rate for the new buildings is pretty well balanced. According to National Bank Financial, the current condo inventory level in Toronto would take 19.3 months to sell, below the historic average of 26 months and well below the four-year mark set in 1990.”

Will the roof cave in on Toronto’s condo market?

http://money.ca.msn.com/investing/deirdre-mcmurdy/will-the-roof-cave-in-on-torontos-condo-market?page=2

#181 };-) aka DA on 04.20.12 at 6:09 pm

#158Longterm on 04.20.12 at 3:29 pm

Which is why you pulled three rental properties out of the pool of available rentals – much as I did mid-2008. I’m not getting back in any time too soon. Sounds like you’re not getting back in any time soon either. I doubt we’re so unique. There are a lot of others like us – guys who owned rental properties because it made sense, but when prices escalated so that we weren’t getting a return on their present day value – well it just made sense to take the profits and run even though that was never our intent. Of course the renters would have us hold that property and rent it for a modest return on what we paid for it not what it is worth today without consideration nor comprehension of the theory of the “opportunity cost”.

Yes there are many unwilling landlords today. It was never their intent to be a landlord. Their intent was to “flip” quick and get out. They got caught with their pants down. They will eventually one way or another rid themselves of that property soon. They who buy it will not likely be intentional landlords and it is near the day we won’t be seeing the creation of any unintentional landlords.

So who is going to maintain the vacancy rate as it is to the benefit of the renters as supply dwindles? Are renters going to invest in rental properties to rent to their brethren at the subsidized rate they’ve come to know and love? Not likely. You and I Longterm will eventually see a reasonable return to be had by picking up those properties the last out reluctant landlords dump at a loss, but that will not be before renters have been forced to endure the pain of significant rent increases which too will add to the attractiveness of the market for us to get back in.

Vacancy rates will fall and rents will rise, real estate prices will fall but not nearly so much as you think before they catch you by surprise and increase far more than you think – count on it – of this I am sure.

And THAT is how is works JRoss @ #134.

#182 im stupid on 04.20.12 at 6:12 pm

They’ll also continue to eat at Burger King and buy Kias. I can’t fix stupid. — Garth

Im Stupid.

Fries? — Garth

#183 TurnerNation on 04.20.12 at 6:20 pm

This will drive potential industrial tenants away, possibly.

ctvtoronto.ca

Date: Thursday Apr. 19, 2012 9:23 PM ET

Energy prices for residential homes and small businesses will be going up on May 1, just as air conditioners start humming across the province.

The Ontario Energy Board announced Thursday that the increases will add anywhere from $3.99 to $5.80 to the average monthly residential energy bill.

The fee increases are part of a twice-a-year review of energy prices conducted by the board.

The Ontario energy minister said that the increased cost is due to ongoing efforts to make the energy system more environmentally friendly.

#184 Canadian Watchdog on 04.20.12 at 6:25 pm

#171 GTA bubble H

It’s called quantitative easing:

http://i44.tinypic.com/1p76er.png

The chart above shows TREB sales cross-charted with 5yr bond yields. The red arrows show yields being driven down right after QE1-2 announcements; notice how lower yields (lower mortgage rates) become less effective from the first to second round.

http://i41.tinypic.com/dxbul0.png

This chart shows 5yr bond yields cross-charted with a 12 month rolling standard deviation for Toronto detached (the price variance or spread between 12 month average prices; or hi/low bidding for layman’s). Notice again when yields fall (from QE) the standard deviation rises, but then falls again. Thus, we can see how rates constantly need to be lowered to move buyers in the market.

Lowering rates has been the monetary tool to get us out of every recession and for decades, only now, we are nearing ZLB (zero lower bound), meaning rates can not go much lower. Remember, banks don’t make money on 2.99% mortgages, they just want [to steal brokers’] customers so they can cross sell credit cards, LOC, ect.

Now just imagine what a 1% hike would do, which is why I don’t rule out Carney taking rates down to zero if things get bad, but that would pretty much destroy whatever creditability central banks have and be the end of money as we know it.

“We all know what to do, we just don’t know how to get re-elected after we’ve done it.” —Jean-Claude Juncker.

Yes. It’s that bad.

#185 Westernman on 04.20.12 at 6:26 pm

Smoking Man @ # 50,
” Westernman don’t get your tizzy in a knot ”
Why would I get MY tizzy in a knot – sounds like you are the one about to do something patently disgusting with YOUR tizzy…
After all, you’re the one who’ll have to live with yourself after, not me…

#186 Devore on 04.20.12 at 6:30 pm

#72 Kevin

These charges are rolled into the rent. Again, as I asked in my previous comment, why wouldn’t the landlord pass these costs on to the renter?

They can try, but ultimately others will not pay for their bad investment decisions. Rents can only rise as far as the market will allow, and since it is a cash business, income is the primary determinant of rent, with supply and demand rounding out the usual suspects.

Who are all these landlords out there who are buying investment condos so they can charge less than the carrying costs in rent? Why would anyone do that long-term? Why wouldn’t they charge enough rent to at least break-even?

Who are they? How about all of them. Unless they buy with 30-50% down, but then your return and cap rate is terrible. Lots of stories of real estate “investors” buying units they know they will rent out at a monthly loss, but which will, naturally, appreciate 10% a year, so it’s ok. Gotta start building that Trump empire somehow.

When the attractively priced condos with low condo fees start falling apart, these geniuses are the ones who will be voting down maintenance projects, condo fee increases, and other capital expenditures, because they know they won’t be able to raise rents to cover their costs.

Each rental market is different, with this tighter than others. In Vancouver, landlords can raise rents between tenants as much as they want, yet rents in the region have been trending negative in real terms, with nominal increases well below the allowed annual limit. Why is this? Vancouver salaries are terrible, and inventory is high, particularly in the 1 bedroom category. 10s of thousands of illegal basement suites pick up the majority of the student market. Net negative interprovincial migration frees up more units.

Back to your point, this is another way that real estate bubble hurts the community. Serious, real investors stay away from the rental market, leaving amateurs to run things, because they see there is no money to be made, only speculative gains. Quality rentals, particularly for families, disappear, as the larger properties rent out for less than 50% of the ownership costs. Condos are a little better. (Imagine rents on a logarithmic curve vs sqft, and prices on an exponential curve.) Long term then, these speculative rentals will go back on the market in one form or another, either to capture gains, or to cut losses. This is why speculation in real estate is bad, because housing, a basic need, should be affordable across a range of types and quality, and stable. No one should be kept up at night worried about where they will sleep next month, whether that’s because the landlord wants to sell, or because you can’t make the mortgage payment or afford the property tax increase.

High housing prices are a net drain on the economy and society. All the money, time, effort, work and resources poured into a bubble real estate market would do far better if they were spent elsewhere more productively.

#187 Timbo on 04.20.12 at 6:48 pm

http://trends.truliablog.com/vis/rentvsbuy-spr2012/

A Great little index to help if you plan to buy down south. It is starting to look better by the day.

#188 Mark W on 04.20.12 at 6:48 pm

I am reminded of “Herbert Stein’s Law” which states the following:

“If something cannot go on forever, it will stop.”

http://en.wikipedia.org/wiki/Herbert_Stein

#189 P & T S on 04.20.12 at 7:05 pm

You have “Issues” with Kia / Hyundai, Garth?? I trust you are aware that these sister Companies are expanding their market share whilst Western manufacturers see theirs shrinking. Maybe something to do with better build quality, far better warranties (both offer 5 year unlimited km even to Commercial users), and class leading fuel efficiencies.

We’ve hired a diesel Carnival from Hertz Freemantle to visit the relatives, and for a 2 tonne eight seater (VERY comfortable eight seater too) we’re getting an excellent 6.5 – 7 l/100km which is 1.5l / 100km better than the Wife’s Peugeot 307 could ever achieve!

It’s interesting that many of the Aussie Vehicle Hire operators have dropped Toyota, and have adopted either Hyundai (IMax) or Kia (Carnival) for their MPV fleets – “Down Under” the Carnival has gained 40% Domestic MPV Market Share, at the expense of previously well-established brands (Ford, Toyota, Volks. and Mercedes).

Try swapping the Hummer for a Carnival – you’ll save enough on fuel alone to buy a second one before the 5 year warranty expires!!

#190 };-) aka DA on 04.20.12 at 7:09 pm

#179JRoss on 04.20.12 at 6:06 pm

Hey, I’m not going to argue with you. You do and believe what you want to do and believe. You don’t know who I am you know how I do what I do. Clearly you hear what you want to hear and I am not an eloquent enough speaker or writer to circumvent that failing in our communication. I am comfortable knowing my moral compass is directed by that which makes my mother proud, my wife happy and scripts a reputable legacy for our children.

As a landlord I am confident those who have rented from me would attest me one of the better. Many continue to have trusting relationships with me long after their tenancy ended. Reasonable people treating reasonable people reasonably. Worst tenant I ever had was my own child – expected something for nothing when it was about time they learned to fend for themselves. We made it an easy transition and gave a break on rent, furnished the place and so on. That was a mistake. Give them an inch… Tough love… has to be done – family and tenants. Respect goes both ways but generally does follow the golden rule. Don’t like it? Then get yourself some of the gold of your own so you can start making some of the rules.

Sometimes JRoss people just don’t see eye to eye. In my business when I come across someone I am uncomfortable with I give them a wide berth and move on. Life is too short. I’ve come to trust my instincts on such matters more recently along with the advice of my wife and mother who doesn’t say much doesn’t need to with the telepathic skills she seems to have. Take a wide berth on me my friend. I’d like to move on. };-)

#191 Nostradamus Le Mad Vlad on 04.20.12 at 7:12 pm


#161 VICTORIA TEA PARTY — Good post. Things appear to be normal, but we all know ‘normal’ is so last century. Anything goes now, and everyone for themselves!

#167 DonDWest — Exc. post, and one that should be shown to interfering old busybodies. Let the kids run their own lives the way they want to. It’s nobody else’s business.
*
93 cents a day hat’s why corporations are so flush with money; The Price Remains The Same, but packages are shrinking; Growing? Food stamp rolls, yes. America, not too sure; Orwellian Office of Financial Research (OFR); Hitting a Wall Very quickly, with corrupt politicos – lobbyists – fiscal meatheads etc. running the circus; Tripled The US national debt from ’01 – present; 700K soon to live on welfare; Crazy Town (Chicago) 3:47 clip. It’s G20 time! — Here’s the story; Vermont Calls for end to corporate personhood.
*
Jaws Teeth need to be cleaned; Leopard Some blog dogs haven’t earned their stripes yet; Cancer industry exposed, and Polio Vaccine and Pic; Hollywood loses its final appeal; EU gives US permission to snoop on citizens; Turkey Making friends with China and Iran, but what about Syria and Libya? GoM Eco System As per just about everything else, it seems to be collapsing; 6:48 clip US seeks indefinite stay in Af’stan. Worked out well for the USSR — Seven Year Itch. Same with ‘Nam, and 6:13 clip Elite and military benefit from war in Af’stan; Computer Chip Able to see thru walls; Five Baffling Discoveries “And if that’s true, then how did some Egyptian mummies wind up with traces of cocaine in their bodies?”; US Military “Libya is the perfect model for our foreign policy. We got the gold. We got the oil. We got rid of their value-based currency and enslaved the Libyan people to the same sort of private central bank that ruined the lives of ordinary Americans. It’s Miller time!” — Official White Horse Souse”. wrh.com; Admitting What Some of us already knew; Fukushima Self-explanatory; Desert Water Kelowna Gen. Hospital uses a similar system, taking cold water from the depths of Okanagan Lake for the A/C system; 5:10 clip Syria II, and a breakdown of countries involved and who it’s for.

#192 maxx on 04.20.12 at 7:20 pm

#9 Nemesis on 04.19.12 at 9:42 pm

Very gracious post and quite true. Still, there’s great nobility in dealing with the meat and potatoes issues of life….

#193 Coraline on 04.20.12 at 7:20 pm

I have to correct what I said earlier re the sales to total listings ratio for condos in TO. It’s not 5%; according to the TREB chart, it’s about 30%.

#194 Don on 04.20.12 at 7:28 pm

#41 Smoking Man on 04.19.12 at 11:13 pm Garth. Your not factoring something. When was the last time you rented?

Their is a premiun for not having low lifes as nabour, not everyone gets a Kramer.

So you wana live next door to a hen den, a brother gangster, or maybe alkida.

The herd wants status they are buying the feeling of success.

I realy should finish my book. Wink
++++++++++++++++++++++++++++++++++++

Geezus – Smoking Man lay off the hooch – you logic is flawed – If you buy you are stuck with your neighbors as it takes more effort to sell and move – if you rent you can move right away. Buy the way the drug dealers, gangsters etc have lots of cash and more often than not are living in upscale hoods, your hood. (as is the situation in Vancouver and most likely Toronto).

I do agree with you on the Herd and the merits of starting a business and reaping the benefits but writing a book REALLY!

#195 jess on 04.20.12 at 7:33 pm

…some of these companies think socialism is evil

April 2012

States are increasingly using the withholding taxes of their workers to subsidize companies. This is justified in the name of job creation, but payments often go to firms that simply move existing jobs from one state to another, or to ones that threaten to move unless they get paid to stay put.

…”their paychecks aren’t supporting public services. Indeed, this is true for workers at more than 2,700 companies in 16 states. Nearly $700 million is getting diverted each year. And it is very unlikely that the affected workers are aware, given that no state requires that the diversion be disclosed on pay stubs.
Where is the money going? To the employers of those workers. A growing number of states are diverting revenue traditionally devoted to funding essential government services to pay for lavish subsidy awards to corporations for job creation or sometimes simply job retention. The practice of redirecting large portions of the state personal income tax (PIT) withholding
deducted from paychecks means many workers are, in effect, paying taxes to their boss.

http://www.goodjobsfirst.org/

#196 JRoss on 04.20.12 at 7:42 pm

DA 182,

“And THAT is how is works JRoss @ #134.”

Turns out, not so much.

http://www.jparsons.net/housingbubble/

Housing prices returned to rents. Rents did not deviate from long term trend even a little. Except to dip slightly (the chart is nominal, so adjusted for inflation the flat part post 2008 is actually a decrease – there is that word again DA) as prices began to stablize.

http://www.lvrj.com/news/breaking_news/rental-housing-prices-down-8_2-percent-in-las-vegas-83404197.html

Rents dropped in the biggest tourist destination in North America, but I’m sure Kelowna will be fine.

That IS how it really works.

And for profiting from duress of potential homelessness by coercing those less fortunate than yourself into foregoing their rights and agreeing to your exploitive terms in direct contravention of the act written to prevent just such a thing, you are still a major Douche.

#197 Carlyle on 04.20.12 at 7:47 pm

#74 Time to leave Canada for a better life on 04.20.12 at 8:04 am
#53 Carlyle

Cityplace is where my cousin who’s stupid bought a 650sq condo for $390k. Not sure how big your place is but at 390k plus taxes and condo fees and everything else she will be paying alot more. Condos are very cash flow negative… .
——————-

Mine is 570 sq ft … But again I’m leasing. The owner lives in dubai …. I think the unit runs 320k or something retarded like that.

I still think 1500/mth with parking is pricey even for downtown but it seems pretty common in the core (east of Spadina, south of bloor, west of Jarvis). Going even a little further out and rents drop to 1200-1300. I’m hoping that rents plummet in the core once the condo market starts to topple.

#198 Cowboy_aka_My_View on 04.20.12 at 8:03 pm

Take a VRM after 3 yrs, no penalty charge, or take one with a 3 month charge.

#199 Smoking Man on 04.20.12 at 8:08 pm

Still on a roll. Reading some of the dogs posts neat specialy the ones that go you rock smoking man. Thanks and I do.

6orgive typos black berry typing

16.25 job and you need a dregree.
No kidding. Jobs suck. Slaves are cheap own one or two

Just got unsolisited sales call on cell. Now these people are traind to have an answer for any rebutle. Came up with a perfect one. If you are trying to sell me something ill listen to you but in states and paying rooming charges can you please call me tomorow and we will chat. They I add the guys number to contact list as Never Answer.

#200 Ol' limey smella. on 04.20.12 at 8:16 pm

Where’s the volleyball beach and broadwalk in Long Branch? Must totally have missed the fine dining and the Jazz fest when last whizzed thru Mimico. Cheap rents though.

#201 Daisy Mae on 04.20.12 at 8:18 pm

#112 AMAZON: “OWNING A HOME DOES NOT GUARANTEE THAT YOU WILL HAVE GOOD NEIGHBOURS!”

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

Tell me about it! LOL

#202 Randy on 04.20.12 at 8:25 pm

“The housing bust that the US experienced from 2007 to present has only begun to affect Canadian property values.

Once the Canadian public wakes up to the fact that they are not some oasis of stability in a world of deflating debt, we will see a rapid descent in housing prices and the associated deflationary effects.

That’s right Canadians, just because you have “the most stable banking system in the world”, does not mean that you can escape the reality of market forces when you borrowed too much and consumed too much.

Those who are wise will capitalized on those inflationary house capital gains before they disappear as they did so rapidly south of the border in 2007 & 2008.”

http://whatisthatwhistlingsound.blogspot.ca/2012/04/deflation-looms-again.html

#203 Daisy Mae on 04.20.12 at 8:28 pm

117SEAN on 04.20.12 at 11:45 am
“Hey Garth, in your response to #77, you used “inferred” instead of “implied.” I’ve always wanted to say that!”

“The implied inference was imbued.” — Garth

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

Garth, you’re something else! LOL

#204 Smoking Man on 04.20.12 at 8:36 pm

Ol lemi smelya. Its coming. Long branch has not had the rush yet but its started. Cheap rents. In mimico yes but soon the dewellers will be forced to move to hamilton. The HAM have just discoverd this gem on an area

#205 Daisy Mae on 04.20.12 at 8:51 pm

#135 RIDING THE PINE: “…and as a LAYMAN (we can’t all be experts in everything)….’

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

That is so true. We can’t all know everything about everything, all the time. LOL

#206 Daisy Mae on 04.20.12 at 8:59 pm

#136 JRoss: “You are a gigantic douche.”

******************88

Yes…shut the hell up, DA! You don’t give a damn about your ‘clients’ and Garth is correct — you have no ethics.

I try to eliminate this term when I spot it. Let’s all grow up. — Garth

#207 45north on 04.20.12 at 9:49 pm

Canadian Watchdog: Have a good look Toronto. You’re only 3-6 months behind.

holy cow, sales are down in Vancouver, if sales drop like that in Toronto, people are not going to be happy, maybe Dalton McGuinty should hope for an election tout de suite. Maybe I should tell him, after all he sent me a Christmas card.

We all know what to do, we just don’t know how to get re-elected after we’ve done it.

pretty funny

real estate sales and yield on 5-year bonds – I’m impressed

Now just imagine what a 1% hike would do

I imagine that real estate sales would stop.

#208 boomorbust on 04.20.12 at 10:33 pm

“The implied inference was imbued. — Garth”

Reminds me of C programming language book written by Kernighan and Ritchie. If you ever have the urge to become a propeller head, read the book. You’d be impressed.

#209 wheredideverybodygo? on 04.21.12 at 7:13 am

Does anybody know when the effect of the cheap 2.99% mortage ends? I went to the bank [email protected] was twiddling his thumbs so I marched over and asked if I could get specs on the current rates they offered. He mentioned that I missed the 2.99 special that was 3 wks ago. Made me think when the gig will be up for this rate teaser. Do people have 90 days to get this thing done or it’s over, is that why the rush? And if people hear about bidding wars does that encourage people to list if they want to get in on that action. And when the deal dries up, so do the buyers but we are left with the inventory? Just wondering what will happen 90 days from now, sorry 70 days from now… and if gas prices will be thrown in to fuel the fire…

#210 Dboy on 04.21.12 at 3:46 pm

Check this report from a Professional. GT is right and if you all thinks its never gonna end.

Listen up folks….
https://www.odlumbrown.com/documents/Content-Docs/Annual-Address-18/OBAA-ML.pdf

Buy orange shorts…. This will not end well….. Sure glad I am renting…. Did someone say Phoenix is better that Kelowna….Hmmmm….

#211 joe campbell on 04.22.12 at 11:41 am

HI Garth, I like how you dropped a single point off your estimated return but still feel you have 2.5% to go(to 3.5%)

First i will say that i think bank preferred shares are a fine investment.

however the few i looked at had you paying a premium to book value with a redemption rate
nk.pr.p: 26.85$, remediable feb 2014 at 25$ This calculates to about 2.5% return a year, a wee bit shy of your 6% estimate.

Not to say that you cannot get a discount for a company with a chance at bankruptcy(AZP.PR.A). risk reward which is what you did say, however i think recommending bank proffered shares and implying a return far greater then achievable is misleading, unless you can enter a time machine to 2008 and buy bank stocks as i already did. We have no time machines Garth.

Achieving no return and no risk is the best goal you can have for your portfolio, that and dying broke while having fun.

I think your advice is fine, just not 6% returns that stopped paying out.

Have a nice day, rent something nice.

One does not buy preferreds to hold until redemption. They are purchased for yield (now about 5% or more on very safe bank shares), and for capital preservation. This is a good example of why DIY investors fail. Thanks for that. — Garth

#212 joe campbell on 04.22.12 at 12:16 pm

And the closer they get to redemption the closer they get to 25$, and the 2y GIC rate of 2.5%. Which is clearly represented in the move of there coupon price.

I am saying there is no fast path to riches, if something looks to good you either do not understand it or its high risk.

You are offering returns that are non existent long term, according to harvard anyways.

Stop embarrassing yourself. — Garth

#213 joe campbell on 04.22.12 at 2:52 pm

anyway, i have already agreed that I think 3% return is good for this period.

Thank you for your reply’s, I am only asking that you consider the audacity of your claims forward thinking.

Enjoy the snow or sun as the case may be.

There is no ‘claim.’ Buy a bank preferred and get a 5%+ yield. Like I said, it’s all about financial literacy. — Garth

#214 Tyredandboard on 04.22.12 at 8:29 pm

@210 wheredideverybodygo

Google cheap mortage rates BC, they are everywhere.

2.75,2.79 and 2.99 percent here:
http://www.bestratesbc.com/

Here’s 2.80 percent:
http://www.thebcmortgageguy.ca/
or
https://www.comsavings.com/Personal/ProductsAndServices/Borrowing/Mortgages/Promotion/FeaturedRates/

Lots more, use Google and enjoy the free money. Cheap money is not going anywhere.