We are needed.
Mark and his squeeze must decide by Wednesday. The 32-year-olds are confused condo captives whose LL is messing with their heads. There’s now half a mill in debt and equity hanging in the balance, sauced with FOMO and hormones. We cannot fail him.
First, the back story. Two days before the end of the year, this came through:
“Hi Garth: I have been following your blog for some time and appreciate your thoughts and the entertainment value you provide me on a daily basis. Thank you for this, but I have a predicament.
“I work and live in downtown Toronto with my girlfriend in a Condo. I have rented it for some time now, all the while socking my money away. Neither of us have debt and each of us have above average jobs with an annual base salary of $100k each plus bonus’. My landlord has advised me that he is looking to sell the unit and we have the opportunity to purchase it privately. I have been going back and forth on the price however with B20 coming in and the risk of higher interest rates, the potential for increase in condo fees and the overall view of the Canadian economy I wanted to get your thoughts. We believe we can get the unit at under the current market value but I am wondering if B20 will really impact the demand/current market value in a meaningful way. I know the timing isn’t perfect but hell Garth, we’ve gotta live somewhere and rent isn’t very cheap these days for comparable units – think $2600+ a month. Living downtown allows us to only have 1 car. That plus the convenience is worth money to us and our lifestyle as well. We would likely need to borrow less than half of what we qualify for in order to complete this transaction so the risk is less than your average buyer but this B20 stuff and the potential negatives effects on the market certainly concern me. Would love your thoughts and guidance on our situation. Don’t worry – I have thick skin and won’t be liquidating my portfolio to get the deal done.”
Being desperately bored over the holidays, I responded. Give some numbers, Mark was told. Plus, are you gonna marry that girl, or what?
The unit’s worth $555,000 to $580,000, he replied, “but I’m trying for $528,000”. Between the two of them they have $470,000 in liquid assets, half of it in pension plans. Monthly fees and taxes are almost $800, and they plan on borrowing $480,000. He’s an insurance dude, while she’s in sales. No marriage on the horizon.
The unit is a two-bedder, two-bath jammed into 730 feet, with a parking spot. It’s in a fat tower overlooking the scenic railway tracks in DT Toronto. Here it is:
Today this arrived:
“We just met with the owners of our unit today. They are willing to sell the unit to us at $550,000 a discount of a minimum of $20,000 compared to market comps. The reason that he is willing to sell it at all is due to the fact that our rent is significantly less than the market rate. He said that he will kick us out and re-rent the place at the market value if he cannot get a minimum of $570,000. My understanding is that he cannot even do this nor could a new owner unless they or a close relative actually moved into the unit. In any event we are seriously considering purchasing the unit as we cannot find anything comparable for less than $600-$620k. At the end of the day we have to live somewhere and the price is well within our current means. Hoping to get your two cents before we make our final decision (we have 1 day). I look forward to your thoughts and will continue to follow your blog religiously!”
Well, Mark, you’re being manipulated. The prickish LL cannot punt you to get more rent, as you correctly state. Yes, he can sell the place and, yup, if the new owner moves in personally, you’ll have to leave. But this is just a threat to force you into an instant buying decision while he avoids a 5% commission and the coming market hit.
The first question is simple. Are you financially better off to buy or rent?
The answer’s simple, too. To borrow $480,000 plus closing costs at 3% will amount to $2,400 a month. Condo fees and property tax are $765 and the lost investment value of your $70,000 downpayment (at 8%) is $465. So, that totals $3,640.
To rent the same unit in Telegram Mews costs $2,500 to $2,800 (several are currently on the market), even bigger, with two parking spots. Here’s a Kijiji ad:
Cool Two Bedroom + Den condo looking for amazing tenant :) What’s cool is it has two car double parking. This is one of the two identical condo units in 8 Telegram Mews I list with a prime location and speculator amenities. My tenant is leaving January 31, 2018 and available beginning February 1, 2018. Perfect for couples with little ones, it has two bathrooms and in suite laundry, also rare two separate balconies, amenities includes outdoor pool, indoor gym, sauna, paid party room and more. Asking $2,800/month plus hydro, I require work reference and a credit report and $200 fob deposit for two fobs and additional $100 for each additional one… As bonus included: super cool landlord, super big smiles and warm welcome to you into your new home :) Call me at 416.837.4965 or email for viewing.
So, buy for $3,640 a month or rent for $2,600 – a 30% reduction, using the extra $12,000 per year to fill both your TFSAs. Better yet, stay where you are and call the owner’s bluff.
In short, there’s only one reason why anyone would grab one of these boxes (the size of location of which make them wholly unsuitable for families) and that’s the potential for capital appreciation. But now that is uncertain, as the stress test reduces new-buyer demand from 5% to 20% (we’ll see) and mortgage rates drift higher over the course of 2018. Worse, the threat of B20 pulled forward demand into the final few months of 2017 in both Toronto and Vancouver, pushing condo prices into silly territory. Buying now, Mark, would be an unwise rolling of the dice. There’s no assurance of a capital gain, and reasons to expect a capital loss. Meanwhile you’re forking over 30% more every month to live in the same place – which sure as hell won’t be your Forever Home. Duh.
And did I mention the foolishness of sharing a deed and a mortgage with someone you’re afraid to marry? Dude. Wake up.
192 comments ↓
Everything else is detail but “And did I mention the foolishness of sharing a deed and a mortgage with someone you’re afraid to marry? Dude. Wake up.” Is really all that needs to be said.
Happy 2018 All!
Year of the assault on the Landlord. This Perfect storm is going to lead to a glut of Condos coming online for sale.
– Airbnb 180 day rule (not much talked about for some reason, but I’m already seeing a lot of former airbnb units going up for sale)
– Cost of money going up and landlords not being able to monetize on Airbnb anymore
– B20 bomber
– new buildings finishing in 2018
– Dumbass landlords like the one in this article finally realizing that they can’t kick out tenants easily because of the new rules
Fun times ahead, get the popcorn ready
By the way he wrote the email to you it’s almost a certainty he’ll be buying the condo. He’s just looking for positive reinforcement to justify something he knows doesn’t make sense. I suspect his squeeze is putting huge amounts of pressure on him, she want to be married and buying something is a step in the right direction.
Mark listen, buy her a ring. It’s cheaper and will buy you time. Plan a wedding 2 years away. She’ll be wrapped up with planning the perfect wedding you’ll be off the hook. In 2 years you’ll be better off financially and prices should be down.
Out on the wet coast, listings are starting to dry up a bit however the sold signs keep on going up.
I think the Van market is still heavily juiced on Viagra.
It’s like one of those B-grade sci-fi movies where the beast keeps on coming no matter how many times the death ray hits it.
I haven’t been a landlord since about 1991 so I may be totally wrong on this but can’t a landlord simply refuse to re let any property at the end of a lease term? They aren’t obliged to rent are they?
I presume the rent controls in Ontario control this now.
First for 3018 !!
Thor Turner drops the hammer on someone again…
M43AZ
Why do these rent vs purchase calculations never include the fact that mortages aren’t forever? At their income levels they can easily pay this place off in 15 years and fully fund tfsa and rsp. I don’t love condo’s and agree that buying a place with a GF could end in disaster but not factoring in long term costs of renting into a rent vs buy calculation is being disengenious. Spending 30k-50k a year on rent forever is for rich people.
If SFH prices are really down 30 percent like this blog has been saying for months then the obvious play with their income and savings is to go big post osfi with a sfh in the city with a rental suite. They can easily carry a 750k mortage so buy the dip, add a renter and live in the city forever.
The above is all based on blog undestanding that like for like city homes are down 30 percent. If that is truly the case this is an amazing opp for savers to get in. Most will of course miss the bottom waitin on further decreases.
Where did I say anything about renting ‘forever’? This is just a stupid, costly, pointless, ill-timed investment made for emotional reasons. – Garth
Jimmy on 01.01.18 at 3:27 pm
First for 3018 !!
=======================
Relax Jimmy. You’re a little early.
Give it another thou.
Same age as me and same circumstances.
Renting is garbage. These “landlords” are garbage too. I’d rather pay a mortgage than further enrich the pockets of another human being. Spending 50% plus of your income for their benefit is a waste.
Buy the place. There is no correction and b20 will amount to hot air and nothing else. Interest rates will rise at a glacial pace. Everyone (governments and individuals around the world) are in total debt. The central banks are aware and therefore terrified. The “plan” is to resist significant rate raises for as long as possible so the “inflation” they hope for reduces the burden of the debt. It’s all a joke and anyone who does the right thing and resists debt and “saves” is a loser.
It hurts to write that but it’s coming from someone in the same undecided boat.
MF
What is the benefit of increasing your housing costs by 30% to live in the exactly the same place? Some twisted revenge? – Garth
“we’ve gotta live somewhere and rent isn’t very cheap these days for comparable units – think $2600+ a month”
By my calculation, $2600/mth for a couple that grosses $200k = 15.6% of gross income spent on housing, about half of what would be considered a typical guideline. Or looked at another way:
Gross Income: $200,000
Taxes Paid: $24,931 each*
Net Income: $150,138
Net Income/mth: $12,511.50/mth
Rent: $2600
Net Income/mth less rent: $9911.50/mth
Almost 10 grand a month net minus rent for a couple with no debt and who already own financial assets. So what exactly is their problem paying $2600/mth in rent?
*http://www.ey.com/ca/en/services/tax/tax-calculators-2017-personal-tax
Here is some advice beyond the obvious Garth stated.
There is a 50/50 chance your relationship will fail. Any money you are saving up is yours for now. So if you have $100k in the bank, and she bails on you, she can’t touch it.
Now take that $100k and buy a condo together. It’s now considered a marital asset and she gets half. So your $100k just became $50k or less.
Had you rented, you wouldn’t lose a penny.
Also, if you do buy something together, match her contribution only. So if she scrounges up $50k, you only put $50k in. That way when the split comes it’s a fair split.
The men who get screwed the worst in our feminist legal system are the ones putting 50% down payments on houses with an unemployed wife who doesn’t contribute a dime to it. When it comes time to split marital assets, she gets half of the house.
People need to start using their brains and always plan for the worst. Hope for the best though.
lets spend half a mill with someone i don’t plan on marrying, and no talk of it! not smart man.
What is the benefit of increasing your housing costs by 30% to live in the exactly the same place? Some twisted revenge? – Garth
Capital gains. There are too many tailwinds for the market to go down in the GTA.
Also, Canadian culture will always favour home ownership over renting. Maybe it’s the harsh winter that makes us value shelter so much? I don’t know but everyone I see who has been renting their whole life is poorer and always afraid/worried. Home owners are rewarded handsomely with the backing of our policy makers. Renting can be worth it if you can save enough to invest and get ahead, but this is difficult with rents to high in the GTA. The 30% premium is therefore worth it to get in on capital gains, never have to worry about some guy who gets to tell you what to do because they put 10% down on the property, and one day pay off the place so you won’t be paying your entire pension on rent when older.
MF
Nobody lives their life in a 700-foot condo. Get a grip. Move to Gananoque and buy a nice house. – Garth
Hey can you repost this blog in 3-6 months when prices for condos skyrocket?
I wish we could post pictures instead of thousand words.
Pretty conservative math, especially assuming nothing for long-term maintenance on the condo (condo fees don’t cover that, especially not interior maintenance!). And assuming a low return of 8% on money which is what, leveraged over 4X into such an extremely expensive asset class.
The condo owner, of course, in this case is completely delusional. Prices have been stagnating and falling in Toronto over the past few years as oceans of new supply have come on stream. Yet here he asks for more, as though there’s an entitlement, a certain level of arrogance, towards the whole matter.
As for insurance dude, he might be riding high right now with a salary dramatically above Canadian averages, but as interest rates rise, the good times are likely to go away for the FIRE sector, especially the insurers who benefitted so handsomely from low rates. There is an additional element of risk in buying RE, the correlation it carries with his job.
No words…
The answer is to always rent. Read the Wealthy Renter Book. Rent and build wealth, buy and succomb to the mort-gage “death lock”.
Mark,
Please do the following in this order:
1. Call the landlord’s bluff.
2. If he boots you, move across the hall to a better unit in Garth’s ad. You should haggle for lower than posted rent. If the new unit has 2 spaces, try to rent the second one out.
3. Get a ring. Ask her.
4. If she says ‘no’, you’ll have a damn fine apt. with a lower rent. Party at Mark’s house!!!
5. If she says ‘yes’, buy a place after the wedding. the market should subside by then.
Good luck!
Welcome to 2018 where President Trump will Make America Great Again and where Trudeau will continue to sink Canada into a pile of dung. I’ve been voting for 27 years and there is STILL no one to vote for in this country. They are all corrupted and co-opted. Sad. Canada used to be a great place to live…….and don’t get me wrong…the same can be said about many other countries too like those in Europastan for example.
I’m not sure if it was the threat of B20 that brought condo demand forward in Vancouver. Condos were already hot before B20 was even announced. I think it was more that everyone in the city is now priced out of SFD so condos are the only option for buying.
There was a guy who crunched numbers who found that even $500,000 a year in salary is no longer enough to buy on the west side, which is based on 2016 assessed values (that have since gone up even higher as of 2017 according to the tax authority).
https://doodles.mountainmath.ca/blog/2017/09/18/zoned-for-who/
You now have doctors and surgeons scraping it together to buy a house on the east side and maybe a two doctor couple can afford a house on the west side now or a business owner or an international buyer with millions, but that’s pretty much it. Hence everyone jumping into condos at a record pace.
Or the landlord can just wait for the lease to expire and then double the rent and then Mark will move on his own.
Also isn’t there a new rule with Ontario govt that if the landlord decides to get rid of them at the end of the lease it will cost the landlord one month’s rent payable to Mark.
And finally to are own resident Mark I have to ask how much do you think that condo was worth at it’s 2013 peak? ha, ha, ha
“Recent changes to the Residential Tenancies Act expand rent control to most private rental units in Ontario. As of May 30, 2017, landlords in Ontario cannot increase the rent for most private rental units each year (with a few exceptions) by more than the amount set by the Government of Ontario’s Rent Increase Guideline. The guideline is published by August 31 every year and sets the maximum percentage that rent can be increased in the following calendar year. In 2017, the maximum amount that rent can be increased is 1.5% of the current rent. For 2018: the rent increase guideline is 1.8 % for increases between January 1 and December 31, 2018.” – Garth
And did I mention the foolishness of sharing a deed and a mortgage with someone you’re afraid to marry? Dude. Wake up.-GT
Hey Garth, they might be common law at which point what’s the dif?
I live for speculator amenities.
Left Toronto 25 years ago.
I missed it for the first 10 years. I just needed to go back and visit to remember why I left.
Lots of nice places to live in our beautiful country.
Spread your wings and settle somewhere else. The upsides of leaving outweigh all the downsides.
“Recent changes to the Residential Tenancies Act expand rent control to most private rental units in Ontario. As of May 30, 2017, landlords in Ontario cannot increase the rent for most private rental units each year (with a few exceptions) by more than the amount set by the Government of Ontario’s Rent Increase Guideline. The guideline is published by August 31 every year and sets the maximum percentage that rent can be increased in the following calendar year. In 2017, the maximum amount that rent can be increased is 1.5% of the current rent. For 2018: the rent increase guideline is 1.8 % for increases between January 1 and December 31, 2018.” – Garth
SUCKS to be a landlord.
Hey Garth
I agree with some of the other comments your rent vs buy calculations does not make any sense. Nothing factored in for price appreciation yet you factor a 8 percent return on investment in your calculation. It really should be zero if they are sitting on cash and don’t investment as its not in their nature to do so.
As well their monthly payments will create equity if prices remain stable.
But the place Mark.
Garth’s analysis of the numbers has failed to mention that part of the increased costs of your monthly payments are more then offset by the reduction in loan balance owing.
Buy not but
#12 and #24
There is no division of net family property unless you are legally married. Common law does not give rise to a division of net family property where a relationship breaks down. A simple co- tenancy agreement between them will ensure each gets back their own capital if the relationship goes south. They can agree to share the profits and losses or divide them according to ownership.
Nobody lives their life in a 700-foot condo. Get a grip. Move to Gananoque and buy a nice house. – Garth
I had Lillooet, BC as my first choice but maybe I should reconsider.
MF
Casting Call
Carnival Cruise Lines is auditioning for Rex Murphy’s futuristic production of Come From Away 2.0. Applicants must be proficient with the ugly stick and able to tread water 24/7.
Understudy
Stephen Poloz announced in the House that he would reset the Bank of Canada rate to 0% in accordance with Sharia law. He was sheckled from the gallery and suffered a cerebral confusion. Suitable replacement must know the rigging. No gaffers need apply.
Two bedrooms in 73o sq.ft?! That’s barbaric! How did we get to such a place in Canada? However such units are favoured by foreign investors so I wouldn’t count on a big price depreciation.
I agree with post 3, this guy is going to buy the unit anyway.
Hi Garth:
I have been following your blog for some time, but I’m still confused about this rent versus buy thing.
Yours, Perplexed.
P.S. Did someone hit me on the head?
That’s bigger than my first SFH.
Don’t think I would take the chance right now as we teeter on the precipice. Could be a hellvamuchytrouble.
Mark and his deflation theory should purchase that condo.$500,000 for a condo in that area is dirt cheap, and prices will only go higher.
Mark and his deflation theory should also put his name only in the mortgage, and use only his share of their savings, which is 95%, as collateral.
Mark and his deflation theory should also put the condo only in his wife’s name, because that means that Mark respects a woman’s rights to own property. 100 years ago the wives of colonial settlers from England were not allowed to own property. It’s time to advance gender equality in Canada./sarc.
“To rent the same unit in Telegram Mews costs $2,500 to $2,800 (several are currently on the market), even bigger, with two parking spots.”
W
What is the benefit of increasing your housing costs by 30% to live in the exactly the same place? Some twisted revenge? – Garth
—-
Year of the dog is awesome!
“To rent the same unit in Telegram Mews costs $2,500 to $2,800 (several are currently on the market), even bigger, with two parking spots.”
Who pays that to live in the worst city in Canada for men and for those who want a social life rather than a poor imitation of Nobility aristocracy?
Ever since Prince Harry dated that actress from Avenue Road, everyone in Toronto thinks that Toronto is like the Victorian era of England…NOT!
#14 MF Capital gains expectations? On a condo? In a normal market (which Toronto hasn’t been for a while), buildings depreciate while land appreciates. Condos, which are mostly building, typically depreciate. Sensible landlords buy them for the cash flow. Is there some reason you believe that Toronto is fundamentally different in terms of basic economics? Look at how many condos are currently being built in Toronto – Mark Twain’s line of “they aren’t making any more of it” certainly doesn’t apply to condos. Expecting capital appreciation long term for condos is optimistic in the extreme.
Run the scenarios if Mark doesn’t buy. 1. capital appreciation. Mark kicks himself but no big effect since he’s been living where he wants to live and saving well. 2. stagnation. Mark is saving 30% more each month. 3. big decreases. Mark can move into his “forever house” in five-ten years – unlike if he is trapped underwater on his mortgage. Seems to me the biggest downside risk is buying and scenario 3 occurring.
#23
For 2018 in BC it’s 4%
I’m not sure what’s wrong with young people in Toronto. Why would someone want to borrow half a million dollars (in a rising interest rate environment) with someone they don’t plan to marry.
Every person I know renting a condo built in the last couple of years in Toronto said they would never buy it because it’s so poorly built and the amenities in the building are crap.
PS Happy B-20 Day!
Hahaha
LL Is f#@ked
Can’t boot you
Can’t sell his depreciating “asset”, its gonna sit on the market
Stay there, do nothing, stop talking to him, keep banking cash, watch the carnage. In 6 months he will beg u to buy in the beehive at 525k . Say no.
Not all condos are an unwise purchase , do your homework ,current status report is a must(legal liens) including the latest reserve study(fund monies there) which gives clues to future fees and repairs ,last years board meetings minutes also good read and last are all inspections Fire (yearly),roof anchors for window washers(insurance liability) up to date,visit the property management company and look over other buildings they manage are they clean and kept up. All this is not humanly possible to do in 24 hours before buying or does the LL know trouble is coming like a special assessment for a repair. I could go on from personal experience .The new condo act may cleanup
What will allow you the most restful sleep, Mark? Do that! Simple.
Mark, using Garth’s magical math your 420k will grow to 10M in 40 years. Even if she splits, your half is more than enough.
Stop investing and spend whatever you earn from now on and enjoy life. The fools here think they are immortal and that ecstacy only comes in a pill. I could give more comprehensive advice if you can post a pic of your GF.
“This is just a stupid, costly, pointless, ill-timed investment made for emotional reasons. – Garth”…and marriage isn’t????
BTW, could you leave Gananoque out of this please. The last thing needed in the 1000 Islands is more Toronto riff raff. There’s the “Valley Rats” invading every summer and that’s more than enough.
Health Canada has announced the immediate recall of “Mme Morneau’s morning-after pill”. The generic equivalent, “Mudder Murphy’s Expectorant” will continue to be sold by BristleMyersSquid. Authorities in Placentia, NFLD continue to recommend a space heater.
Mark, if someone else hasn’t already secured the unit Garth mentioned in his post, call that landlord today. Move, tell your old LL that you want to help to facilitate the sale of the unit you are currently occupying. One trusts that you are not in some contract that will force you to stay in the old unit…..
My advice is, never purchase a condo because you do not have the control over your space that should come with ownership. Have a happy (& non-manipulative) 2018!
So this guy follow your blog “religiously”, yet learns absolutely nothing from his readings!
You were too nice to answer his ridiculous “clueless” questions on RE.
“SUCKS to be a landlord.” — Henny Penny
Well, it’s a good thing some people/companies exist to offer shelter to those not willing or able to buy.
Rent vs. Own … either way, it costs money to live somewhere. But if you are looking for capital appreciation, better stick to the balanced portfolio at this time.
Everyone should know these rules. Especially in this day and age. Look up your Province.
http://www.cbc.ca/news/canada/4-myths-about-common-law-relationships-1.1315129
Like #50 Linda said: Grab the nice unit Garth found, give your notice to your landlord and tell him he is now free to rent it out at a new price.
I wasn’t to post but this comment startled me:
http://www.greaterfool.ca/2017/12/30/carnac-the-magnificent/#comment-563378
“100,000’s of acres of productive farmland now technically restricted from agricultural use. The Greenbelt designation is about to grow again, taking in nearly all of Simcoe County. Everything that is within the Niagara Escarpment Designation is included in the Greenbelt.”
….
As I say take everything our elite rulers say and flip it 180 degrees to make sense. Every NGO, ‘charity’ , govt, and I mean every one bleats about “Sustainability” and Food Security”.
Took me 2 sec to recall this one I can find tons:
(http://www.trudeaufoundation.ca/en/about/our-targeted-areas-inquiry)
So why are they taking over rural and farm land and making it a no-go zone? (All famines are man-made anyway).
Elites never ever give us food. Case in point, the Aboriginal Ministry budget is well over 8 Billion dollars – plus all the usual benefits the few million members of this community receive.
They need food – but it’s coming via donations. Not one cent of 8b of our taxes passed on in food.
http://www.cbc.ca/news/canada/windsor/how-giant-vegetables-from-leamington-are-helping-indigenous-communities-in-need-1.4452239
So don’t even ask what these so-called helpers are doing overseas….just dont’t
The condo is an obvious ‘don’t buy’.
When did this blog get so pro-marriage? It’s an archaic concept. I’ve been with my SO for over a decade and (gasp!) we share investment accounts as well as a long term investment strategy. That’s more than I can say for my divorced friends of the same age.
OMG, don’t be IDIOTS! Just let the cards fall where they may, but if you have to move, MOVE! Just tell landlord you’re not interested. Full stop. Move along. It’s a crappy condo with all the crappy crap that comes with it. I would not touch a condo with a 100000000 foot pole in TO or Van.
Not to mention the market! B20, rising interest rates, foreign buyer’s tax, peak credit, peak prices, I really DON’T see a huge upside here, do you?
I’m totally with Garth on this….
“Better yet, stay where you are and call the owner’s bluff.”
Many ‘landlords/ladies’ are unprofessional – the name says it all!)…A good tenant is worth their weight in gold (as is a good landlord or property management firm)….if you and your sweetheart are taking good care of the place and pay your rent on time….no reasonable landlord will be looking to replace you in a hurry!
There are many facets of property ownership you might want to consider:
1. Living common law and owning mutual property will quickly put you in the legal category of ‘married’ whether you actually decide to be or not – the law will decide for you!
“Under the Ontario Family Law Act, two parties can be declared common law spouses after they’ve cohabitated for at least three years. Once you’re cohabitating for at least three years, a court can declare your relationship a common law marriage. This holds you to many of the same standards as a married couple.” http://www.haber-lawyer.com
2. Ontario’s large condo fees allow for a contingency fee to be accumulated (unlike BC where contingency funds are inadequate and condo owners are responsible for periodic ‘special assessments’ .) In Ontario, expect condo fees to rise rapidly to account for ongoing building maintenance and repairs. Again, something you will have little control over.
3. As a renter, you can enjoy your apartment as it is, make reasonable upgrades if you have a proper working relationship with the landlord and generally ‘enjoy ‘ your space. As an owner, after the joy of ‘bragging rights’ wears off, you will cringe in a different way when the fridge starts leaking, the drains clog up, and the washing machine grinds to a halt.
All of a sudden what gave you pleasure (your rental space) will start to give you pain (your new condo) …..try it and see!
$750.00 per sq. ft. for air space. That makes the bathroom valued at $37,500. LOL Completely nuts. Why would anyone ever think of trapping themselves into something like that at the worst possible time. Rent.
My wife and I love being renters during these uncertain times. We sold our Van suburb McMansion a year and a half ago and found a great rental. I give some credit to this blog for making us realize a house can be a ball and chain and homeownership isn’t everything. If it makes sense we will buy back in in a few years but no fomo here.
#55 TurnerNation on 01.01.18 at 7:01 pm
I wasn’t to post but this comment startled me:
http://www.greaterfool.ca/2017/12/30/carnac-the-magnificent/#comment-563378
“100,000’s of acres of productive farmland now technically restricted from agricultural use. The Greenbelt designation is about to grow again, taking in nearly all of Simcoe County. Everything that is within the Niagara Escarpment Designation is included in the Greenbelt.”
….
As I say take everything our elite rulers say and flip it 180 degrees to make sense. Every NGO, ‘charity’ , govt, and I mean every one bleats about “Sustainability” and Food Security”.
Took me 2 sec to recall this one I can find tons:
(http://www.trudeaufoundation.ca/en/about/our-targeted-areas-inquiry)
So why are they taking over rural and farm land and making it a no-go zone? (All famines are man-made anyway).
—
same reason family farms were replaced with corporate farms- if the elite ever have to relinquish the money scam, they will have food, water and energy to control the serfs
Haven’t been doing much on the Pink Snow front ,but one entry that caught my eye was this place in West Vancouver.
It’s a heavy hitter for sure ,but they were probably surprised that their assessment was rolled back 8% or roughly 3/4 of a million.
As I said ,I haven’t done that many in the last week but haven’t seen much of difference between the amount of increases versus decreases in assessments…
M43AZ
https://www.bcassessment.ca/Property/Info/QTAwMDAyOTE4Tg==
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So B20 will drop demand, rates are heading higher. What is the outlook for new units on the market in the near future?
Personally not looking downtown, but where I have been looking, the new units are finally going to hit the market in 2018/19. I know the Realtors always talk about a ‘supply’ problem, but I think this may be an issue going forwards as well. I am looking forwards to see how prices are effected locally when these new units come up for resale once they are closed on.
In Mark’s case it probably doesn’t make much difference he likely didn’t sign a cohabitation agreement so he’s stuck with common law either way. Lot’s of kids think they are avoiding the consequences of marriage by just living together but if you don’t have a cohabitation agreement that just isn’t so. You’ve got 6 months to make up your mind and then the court decides for you.
2018 Prediction
Almost everyone will continue to believe just whatever they want to believe which is mostly whatever they currently believe. People will continue to look for views that support their current views (confirmation bias). With the internet, everyone will find plenty of “evidence” for their current beliefs, no matter how wrong they are.
In an effort to convince others that their view is correct, almost all commenters on almost every subject will continue to present one-sided arguments in almost all cases.
Those who want to rent will continue to rent.
Those who want to buy a house will mostly find a way.
Very few home owners will sell and rent.
Most people will continue their victim mentality.
Winners will mostly continue to win. Losers, well…
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Oops I did not mean to put dot com after my name. I’m a bit rusty after my self-imposed hiatus.
Yikes, I did it again.
The Landlord is realizing that B20 is going to hammer mortgages like Thor on benzedrine.
Dont buy anything.
It will drop in value.
You work too hard for your money to watch it melt away in 2018.
Short term moving pain for financial gain.
Find another landlord that would love stable renters like you two.
To me, the bigger question is why in God’s name would anyone at any age aspire to own a condo, much less pay well over half a million bucks for one. What quality of life do you really have?
Mark.. tell your landlord to go stuff himself.
Assessment Watch 2018
O.k this time I will go the other way for the sake of variety.
This is one of my long term patients hanging onto a luxury condo in Richmond.
As you can see by my notes, has been trying to sell since at least November 2016.
Started off trying to get a little bit more than 2016 assessment and in the 6 months or so a comp sold for 3million taking a 300k hit after expenses.
These guys assessment just went up 15% or roughly 600k ,but they already couldn’t find anyone to make them whole after expenses.
Everything is going up for these guys except the chances of getting out of this one without being financially torpedoed.
If someone realtor recommends to a potential buyer that they come in with an over asking offer I will hunt them down and force them to eat some of my cooking…
No one deserves that…
M43AZ
102-5131 Brighouse Way, Richmond paid 3.02 asking 3.58
Nov 27:$3,988,000
Feb 9: $3,880,000
Change: – 108000.00 -3%
http://www.rew.ca/properties/R2137308/102-5131-brighouse-way-richmond-bc
https://www.zolo.ca/richmond-real-estate/5131-brighouse-way/102
https://www.bcassessment.ca/Property/Info/RDAwMDBLMkI3VA==
the foolishness of sharing a deed and a mortgage with someone you’re afraid to marry
………………………………………………………………………..
Been there, done that and got burn’t
This might be one of the few situations where buying is actually better than renting. Despite assuming a generous 8% return, Garth neglected to add in the amount going to principal (roughly half). Add that in as a guaranteed $1000-1300/mo in equity and renting/buying is probably a wash at best.
Brad Lamb math! – Garth
Mark
Listen to Garth…..he has no reason to give you fake data.
Numbers are clear…..keep renting…..use the “head on your shoulders”
You are being forced to make a decision that you may not realize is a threat by your Landlord….Don’t trust the Landlord…..”many landlords are now in the corner thanks to new rental laws.
Just look how many condos are for sale and for rent…..many many more than is normal for this time of year. This is not an accident…..panic is quietly setting in.
It always happens when greedy people have to act before the downturn.
Remember the Ontario Premier had made new changes in rent review to help people like you because landlords were becoming extremely greedy and trying to screw tenants like you.
Be grateful for the Ontario Premier listening to the people’s pain.
Chill out and wait…..this is Garth’s specialty.
He has nothing to gain for his advise to you.
Say thank you.
You might want to look at ZOLO, average condo price is under pressure, I dont see a rebound because of b20.
Also if you look at 2bd condo, sales are down -27%, active listings up 45%, this is indicating a buyer’s market, I would be in NO rush to buy.
Plenty of choice here on the market, days on the market increasing to almost 27. No need to panic.
The ratio of sold/active list is getting worse..1:3 ratio, this is not balanced market, but a buyers market with pressure on price because, there is not enough demand to sell all inventory.
WIth b20 knocking out 10-20% of buyers, this should impact bottom end of market the most (condos), those with semi and detach already have a lot equity. The bottom end of market cannot afford that segment anyway, so condos should get the blow.
Where did I say anything about renting ‘forever’? This is just a stupid, costly, pointless, ill-timed investment made for emotional reasons. – Garth
Well you didn’t but you pulled out rent vs own math that wasn’t complete. And you have been advocating for folks to rent for at least 8 years..is there ever a time to buy, and if not now – after a 30 percent decline , then when?
This couple is spending 30k a year, 300k over ten, on rent. They can easily afford to buy.
The market you keep telling us is down. Money is historically cheap – insanely cheap. The economy is hot. Immigration is rolling. If now is not a good time to buy, when is? Is there some event that we should be waiting on or will you always be advocating that we pay rent forever and put the difference in ETFs? If so I’d love to see how you feel that looks over 30 years. Me, I see no reason why someone that has savings and can easily afford a sfh in the city to blow 30k a year on rent for the 500 per month upside.
So go ahead and spent $750 per foot for a box with $800 a month in structural costs that you could rent for far less. Be fulfilled. – Garth
#10 MF on 01.01.18 at 3:56 pm
Same age as me and same circumstances.
Renting is garbage. These “landlords” are garbage too. I’d rather pay a mortgage than further enrich the pockets of another human being. Spending 50% plus of your income for their benefit is a waste.
===================================
You think paying a mortgage isn’t enriching the pockets of another human being? You haven’t seen my portfolio obviously. But hey, fill your boots. You’ll show those landlords!
If the only renters you meet seem to be poorer maybe you just need to start meeting more successful people. Surrounding yourself with loser attitudes tends to rub off on a person, as you’re making abundantly apparent.
Soooooo much supply… tell the LL to stuff it. Moving sucks, but the pain is so temporary. For $2600 you can rent an amazing space… my place is a hair less and Ive got 1100sq ft + a terrace. Condo fees go up by whatever amount is decided each year – rent increases haven’t topped 2% in ages.
For the record, I own RE just not where I live.
Not married, eh?
Run to the nearest exit before you buy property with your squeeze…and only then if you are married.
Rent and nothing but rent until then. If the relationship turns south one day you may save some of your assets accordingly.
Flop, having a little walk in the ‘hood today and noticed this sold:
https://www.bcassessment.ca/Property/Info/QTAwMDAwME1IQw==
Don’t know the sales price, yet, but note it was last flipped in Sept 2016 for $2.9 million, after selling in Jan 2016 for $2.4 million. The current, 2017 assessed is $2.7 million. Likely sold for less than that. We’ll see…
2993 W 21st – oh and they’re renovating it too! :-)
#74 – bad math indeed.
guaranteed equity? dont walk, RUN from that advice. If you’ve never experienced a real RE crash then you have no idea what actually happens… “equity” is the difference between debt + assets; if that asset value drops, so does the equity – but never the debt.
special assessments
inexperienced property management
poor construction
rising property taxes
all avoidable when you rent
Garth is right
Mark schooled again. Sorry couldn’t resist
Happy deplorable new year
Do Not Purchase
Your LL is a slime ball
He knows your a potential sucker on his hook and he is saying anything to haul you in.
Believe me, your slime ball LL would have put this up on MLS a few months ago to the highest bidder. He now knows you are the last potential Greater Fool
You are holding all the cards. Call his bluff.
You have money and credit and this slime ball LL is working you to get it.
Just picture your LL’s conversation if he hauled you in. He’d be sipping margaritas laughing at the sucker who bailed him out.
Even with cold reality of numbers staring at our protagonist Mark, the emotions and FOMO are more than he can stand. He. Must. Own. No surrender. No retreat.
With a girl, no less — one that he can’t even put a ring on. Good luck with all that.
“The unit is a two-bedder, two-bath jammed into 730 feet”
———————–
He’s got to be kidding……..right ? Only a moron would live in something like that.
More accurately it should be described as a condo with 4 closets and a kitchen.
My wife and I rent a 630′ one bedroom and one bathroom condo, and that’s the lower limit of functional space for a couple who want to enjoy basic human rights when it comes to shelter.
Please buy it, I love to see idiots get burned. Especially when she moves out on you because she found a man with more money and brains. Trust me, she’s looking…….they always are.
I’d never be in such a stupid situation, but if an owner threatened me like that, I’d walk out of the room, NOT think about giving them 6 figures.
I agree 100% with your arguments, Garth. Well stated.
-A.
Ignore all the replies involving math. Go straight to Garth’s last point: sharing a deed and a mortgage with someone you aren’t prepared to marry. Getting into agreements is easy. Getting out of them keeps lawyers employed by the dozens and can take years. It isn’t painless. You ready for that?
Unless dropping a lot of cash on the Toronto condo, leveraging up for it is not worth it.
The BC scam Assessment Authority here in BC has dropped their scam numbers.
Everyone knows about the situation in Vancouver.
My SFD in Metro Vancouver was flat around 2% / 25kish appreciation (complete garbage house from the 70’s ready to fall over)
I will fill in the blanks on the places that Garth rarely talks about…#4 in my mind just behind Vancouver, Toronto, Victoria: Kelowna.
My SFD in Kelowna up 19% up 138K in dollar y/y.
750K for an average house now in Kelowna…but don’t be fooled by this….shifts are underway. My SFD cost 420k just 3 years ago…this is debt leveraging people…and a financial event has never NOT happened after such a run up in debt…get the slip and slide ready…it is coming…probably not tomorrow..but it is coming.
For anyone wanting to listen to what I have been saying is that these assessed values came from 2016-until about the summer of 2017…then a death cross was noted in the data shortly nearing the end of summer (in-line with the tweak in interest rates)…this trend is being closely watched, especially coming into the new year / spring market with b20…
You have the B-20 and rising rates….AND rental demand has dropped substantially in Kelowna in the last half of the year (sales dollar volumes up big from completed projects – and guess what? vacant places and or/rentals are coming on…now fill some and voila rental demand dropping). At least in the last several months…another trend being watched closely…because I have skin in the game.
This might be one of the few situations where buying is actually better than renting. Despite assuming a generous 8% return, Garth neglected to add in the amount going to principal (roughly half). Add that in as a guaranteed $1000-1300/mo in equity and renting/buying is probably a wash at best.
………….
yup. BUT, factors for price depreciation r quite looming
timing real estate markets is not easy. I’d definitely not buy in this environment. Wait it out, Mark….
Population of Kelowna about 124k
Also remember, Kelowna came in with the highest pace of second mortgage growth in all of Canada this past year…
Average price of an SFD in Kelowna is 750k ish…watch out for NDP rules…they are either going to blanket the province or just Victoria…which could further cook Kelowna.
I have data showing foreign buyers scooping 80% of two condo tower projects in Kelowna….is the NDP going to address the pre-sale loop hole that they were all over CClark about?
How does Kelowna compare with London, ON? or Hamilton?
Slowest time of the year and there are about 1500 SFDs in Calgary (all neighborhoods) for 550k or less.
Calgary population = 1.26 million…slightly bigger than Kelowna…there might even be a few more jobs there ;)
Yes, the boomers all want either Victoria or Kelowna, since Vancouver is not affordable…Kelowna has been negative-12ish for the past few weeks with snow galore…could not wait to get back to Vancouver…broke my back shoveling…almost bought a snowblower inland….Victoria positive +3…easy choice…but Victoria is cooked and Kelowna is pretty much cooked.
Do your due diligence on these areas…surrounding areas are coming in at a way more affordable price without the recent Langley, BC style traffic jams from everyone crowding these places and pumping everything.
@ Yorkville Renter
All correct downsides to renting, but doesn’t change the math. Garth didn’t make any assumptions regarding Property values rising or falling and neither did I.
The only point is that paying down a 400-500k mortgage will bank you about 12k per year in paying down the principal. That’s what’s missing from Garth’s breakdown, and it changes the analysis significantly.
Paying off debt with earned income (while forking out big bucks on interest) is paying off debt. It’s not creating wealth. – Garth
Garth: Plus, are you gonna marry that girl, or what?
Mark: No marriage on the horizon.
“but darling don’t cling to me
I’ll soon be out-of-sight”
https://www.youtube.com/watch?v=3kzeCjluvxU
LS pm
Flop, having a little walk in the ‘hood today and noticed this sold:
https://www.bcassessment.ca/Property/Info/QTAwMDAwME1IQw==
Don’t know the sales price, yet, but note it was last flipped in Sept 2016 for $2.9 million, after selling in Jan 2016 for $2.4 million. The current, 2017 assessed is $2.7 million. Likely sold for less than that. We’ll see…
2993 W 21st – oh and they’re renovating it too! :-)
///////////////
Thanks LS,I will put it in the Waiting for Clearance folder.
Just had a quick look they might have been asking 3.18 but even that is not the greatest result.
Will try to find out the sold date and then stick it in the oven for 3 to 4 months.
Some homeowners are still unaware that they have been gathered up by the real estate pygmies and placed in a large pot to cook slowly…
M43AZ
TheSecretCode: $750K for an average house now in Kelowna…but don’t be fooled by this….shifts are underway. My SFD cost $420K just 3 years ago…this is debt leveraging people…and a financial event has never NOT happened after such a run up in debt…get the slip and slide ready…it is coming…probably not tomorrow..but it is coming.
I’m thinking tomorrow.
#78 BillyBob on 01.01.18 at 8:14 pm
“If the only renters you meet seem to be poorer maybe you just need to start meeting more successful people. Surrounding yourself with loser attitudes tends to rub off on a person, as you’re making abundantly apparent.”
-Actually, this has nothing to do with my attitude. When a house appreciates 400% in a few years it has everything to do with failed central bank policy, hormones, and real estate market manipulation. As someone who has had failure in his own life, and who had to leave the country to succeed, you above all should display humility. That’s the mark of real success from what I have observed from those who are the most successful. It’s also a quality I try to display myself.
Anyways,
You are correct about surrounding yourself with those who are successful. I should have mentioned that I come across people from all walks of life since I work with the public. In general, the older renters who have been renting for decades (remember I’m early 30’s) seem less secure and less wealthy than the owners. After a 15 year bull run in housing that is what you would expect.
MF
People who speak to the distance from previous rate peaks know not of which they speak.
http://www.risktopia.com/2017/06/canadian-housing-rates-are-far-from.html
#77 Mattl on 01.01.18 at 8:14 pm
…If now is not a good time to buy, when is?
——
It’s usually a good time to buy if you plan to stay put for five years and total holding costs (mortgage payments, including principal repayment, maintenance, fees, taxes, closing costs, etc.) are less than total renting costs. The gain you stand to make in equity, if the price does not go down, is your reward for the risk of holding and managing an illiquid physical asset that requires upkeep.
This has been the golden rule since forever. That is why rentals exist. If it were not cheaper to own than to rent, nobody in their right mind would buy something and then rent it out to someone else. That would be a losing proposition, akin to buying apples for five dollars a pound and selling them for three.
Anywhere in the world where accommodation is rented, at any time in history, you can be pretty sure that situation was made possible by the fact that it was cheaper to buy than to rent. The only situation where this rule is not followed is at the top of a bubble.
It’s not the girl, not the condo, not even the deal… it’s the lust to be downtown… in the people pit… and have a stake where the “action” is.
Neon bulbs and boxes in the Big Smoke, no thanks. Crystal clear Wolf Moon tonight, btw.
Is it my imagination or is GT getting a little unsure of his predictions of CDN real estate? He’s sticking to his many years of bubble theory; but only for the the short term. He doesn’t have enough faith in the mills to be patient and hang on to their savings. Should we all sit down and talk to one of them? They know not what they do…..
For my 2 cents worth, we have owned, sold our 1st home and rented thereafter for over 15 years. Now, have saved to buy a home for our retirement. Sounds a little crazy, but, if you can afford a reasonably priced home, buy and enjoy it. We, haven’t found that home as yet, but, this being 2018, a year of surprises, who knows. I have waited 4 years, that is how patient I am. But, life is too short to wonder if and when. Buying that special place will eventually happen… Anyhow, hope everyone had a lovely warm New Years …. a little chilly here in B.C.
online – Kingdom Economics- The Future is Now
Eight [8] Cities where Real Estate Prices [values] drop in 2018 – Vancouver possible drop by 50% by end of 2018
Just ’cause I clicked ‘submit’ twice by mistake now it won’t let me submit. I’ll try again.
O darn I goofed! 98/99
#72 For Those About to Flop
Close to $4 million for a condo? In Richmond? Anyone who denies foreign ownership is a very problem needs to look no further.
Mark your LL is offering you a discount of about 3.6% to save him/her paying a RE commission of 5%. This is not a deal. $520,000 is the deal. Say that you want first refusal if he ever gets a buyer.
Alternatively if you are going to buy then find a better location. I know these building and they are a future slum clearance. Tiny units and too many for the location. Plus very smoggy in the summer. Not good for long term health. Riddled with full time AirB&B units that the owners can no longer run profitably, a lot of your units will hit the market in 2018 as current owners want out. This area is the Regent Park of 2030.
Look for a real deal and not a fake one. But as many posters have commented I think you will buy it due to all the self-justification in your email.
Why is this bird not good enough to marry then?
I wasn’t expect a post today, Garth.
Anyway, Happy New Year, everyone!
—
Mark is at a crossroads. The greater fools’ last hurrah is about to take place. I’d follow Garth’s advice, Mark.
Robert Frost
The Road Not Taken
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I–
I took the one less traveled by,
And that has made all the difference.
Expecting, sorry.
Garth: I agree with your assessment and the way you explained it was classy, and not demeaning to this fellow starting out and at the crux of a big decision. The crazy-ass market puts people in a vulnerable and tricky position, and it is good to explain things in a clear but classy way, not putting salt in the wounds…. well done…
I guess nobody makes around $40,000 a year anymore.GTA,YVR,Kelowna and Victoria average wage must be over $80,000 a year to buy or even rent.No poor people in these cities.
Poor girl…..probably nice….but getting heartlessly, thoughtlessly bashed for her potential to go full digger on this ‘poor guy’. Keep your pants on fellas…..the common law in Ontario is something like two months cohabitation…..either way….if they live together for even a short period of time she’s got her greedy hooks into him anyway….according to the law. That works both ways…..until there’s children, wherein he loses all rights to property and income in favour of the conniving witch and her soul sucking offspring. The law is quite clear guys…..keep it in your pants….or……yer f*8ked. However….if you can deal with the law as it’s written there are avenues into a woman’s heart that have been proven effective. Women….being the gushing bladders of free flowing hormones that they are, respond to certain things….like a commitment to their well being and that of the children. Keep the woman happy….in a very primordial hypocampus sort of way…..give her everything and keep her happy in the nest…..she’ll get it all anyway in court….so why stress?
Re: #96 45north on 01.01.18 at 10:52 pm
TheSecretCode: $750K for an average house now in Kelowna…but don’t be fooled by this….shifts are underway. My SFD cost $420K just 3 years ago…this is debt leveraging people…and a financial event has never NOT happened after such a run up in debt…get the slip and slide ready…it is coming…probably not tomorrow..but it is coming.
I’m thinking tomorrow.
++++++++++++++++++++++++++++
One explanation: drug money, when one gang makes $3 billion selling pot in one year in BC alone, where do you expect it to go. Just like Gangcouver.
I went to Kelowna’s Lake City Casino down by the waterfront last year, and who do I see there walking with security, a member of one of those gangs, all buddy buddy with his arm around him. So I ask the dealer there about it and he tells me that they “used” to run the casino but don’t anymore, the Liberals at the time had to take it back because the optics weren’t good. R-i-i-i-ght.
And they tell me casinos aren’t launderers, right.
If you did purchase and forgo the income you make investing in the market or tfsa’s at least you wouldn’t have to worry about someone selling or raising your rent. Buying a condo with leverage has been an excellent investment over the past few decades in Canada, where is the evidence of financing a home being so bad?
For me I prefer to have been a “fool” for the last 20 years. Watching my leveraged investments of residential real estate in sfh and condos consistently appreciate. Maybe in another 10 years the rent and invest crowd will pull ahead but I have a roof over my head and guaranteed housing options for my kids. And over the long term I think real estate is safe(based on history and inflation)
#14 MF on 01.01.18 at 4:22 pm
Nobody lives their life in a 700-foot condo. Get a grip. Move to Gananoque and buy a nice house. – Garth
——————————–
You first, Garth.
Funny these older people who expect younger people to move to places with no jobs. And do what exactly?
Create one. – Garth
#78 BillyBob on 01.01.18 at 8:14 pm
“If the only renters you meet seem to be poorer maybe you just need to start meeting more successful people. Surrounding yourself with loser attitudes tends to rub off on a person, as you’re making abundantly apparent.”
-Actually, this has nothing to do with my attitude. When a house appreciates 400% in a few years it has everything to do with failed central bank policy, hormones, and real estate market manipulation. As someone who has had failure in his own life, and who had to leave the country to succeed, you above all should display humility. That’s the mark of real success from what I have observed from those who are the most successful. It’s also a quality I try to display myself.
Anyways,
You are correct about surrounding yourself with those who are successful. I should have mentioned that I come across people from all walks of life since I work with the public. In general, the older renters who have been renting for decades (remember I’m early 30’s) seem less secure and less wealthy than the owners. After a 15 year bull run in housing that is what you would expect.
MF
====================================
Meh. A pretty weak attempt at a dig. I’ve learned far more from failures than successes, and I’ve had my share of both. And if I’m considered a failure, I guess the generally accepted measures of success being health, wealth, and happiness have changed. I suppose it’s now how many Instagram followers has or whatnot. I’m ok with that.
A key difference between you and me is that you whine a lot, and I actually took action. Another one is that you view the world through a Canadian lens, I look at it through a worldwide one.
If you think houses will go up 400% again in a few years, why are you struggling with your decision? Just buy already. You’ll be secure and wealthy, according to your own words.
#43 SimplyPut7 on 01.01.18 at 5:52 pm
Every person I know renting a condo built in the last couple of years in Toronto said they would never buy it because it’s so poorly built and the amenities in the building are crap.
——————————–
This.
I think the best advice Garth has given on this blog is the following : if you’re going to buy something, buy some dirt (i.e. SFD or a freehold townhouse).
If you absolutely must own an apartment for some weird religious reason, go with one of the 1960s era buildings (in Toronto anyway). Not as flashy, and the exterior will be ugly, but they’re built to last.
Do you really want to buy a glass condo?
https://nowtoronto.com/news/ecoholic/toronto-s-glass-condos-burning-thermal-holes-in-the-sky/
But there’s another glaring reality: many glass towers and other hastily built condos are falling apart faster than the old concrete giants – springing leaks, facing high repair bills and prompting lawsuits.
They’re also greenhouse-gas-emitting giant thermal holes. Anyone living in a glass box knows that all those windows have them cranking the thermostat in the winter to keep warm and blasting the AC in summer to keep from getting heat stroke.
It’s one thing for owners to pad brick-and-mortar houses with extra insulation and to clad old concrete tower exteriors with foam insulation boards, à la Toronto’s Tower Renewal Project. But how the hell do we deal with all the floor-to-ceiling-glass -condo towers already crowding the skyline?
“I don’t really have a solid answer for that,” says Jim Baxter, director of the city’s Environment and Energy Division and one of the authors of the TransformTO report. “The new condos are basically floor-to-ceiling windows, and windows are large thermal holes. So you have entire sides of buildings that are open to the outside.”
Upgrading things like furnaces and lights and adding insulated blinds and smart thermostats that detect when occupants are home all chip away at carbon footprints, but energy is still pouring out of those thermal holes – a problem that will only get worse as insulating argon gas between the panels leaks out.
#105 AGuyInVancouver on 01.02.18 at 1:05 am
#72 For Those About to Flop
Close to $4 million for a condo? In Richmond? Anyone who denies foreign ownership is a very problem needs to look no further.
———————————–
I don’t really consider Richmond, BC, or most of the Vancouver area municipalities for that matter, to be a part of Canada. So let them sell $4 million glass boxes to each other. Have fun. Don’t come crying when the earthquake strikes.
#93 Bad Math
That is one of the dumbest things I’ve read on this blog. Banking equity ? LMFAO. You’re paying off debt dude, not creating wealth.
You take money from your bank, you pay the mortgage, and only a portion of that mortgage is equity. So your wealth decreases due to interest . You’re house has to appreciate a minimum amount to cover your cost of ownership, otherwise you end up losing more than a renter.
#93 Bad Math on 01.01.18 at 9:59 pm
@ Yorkville Renter
All correct downsides to renting, but doesn’t change the math. Garth didn’t make any assumptions regarding Property values rising or falling and neither did I.
The only point is that paying down a 400-500k mortgage will bank you about 12k per year in paying down the principal. That’s what’s missing from Garth’s breakdown, and it changes the analysis significantly.
Paying off debt with earned income (while forking out big bucks on interest) is paying off debt. It’s not creating wealth. – Garth
———-
Looks like I have learned one thing from this blog and that is to read all posts before I post a question. Therefore you can ignore my last post as you seem to have provid ed your answer to another similar.
Your answer however belies the fact that the “ debt pay down” is towards an asset that will always have a value regardless of market conditions and an asset that has demonstrated a most reliable upward trajectory in nominal price at the very least time over long periods of time.
Buying your dwelling is a recipe for at least some success for those without the well healed financial market acumen of people like you.
I remember my first real estate transaction well. Made the classic mistake of trusting the seller, real estate agent, banker, and lawyer, big mistake. All were nice people but it turned out they only wanted my money. Who would have thought?
#3 I’m stupid.
————————————————————
Quite the contrary. Evil genius!
A thought for the long new year ahead:
By the time ordinary millennials and the rest of Canadians take our first coffee break this morning, the Boomer Elites will already have taken in more money than most of us will get for all of 2018.
https://www.thestar.com/business/opinion/2018/01/02/top-100-ceo-compensation-hits-2489-an-hour.html
This self-serving, corrupt and totally unjustified mostly Boomer oligarchy has gamed the system for their own benefit for far too long. This must be stopped.
The disruptions promised by T2 are absolutely essential, and only the beginning.
Get ready for economic fairness.
Boomers, climb aboard the change.
Or be run over by it.
As mentioned, this is a comparison of 100 people to the rest of the population. Meaningless. And there’s absolutely nothing stopping you from becoming one of the corporate leaders. Maybe that would be a better use of your time at 7:30 am on the first business day of a new year than posting your envious drivel here. – Garth
Better U.
The Xmas edition of the Economist has an excellent read on nationalism, and Canada is featured prominently and positively.
https://www.economist.com/news/christmas-specials/21732704-nationalism-not-fading-away-it-not-clear-where-it-heading-whither
Also , for the tea-baggers, an article on the link between tax revolts and the Scottish diaspora. I made that one up ;-)
@#73 Portia
the foolishness of sharing a deed and a mortgage with someone you’re afraid to marry
………………………………………………………………………..
Been there, done that and got burn’t
++++++
Well, at least you got to keep the car…….
Re: #9 Russ on 01.01.18 at 3:49 pm
Jimmy is still a force to be reckoned with and a champion Furst Poaster.
“Shortly before 11 a.m. today, the average top-earning CEO in Canada will have already earned — in less than one work day — what the average worker makes in an entire year, says a new study….
“Turns out, those corporate executives had a stellar year. Their average annual compensation hit a record $10.4 million — that’s more than 200 times an average worker’s salary of $49,738, says the report.
“It also found that top CEOs got a big pay hike. Their average compensation rose eight per cent compared to 2015, whereas an average worker’s salary rose by just 0.5 per cent….”
http://www.cbc.ca/news/business/ceo-income-pay-canadian-worker-1.4462496
Leave it to the CBC to compare the top 100 corporate leaders to 36.29 million other people, of whom only 16 million are working. Meaningless clickbait. – Garth
Re: #14 MF on 01.01.18 at 4:22 pm
Facts are facts and the fact is in the heart of most American cities you could buy “ten” 2 bedroom condos for the price of “one” in Toronto and real estate in America is looking to rollover this year. If home prices drop in the GTA rent will also fall albeit with a lag period of time.
#47 Bit Trader
“I could give more comprehensive advice if you can post a pic of your GF.”
——————————————————————–
That would be a nice start to 2018.
Or not.
Well its been almost two weeks since a driver speeding across the Burrard St Bridge in Vancouver cut his Audi R8 V10 in half and expired in a flaming wreck.
Estimated speed…… 140mph….in Downtown Van.
Almost snuffed out the life of two innocent bystanders in a cab that he hit. One paralysed the other critical.
The silence of the media is deafening.
No name….. nothing.
Yet , within hours we have heard all the personal details about a BC float plane pilot dead in an Australian plane crash.
All the personal details of father of two young girls found dead on Christmas Day in Victoria.
Yet in the “drinking and driving Roadblock season” an expensive car involved in a high speed, flaming , fatal car crash…….crickets…..?
#114 Shawn on 01.02.18 at 5:46 am
For me I prefer to have been a “fool” for the last 20 years. Watching my leveraged investments of residential real estate in sfh and condos consistently appreciate.
Congratulations. When interest rates go from 5-6% to 0% (mortgage rates roughly 7.5% to ~2%) and the population leverages up, how can you possibly NOT win that trade. You’d have to buy real estate in the worst locations in Canada to not to win. You’re completely discounting an alternate history where interest rates did not plunge. Don’t confuse outcomes with strategy. The Canadian real estate bubble is if nothing else an excellent example of how you can spot a bubble, but you can’t predict how long it will go on.
#10 MF on 01.01.18 at 3:56 pm
“……There is no correction and b20 will amount to hot air and nothing else.”
We shall see……
“Interest rates will rise at a glacial pace.”
But rise they will. People with debt (and that would be most) will feel the pain of these rises and be forced to course-correct downward on quality of life. That’s what debt does.
“Everyone (governments and individuals around the world) are in total debt. The central banks are aware and therefore terrified. The “plan” is to resist significant rate raises for as long as possible so the “inflation” they hope for reduces the burden of the debt.”
There is and has been far too much money sloshing around the system for 18+ years, ergo the cheapest rates in the history of mankind.
Going forward, the elephantine factor affecting coming rate rises is that AI and AUTOMATION, in addition to the losses of so many quality jobs (and that transformational trend continues) is inexorably leading to a borrower base of far inferior quality. Lenders will only take risks on quality borrowers now. This is no longer the age of “irrational exuberance”. Lenders will simply find other means to satisfy balance sheet requirements. Fees, fees and more fees as well as other banking “products” spring to mind.
More return on lower cash volumes is becoming the norm.
“It’s all a joke and anyone who does the right thing and resists debt and “saves” is a loser.”
Low rates have been an economic tragedy for the past 18+ years – but you’re 100% wrong about “savers”. That much-reviled group will see the value and power of their wealth increase exponentially – as will those who invest wisely.
Make no mistake: those with no debt and accumulated wealth (for instance…….T2 and Morneau) are firmly at the top of the economic pyramid.
Garth is 100 percent correct on this one . Don’t get bullied into this deal .
#128 Gravy Train on 01.02.18 at 8:20 am
“Shortly before 11 a.m. today, the average top-earning CEO in Canada will have already earned — in less than one work day — what the average worker makes in an entire year, says a new study….
Leave it to the CBC to compare the top 100 corporate leaders to 36.29 million other people, of whom only 16 million are working. Meaningless clickbait. – Garth
********
Are the shareholders complaining? Nein! … I mean No!
And how many of those 20.29 million are still suckling at momma’s teats, literally and figuratively.
#130 dharma bum on 01.02.18 at 8:25 am
#47 Bit Trader
“I could give more comprehensive advice if you can post a pic of your GF.”
——————————————————————–
That would be a nice start to 2018.
Or not.
**********
That’s jest rude, but Garth can probably always use some fresh pics. I was alluding to a comprehensive assessment of any suspicious moles.
Addendum
Any other “marks” out there should be prepared to take full body shots.
#124 Millennial Realist on 01.02.18 at 7:31 am
A thought for the long new year ahead:
By the time ordinary millennials and the rest of Canadians take our first coffee break this morning, the Boomer Elites will already have taken in more money than most of us will get for all of 2018.
https://www.thestar.com/business/opinion/2018/01/02/top-100-ceo-compensation-hits-2489-an-hour.html
This self-serving, corrupt and totally unjustified mostly Boomer oligarchy has gamed the system for their own benefit for far too long. This must be stopped.
The disruptions promised by T2 are absolutely essential, and only the beginning.
Get ready for economic fairness.
Boomers, climb aboard the change.
Or be run over by it.
As mentioned, this is a comparison of 100 people to the rest of the population. Meaningless. And there’s absolutely nothing stopping you from becoming one of the corporate leaders. Maybe that would be a better use of your time at 7:30 am on the first business day of a new year than posting your envious drivel here. – Garth
————————————
You’re in Kevin O’Leary territory here. Remember when he said it was “fantastic” that the 400 Forbes wealthiest people had more wealth than the bottom half of the world’s entire population (3.5 billion people)?
It would be fine if their obscene salaries were a reward for the risk they take, but really what risk is the CEO of a publicly-traded company taking? Even when they fail they still get bonuses in the millions.
http://www.nbcnews.com/id/21549196/ns/business-us_business/t/ex-merrill-lynch-ceo-walk-out-m/#.WkueDrCDNEY
O’Neal, the second-highest paid Wall Street CEO in 2006, retired from Merrill Lynch & Co. Inc. on Tuesday, almost a week after the investment bank reported its largest-ever quarterly loss. The $2.24 billion loss was precipitated by a $7.9 billion third-quarter writedown, as the company revalued assets backed by shaky mortgages. O’Neal’s ouster was expected after the loss.
O’Neal left with a $131.4 million equity package of stock, options, restricted shares and restricted units. His restricted stock and restricted stock units will continue to vest on their original schedules, the company said.
He also has retirement benefits worth $24.7 million, while his deferred compensation stands at $5.4 million, according to the company. He will be entitled to an office and an executive assistant for up to three years.
Merrill Lynch, as you may recall, was several weeks away from bankruptcy when it had to go begging Bank of America to buy it.
One more thing : are one ever allowed to criticize the mega-rich without the “jealousy/envy” canard? Or are they beyond reproach? Is this the Tudor era where criticizing the elite is against the law?
When you have to reference the CEO of a major bank conglomerate in the world’s biggest economy to support a CBC story on Canadian CEOs, you’ve already lost. Go back to work. – Garth
#137 Howard on 01.02.18 at 10:03 am
Sorry this was in response to Garth’s response to #124, not to #137 itself.
Well, you know – not that I’m saying that purchasing is the right decision, by any means…
Living in a small space can be great. No need to go and purchase TONS of stuff, and fill your triple garage with junk, your basement with junk, all purchased on “buy now, do not pay til 2019”.
No need for lots of clothes. No need for lots of furniture. Close the door, go away for a month traveling (or, camping in Algonquin, for those Toronto-ites).
No need for a ton of kitchen gadgets. COSTCO “industrial sized” products, of which you’ll only need 10% of the box.
No need for two cars. Actually, no need for 1 car. That’ll save something like 1,000.00 month right there going 2 cars to 0. Rent one if you need it – less hassle.
The average HOUSE in the Netherlands is something just like over 1,000 sq. ft. and these people enjoy life.
Anyway, something to think about.
Mark, I am in the exact same position as you. My landlord has generously offered to privately sell me the one-bedroom condo that I have been renting, before he lists it publicly in a few months. Wanna know how much he generously offered to sell it to me to for? 600k! One bedroom. No parking.
Thanks to Garth and the blog dogs, my landlord is not getting a single penny of my investment portfolio, which just topped 400k. Of that, 115k is in a locked-in work pension, the rest is in accessible funds. This morning I topped up my TFSA and I will continue to save 2.5k/month in 2018. If my landlord successfully sells his unit for 600k+, I will move into an apartment or another condo. The plan is to not touch my investment portfolio until it starts generating enough dividends to live off of. I will happily pay rent of 2k/month or less while I continue to build wealth over the next 10 years.
That said, I do enjoy condo living and I understand why you are leaning towards buying your unit. If money was no object (and I mean no object), I would buy a luxury condo unit. It’s nice having a gym, pool, concierge, not having to shovel etc. It’s nice turning the key in the door and jet-setting for the airport. But that’s for wealthy people with money to burn, not people like you and me who are still building our wealth. There will always be the threat of special assessments and rising maintenance costs in even the most well managed of buildings. As others have mentioned, the novelty of owning will wear off eventually. Something is telling me that my mid-30s are not the time for owning a condo. Maybe when I’m in my 60s/70s and could benefit from the amenities and community of some well-managed buildings, but not now.
Stay strong in 2018!
“Van City Blues” ….. sorry Bruce
Well I got a job and tried to put my money away
But I got taxes that no honest man can pay
So I drew what I had from the Canada Trust
And I bought us two tickets on that Van City bus
Everything dies baby that’s a fact
But maybe everything that dies someday comes back
Put your lipstick on fix your hair up pretty and meet me tonight in Vancouver City
Down here it’s just winners and losers and don’t get caught on the wrong side of that line
Now our luck may have died and our love may be cold but with you forever I’ll stay
We’re goin’ out where the sands turnin’ to oil so put on your stockin’s cause the nights gettin’ cold and maybe everything dies
That’s a fact but maybe everything that dies someday comes back
DELETED
#138 Howard on 01.02.18 at 10:03 am
When you have to reference the CEO of a major bank conglomerate in the world’s biggest economy to support a CBC story on Canadian CEOs, you’ve already lost. Go back to work. – Garth
——————————–
Well is it really much different in Canada, aside from scale?
You attacked the Eau Bros’ tax reforms because they went after small business owners and doctors, among others. One of the bases of your attack was that these groups take significant risk in reaching professional success and wealth and should be allowed to keep more of it. On that I agree with you completely.
However I see no risk whatsoever for CEOs of large established corporations. What are they risking? Their reputations? Who cares? They are not materially risking anything yet are paid obscenely. It’s all well and good to say that’s just how the world is (although it wasn’t, from post-WW2 to the 1980s), but it’s still a fair subject for debate.
Let’s debate things that matter to the lives of most people. What 100 corporate guys earn ain’t one of them. – Garth
Mark inna tricky sitch
GF ya gotta ditch
jest be mr milko
dont take it inuendo
Not only should you not buy, you can find a way better rent situation than that. And forget Telegram Mews, the city planning / traffic on that road is a gongshow of epic proportions.
On to more general matters…now that OSFI B-20 is in, I’m hearing this am that the feds might extend amortisation length for mortgages, undoing all the great work Flaherty started.
I knew the Feds would concoct something to mitigate the political risk they see from B-20. Falling house prices will not be good for their chances in 2019.
GTA median price is going to get MURDERED this year. April -> December last year was fun, but now the chaos starts. A number of us on here have been waiting for this for a long, long time.
Jerome Powell is in at the Fed in a few weeks and US keeps raising rates. Time for BoC to get on the train.
Also, since it’s 2018, I look foreward to more rants from Happy Housing, updates from Smoking Man from California, and lots of Mark Deflation Theory!!
I love it:
When you have to reference the CEO of a major bank conglomerate in the world’s biggest economy to support a CBC story on Canadian CEOs, you’ve already lost. Go back to work. – Garth
————————–
Know you place serfs!
Go back to work. Thinking is not your domain/strenght, leave it to T2 and wild bill.
P.S. It seems this is selective socialism, excluding the truly wealthy from fair taxation, but call plumbers and doctors rich and tax them to death, that is fair.
You have no idea what level of tax Canadian CEOs pay, only what they earn. Envy much? – Garth
Been reading this blog for about a year now and there were lotsmof folks waiting for a large correction in the GTA to allow them to enter the market. By all accounts here, that correction has come and sfh are selling at 30% discounts off the peak. So I’m curious, has anyone bought into the market?
Market down, economy up and you can write a mortage easily at under 3%. Tons of inventory to pick through.
So can someone please explain to me why now is a bad time to buy a sfh (not a condo) in the gta if they plan to live in it and can afford it? Seems like a perfect time to buy. Is this a case of folks that missed the last bottom about to miss it again, waiting for the perfect time to buy? So what if it goes down by 10 percent more, or rent saves you 500 bucks. Cheap money, strong economy and a large correction should equal a great opportunity to buy a nice family home.
You have no idea what level of tax Canadian CEOs pay, only what they earn. Envy much? – Garth
——————————–
I do, apparently it is LOWER than mine:
http://www.cbc.ca/news/business/stock-option-deduction-tax-rate-1.4030442
Tax breaks for top earning CEOs
A recent study by the Centre for Policy Alternatives reported that in 2011, about 99 per cent of the benefits from the stock option deduction went to Canada’s top 10 per cent of income earners.
In a second study on CEO salaries, the organization reported that among the highest paid 100 CEOs in Canada in 2015, 75 received stock options as part of their pay package.
Top earners included Hunter Harrison, then the CEO of Canadian Pacific Railway. According to the report, he earned $2.8 million in base pay. On top of that, his stock options were worth an estimated $5.2 million.
If he had cashed them in, presumably that $5.2 million would be taxed at half the rate of his base salary.
“[CEOs] get big breaks on this,” says Macdonald.
Well, now you have a tangible incentive to stop moaning and start succeeding. – Garth
Hi- I enjoy reading this blog and often find what I think are very useful nuggets of info but I was a little disappointed by the failure in this last post to include an important number the calculations about the pros and cons of buying a condo. By my calculations over a 5 yr mortgage term $69,722 would be paid towards the principal, which works out to $1,162 per month. When you subtract that number from Garth’s $3,640 you get $2,478, less than it would cost to rent ($2,600). So it seems to me like all these calculations should have led to the opposite conclusion! What gives??
Of course over time the deal would keep getting sweeter as more and more of your monthly payment goes towards the principal. Even if in the long run prices only stayed level with inflation you would still end up way ahead (or so it seems to me…).
Am I missing something here?
Repaying debt from taxable income is not building new wealth. – Garth
You forgot to mention the annual “fire season” formally known as summertime in the OK and Caribou regions.
Well, now you have a tangible incentive to stop moaning and start succeeding. – Garth
——————-
A proof that small businesses, doctors, laywers and plumbers in Canada are just serfs who do not deserve attention, i.e. they are treated as inferior to CEOs.
CEOs, Bill buddies are the brightest and smartest.
Sure.
Back to work, serf. We’re watching you. – Garth
#149 Mattl
____________
RE market in GTA is dead in 2018, its just waiting for its executioners to press the switch. And boy, its a line up to pull that switch, from Mr. Debt, Mr. Rates, Mr. B20 and so on.
Absolutely nothing to sustain this bubble (not even a strong economy and immigration) as real wages are not moving up but down and immigration does not increase housing prices, its a myth.
If anyone is planning in buying a SFH in GTA, its still way too early. The real price drops have not really hit home yet in the City of Toronto and GTA. It always starts from suburbs (Newmarket, Richmond Hill) and moves down to the waterfront. Lots of time, the party has not even begun.
1) U.S 10-year interest rates are starting the year up at 2.46%. They could easily break above 3.00% by April.
Canadian banks must be itching to raise their rates.
2) B-20
It’s looks to me like the worst time to be buying and the best time to be selling.
#151 Babou on 01.02.18 at 11:46 am
Even if in the long run prices only stayed level with inflation you would still end up way ahead (or so it seems to me…).
Am I missing something here?
Repaying debt from taxable income is not building new wealth. – Garth
**********
Mark already has more than enough in the kitty to build new wealth that he may not ever need.
Trust me on that one.
Hunter
#151 Babou: yes you are missing something: include property tax and condo fees. Not to mention special assignments, i.e. forced maintenance costs (sooner or later this will hit you).
BREAKING: Canadian Dollar hits 80 U.S. Cents
Asterix1- if real price drops haven’t hit the gta then why all the posts the last three months about price drops, deals being reneged on and sellers getting killed? Are you saying that the 30 percent drops are not real?
And with all due respect this is a comment section that has been calling for a crash since 2011. What are the odds this same group finds the bottom…they missed it last time.
It seems pretty ridiculous that you have to continue arguing the point that paying down a mortgage is not building wealth, Garth.
To simplify things for people – when you’re paying off a mortgage on a primary residence; that isn’t building wealth. You can’t make money on your primary residence unless you have a magical rental suite that nets more than your mortgage and related fees. Very uncommon scenario in the best of markets. Having an asset when it’s paid off is all well and good, but it’s still not going to inherently produce wealth for you (unless you get a cheap HELOC that you then invest with and make gains, or rent out space when it’s all paid off. People aren’t usually willing to share space with relative strangers in their own home after paying it off when they’re 60).
Housing over the long term usually tracks inflation and windfall flips have already become way less likely. You will also ALWAYS need a roof over your head that will cost you money. Getting out of a mortgage when you’re 60 and have to consider paying exorbitant fees at a home in 10 years or so will quickly evaporate any money you earn on a primary home sale. Millennials will soon find this fact apparent, provided they have any engagement at all with their parents.
I could spend months illuminating folks about the benefits of building or renovating a cheap bungalow in a reasonable area and making it close to net zero; however it seems most people my age are either chasing the dream of a 6 figure job in TO or equivalent – or burying themselves under a massive mortgage for a palacial home that they don’t use half of; and won’t be able to climb the stairs when they’re older. Having lived both of those scenarios and being relatively successful at both; I will tell you that being successful relative to the rest of the Canadian population is not a goal worth striving for in that context. We should expect better of ourselves.
Thank you for the quick response Garth- but paying rent is not building wealth either. We can’t escape paying rent but in the long run if we buy a home more and more of that “lost” money comes back to us. AND you have the potential to make money if prices go up (or yes lose it). I often think of that expression “you need money to make money”. Of course borrowing money is risky but if there is ever a time for risk it’s while you’re young and have some time to recover or wait out a bad investment. For young people starting out (myself included) the only way to access large amounts of cash is to buy property. Making 10% off a million dollar loan is a hell of a lot more than making 20% off your savings of $100K…I think once you have a good sized pile of money to play with it makes a lot of sense to put it into diversified portfolios etc but at most people’s rate of saving this takes most of their lives! There has to be a better way than working your whole life inching towards some kind of “comfortable” retirement. If that is the best way then I’m not sure it’s worth it.
I think the real currency to watch is time, and the less I have of it the more it’s worth. I’m not sure many of my generation think it’s a great use of our lives to work until we retire and so far real estate has offered my best shot at bypassing twenty years of slogging away at my job. Which I like, by the way, I would just rather not have to do it.
Paying rent and investing the considerable difference does, of course, build wealth. Why would any young person buy a condo they will never live their lives in, take on big debt plus structural expenses and give up freedom? Are you nuts? – Garth
“You have no idea what level of tax Canadian CEOs pay, only what they earn. Envy much? – Garth”…but I will bet a year of my dividends that they have maxed TFSAs for them selves and everyone else in their families, no RSP to speak of and one honkin’ big 60/40 ETF portfolio.
#147 Ian on 01.02.18 at 11:31 am
Also, since it’s 2018, I look foreward to more rants from Happy Housing, updates from Smoking Man from California, and lots of Mark Deflation Theory!
………………………………………………………………..
Is that because you can not spell either? Smoking Man knows nothing about California, he is just working there now since he lost his home in Toronto. He is a multi millionaire in disguise. He just works to make it look good.
Absolutely shocking how few people here know how to do very basic math to flush out the whole rent versus buy debate.
Don’t buy the condo. There is nothing unique or valuable about it.
If you buy anything, purchase a three or four plex and live in a unit and rent the others. Preferably a house conversion in a desirable area of Toronto. Or at least have a basement suite.
Garth you can label it all you want (paying down debt is not creating wealth), but if you just type out situation A and situation B, in one of them you will still have equity from the principal paydown. It does not vanish into thin air.
Nor is it created out of debt without paydown from an external source. This is too moronic a conversation to continue. – Garth
#12 Fuzzy Camel on 01.01.18 at 4:09 pm
Here is some advice beyond the obvious Garth stated.
There is a 50/50 chance your relationship will fail. Any money you are saving up is yours for now. So if you have $100k in the bank, and she bails on you, she can’t touch it.
Now take that $100k and buy a condo together. It’s now considered a marital asset and she gets half. So your $100k just became $50k or less.
Had you rented, you wouldn’t lose a penny.
Also, if you do buy something together, match her contribution only. So if she scrounges up $50k, you only put $50k in. That way when the split comes it’s a fair split.
The men who get screwed the worst in our feminist legal system are the ones putting 50% down payments on houses with an unemployed wife who doesn’t contribute a dime to it. When it comes time to split marital assets, she gets half of the house.
People need to start using their brains and always plan for the worst. Hope for the best though
————-
Mark, don’t take the above post as a joke. If you have a good chunk saved up and it was accumulated before your GF moved in it’s safe. If you spend any of it on a common asset and you two stay together long enough to become common law, it’s gone if she bails.
Interestingly, financial stress (like fretting over a special assessment, or coming up with the monthly when one of you becomes unemployed) is the most prevalent cause of divorce.
Sounds like you both work in the private sector, and at 32ish, losing your job somewhere along the line is GOING to happen to both of you. Happened to me at 38, and I had to change careers to get a decent paying job again. Took several years to get back to what I had earned at the previous position.
My wife works in a profession that has her hearing the pain life can bring to successful couples seemingly immune from financial and marital trouble. It’s always unexpected when you’re let go. Financial stress builds quickly if the bills become hard to pay. Many rock solid couples have been reduced to ash inside of a year because everything changed upon a round of severe involuntary belt tightening. Many Men, especially young Men; never get back to where they were financially before for a multitude of reasons.
If you buy today, I hope you had previously consulted with a Lawyer to get a solid grip on your newfound and significant labilities.
Back to work, serf. We’re watching you. – Garth
————————————
Just stating the obvious (not that anyone will take notes …). Don’t kill the messenger :)
There shall also be two main sources pitting RE bulls and bears in their argumentative battle in 2018.
1. The media: Those who blindly trust the words being printed in these sacred and openly pimped scrolls. As printed media keeps declining and begging for ad revenue, the RE industry will keep pumping large sums of money to control what we read. What is truly happening and will happen in the future will keep being distorted for the masses.
2. Real research and analysis: Those who refuse to accept the status-quo being cemented by the
RE industry (banking economist, Remax and gang, brokers, developers etc..) will succeed. The winners will follow the unbiased research and analysis created by international, national and regional sources. The key to this puzzle shall remain knowledge.
Thank you Garth for being part of this puzzle in 2018 and beyond…
#140 Another Deckchair on 01.02.18 at 10:32 am
Well, you know – not that I’m saying that purchasing is the right decision, by any means…
Living in a small space can be great. No need to go and purchase TONS of stuff, and fill your triple garage with junk, your basement with junk, all purchased on “buy now, do not pay til 2019”.
No need for lots of clothes. No need for lots of furniture. Close the door, go away for a month traveling (or, camping in Algonquin, for those Toronto-ites).
No need for a ton of kitchen gadgets. COSTCO “industrial sized” products, of which you’ll only need 10% of the box.
No need for two cars. Actually, no need for 1 car. That’ll save something like 1,000.00 month right there going 2 cars to 0. Rent one if you need it – less hassle.
The average HOUSE in the Netherlands is something just like over 1,000 sq. ft. and these people enjoy life.
Anyway, something to think about
————-
Small efficient houses are great, my next place will be exactly this. Easy to build, easy to maintain, easy on taxes, easy on energy.
Small 1000sf condos for 600K are quite another scenario though. No dirt means it will depreciate in the long run. If you’re not out by the time the OPP has to chaperone your condo Corp. meetings, you’re toast.
BTW, my last car cost me $1300.00 and I got 5 years out of it.
#159 Mattl on 01.02.18 at 12:18 pm
Asterix1- if real price drops haven’t hit the gta then why all the posts the last three months about price drops, deals being reneged on and sellers getting killed? Are you saying that the 30 percent drops are not real?
And with all due respect this is a comment section that has been calling for a crash since 2011. What are the odds this same group finds the bottom…they missed it last time.
____________________________________________
My bad, I might not have explained myself properly. The price drops in GTA are real, I’m not denying that. I was just saying that this is just the start, more drops to follow. The bottom is a long way from today.
When you analyse all the relevant info out there, its just a logical conclusion. Its a “cycle”, like so many others before this one. The problem is that people believed that prices would always go up. History was easily forgotten and the RE industry did not want to be your teacher, they are your dealer!
Regarding people “missed it last time”, its hard to judge such a group since some were not even looking for a property at the time, or were not living in Canada or other reasons. The past is the past, I see the future and its not looking good for RE in GTA.
This B20 doom and gloom – isn’t it assuming that every new buyer is overextending themselves? How many were actually considering taking on the maximum mortgage that the bank is offering? How many could really afford that? If you are taking on a reasonably sized mortgage, I can’t imagine the new regs will impact the majority of buyers at all.
Nobody ever suggested the majority would be impacted. But affecting 10% would be a major market-mover. – Garth
Dear InvestorsFriend:
still hiding?
start commenting!
Happy new year!
oh …
you have started commenting already. All good now
Like reading your comments!
Maybe its reading comprehension that is the problem, not math. Nobody is arguing that paying down your mortgage creates wealth. What matters is how affordable a mortgage is relative to renting.
It’s simple – if you pay $2600 to rent, and $3600 to mortgage (incl expenses) you come out about the same because approx $1000 of the mortgage payment (in Mark’s case) is to the principal. That is incredibly basic, and Garth either unintentionally or disingenuously excluded that from his “rent vs buy” calculation.
Whether or not the market is in a bubble or whether stratas are a pain is another point entirely.
It ain’t worth it! Best to rent a spot to live as cheaply as possible and save up for something out in the sticks or wait untill after the markets have their reality check.
#172 RL – Unfortunately, I think a lot of people need pretty close to a maximum loan. If median household income is 68k and in TO and Van your average place to live costs pretty close to an even million, you are going to need every cent plus a ton of help from Mom and Dad. Even the move ups will do it. Say your starter condo doubled in price from 250 to 500k and by some miracle you paid it off, you still need a 500k loan which maxes out your average household.
#152 #92 TheSecretCode on 01.02.18 at 11:53 am
You forgot to mention the annual “fire season” formally known as summertime in the OK and Caribou regions.
I’d add First Nations land claims to that too.
#165 Karlhungus on 01.02.18 at 12:57 pm
Garth you can label it all you want (paying down debt is not creating wealth), but if you just type out situation A and situation B, in one of them you will still have equity from the principal paydown. It does not vanish into thin air.
————-
What’s the difference in costs between A and B?
Home ownership costs about 100% more than you paid for the place over a 25 year mortgage thanks to taxes, insurance, interest, maintenance, etc.
2500.00 for rent for 25 years is 750,000. That is slightly less than JUST the combined taxes, insurance, interest, maintenance etc… that come with buying a 1 million GTA shack – NOT COUNTING principal payments. These extra cost are just burning money, they do not increase your equity as they do not come off your principal. You don’t even get a roof over your head for this money like you would with rent payments.
If you borrow a mil to buy a house, and you subsequently spend a total of 2 mil getting to the end of the Mortgage; how much “equity” have you got in your house?
When Mark calls his landlords bluff, he could also simply ask the landlord to list him as an exclusion when he signs with a realtor. That way it buys Mark time to see the market conditions and still potentially buy the condo sans commission.
#175 “Maybe its reading comprehension that is the problem, not math.”
Nope, the problem is math. While I agree Garth’s calculation is a bit back of the napkin, he also didn’t include a number of costs on the other side as well including all of the transaction costs, legal costs, ongoing maintenance, special assessments, which depending on the situation could easily come out more than your $911 dollars a month going towards the principal. All that in a falling asset price and rising interest rate environment.
You need price appreciation to make it even close plain and simple.
#179 IHCTD9
2500.00 for rent for 25 years
===
How do you manage to “lock in” your rent for 25 years?
How much did you pay 10 years ago vs now?
so you work your entire life for a box in the sky?
man, go to Port St Lucie Florida, i paid $86K us for a nice condo. low fees good weather and paid for.
all this Canadian discussion is crazy, in three years will be set in the USA.
go ahead, go to work every day, i have no idea why, early bird specials are $8.99, the roast beef melts in your mouth. ….so how is the weather is Toronto? lol
#179 Real estate is just a place to live. It should not be an investment…. If you need to make an investment then may be Garth could be of assistance.
It’s an investment now, whether you like it or not. – Garth
Realtors® are NOT licensed or qualified via their training to provide investment advice.
#152 #92 TheSecretCode on 01.02.18 at 11:53 am
You forgot to mention the annual “fire season” formally known as summertime in the OK and Caribou regions.
……………………….
And you forgot to mention that “ fire season “ is choking to death season from May to August. Air quality alerts for 4 months. Kelowna was surrounded by forest fires and smoke from all four directions during “ summer “ of 2017. It gets worse every year because of the pine beetle infestation in B.C. When lightning strikes the forests of standing dead trees they go up Roman candles. Southern parts of the city of Kelowna burned to the ground in 2006. Fire hazards get worse every year and will continue until all the standing dead wood is gone, maybe another 20 or 30 years.
#183 crossbordershopper
Why?
Because, maybe a lot of Canadians don’t want to be surrounded by a lot of insufferably dumb Americans.
That’s why.
Well by not accepting that the principal will eventually be returned to the owner is like saying the property will be worth zero when you sell it, which is moronic.
I find it refreshing that InvestorsFriend has begun with some excellent posts in 2018. Though I’m not sure why he still struggles to understand and accept that the reason for the 5-year renewal is simply to defer advantage to the Canadian banking oligopoly and not to the consumer. Seems obvious.
Moving on… Recap: last year, my global team and I had succeeded in beginning the dismantling of the Saudi elite (who are just Hollywood actors), and now on to Iran. 2/3 of the population are under 30 and they are getting the message via social media that Rouhani is played by Steven Spielberg. Full biometric match on the ears and irrefutable. He even forgets to change his favourite sunglasses for both roles.
#175 Bad Math
I think Garth is tired of trying to explain this to you. We all are… I see the conceptual error you are making:
The problem is that you still believe that paying down a mortgage principal is “building equity”. It’s not. Paying down debt is not building equity (wealth), because that wealth (if any remains) is not realized until you sell. Is that clearer?
@Mark
pls factor in foreign capital. This site seems to believe the govt numbers (4%) but do a bit if research and you’ll find the true percentage of foreign buyers in TOR/VAN is about 33%.
You think all foreign capital plays by the unwritten CDN rules?? Not even close..
Theres still lots more room to grow. CDN cities are not for canadians anymore. The govt has stated they will do NOTHING about it at all so the quicker you realize that the better decision you will make!!
Cheers!
Hey Mark, if you are reading this please understand that you would be the stupidest dude in Toronto buying real estate right now.. and you are living in a city where there are many competitors for this title.. The Darwin Awards come to mind … pretty sums up your economy too. 2018 is gonna be ugly period for you hosers.. no economy worth speaking of even though you have seen growth.. it’s all fleeting and tied to a 20th Century economy.. Please save your money and rent.. even from mom.. it’s gonna be a once in a lifetime opportunity for many to get into a city where the future is bright.. but the next 5-7 years is gonna make LA’s levelling look like a blip. And 1989’s correction in Toronto.. won’t even touch the surface of how bad it’s gonna be. Worst of all worlds is how I see the Toronto economy.. even my neighbors in builder world in Central Etobicoke are gonna be cryin’ in their Bentleys at night so their wives don’t hear it. Sometimes you can’t stop stupid.. Toronto’s market proved that to me even more so than LA’s . Good luck!