Bad attitude

So Michael bought a condo. “No brainer,” he says. “All that crap on your blog is, well, crap.” And thus it became his – a one-bedder in DT 416 with a price tag of $620,000, as young Mike joined the investor class. A proud rentier. Required was 20% down and a half-million mortgage. The bank was happy to oblige.

The loan costs $2,300 a month and condo fees are $524 (for now). Insurance and property taxes chime in at $300 a month. Total overhead: $3,124. The opportunity cost of the downpayment (what it would earn if invested at 6%) is $620 a month. So the real cost of the rental condo is $3,744.

And the market rent? Well, that’s $2,600. Some investment. But Mike’s happy because, “the rent covers the mortgage and condos always go up”.

This logic is pervasive, and has been for some time. The tidal wave of speckers that’s washed over the property markets of Toronto and Vancouver is more responsible for an explosion in prices and rents than any whack of house-horny Chinese dudes.  For example, half all the new condos sold in the GTA last year went to amateur landlords, not end users. The average amount they mortgaged was just shy of 80% of the unit’s value. And the evidence is mounting a big swath of these people are bleeding bad.

For example, CIBC and Urbanation found 44% of rental-condo owners are in negative cash flow when only mortgage payments and condo fees are factored in. Once insurance, property tax and opportunity cost are added, that number is likely north of 60%. Maybe more.

Now Veritas discovered the same thing in a poll that company ran. Half of respondents admitted to losing money every month – again just from a cash flow perspective, rather than true ownership costs. The survey found only 18% of landlords actually make money, as opposed to sorta breaking even.

And this was an interesting conclusion: “House price corrections happen when there is a flood of sellers. In our opinion, the next flood will not come from a glut of new construction or even from owners, but from real estate investors and speculators.”

That’s not far-fetched, given the massive numbers of specuvestors active in the condo market and the cash half of them are hemorrhaging. Since price appreciation is the only reason condo ownership makes sense (augmented by the use of leverage), if the market levels or declines a lot will want to bail. We know from government stats that four in ten Toronto condos are not owner-occupied – a number which rises to almost 50% in delusional Vancouver.

Is condo ownership just a real bad idea?

Not entirely. If you live in one it’s pretty simple to compare the cost of owning to renting, then deciding if the premium to be an owner is worth it. Financially the answer is usually ‘no,’ given the high closing and selling costs owners face, along with escalating strata fees and city taxes. But people (especially first-timers) buy property more out of emotion than logic. Cultural myopia makes us crave real estate while social myth suggests renters are inherently less stable and make dodgy spouses. (Rule One for single, Tinderesque guys is to get a condo. “Chicks like that.”)

Anyway, as mentioned here a few times, nobody lives their full life in the same concrete box. Relationships, marriages, kids, maturity, career advancement – they all push people into property with actual dirt associated with it. That means demographics are also turning negative for condos. The majority of the downtown population is currently Millennials – the largest single cohort in the population – who are aging rapidly. Leading-edge moisters are now just shy of 40 years old. The trip from mom’s basement to a condo to the grave is apparently in full progress.

Well, back to Mikey. A month ago he had $125,000 in cash and no real estate. Now he has no cash, a condo losing $12,000 a year and $500,000 in debt.  And he thinks this is an improvement.

Multiply him by untold thousands of others and tell me, how does this end well?

147 comments ↓

#1 Paddy on 10.30.19 at 4:01 pm

It really just boils down to running the numbers and seeing if it makes sense….and this clearly doesn’t make sense. Good ol’ “myopic millennials”….

#2 Camille on 10.30.19 at 4:08 pm

Start by thinking that its an apartment. Then think if you want to own it. Many people in big cities live almost all their entire healthy lives in apartment and condos. Its not that complicated. But as an investment I agree it looks really bad.

#3 Ron on 10.30.19 at 4:11 pm

Mikey’s gonna do just fine cuz in Canada there’s always a greater fool!

#4 joblo on 10.30.19 at 4:14 pm

Hey Alberta, Kenney mulls creating Alberta Pension Plan
Youngin dont wanna pay for wrinkly
Adios CPP
AIMCO can manage the 40B

Next up Bye Bye RCMP

#5 Andrewski on 10.30.19 at 4:15 pm

Yet again, financial illiteracy rears it’s ugly head!

#6 PastThePeak on 10.30.19 at 4:16 pm

Always interesting to read comments to the tune of “interest rates are low, and will remain low for decades” (how else could someone convince themselves to take a $1M mortgage for the next 25+ years). This would be an example of recency bias that Garth talks about.

It is true that CB’s dropped rates to the floor, left them there for about 8 years, and then found they couldn’t raise them without causing the economy to choke. So down then will go again.

However, it is extremely naive to think that this situation will remain static for decades. The world is awash in debt, and it is growing faster than the global economy. All of this debt must find a buyer – not just new debt, but the rollover of existing debt.

There is no telling the point at which bond purchasers start to say, at gov’t auctions, “nah…I’ll need some more return before I purchase that crap”. And so interest rates will rise.

Or if no buyer, then it falls to the CB to print money to financialize the debt. Possibly even worse.

Governments NEED inflation (deflation will make their debt burden grow larger in real terms). Governments will GET inflation. They have tried the usual policy tools but still not much (outside of asset bubbles). But make no mistake – they WILL get inflation as the debt burden rises, because they MUST.

Borrow accordingly…

#7 Rico on 10.30.19 at 4:20 pm

Pretty hard to rent when you have a dog, especially a reasonably large one.
I would rather own and have a dog than not.

#8 marcus on 10.30.19 at 4:27 pm

I think that if a real examination of the IQ of Canadians was performed it would compare very poorly to the Canadian IQ of 100 years ago. People are getting dumber by the day.

#9 Shawn Allen on 10.30.19 at 4:32 pm

Condo Investments are Like Long Bond Investments?

Apparently, these days, no one buys either one for income.

It’s a strange world.

If long bonds can have negative yields, then why not condos?

#10 Ron on 10.30.19 at 4:33 pm

#6 PastThePeak on 10.30.19 at 4:16 pm

Governments NEED inflation (deflation will make their debt burden grow larger in real terms). Governments will GET inflation. They have tried the usual policy tools but still not much (outside of asset bubbles). But make no mistake – they WILL get inflation as the debt burden rises, because they MUST.

———————————–

Where is this inflation going to come from? There is no catalyst for it:

-technology
-globalization
-renewable energy
-peak population
-women in the workforce

are all deflationary.

Bond traders are betting we’ll never see inflation (outside of investment assets) in our lifetime.

#11 Bad attitude | LoginBookkeeping on 10.30.19 at 4:45 pm

[…] Source […]

#12 WelcometoSlurrey on 10.30.19 at 4:46 pm

As always GT, you make great logic and sense. However, Vancouver and Toronto don’t make logic and snese. Prices have only gone up since the inception of this blog…..and dramatically. YVR residents are still confident as ever in real estate, I don’t see this changing until interest rates change, which have continued to stay low and are predicted to stay low in the long run. Can’t call this recency bias since home prices have been escalating rapidly since 2003 ….. so nothing but rising prices for the last 16 years. Your real estate predictions make sense for the rest of Canada, just not the two major markets. Appreciate the daily advice, but as Mike stated, predictions on YVR/TO real estate have been crap here.

2010 new detached home in Slurrey =600- 700 K
2019 = 1 mill +

Don’t know how many renters here could have gained that much equity by renting a place and investing.

Going back nine years is meaningless to young people investing today. – Garth

#13 High on houses on 10.30.19 at 4:48 pm

Unfortunate our man Michael can’t buy a starter home, or a bachelor apartment and just enjoy living in something he can tinker with and paint in manly tones. Rather, housing has to be an investment that ‘will’ appreciate 10% per annum.

Housing has become an investment (speculation?) rather than a place to live. Given the threshold to get into real estate – one has to be delusional to purchase. You have to count on the resell windfall! Rent and buy a lotto ticket instead.

#14 MF on 10.30.19 at 4:50 pm

Pfft

We’ve read about the supposed condo glut for 5 years now and what has the price of condos done? Yeah exactly.

It’s not only that people believe in price appreciation continuing (it will) it’s that we millennials are getting older. Garth mentioned this in the post. How long are people supposed to be spending huge sums of money on rent, or, being at the mercy of some idiot landlord? Might be okay at 25 but not 35 with a family.

Add to the mix that the jig is up for the central banks. Everyone is aware rates are going nowhere because they can’t. The word is out. No matter how much Poloz jawbones about debt he still manages to talk about rate cuts.

Good move Michael. Congrats.

MF

#15 Mike on 10.30.19 at 4:54 pm

I’ve mentioned this before here. Live in Calgary. Divorced in 2008. Bought a condo so I could walk to work in downtown. Great neighborhood with an awesome vibe to it. Close to all amenities. Paid $325,000 in 2008. Today, I’d be lucky to get $265,000. Not complaining as its paid for and rented now. But things don’t always go as planned.

Best of luck to Michael. I hope it works out for him.

#16 CBo on 10.30.19 at 4:56 pm

Meh, anti RE vitriol. 3 ways of gaining wealth in RE:
Appreciation
Building equity
Positive monthly cash flow
2/3 don’t really work at $1000 psf, today’s asking price. But if you picked up something 5-7 years ago at 500-600 psf, the bets a safe one.
If the purpose of the post is to deter today’s investor, you’re spot on. If you want to call out those who lived in a box and now rent it out to today’s moister, you can’t argue that the long term annuity stream is a bad one. Full of risk, just as well as any ETF strategy.
And many lucky lottery winning boomers/empty nesters are downsizing and picking up 1M 2 bedder after selling their 1.8M PR. I see it everyday. Many have dogs. The amount of dog walkers tells you how accommodating a building or neighbourhood is to accepting poochies.
Woof.

#17 Dave on 10.30.19 at 4:59 pm

DELETED

#18 Stan Brooks on 10.30.19 at 5:02 pm

2CELLOS – Oblivion (Piazzolla)
https://www.youtube.com/watch?v=D8KmjzQs0x4

“Oblivion is the secret of eternal youth. We only grow old because of memory. We forget too little” (Erich Maria Remarque)

Blessed are you who are poor, for yours is the kingdom of God.

Amen.

#19 Figure it Out on 10.30.19 at 5:22 pm

What’s the assumed appreciation on the condo?

When the down payment is compared to an opportunity cost, that’s the growth of a portfolio consisting of interest, dividends, and Capital Gains, right?

Seems only fair to pencil an assumed capital gain in comparison. Is it an implied zero?

#20 Randy on 10.30.19 at 5:27 pm

What`s a mortgage….

#21 Shame On You Facebook on 10.30.19 at 5:31 pm

SAN FRANCISCO (AP) — Twitter is banning all political advertising from its service, saying social media companies give advertisers an unfair advantage in proliferating highly targeted, misleading messages.

Facebook has taken fire since it disclosed earlier in October that it will not fact-check ads by politicians or their campaigns, which could allow them to lie freely. CEO Mark Zuckerberg told Congress last week that politicians have the right to free speech on Facebook.

#22 FreeBird on 10.30.19 at 5:33 pm

I’ll just repeat the quote I used yesterday.

Be careful following the masses. Sometimes the M is silent. -Unknown

Mike and some (many) other Mills in a few years when financial reality hits home?

https://m.youtube.com/watch?v=eX9BXEYcEF4

#23 Renter's Revenge! on 10.30.19 at 5:47 pm

#10 Ron on 10.30.19 at 4:33 pm
Where is this inflation going to come from? There is no catalyst for it:
-technology
-globalization
-renewable energy
-peak population
-women in the workforce
are all deflationary.

============================

I understand the first four, but how are women in the workforce deflationary?

#24 CJohnC on 10.30.19 at 5:55 pm

#20 Randy

If that’s a serious question then google it. You obviously can use a computer

#25 Doug t on 10.30.19 at 5:57 pm

Math is hard for some people

#26 The Wet One on 10.30.19 at 6:09 pm

Stupid is strong these days.

More evidence of same.

So it goes…

#27 the ryguy on 10.30.19 at 6:10 pm

$524/month in fees for a 1 bedroom condo? Wow! Is that insanely high or is it just me? Maybe there is a ton of amenities..still thats nuts. I haven’t owned a condo for over a decade but I remember my fees not so slowly creeping up atleast 2x a year..yeesh. Wonder what those fees will be in 3 years.

#28 Lost...but not leased on 10.30.19 at 6:11 pm

Condos are the Real Estate equivalent of fractional reserve banking meets Tulip mania.

Many got sucked in and look out !!!

#29 Randy on 10.30.19 at 6:11 pm

#24 CJohnC
—————————–
Wish that I had a mortgage…….

Just kidding

just kiddin…

#30 Cottingham a bargain on 10.30.19 at 6:13 pm

As always Garth , your rental condo math above conveniently obfuscates the fact that the mortgage payment , in this case significant , is also significantly reducing the principal owing. This is an important aspect to the investor class buying these things and to some , the reason they are buying them .

After all if ‘ opportunity cost ‘ is being factored in to your analysis , then so too should the fact that the condo will be discharged of mortgage over the amortization period .

#31 Smartalox on 10.30.19 at 6:13 pm

Welcome to Slurrey @ #12:

I started renting and investing in 2010. Still renting the same place in 2019.

My family’s cash flow has been very positive, averaging $6000/month, invested mostly in tax-advantaged. or tax-deferring accounts.

We have easily outpaced the gains that you’ve supposed on that ‘detached home in Slurrey’ and all within the same time frame, without accumulating any debt, or encountering hour-long commutes. All while still being able to enjoy some excellent vacations and life experiences along the way.

#32 Tater on 10.30.19 at 6:16 pm

#144 Sail Away on 10.30.19 at 4:35 pm
#130 Tater on 10.30.19 at 1:26 pm
#121 Sail Away

—————————-
Effective people are not without their flaws, Tater.

The tweet is settled. We’ll see what happens with Solar City and the Thailand tweet lawsuit. Neither will affect his companies or his visions.

Don’t miss the forest for the trees. Henry Ford did a lot of crazy and totally socially unacceptable things as well.

—————————————-

Effective corporate leaders run profitable companies. Elon has never run a profitable, public company.

The 420 tweet is far from settled, as Tesla will be fighting a lawsuit about it for the next couple of years. Liability to Musk and Tesla is easily in the billions. The Solarcity suit also has billions in liability attached to it. The diver suit will be an 8 figure payout from Musk’s pocket.

So very effective at making an ass of himself while incinerating investor capital!

#33 RWZM on 10.30.19 at 6:17 pm

“Going back nine years is meaningless to young people investing today. – Garth”

Personally, 9 years ago I was 25 with a down payment. Now I’m 34 with a lot more money and less of a down-payment. I’m still staring at the same decision, but older and worse-off.

Anyway, as to your main point: the rent is $2600 and it costs him $3744, you say. Let’s assume you’re right about the opportunity cost and there’s zero appreciation on the condo (not consonant with the last 40 years but OK).

He’s not actually losing the difference because there’s equity accumulating in the property. Even with zero appreciation, the worst he’s doing to himself is putting a bunch of money in a low-interest bank account. The most he’s doing is insuring himself against further nuttery.

If all the speculators sell due to their negative cash flow, it wouldn’t logically drive the cost of owning down below the rent. But the rent is completely out of control, and as per the above, building up equity kind of counts for something, so… I’m not holding my breath.

The only reason to actually eschew buying is higher rates and a correction (or staying in a rent-controlled place), which we all keep believing in, but continues not to materialize. The Fed cut again. The “historical” interest rates are worthless–we have about 100 years of meaningful data, a huge spike due to a global war that will never happen again, and no records of countries emerging from the gravity well of low rates.

It seems like it was different this time, and that there was good reason to think so all along.

#34 Tater on 10.30.19 at 6:19 pm

#23 Renter’s Revenge! on 10.30.19 at 5:47 pm
#10 Ron on 10.30.19 at 4:33 pm
Where is this inflation going to come from? There is no catalyst for it:
-technology
-globalization
-renewable energy
-peak population
-women in the workforce
are all deflationary.

============================

I understand the first four, but how are women in the workforce deflationary?

—————————————

An increased ratio of working people to non working is deflationary as workers produce more than they consume.

BIS has a great paper on the demographic tie in to deflation here: https://www.bis.org/publ/work722.pdf

#35 JSS on 10.30.19 at 6:19 pm

#4 joblo on 10.30.19 at 4:14 pm
Hey Alberta, Kenney mulls creating Alberta Pension Plan
Youngin dont wanna pay for wrinkly
Adios CPP
AIMCO can manage the 40B

Next up Bye Bye RCMP

===

umm… what Alberta Pension Plan?
Is this a fabricated lie?

Anyways, i like the CPP

#36 Capt. Serious on 10.30.19 at 6:21 pm

On the plus side there might be some great condo deals in the future.
Bon chance Michael.

#37 Ron on 10.30.19 at 6:25 pm

#23 Renter’s Revenge:

This is probably the main reason why real wages haven’t budged in a generation.

When women entered the work force en masse, they effectively doubled the supply of labor. It’s the reason why every family needs two breadwinners today when there only needed one in the old days.

#38 crossbordershopper on 10.30.19 at 6:27 pm

in the usa he could easily buy a business put the 20% down, on the purchase price and net about $120k return, there is no reason why this guy cant make 100% annual return on his leveraged investment.
there are lots of business you can buy in the usa with sba loan, with 20% down, at 3x cash flow or cheaper, stable business etc, and taxes either through a straight C corporation or S pass through structure,
canadians are happy with negative returns, maybe its the weather effecting their brains.
my strategy is straight cash , real cash in your account, not this funny money, negative cash flow for years and hope some clown 5 years down give you what $800K for this condo. the new guy who buys it off you might get 3K a month rent in 5 years, (rent control) etc. either way, still negative cash flow for the new owner, or the old owner, negative cash flow playing hot potato with a condo in the sky. who is going to own it in the end.
i think the usa is the only place for business to operate and low taxes, Canada doesnt even compare.
and big mortgage how do they sleep at night, knowing if everything goes well they will loose money, and how do you do this for tax purposes, you think the cra will even allow a guranteed loss forever, with no chance of profit, how do you argue that you are a rental business, you are for sure going to make money, no reasonal expectation of profit, contractual revenue and contractual expenses, its fixed, its either you loose a little or a lot thats your two options

#39 Smoking Man on 10.30.19 at 6:31 pm

Not shocked.. go team T2

https://www.thepostmillennial.com/u-s-business-sentiments-towards-canada-hit-two-year-low/

#40 Tom on 10.30.19 at 6:36 pm

Principal pay down is $1140/mo (and increases over time due to amortization) so it turns out buying is $600 cheaper to renting. And that’s not even factoring in capital appreciation (which even at 2% per year to pace inflation makes buying make even more sense).

Moister math. Good luck with that. – Garth

#41 Cottingham a bargain on 10.30.19 at 6:38 pm

Condo math above corrected by the real people walking into sales offices buying these things below:

2300 a month for mortgage at an estimated rate of 2.4%
means 1300 a month is principle pay down .

Therefore mortgage carrying cost 1000 per month plus524 for maintenance and 300 for taxes leaves 476 a month as a return on 120k down or about 4.5%.

Plus of course the continual upward price appreciation which seems to continue unabated .

Just saying the way street looks at it

#42 Tom on 10.30.19 at 6:38 pm

My bad wrong numbers. They end up being equal, but not including capital appreciation..

#43 D on 10.30.19 at 6:41 pm

@Stan Brooks from yesterday:

***My doctor scaled back his practice long time ago at much better times stressing on long-longevity, i.e. working longer years but with less load and stress and paying less taxes***

Yeah. I’m a 40-year-old physician who’s made exactly that calculus over the past few months: work less, so I can continue working longer. I’ve met enough patients who retired and claimed to be “bored”, and seen even evidence that working a certain amount is good for you, that I could see going for a long time as long as I pace myself, instead of breaking myself trying to retire at 55.

Here in the rural Maritimes the local emergency departments close sometimes, for lack of a doctor. It makes the news, and people are upset, and i could help fill the holes, but I won’t. Nope, I won’t bust my hump any more than is pleasant and fun for me personally, not when I look at what they “pay” me and realize I take home 46% of that. The 50% taxation psychological threshold.is real.

#44 HH on 10.30.19 at 6:42 pm

In BC owners get grants on their property taxes. This does not apply to owner/investors. They get no grant. If you are over 65 the grant is fairly substantial at 51%. My brother in Manitoba pays three times what BC owners pay for the same style of condo.

#45 BobC on 10.30.19 at 6:44 pm

I had $4mm in both commercial real estate and personal home in 2009. EVERYBODY was buying any real estate they could get a loan for. If you could fog a mirror you got the loan.
Then I got the shock of my life. Wife was pushing 50, kids were grown adults and she went nuts and demanded a divorce and forced the selling of it at the very bottom.
Point is everybody thought this time is different. Prices will always go up and interest rates will stay low.
Sound familiar?
The words young and stupid go together nicely. I won’t laugh at him. We’ve all been there. Follow Garths rule of 90.
Canada in so many ways seems to be 8 years behind the U.S..
Your on your second round of obama and the socialist left. I’ve said it before and I’ll repeat myself. The day will come when your hoping for a Trump. Time will tell.

#46 Steven Rowlandson on 10.30.19 at 6:45 pm

‘Well, back to Mikey. A month ago he had $125,000 in cash and no real estate. Now he has no cash, a condo losing $12,000 a year and $500,000 in debt. And he thinks this is an improvement.”

If I was his father I would kick him in the butt for being an idiot and then demand that he go to a psychiatrist….
The lad is crazy. Then again may be the banks are also crazy for going along with such a deal…

#47 JohnnyAB on 10.30.19 at 6:45 pm

Going back nine years is meaningless to young people investing today. – Garth

Let’s talk about the ones who didn’t buy real estate 9 years ago and thought they are doing the right thing. What’s the difference between 9 years ago and today considering the rate/price ratio, monthly payments and salaries? If a person who bought 9 years ago a house/condo was paying 50% of its after tax salary on housing, and today he/she pays the same, then what’s the real difference? Weren’t we saying 9 years ago that the market is overpriced? Didn’t we say that the rates are already very low? Didn’t we think that the rates couldn’t go lower and now we are looking how bankers are thinking about negative interest rates? Didn’t we think that the government won’t care about the indebtedness of the population and now we see they are actually considering it when making decisions (Poloz’s comments about it)? RE is too big of an industry (that doesn’t produce anything), not to be considered. Then there are elections that will make the politicians do everything they can to keep the bubble, and not to burst it under their reign cause otherwise they are pooched. Everything plays for the RE today, and I see a high probability for the condo move to bring money. Only one thing can end this madness.. it’s a moderate recession. Why did Alberta’s RE go down? Because people didn’t have money to pay for the high prices when oil’s price plunged. Today in Toronto people still have money to pay their monthly bills, so everything stays afloat. Rates will still go down, which will make the RE market even hotter. So it might be that the guy made the right choice by buying the condo.

Financial portfolios have about doubled in the same nine years, with no amortization, no property taxes, condo fees, insurance, maintenance, closing costs, lawyers or realtors. Plus you can still use leverage. – Garth

#48 Yukon Elvis on 10.30.19 at 6:47 pm

Been saying it for ten years. The PTB will never do anything to pop the housing bubble or raise interest rates in a meaningful way. They will keep it going as long as they can. The economy and consumers would collapse otherwise. Oil industry in Alberta and lumber industry in BC are in the dumper. The economy depends on population growth/immigration and low interest rates. If not for a sea of debt what “growth” would we have ? If housing went into the dumper we would be absolutely screwed. So I don’t see a housing collapse happening. The PTB will prop it up no matter what.

You don’t need a housing collapse to hurt people. Flatlined prices will do that to the over-extended. – Garth

#49 mark on 10.30.19 at 6:53 pm

A guy emailed to tell you he bought a condo and your blog was crap? Good lord.

#50 TurnerNation on 10.30.19 at 6:55 pm

I was waiting to post this. 600,000 is the new normal for 1 badroom kandos
Price list here.
https://old.reddit.com/r/toronto/comments/dopd44/preconstruction_condo_prices_at_bathurst_and/

– Climate change..is there anything it cannot do?

It causes new consumption taxes on heavily indebted tax slaves in heavily indebted First world countries.

“Climate migration” always occurs into those countries offering free health care the benefits. Funny how this works. Heavily indebted countries.

Now we are on the hook for military action (occupation) globally too! Ask yourself is there anything Climate change cannot do:

“Climate change in Africa may mean more Canadian military help is needed: analysis
Climate change is expected to play havoc with already fragile African countries, prompting more calls for help from the Canadian military, warns an internal …
Global News
10 hours ago”

….At this point all extra taxation is pure theft. No new roads, hospitals or schools will be coming our way.
Climate Change…bank on it bankrupting us.
101 new laws coming get ready for a crack down.

#51 SoggyShorts on 10.30.19 at 6:59 pm

#39 Cottingham a bargain on 10.30.19 at 6:38 pm
Condo math above corrected by the real people walking into sales offices buying these things below:

2300 a month for mortgage at an estimated rate of 2.4%
means 1300 a month is principle pay down .

Therefore mortgage carrying cost 1000 per month plus524 for maintenance and 300 for taxes leaves 476 a month as a return on 120k down or about 4.5%.
**********************************
So the comparrison is

Buying Condo
4.5% return on 120K down payment
+appreciation
-upkeep (landlord stuff)
-vacancies (landlords often have a 1-month vacancy every couple of years, especially in condos with high turn-over)
-closing costs on sale

vs

Renting & 120K in a B&D portfolio
—————————-
Renting still sounds way better to me

#52 Shirl Clarts on 10.30.19 at 7:15 pm

#21 Shame On You Facebook.
^^^^^^^^^^^^^^^^^
Agreed. So happy I quit Facebook 7 years ago. I found it to be a huge waste of time and incredibly boring.

“if you are not paying for the product, you are the product.”

#53 WelcometoSlurrey on 10.30.19 at 7:17 pm

@31 Smartalox

I’m not sure how you have outpaced housing in that timeframe. I am diversified and invested, with money in equities/bonds as well as having equity in real estate. Keep in mind the real estate is usually leveraged. So Im fairly confident in saying that in 2010 if you would have leveraged your current holdings in real estate, you would have done far better. Cash flow of 6 k a month from liquid investments ? Basing this on an annual return of 6%, I am you have approx. 1.2 mill invested. If you would have taken a portion of that and bought real estate in YVR, you would be bragging about the real estae.

@ 33 RWZM – Agreed

@ Garth – Yeah it may be meaningless for a young person to go back nine years, but what about someone who agreed with your take on real estate nine years. Not blaming you, I agreed with you at the time, thought we were in for a correction. It may appear to be here now somewhat, nine years later, but we won’t know since we’ve only seen one year of decline. Plus factor in that interest rates may remain low and new mortgage rules may increase sales, maybe Mikes decision is not as bad as you state as per # 33 RWZM.

#54 Lost...but not leased on 10.30.19 at 7:19 pm

Condos….

Family member is in one…built 1986…

Had leaky condo fix….

The strata is definitely “on top” of things..but that’s the problem….one has to cover strata fees , contingency fund…etc. etc. it never ends..VERSUS the other extreme of slacker strata …. that delay inevitable.

Other things to watch for are Elevators…some developers build 30+ story condos with minimum elevators….good luck on moving days or when they are out of service.

#55 crowdedelevatorfartz on 10.30.19 at 7:20 pm

@#135 MF
“Still doesn’t justify someone earning 500k complaining about hours though.”
*****

I do recall that Loonie Doc wasnt complaining about the hours worked.
He complained about the exorbitant taxes (54% scalped off the top)
Perhaps you might see the light if you were working the same amount of hours and had 54% of your pay taxed?

Oh, right.
You spent “decades” getting a degree in ….Basket Weaving was it?
And only make 50k per year and work slavery hours.
Apparently your degree was a waste of time?
So you think the “rich” deserve to pay exorbitant taxes.
Sounds fair….only to the pleebs in the 25% tax bracket.

The scary version?
You vote.

#56 Sandra Small on 10.30.19 at 7:20 pm

Nobody is talking about the leaky condos in BC. I hope the craftsmanship is better for Michael. Good luck condo lovers.

#57 tccontrarian on 10.30.19 at 7:21 pm

Well, back to Mikey. A month ago he had $125,000 in cash and no real estate. Now he has no cash, a condo losing $12,000 a year and $500,000 in debt. And he thinks this is an improvement.

Multiply him by untold thousands of others and tell me, how does this end well?
/ / / / /

Come on Garth! You know full well that Mikey is betting on winning the 6/49 one day. A full 25% of Canadians have stated ‘Lottery Win’ as their retirement plan.

Incredible!

tcc

#58 Yukon Elvis on 10.30.19 at 7:24 pm

You don’t need a housing collapse to hurt people. Flatlined prices will do that to the over-extended. – Garth
…………………..

Copy that. Population growth / low interest rates / and enabling government policies would suggest that the trend is still upward rather than flatlining.

Pivot much? – Garth

#59 Gramps on 10.30.19 at 7:26 pm

Well, back to Mikey. A month ago he had $125,000 in cash and no real estate. Now he has no cash, a condo losing $12,000 a year and $500,000 in debt. And he thinks this is an improvement.

Poor math. A month ago he had nothing. Now he has 125,000 from Mom, a condo losing 12000/year, and a 500000 mortgage

#60 joblo on 10.30.19 at 7:28 pm

#35 JSS on 10.30.19 at 6:19 pm

#4 joblo on 10.30.19 at 4:14 pm
Hey Alberta, Kenney mulls creating Alberta Pension Plan
Youngin dont wanna pay for wrinkly
Adios CPP
AIMCO can manage the 40B

Next up Bye Bye RCMP

===

umm… what Alberta Pension Plan?
Is this a fabricated lie?

Anyways, i like the CPP

No lie, spoke to it in a Q&A yesterday. Also:

https://business.financialpost.com/opinion/an-alberta-exit-from-canadas-pension-plan-would-cost-the-rest-of-the-country-big-time

#61 Nonplused on 10.30.19 at 7:41 pm

“(Rule One for single, Tinderesque guys is to get a condo. “Chicks like that.”)”

I got dumped once for buying a house. I was living in a basement suite at the time but I had 2 little kids on the weekends, so I decided to buy a small house with a decent yard and suite the basement. My girlfriend at the time decided this indicated I wasn’t ready to move forward with our relationship because buying a house was “something we should have done together”. But she already owned a condo so I didn’t see what the big deal was, and I needed the extra space and the yard for my kids. Oh well.

Same sort of thing happened to my sister’s boyfriend. When they decided to shack up, he was left holding a condo at a substantial unrealized loss. He rented it out because he couldn’t afford to sell it.

Single people should not buy condos or houses unless they intend to stay single. Owning property just makes shacking up more complicated than it already is. Usually what property is currently owned must be sold and a new one mutually agreed upon purchased. In places like Toronto where there are large land transfer taxes that can be expensive even beyond all the real estate commissions. You could be looking at $50,000 in fees to dump 2 condos and buy a semi. Ouch! Who has that kind of money for a simple life transaction? And that assumes neither property is underwater. No wonder family formation is on the way down like a stock market crash. Nobody can afford the fees associated with normal family formation.

Actually I have a hundred stories about how relationship changes drive real estate transactions. Pretty much everyone I know who has switched partners or become single has had to switch properties. Many others have done it because their job changed. My neighbor is ditching his house after only 5 years because he is moving to the Cayman Islands for tax reasons. He works in the US anyway and the Cayman’s is a much shorter flight. If he gets his asking price he’ll about break even. He’ll probably have to negotiate a small loss.

Even the ladies I know who managed to keep the house through a divorce were not usually able to maintain it long term and had to downsize eventually. The courts seem intolerably biased towards women in divorce but that is primarily a result of the courts trying to maintain the children’s lifestyle, and they usually end up with mom, or so was the case in the past. However once those child support payments dry up the economics of owning a family home on a single wage often become untenable.

I suppose some ladies believe that owning a house shows financial responsibility and capability in a man, same as how you had to own a car to get dates when you were a teenager. But with transaction and carrying costs now so high, a prudent single person rents. Add to that the fact that mobility is a great asset in today’s gig economy, and renting for young people becomes a slam dunk.

—————–

As for retired people, I think an RV and a passport might be the best bet. $1000 a month will camp you just about anywhere in North America and you can just follow the sun. Add another $500/month for fuel and $100 for insurance and you are set. If you are able to dry camp and stay put for long periods of time you can drive the costs down even further. Plus there is no property tax, saving maybe $5000 a year. So if you sell the $1,000,000 house, spend up to $200,000 on a sweet rig, and invest the $800,000 you saved (assuming no mortgage) and invest at 6% which will kick off $4,000 a month, you are golden until the rig needs major repairs. Costs are $1,600 a month for the rig, income is $4,000 without touching capital, leaving $2,400 plus whatever CPP and OAS you get in your pocket for walking around money. This is why every winter the Arizona desert fills up with Canadian snow birds. And once you get too old to drive the rig or live that lifestyle, you ditch the rig for whatever it’s worth (probably not much) and you still have $800,000 to fund the retirement home of your choosing. This is all assuming you have no other retirement funds. I predict the RV industry is in no immediate danger, and campgrounds catering to retirees with full service sites should do quite well. So if you are about to retire maybe think of front-running Trudeau’s “luxury tax” (as Garth has advised) and buy that rig.

I think this example also highlights the ridiculousness of Turdeau’s “luxury tax”. What is a “luxury”? So if a retired couple needs to sell their house and live as nomads in a $200,000 RV and tow-able car, they have to pay a 10% “luxury tax” to buy it? How is that a “luxury”? Seems more like a “necessity” to me. It’s really hard to define what is a luxury and what is not. These days the preferred vehicle of choice for the farmers around here is a Dodge Cummins 3500. They need it for the towing capacity and outstanding reliability of the engine. But they also have them fitted out with a back seat and all the options found in family cars so the vehicle can serve both as the farm truck and the family vehicle. But those things run damn near $100,000 these days. Is a farm truck that can tow a 40 foot trailer piled high with hay during the week and then take the kids to church on Sundays a “luxury”? What the hell?

Luxury taxes and wealth taxes both fail on the same grounds. Nobody knows what the criteria is. What is a “luxury”? Is it certain types of cars but does not include trucks used for farming? What about the tractor, those things aren’t cheap. Are tractors and other equipment exempt from “luxury taxes”, but not “wealth taxes”? What about the guy who has a bunch of tractors for his snow removal service? He’s already paying income tax and HST plus a bunch of other buried taxes and soon a carbon tax. Does he now also have to pay a “luxury tax” on his more expensive equipment plus down the road a “wealth tax” on the same equipment? Where is he going to get the money? Eventually the snow will just stay on the ground.

As I have stated here before several times, “wealth taxes” are stupid because it’s really hard to tell what anything is worth until you sell it, and we already have capital gains taxes for that. “Luxury taxes” are equally stupid, because what is a “luxury”? Is it just something that other people can’t afford? But what if, as in the farmer’s truck or the retired couple living in their RV examples, it is no “luxury” at all? How many exemptions do we need? (I’m guessing a 1000 page book). What about private jets and tour buses for rock bands that really do need to be in 20 cities in 20 days and can’t fly commercial because of logistics? Is the jet a “luxury”? I’ve flown on a corporate jet before because the jet was going there anyway aand there was an empty seat so there was no point in the company paying for commercial. So the argument is made that the executives should also fly commercial. Have you seen their schedules? They simply don’t have 2 hours to spare to go through customs and sit around in airports. “Luxury”? Or “necessity”? How can anybody tell?

#62 Yukon Elvis on 10.30.19 at 7:42 pm

You don’t need a housing collapse to hurt people. Flatlined prices will do that to the over-extended. – Garth
…………………..

Copy that. Population growth / low interest rates / and enabling government policies would suggest that the trend is still upward rather than flatlining.

Pivot much? – Garth
……………..

Not at all. People who overpay or over borrow get hosed. The trend still seems to be upward.

#63 crowdedelevatorfartz on 10.30.19 at 7:47 pm

My my my.
Quebec isnt wasting much time pushing Bill 21 to include
Immigrant “screening”…..

https://www.reuters.com/article/us-canada-quebec-test/quebec-to-put-immigrants-seeking-residency-through-values-test-idUSKBN1X92PM

#64 Flop... on 10.30.19 at 7:55 pm

Yeah, I saw the huff and puff version of the condo investors losing money yesterday, and was going to put it up.

Then I got sidetracked comparing Trump to asparagus…

M45BC

https://www.huffingtonpost.ca/entry/condo-investors-losing-money_ca_5db46899e4b006d4916f8837

#65 Burnaby Boy on 10.30.19 at 7:58 pm

Re No 8 Marcus and I.Q.: Try this third year test from university, sorry, grade eight test from 1912

https://www.bullittcountyhistory.com/bchistory/schoolexam1912.html

#66 Lost...but not leased on 10.30.19 at 8:07 pm

#56 Sandra Small on 10.30.19 at 7:20 pm
Nobody is talking about the leaky condos in BC. I hope the craftsmanship is better for Michael. Good luck condo lovers.

======================

Just give it time…

From what I see…developers are rushing to complete projects..likely to entrap pre-sale buyers…

History has shown corners get cut…choose yer poison

#67 Quintilian on 10.30.19 at 8:09 pm

Let’s not berate Michael, after all he does serve a useful function, that is to confirm we are indeed in a housing bubble.

#68 WSP on 10.30.19 at 8:15 pm

As a young man, this drives me bonkers. How many of my peers – flirting with our future pending doom on being 30+ (#old) – are buying houses telling each other: “Oh yea, what a practical investment and houses always go up!” No one seems to think about the fact that jobs aren’t forever, family’s grow, and expenses change. I bought my first house a year ago. Bought a fixer-upper from the high 300’s in the dirty shwa. Mortgage is manageable, reno’s are fun, cash flow in is high, but this was no “investment”. It was emotional. I love being a home owner; I wanted a house, so I bought one within my means.

#69 MF on 10.30.19 at 8:19 pm

#55 crowdedelevatorfartz on 10.30.19 at 7:20 pm

Who the he** ever said I spent decades in school or make 50k/ year?

I think you are so consumed with your little teeny tiny us vs them worldview that you have me confused for some other poster and appear to be projecting. Only logical explanation I can think of. That or you are suffering from early onset dementia.

“The scary version?
You vote.”

We support the same political party. Once again I think you are confused.

Anyways,

Not everyone simply projects their own insecurities and biases on here like you. Some of us can put ourselves in the shoes of others.

Here are the average incomes of Canadians:

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110023901

Some Dr making 500k complaining about taxes is not something the average person gives two poops about. Most people would gladly like having the option of working more and making more -even with higher taxes paid. I also don’t buy the time in school = earnings argument. Time in school hasn’t meant anything since 1985. Yes even for STEM degrees.

BTW, I do well at my workplace. But not everyone has the same position or experience as I do. I can see what others do to make money. As an example, try asking the average person at your workplace what the “capital inclusion rate” is to see what I mean.

Fartz you are old enough to know that nothing is black and white. Millennial does not mean automatic liberal socialist. Those with extreme views are always the loudest. A great silent majority of us (usually older millennials like myself) are out there. This is the same for any population. So get a grip already and grow up.

MF

#70 leebow on 10.30.19 at 8:27 pm

Well, the good thing about it is all the express life lessons Mike is going to receive. Most importantly, respect to elders. Not free, but worth it. That’s how millennial boys become millennial men.

#71 crowdedelevatorfartz on 10.30.19 at 8:46 pm

@MF
Re your soliloqy at #132
“In a world where most people earn 50k after spending years, sometimes decades, in post secondary education only to be under employed it’s hard to feel bad for someone who gets paid ten times as much complain.
It’s also hard for people who work 7 days a week for 50k to make ends meet hear someone making ten times that with similar work hours complain about scaling back…..”

*****

That endless “keening” had me (mistakenly) believing you were one of the 50k earning “oppressed” , overly educated, underpaid, under appreciated, Mils that want a great paying job that satisfy’s their every fantasy.

My bad.
You voted for the Independant in your riding?
Well done you rebel.
Alas, I’m getting tired so……
I’ll take my dementia pills and skulk off and count my overtaxed dividends…….

#72 the Jaguar on 10.30.19 at 8:47 pm

Billy Bob. Are you still there? I hope you don’t leave us.
CBC The Current had a very interesting podcast today about the 737 Max 8 debacle. Pilot turned lawyer perspective. If you are still reading the blog providing the link for you.
I have always appreciated your blog contributions.

https://www.cbc.ca/radio/thecurrent/the-current-for-oct-29-2019-1.5339212

#73 crowdedelevatorfartz on 10.30.19 at 8:53 pm

@MF
P.S.
Wasnt the original arguement from Loonie Doctor about taxes ?
As in ‘ Why should I continue to bust my ass at work when I’m taxed at 54%?”
It doesnt matter if you make 50k or 500k
Grossly taxed is grossly taxed.

Perhaps we should tax everyone at 54% and see how long people work overtime …..

Not much incentive to work hard and try to get ahead when the govt is taking more than half of your income.
Especially when they STILL cant balance a friken budget.

#74 the Jaguar on 10.30.19 at 9:14 pm

Billy Bob. Oh crap. Wrong link. Here it is:

http://21393.mc.tritondigital.com/CBC_CURRENT_P/media-session/7fce553b-04d4-4379-aaa1-dafa00380441/current-5cQJbkvK-20191030.mp3

#75 Lost...but not leased on 10.30.19 at 9:16 pm

My day was made when Comment #69 engaged Comment # 55.

#76 the Jaguar on 10.30.19 at 9:17 pm

OMG. Techno peasant. Here is this. p.s. this will affect those holding Boeing stocks. That’s my finance related angle…..lol.

https://www.cbc.ca/listen/live-radio/1-63-the-current

#77 T on 10.30.19 at 9:25 pm

As I mentioned in a previous post, Garth, you are now being used as ‘evidence’ real estate only goes up and that many have been calling for the end forever, and have been wrong and will continue to be. I’ve overheard several conversations lately regarding this blog and your views, and how you are wrong and not to buy into your investment sales pitch (and to buy into the newest presale condo / move up to a larger house / etc).

No one comprehends the real math of real estate ownership. Everyone believes real estate is the end all, be all. The group think is real. I used to care and debate, but it’s a fleeting task. I really don’t know how you do it, or what drives you to continue on with it.

Regarding today’s sucker – proof. It’s exactly what I am describing.

Unfortunately, I truly believe the reality is from here on out the only way Canada is going to survive is by printing money and devaluing the currency. $5M condo, $50 loaves of bread, $100 bags of milk, $200 / hour minimum wage by 2030.

#78 cowtown cowboy on 10.30.19 at 9:25 pm

Well the election showed that the dumbest people in the country are in toronto so hopefully the losses are in the $100’s of thousands, cuz if you can’t fix stupid, maybe we can at least bankrupt it..

#79 Stahom on 10.30.19 at 9:31 pm

Dad had some multi-family rentals in the late 70s early 80s when I was a teenager. He was in heavy subsidizing mode when the interest rates went skyward and the economy wilted cratering rents, major strain on the family budget to say the least. Survived due to steady income and sweat equity, but the whole affair taught me to be very cautious in this rental business. Many factors beyond one’s control.

REIT ETF at 5% of portfolio are my speed. Good luck solo landlord; may you dodge vacancy, capital levy for structural deficiency, recession, or interest rate shocks.

#80 colin knudsen on 10.30.19 at 9:31 pm

Hey Garth,
Two Questions,
1. Why do you not include the equity gained during the year from the mortgage payments in your calculation?
2. The survey you mention about amateur landlords having negative cash flow. What are your thoughts on them actually paying taxes on their rental income? I can’t find any solutions where I can be cash flow positive and actually declare rental income…
And if so, how big do you think that pot of undeclared rental income is?

#81 gaga on 10.30.19 at 9:31 pm

620k for 1 bed?
i hope he sleeps well at night

#82 Loonie Doctor on 10.30.19 at 9:42 pm

#69 MF

“Some Dr making 500k complaining about taxes is not something the average person gives two poops about. Most people would gladly like having the option of working more and making more -even with higher taxes paid.”

You are correct. However, they wouldn’t be so glad about the reality of the sustained work and sacrifice to get there though. I also agree that it is a lost cause hoping that the average person will truly understand any of that. It is somewhat abstract and like the income, the work is pretty far out of the scope of the experience of most people. Hard to identify with. I know that I had no idea before I got into it. I grew up in a very average-income family (although they saw financial success as something to strive towards rather than covet). So, the logical approach is to work less at the point where you don’t like working-more-for-less-take-home-pay, rather than try to change people’s minds. Few will feel sorry for someone busting their but to make a high income. Most just see the high income and only in the present (it is why we are easy targets). I am choosing to accept that and take personal action rather than try and change that (hopeless, as you are demonstrating). I am not really complaining about my workload. My main concern with the tax-rate is how it will affect financially-successful and skilled people’s decision-making. I described how weighing those affected my decision-making. Others may decide differently, but I do think that many doctors are waking up to this. It is frequently discussed and increasingly acted upon. I am surrounded by these people.

“Time in school hasn’t meant anything since 1985. Yes even for STEM degrees.”

This is also correct. It is not just time in school. It is also about performance. Performance, not only academically, but in developing the other attributes required for success like relationship building, leadership, vision to see where the opportunity lies, and the courage to execute upon it. People make many choices in those areas. If they make bad choices, they don’t do as well. There is a component of dumb luck too, but we can’t really control that. Generally, there are equal opportunities in Canada (not perfect, but pretty good). Proactive people tend to make their own luck. Equal opportunity does not mean equal outcomes because people make different use of the opportunities they have.

-LD

#83 Bad Hombre & the Impeachment Posse on 10.30.19 at 9:42 pm

Seems like perfect Trumpenomics to me.

I just also want to say neither I nor the posse have ever done blackface, blackeyes well yeah, many times but never blackface that’s wrong Mr. Dressup.

#84 BigAl (Original) on 10.30.19 at 9:48 pm

With respect to debt people have become like countries but without the power to tax for revenue. I looked the Wikipedia “List of countries by external debt” and I’m amazed. Especially at Luxembourg – here’s a country of about 600K population, about 2500 sq Km size. It’s per capita external debt is…..drum roll….USD $6,968,000. Per capita! The debt is 6,307% of GDP.

Canada is $52,300 per capita at 115% of GDP, and the US is $58,200 per capital and also at 115% of GDP.

Montserrat’s debt is only $200 per capita of a population of only about 5K. Wonder if I can just show up with a cool Mil, pay off their entire debt, and install myself as king? Then I could tax them forever myself, and run my own sovereign debt scheme too. But…then I wonder what their tax compliance rate is?

#85 Ronaldo on 10.30.19 at 9:51 pm

#12 WelcometoSlurrey on 10.30.19 at 4:46 pm

Don’t know how many renters here could have gained that much equity by renting a place and investing.

Going back nine years is meaningless to young people investing today. – Garth
===================================
I know of a couple who purchased a teardown in Vancouver 11 years ago for $875 and put maybe $25m in improvements into it and sold it at the peak in 2017 for $1.9m but turned around and bought a place for $3.5 m which probably they would be lucky to get $2.5 if tried to sell it today. Easy come easy go. I suspect many more in this position.

#86 IHCTD9 on 10.30.19 at 9:53 pm

#14 MF on 10.30.19 at 4:50 pm

Good move Michael. Congrats.

MF
———

If you do a little reading about condo prices, you find out pretty quick that after 5 years of age in normal market conditions, they start dropping in value.

This is especially true in a market that is pumping out new condos like gangbusters every year (like YVR/GTA). Mike pretty much HAS to sell within this timeframe if this is to be an investment. So let’s run the numbers:

After shelling out 151,440.00 over and above the rent he receives at the 5 year point, his mortgage balance at 3% interest rate would be roughly 427,000.00 outstanding, for a total input of 578,440.00 if he nuked the mortgage on the day of sale.

If Mike were to dump the same initial investment into a portfolio, and paid the same monthly outlay, he’d have 189 grand, most of it tax free after 5 years at 5%. So Mike needs to sell at 767,440.00 to match that.

BUT, Mike will need to pay capital gains tax of about 29,500 on the increase in value. This brings him to a new sell price of 792,440.00 to roughly match the financial investor dude (who would be mostly in tax sheltered accounts).

Finally, he’d have to pay commissions to the RE agent and let’s say a couple grand to a lawyer – about 33,700.00 in total. So now he has to sell at 826,440.00.

If I were looking at a rent/re investment condo, I’d need a good premium over what a b+d portfolio would pay for all the bs involved. I’m thinking about 50% more than the 5% a portfolio would pay, about 7.5%, or about 4300.00 per year. I’d need then to sell at about 847k. I’d also need to cover the unexpected (or totally expected) increases in insurance, condo fees etc. I’d need 2k a year to feel comfy here. Final sell at 857,000.00 to make it a real investment.

Given the current market (bubble already well inflated) do you think Mike will be able to sell his one bed used condo for 857k 5 years from now? Much less than that, and he may as well just have invested in the markets. He won’t be able to hang on to it beyond 5 years without guaranteeing puddly gain, or even a loss. There will be way too many brand new super cool condos up for sale by then (better be selling for near a million too, or Mike is totally screwed).

My math could be wrong, but it looks like no way that I’d take this bet.

#87 JohnnyAB on 10.30.19 at 10:02 pm

Financial portfolios have about doubled in the same nine years, with no amortization, no property taxes, condo fees, insurance, maintenance, closing costs, lawyers or realtors. Plus you can still use leverage. – Garth

But houses doubled as well since then (in Toronto at least). And even more than that, you don’t get to pay rent and taxes on capital gains when selling the house.

It’s not a contest. And accounts like TFSAs are taxless. – Garth

#88 MF on 10.30.19 at 10:08 pm

#71 crowdedelevatorfartz on 10.30.19

-All good Mr Fartz!

Apologies for the harsh remarks and insults about your sanity lol. I take it back.

For what it’s worth, I try not to get too caught up in the generational warfare thing because I’m always reminded of my evil boomer parents who gave me everything in life, and do whatever they can for me. These evil boomer parents are my role models. Every boomer stereotype they easily dispel so I can see the faults in generalizations.

Btw I thought you were a Scheer fan. Peter Kent was elected in my North GTA riding and I was happy about that. Definitely not as rebellious as going rogue independent though!

MF

#89 it will end badly on 10.30.19 at 10:10 pm

More QE / not QE and rate cuts are going to distort the distortion to the point where nobody will recognize what is going on anymore.

The Mikey’s out there will get kicked in the groin so bad, they will possibly never recover.

Glut of lower end housing is coming into the market. Low end, small chicken coops in Suburgatory is overpriced to the point that 2 families combined can now purchase a real house with real dirt in the city and co-occupy the dwelling with less commute, access to better schools, better jobs and better services.

Nothing is perfect but overpaying for beaver barf in Suburgatory, 2 hour drive from downtown TO or VAN is definitely a crapshoot.

Economy is a pile of steaming b.s. here and South of the border. Credit is already a problem and credit scores an even bigger problem. So are debt ratings.

Then there’s inflation, the real deal inflation which has taken about 50% of purchasing power over the last 10 years from all incomes. Feels that way anyway. Same paycheque of $120,000 in 2009 was buying a heck of a lot more lifestyle than today. Even with modest 2% COLA increases. The money is just not worth that much anymore. My family is going to be ok. Many families with formerly decent incomes are not going to be ok and there’s obviously no sign of relief and no chance their incomes will ever increase to the point where they can keep up the lifestyles they’re accustomed to. You all know this means less spending, less money going into shops and services.

All downhill from here.

#90 IHCTD9 on 10.30.19 at 10:25 pm

#76 Loonie Doctor on 10.30.19 at 9:42 pm

…So, the logical approach is to work less at the point where you don’t like working-more-for-less-take-home-pay, rather than try to change people’s minds. Few will feel sorry for someone busting their but to make a high income. Most just see the high income and only in the present (it is why we are easy targets). I am choosing to accept that and take personal action rather than try and change that (hopeless, as you are demonstrating).
— –

Ahh Doc, this is music to my ears. I can tell you are a well sorted out individual. There is no point in trying to sway the opinions of others, you have control only of your own space. Taking action and making a plan to deal with your personal circumstances is the singular road to contentment.

I monologue here often about dodging taxes, getting your hands dirty, and cutting the costs of living. But, what I’m really doing is providing and exit from discontent. I reason, I find truth, I accept, then I plan, and then I execute.

You are dealing in reality, logic, acceptance, and in execution and mastering of self. You are thinking very well, Epictetus would be proud.

#91 Dumb Wealth on 10.30.19 at 10:47 pm

If anyone is THAT excited about becoming a landlord, just buy a REIT.

Low transaction costs, instant diversification, professional property management, access to markets beyond residential, no toilets to fix at 3am, no bounced rent cheques…

A bunch of landlord horror stories here:
https://dumbwealth.com/landlords-beware/

Sure, yields are low but I’d pick a REIT any day to avoid the headaches of being a landlord.

#92 Calgary buck-o on 10.30.19 at 10:59 pm

We are moving towards a dystopian future.
Do people realize how many single people there are in their twenties and thirties that are perpetual single?
Builders are noticing these trends and that is why they are building so many glass towers in the skies or suburban townhomes or mid level rise condo buildings.

I can’t believe someone would pay upwards of half a million dollars for a one bedroom condo.
It is not an asset, it’s a liability.

It seems to me that Canada’s economy is based on immigration. We don’t produce anything anymore. We don’t have a manufacturing sector, no more oil and gas, mining is terrible, logging is faltering. How much longer can the Canadian economy be propped up by immigration and cheap money?

#93 Bobby on 10.30.19 at 11:19 pm

Michael sounds like he is as sharp as our PM. Given budgets always balance themselves, perhaps it could be said that rents always cover the costs. What could go wrong? Remember voters like Michael just helped our PM get re-elected. Send help.

#94 greyhound on 10.30.19 at 11:32 pm

Real estate speculation is usually based on leverage. The lower mortgage rates go, the more affordable that leverage becomes.
Manias are usually based on an idea that “everyone” believes is correct. In the US in 2008 it was “real estate prices cannot go down.” Now we have record-high stock and bond prices and the received wisdom is “interest rates cannot go up.”
But what if they did?

#95 Dr V on 10.31.19 at 12:00 am

Fartz/MF – Lost at 75 spilled the beans! congrats on your engagement!

Garth – can you host the ceremony online??

#96 fishman on 10.31.19 at 12:09 am

So what’s the richest man in Hong Kong doing about condo development. He knows a thing or two having built all the condos in Yaletown after Gracie “gifted” him the Expo lands. Well, 3 years ago he bought the 8 acres of Molson/Coors land south side of the Burrrard Bridge. Skitsalano, real nice. The boys figure 220-240 with 180 on the books. Anyways, 20-30 million an acre.
Last month he brought in 20 dump trucks of pea gravel, covered all the parking lots,(4-5 acres). Then 130 double dumpers of top soil. He’s planting veggies to feed the homeless. The plant is empty & looks like the movie guys using inside for movie shots.
He just gifted around $C 180 mil for affordable housing in Hong Kong. He’s planting root crops in Vancouver. Go figure. Maybe these millennials should shut down the airport or something instead of dropping their cash on a condo.

#97 Fortune500 on 10.31.19 at 12:22 am

The problem is life is not just about spreadsheets and numbers. The sad truth is that, with government help (as we are seeing) this ‘unsustainable’ reality could go on for another decade or more. By then my peers and I will be pushing 50 and it won’t matter. A big part of life will have happened.

Unfortunately blog dogs, the market can stay irrational longer than you can remain solvent.

#98 CEW9 on 10.31.19 at 12:22 am

Whatever else the math says, in a condo the condo fees never stay the same for long.

You need to factor in regular fee increases, not tied to inflation or anything in particular, except the trend that older buildings need more maintenance.

As the building ages, the rate of increase in condo fees grows.

#99 Tony on 10.31.19 at 12:32 am

Ha ha ha ha, Condos never go down in price.

Come to Edmonton stupid.

Then talk to people who said the same thing all over the U.S. in 2007. The UK, France, Italy, Japan, Thailand, Australia.

TO isn’t unique. You will go broke within 20 years when interest rates do what they always have, revert to mean.

You own nothing but a depreciating asset. You own from the paint out. The land isn’t yours, the rest devolves to dust.

#100 Smoking man on 10.31.19 at 1:13 am

James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th

Still has 140k . To re invest…

She is a bit of a physco. She doesn’t get the tax system.. I’m not going to tell her about it at the moment.

Trading CFDs in America not allowed.

I need a good us tax attorney…

#101 The Real Mark on 10.31.19 at 2:18 am

“The opportunity cost of the downpayment (what it would earn if invested at 6%) is $620 a month.”

Why such a low ‘opportunity cost’ on an investment that’s leveraged 5X? A plane-jane stock market index fund (or portfolio) has an implied return of 7-8%/year (at least), *and* is certainly less risky than a 5X leveraged investment in real estate.

Personally I’d expect a return of 20%/annum if not higher taking into account the extreme amount of leverage and risk to invested funds involved here with 5X leverage into real estate. This is yet another trick that Realtors will use when trying to compare the stock market to RE investment — they will use unrealistically low “opportunity costs” for the downpayment.

#102 Zie stretchenmeister on 10.31.19 at 4:28 am

Garth

Its all part of UN agenda 21 to force people into cities and yoga pants. it helps the global intelligentsia control the great unwashed masses

#103 piefartzen on 10.31.19 at 4:36 am

Garth
How to make guaranteed 6% per year? You use this in all your examples, but even rocket scientist IVY league active fund mangers do not always hit this number.

Nobody mentioned a guarantee. As for returns, the average over the last decade has been 7%. It is a historically valid number. – Garth

#104 BillyBob on 10.31.19 at 5:10 am

#76 the Jaguar on 10.30.19 at 9:17 pm
OMG. Techno peasant. Here is this. p.s. this will affect those holding Boeing stocks. That’s my finance related angle…..lol.

https://www.cbc.ca/listen/live-radio/1-63-the-current

=====================================================

Hi Jag, yep still hanging around from time to time making a pest of myself, thanks for the kind words and the link – I look forward to listening to the segment in its entirety.

For what it’s worth, this NY Time piece is by far the most comprehensive, thoughtful and accurate analysis of the Boeing 737 Max situation I’ve encountered:

https://www.msn.com/en-ca/news/world/what-really-brought-down-the-boeing-737-max/ar-AAHtLIx?li=AAggNb9

It is very lengthy, very detailed. It will probably have zero appeal to the Facebook/Insta crowd with short attention spans and the need to frame everything in simplistic binary terms.

But there are so many complexities to WHY these accidents happened, from the company culture at Boeing, to the flight training cultures in certain places around the globe, the protectionist and at times incestuous regulatory regimes in some jurisdictions, to the changing dynamics of pilot experience versus automation and many other things that contributed to the current state of things. This article covers them all, and accurately.

A thoughtful read for anyone with the time and patience.

#105 under the radar on 10.31.19 at 5:21 am

Annual return on a 416 condo with cash is about 4% before tax and without inflation. Big deal. Potential for negative return increases with time. Special assessments , tax hikes , remedial work once tenant vacates. Amateur stuff. I know a lot of condo mavens gleefully subsidizing their tenants. Triple net commercial for me.

#106 SunDays on 10.31.19 at 7:20 am

#10 Ron on 10.30.19 at 4:33 pm
#6 PastThePeak on 10.30.19 at 4:16 pm

Governments NEED inflation (deflation will make their debt burden grow larger in real terms). Governments will GET inflation. They have tried the usual policy tools but still not much (outside of asset bubbles). But make no mistake – they WILL get inflation as the debt burden rises, because they MUST.

———————————–

Where is this inflation going to come from? There is no catalyst for it:

————————-

Our politicians are working hard to make sure CAD is losing purchasing power. Think about the impact of:
– carbon tax
– deficit spending
– investors losing confidence in Canada

Inflation is with us. It did not go anywhere.

For example, in 1996, ~4,500 employees were on the Ontario Sunshine list. In 2018, there are ~150,000:
https://www.ontariosunshinelist.com/inflation

#107 Hicksville Alberta on 10.31.19 at 7:41 am

# 103 BillyBob

Maybe Boeing is past its peak as surely its name brand may be tarnished beyond repair , especially in this more and more globalized world.

” If its a Boeing, i ain’t going ” is an expression i’ve seen around quite a bit now. So even if Boeing can convince airlines to order and take delivery of their planes, maybe airlines customers and perhaps even their employees will have other ideas.

From what i’ve read, there seems a big push in China and as well in other countries to develop their own commercial aircraft fleets and i’m sure they have the technology, capital and customers to do so.

Once a corporation gets away from its primary purpose and gets into financializing everything over its legacy , then maybe its days are numbered even though they are still up to their necks in the MIC where they continue to do well for now.

#108 Reximus on 10.31.19 at 8:26 am

if Mike is renting out the new condo…where does he live and at what additional cost

Ask his mom. – Garth

#109 Keyboard Smasher on 10.31.19 at 8:36 am

My question is, why the hell would Mike, the condo kid put down ALL of his liquidity when interest rates are at a historic low?

I got a fixed, 5-year mortgage from the Big Three at a rate of 2.89% without even groveling. FREE money when inflation is 2%.

So what, I pay a couple dollars more per month for the CHMC insurance, but I hold onto 75% of my cash which I can put into mid-cap energy currently paying a 10% dividend, RIGHT NOW.

#110 Fabio on 10.31.19 at 8:43 am

All condos bought pre-constuction with parking and locker. Never buy a Toronto unit without them.

Bought my first condo in 2007, South facing 1 bedroom, at Yonge/Sheppard for $189K. Condo fees $230/month. Sold 15 months later for $280K.

My second condo was Spadina/Fort York, S/E facing the lake, 1 bedroom w/study (lol), for $215K w/ $305/month fees. Sold 18 months later for $320K.

Bought my third condo in 2010, next building west, for $450K 2 bedroom 2 bath SW view. Fees are now $520/month. Chinese neighbor is pushing me to sell it to him for $900K. RE agent says that’s too little. I can rent it out with parking and locker for $3500/month if I want to be a landlord but no way.

I purchased 3 bed 2 bath South facing at Bathurst/Lakeshore. Loblaws will be at the bottom. Since I kept buying from the same builder I was VIP for initial release. Only 5 floors released that day. Bought at $709,000. Condo will be finished next year. A few units remain. Currently one like mine is selling for $1.2 million, three floors below mine.

While condo hopping my wife and I still invested. Mostly Vanguard products. (www.vanguardcanada.ca) Not bad at all. Over 15 years investing and we’ve averaged better than 10%.

I still don’t see how RE in Toronto is bad?

#111 Tater on 10.31.19 at 8:59 am

#100 Smoking man on 10.31.19 at 1:13 am
James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th

Still has 140k . To re invest…

She is a bit of a physco. She doesn’t get the tax system.. I’m not going to tell her about it at the moment.

Trading CFDs in America not allowed.

I need a good us tax attorney…
——————————————————–

You need a good psychiatrist.

Your algo doesn’t exist and you’re a failed VBA support tech.

Alternatively, if your algo does exist*, and you aren’t capable of raising the capital to become a billionaire, you an even more pathetic hump than we all believe.

*it doesn’t

#112 N on 10.31.19 at 9:01 am

Ontario’s auditor general says the corporation that enforces warranties on new homes has favoured the interests of builders over homeowners.
Bonnie Lysyk released a report today on Tarion Warranty Corp., noting that Tarion requires half of its board of directors to be nominated by the Ontario Home Builders’ Association and it consults with the association before changing any regulations.
She says Tarion’s processes are often too difficult and time consuming for homeowners to navigate when they want to complain about builders, but builders with poor warranty records continued to get licences.
She also found that senior management was rewarded for increasing profits and minimizing payouts to homeowners, which she says is contrary to a consumer-protection mandate of a not-for-profit corporation.
https://toronto.ctvnews.ca/audit-finds-home-warranty-corporation-tarion-favours-builders-over-homeowners-1.4662817?fbclid=IwAR3fZVTmVD9hoddyU7jGleKZAIwF_FDnb8qqDFqzBeH8mniL7RZ1fLNGBcU

#113 Jenny Wang on 10.31.19 at 9:44 am

Trudeau kills another great Canadian, now American company. Think it’s just foreign investment and local expertise flooding out of the country under the Liberal wrecking ball? Think again. Here’s thousands of more jobs killed and billions more tax revenue gone, forever. There goes history and a lot of schools and hospitals that won’t get built. Is Trudeau building those with his borrowing? No, but he’s sending billions to his buddies in the Middle East and the Horn of Africa.

https://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=pcw45455&mobile=false

Goodbye Encana, sad another great Canadian company is being forced out.

#114 the Jaguar on 10.31.19 at 9:46 am

@ #104 BillyBob on 10.31.19 at 5:10 am

Thank you for the article link. A masterpiece by the writer and devastating to read.

#115 Mr Happy on 10.31.19 at 9:48 am

“Well, back to Mikey. A month ago he had $125,000 in cash and no real estate. Now he has no cash, a condo losing $12,000 a year and $500,000 in debt. And he thinks this is an improvement.”

When will you learn Garth…you can’t fix stupid! But kudos for trying…

#116 Mattl on 10.31.19 at 9:59 am

#7 Rico on 10.30.19 at 4:20 pm
Pretty hard to rent when you have a dog, especially a reasonably large one.
I would rather own and have a dog than not.

—————————————————————–

Under appreciated post. When we sold our last house we tried to rent but 2 dogs, one large, was a non starter. With vacancy rates at 1%, there aren’t many nice places for rent that will take dogs.

I like the concept of renting but for our lifestyle – family, pets, toys – it makes no sense. It SHOULD cost less, cause IMO it sucks.

#117 James on 10.31.19 at 10:01 am

#100 Smoking man on 10.31.19 at 1:13 am

James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th
Still has 140k . To re invest…
She is a bit of a physco. She doesn’t get the tax system.. I’m not going to tell her about it at the moment.
Trading CFDs in America not allowed.
I need a good us tax attorney…
__________________________________________
I recommend Dewey, Cheatem & Howe Old Man.
They are located beside Geslons Market in Harbor View Plaza behind you. Did you share the good news with your sons?
I guarantee you are not buying any home on the water South of the Pacific Coast Hwy for $2M. If you had say $7M to $15M you could buy a home on Bayside Drive and have a private dock. Perhaps North of the Coast highway you can find a 900 sq ft shack for the $1.75M range. So your boat will be at Newport Dunes Marina. Your property taxes will be around $20K or more per year. When I lived there I avoided all the pitfalls of owning and rented a nice home. My children attended Harbor Day and we backed onto Buck Gully, nice view. Beware Old Man there are some rules for wifey poo and you as resident aliens. Just wait until you sell! Oh and you may need to figure out the if you fit into the Substantial Presence Test from the IRS.

BTW You wife is too way smart for you if she made 2 million while your puttering away as a tax farm slave.

lmao and it is spelled Psycho for gods sake!
What is that smell?………..Is that Santa Anna Smoke?………….what an ironic twist Smoking Man living in the land of Smoke.

#118 James on 10.31.19 at 10:08 am

#27 the ryguy on 10.30.19 at 6:10 pm

$524/month in fees for a 1 bedroom condo? Wow! Is that insanely high or is it just me? Maybe there is a ton of amenities..still thats nuts. I haven’t owned a condo for over a decade but I remember my fees not so slowly creeping up at least 2x a year..yeesh. Wonder what those fees will be in 3 years.
___________________________________________
Uppa, uppa, uppa… has anyone ever seen them go down? That is why the crusty old boomers will all be eating cat food in the future. Their fees will be eating up their investment funds slowly.

#119 TurnerNation on 10.31.19 at 10:20 am

Some people might not yet believe it, that these big tech companies all are fronts for a global system of control.
Do you honestly think the militaries of the worlds, having control over ever inch of earth/underground/space let some Musk guy fire projectiles over them? As if. He is a goofy frontman, to resonate with the Mills.

How Uber, Air B&B have swooped in and overridden all local laws.

Toronto…Globalists have arrived via Google’s “Smart” city of control.

https://boingboing.net/2019/10/30/citizen-scores-eh.html

Leaked document reveals that Sidewalk Labs’ Toronto plans for private taxation, private roads, charter schools, corporate cops and judges, and punishment for people who choose privacy

#120 Shawn Allen on 10.31.19 at 10:58 am

Encana and Equalization

#113 Jenny Wang on 10.31.19 at 9:44 am said about Encana leaving:

Here’s thousands of more jobs killed and billions more tax revenue gone, forever.

*****************************
If some significant tax revenue does leave, then the Canadian federal government will collect less tax in Alberta and therefore the net transfers out of province will be less.

Will that make some Albertans happier? The ones who think that every man woman and baby in Alberta is paying equalization to Quebec?

#121 Jenny Wang on 10.31.19 at 11:06 am

Reuters: In Chile’s Atacama Desert, a cautionary tale for bold renewable energy vows.
https://www.reuters.com/article/us-chile-energy-solar/in-chiles-atacama-desert-a-cautionary-tale-for-bold-renewable-energy-vows-idUSKBN1X9132

The Green Carpet Baggers gave played you climate flunkies for suckers. They got in on the ground floor and made you pay for their redundant antiquated unsustainable useless contraptions. Be proud of yourselfes, Trudeau promises to waste billions more on the climate fantasy, all the while shovelling your money out the back door into the pockets of carpet baggers.

#122 not 1st on 10.31.19 at 11:14 am

Good job Liberal NDP Green voters. The path to Venezuela 2.0 just got clearer.

Sell the TSX, get right out of maple. Garth is behind the curve. No rate cut is going to save this dumpster fire coming down the line.

https://business.financialpost.com/commodities/energy/encana-moving-to-the-u-s-changing-name

#123 ablurker on 10.31.19 at 11:33 am

#8 yes, the number of people on this planet increases daily while the quantity of intelligence stays the same.

#124 Axehead on 10.31.19 at 11:34 am

Awesome blog Garth.

Even in depressed Calgary where you can’t sell your condo and they keep building more, renting makes more sense. I rent 1200 sq ft downtown furnished with parking in upscale accomodations with concierge all in for 2k month. No friggin way could I buy and pay less.

#125 Flop... on 10.31.19 at 11:50 am

ABOOM!!

$718,000 loss (+ expenses)

3312 WESTMOUNT ROAD, West Vancouver

Bought 2015 $3,618,000

Just sold for $2,900,000

2018 Assessed: $2,819,200
2017 Assessed: $3,160,200

https://twitter.com/mortimer_1/status/1189723260306354176

#126 IHCTD9 on 10.31.19 at 11:58 am

#27 the ryguy on 10.30.19 at 6:10 pm

$524/month in fees for a 1 bedroom condo? Wow!
___

Just for laughs, my house was 123K in 01, and nearing the end of my mortgage, I ended up with a sub-prime variable (less 3/4 IIRC). During this time for a short period, my interest rate sank to 1.5%.

My **Mortgage Payment** was ~$550.00/month LOL!

One of my bro’s sent me a pic of an RE listing in a small town near where he was camping – town had decent work options for certain careers nearby. It was a fixer upper just like mine was back in 01. It just needed to be updated aesthetically inside and out.

It was listed for 67,000.00. If you put 10K down on that, the mortgage payment would be 270.00/month LOL!!!

#127 Damifino on 10.31.19 at 11:59 am

Peter MacKay pops up out of nowhere to tell us Scheer failed to score with a breakaway on an empty net.

Furthermore, it was due to his socially conservative beliefs (that he pledged not to foist upon the general population, but nobody believed him).

I’d hoped it wasn’t true, but maybe Pete’s correct. Still, it’s hard to believe Canadians would leave the shop in the hands of a misguided gadfly for that reason alone.

Scheer didn’t attend a pride parade. I suppose he should have. Trudeau didn’t wear an “I Love Oil & Gas” T-shirt in Alberta. I suppose he should have.

But these seem lightweight things upon which to base leadership competency. So I’ll say it again.

We get the government we are.

#128 EducatedGuess on 10.31.19 at 12:21 pm

Anyone else agree that the major culprit for the real estate situation could be AirBnb?

If you can get 2x the rent from an AirBnb unit vs traditional rental, wouldn’t the price of the asset simply adjust to 2x previous value to equalize the cap rate?

#129 Doug in London on 10.31.19 at 12:24 pm

So how does it end well you ask? If Mikey is out $1124 every month by not renting a similar condo, it means a lot of renters are being subsidized every month. Hardly a day goes by that someone isn’t complaining about the high cost of living in the GTA and for good reason. It’s great news that many of these speculators are willing to offer up badly needed subsidized places to live.

We also see here why capitalism is such a great economic system. A person who takes the time to sit down, do the math, and see whether or not buying makes sense ends up better off financially in the long run than someone who’s too preoccupied with rubbish like what the Kardashians are doing to do a proper analysis. Yes, it’s Revenge of the Nerds in real life.

#130 IHCTD9 on 10.31.19 at 12:27 pm

#126 IHCTD9 on 10.31.19 at 11:58 am
#27 the ryguy on 10.30.19 at 6:10 pm

$524/month in fees for a 1 bedroom condo? Wow!
__

I have to add more!

I don’t spend 524.00/month, every month, every year, for infinity maintaining an *SFD* with a big barn, and 4 acres to boot. I’d be up to 113K if I had to pay that since the purchase date.

I realize I may be a semi-unique case with doing a lot of it myself – but 524.00/month to maintain zero land and a building the size of a garden shed doesn’t seem to make a lot of sense.

#131 TurnerNation on 10.31.19 at 12:37 pm

Volatile Vermillion – VET.TO – down 7% today. Crazy yield on it and guess what they affirmed their dividend payout ratio.
For Schlock Pickers/YieldHounds only.
Why I come here, seeking alpha with zero hedge.

#132 PKP801 on 10.31.19 at 1:01 pm

“Multiply him by untold thousands of others and tell me, how does this end well?”

Easy. Is it north of 60% of families in Canada own homes? And something like north of 70% of households can’t come up with 500 or 1000 if they needed to? The very minute that 51% of households get to be seriously struggling and under water (it hasn’t happened yet), our friends in government will swoop in to save them. A bloc full of indebted, desperate voters that large is too juicy a morsel for any politician to pass up.

They’ll either bail them out outright, change the regs to lengthen the amortization on the mortgage, increase tax benefits, or some other foolery. As usual, it will be the prudent savers who get the short end of this. After all, they have savings. They’re in the black. Therefore, hey must be rich and aren’t paying their fair share.

#133 MBA101 on 10.31.19 at 1:12 pm

I didn’t get the same $12,000 as a loss estimate as Garth. Was the entire mortgage payment considered an expense? I still would have passed on this investment. Personally, I prefer multi-family units that generate higher rents per month.

Total Revenue: $31,200 ($2600 x 12)

Interest expense: $13,573 (25 year 5-year fixed @ 2.75%)
Condo Fees: $6288 ($524 x 12)
Property Tax: $3600 ($300 x 12)
Insurance: $1600 (Rough estimate)
Opportunity Cost: $7440 ($620 x 12)
Vacancy Expense: $2600 (1 month)
Repairs: $3900 (1.5 x monthly rent)
Property Management: $3120 (10% of monthly rent)

Total expense: $42,000

Profit (Loss): -$10,800

The mortgage is amortized and you neglected debt repayment. The cash flow is negative. – Garth

#134 jess on 10.31.19 at 1:14 pm

..”The changes would allow up to three residential units on a property, such as adding basement apartments, granny flats, an apartment over a garage or even place tiny houses on properties.”

New rules around adding granny flats and tiny homes gets Kitchener council approval
Social Sharing

Changes to residential bylaw will come into effect over the course of 2020, city staff say

https://www.cbc.ca/news/canada/kitchener-waterloo/granny-flats-tiny-homes-kitchener-rules-1.5339347

#135 SoggyShorts on 10.31.19 at 1:25 pm

#100 Smoking man on 10.31.19 at 1:13 am
James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th

Still has 140k . To re invest…
****************************
Of all the things that never happened, this never happened the most.

#136 the ryguy on 10.31.19 at 1:57 pm

#130 IHCTD9 on 10.31.19 at 12:27 pm
—————————————————-

After posting this yesterday I looked at listings online..yikes condo fees are crazy. Im in Edmonton right now and they ranged from $400-$900/month..sheer insanity. Some of the higher end condos, over $1M had fees of $1800/month..on what planet?

just for reference; I have a condo in Cabo, Im heading there right after xmas. That complex is open air with 2 pools, a hot tub, gym, bbq, underground parking, etc. The fees are $250 USD a month..and they haven’t changed since the place was built 9 years ago. A lovely husband and wife come in 6 days a week and maintain the place, its always “showroom condition”.

Id love to hear a realtors spin on how a $750 monthly tab is “normal”.

#137 Mrs Smoking Man on 10.31.19 at 2:02 pm

#100 Smoking man on 10.31.19 at 1:13 am
James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th

Still has 140k . To re invest…
….
We need a guest post from the greatest investor this blog has ever seen…. what is that …a +2000% return in 6 months

I thought you paid no taxes and offshored everything

#138 miketheengineer on 10.31.19 at 2:12 pm

Garth et al:

I have a friend in the UK, London. Owns ~6 flats. 1 she lives in, 2nd momma lives in, 2 are rented to “good” friends that are paying regular. One she just purchased, because the price was right and in the right location thanks to Brexit fear (and drop dead lovely). The last one, was rented and a small company paid to manage it. Guess what, the renters turned it into a bordello. The tenants in the building sued her for damages due to loud noises, police activities, etc. The management company faded away (ie left the country). The tenants had to be evicted. The tenants trashed the place and it cost her ~$40k to repair as the interior was a complete gut and referb. She went to court and lost. The Judge awarded ~$60k in damages. She is dealing with a stage 3/4 cancer right now on top of the tenant issues.

Owning and renting and risk….can you handle this? Everyone I know who had tenants had to “deal” with crap.

Good luck!

#139 IHCTD9 on 10.31.19 at 2:18 pm

#127 Damifino on 10.31.19 at 11:59 am
Peter MacKay pops up out of nowhere to tell us Scheer failed to score with a breakaway on an empty net.

Furthermore, it was due to his socially conservative beliefs (that he pledged not to foist upon the general population, but nobody believed him).
____

Ms. IH linked me to a CBC Front Burner podcast she though I may find interesting that dealt with reactions of two Conservatives to the Election outcome. Both had inside the party ties, one was 21, the other 60 years old.

It seems that there was some talk after Harper lost to sock-head about reorganizing things to lessen the social Conservatism. Supposedly these conversations ended when Scheer took the helm.

Old guy was small c and was offended at some of Harper’s policies. Young guy was bigger C and didn’t trigger like the old guy. Both agreed that the conversation is going to start up again. Scheer may be facing some building desire for change within the party in the days ahead.

I have to wonder how many folks out there who are Liberal/NDP voters would ever vote for a right wing party no matter what they stood for. Doesn’t seem to matter what the platform says, or what the answers were in the interview. Some folks have typecast the Cons, and don’t plan on paying attention, or even give a rip what they have to say.

Meanwhile, knuckle dragging neandercons like me are watching carefully from a distance. I’d rather allow the financial doom of Canada, than have the 3 mainline parties all want to spend us into oblivion. Nor do I care about most Social Justice issues at the present, in Canada specifically. Most of these SJW’s need to get their @zz’s over to the Middle East where they might do something worthwhile IMHO. Cons risk chasing me away to get a chance at receiving votes from these folks who probably would not vote for them even if coerced at gunpoint.

The Cons have a real balancing act coming at them I think.

#140 Mandria on 10.31.19 at 2:39 pm

I’d be very wary of buying into a condo with a lot of “investor” units…if they bail the critical building systems will still need to run (HVAC, Elevators etc.) to keep the place habitable. Can you imagine the condo fee hikes if investors bail and only 50-60% of units need to bear the full cost of operating the building. Doesn’t sound like fun to me.

#141 Tater on 10.31.19 at 2:54 pm

#136 the ryguy on 10.31.19 at 1:57 pm
#130 IHCTD9 on 10.31.19 at 12:27 pm
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After posting this yesterday I looked at listings online..yikes condo fees are crazy. Im in Edmonton right now and they ranged from $400-$900/month..sheer insanity. Some of the higher end condos, over $1M had fees of $1800/month..on what planet?

just for reference; I have a condo in Cabo, Im heading there right after xmas. That complex is open air with 2 pools, a hot tub, gym, bbq, underground parking, etc. The fees are $250 USD a month..and they haven’t changed since the place was built 9 years ago. A lovely husband and wife come in 6 days a week and maintain the place, its always “showroom condition”.

Id love to hear a realtors spin on how a $750 monthly tab is “normal”.
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Local man shocked to discover cost of living is lower in third world countries.

#142 James on 10.31.19 at 3:00 pm

#135 SoggyShorts on 10.31.19 at 1:25 pm

#100 Smoking man on 10.31.19 at 1:13 am
James
Wifey poo just bought a little shit house in Newport Beach. i get a dock for the new boat. So I’m happy.
She cashed in her 2 million wind fall trading forex on my amazing algo. Since March 18th

Still has 140k . To re invest…
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Of all the things that never happened, this never happened the most.
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I verily believe that the Old Man (Smoking Man) believes it!

#143 Linda on 10.31.19 at 3:22 pm

#8 ‘Marcus’ – one hundred years ago, there was no social safety net. No CPP, no universal health care & definitely no E.I. Income taxes had just been created – a ‘temporary’ measure to pay for the cost of the war effort. Credit cards were unheard of, though one might be able to get credit at the local shops. However, the consequences of living beyond ones means was literally destitution & potentially life threatening. Those whose debtors called in the loans owed usually found themselves & their families if they had one living on the street unless they were lucky enough to have relatives willing & able to take them in. There were charities, but the help available was limited, with the expectation that anyone able bodied would be put to work in return for such food & shelter they might receive. Children were not exempt from that expectation, BTW.

My point is that folks 100 years ago had a LOT more incentive to make wise financial choices than folks do today. So I don’t think folks are less intelligent, just far more protected from the consequences of making poor financial choices.

#144 Jesse on 10.31.19 at 3:44 pm

#92 Calgary buck-o on 10.30.19 at 10:59 pm
We are moving towards a dystopian future.
Do people realize how many single people there are in their twenties and thirties that are perpetual single?
Builders are noticing these trends and that is why they are building so many glass towers in the skies or suburban townhomes or mid level rise condo buildings.

I can’t believe someone would pay upwards of half a million dollars for a one bedroom condo.
It is not an asset, it’s a liability.

It seems to me that Canada’s economy is based on immigration. We don’t produce anything anymore. We don’t have a manufacturing sector, no more oil and gas, mining is terrible, logging is faltering. How much longer can the Canadian economy be propped up by immigration and cheap money?
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This is something I’ve thought about as well, what do we do in Canada now? We’ve off-shored most of our industry, we let the enviro-nazi’s kill our oil and gas, mining and forestry industries (and watched other countries laugh in our faces about it) for what?

Not a single politician called out the foreign interests that killed our energy industry (with political help *cough* Gerald Butts *cough* *cough*) during the federal election….not one.

Who is running the country?

It’s disgusting that we allowed this to happen, and even worse, people still can’t believe, or won’t believe it happened.

Over a Barrel: https://youtu.be/NPax7r7Kv2c

#145 Sail Away on 10.31.19 at 3:47 pm

#140 Tater on 10.31.19 at 2:54 pm
#136 the ryguy on 10.31.19 at 1:57 pm
#130 IHCTD9 on 10.31.19 at 12:27 pm
—————————————————-

just for reference; I have a condo in Cabo, Im heading there right after xmas. That complex is open air with 2 pools, a hot tub, gym, bbq, underground parking, etc. The fees are $250 USD a month..and they haven’t changed since the place was built 9 years ago.

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Local man shocked to discover cost of living is lower in third world countries.

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Haha. Yes. That’s a real mind blower, RY.

#146 MBA101 on 10.31.19 at 6:12 pm

The mortgage is amortized and you neglected debt repayment. The cash flow is negative. – Garth
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My understanding is opportunity costs are used to calculate economic profit and loss. Debt repayment would not be included in that type of evaluation. I see now that you were referring to cash flow.

It seems odd to include opportunity costs into the cash flow calculation, something used to evaluate if the business can adequately operate on a day-to-day basis. It makes sense to consider opportunity cost when calculating NPV. If you were to include it in the project cash flow, the loss would be a lot higher than 12k / year as there are other explicit costs that you never considered (Insurance, vacancy, repairs, etc).

#147 Scott Danese on 11.01.19 at 12:25 pm

Linda, one word, “Socialism”. The cancer of society.