Canadian housing prices overvalued by 20%

[89coupe]

I tend to agree.

http://www.calgaryherald.com/touch/story.html?id=8046034

EDIT: Use this link if you're not on a mobile device: http://www.calgaryherald.com/business/real-estate/story.html?id=8046034

[dj_patm]

I plan on buying this year. If I were everyone else I'd expect the floor to fall out shortly after that.

[ercchry]

“Because of the effects of inflation and price momentum, it is not expected that prices would drop by this amount,”

... the value of something is what someone is willing to pay for it... soooo....

at what point is a boom no longer considered a boom? 10 years? 20 years? every year they say its going to fall apart, yet it continues to grow :dunno:

[Kramerica]

Yup I agree, I have no plans to buy until the market cools. No sense buying and rolling the dice on whether you'll lose 10% of our value in few years.

[Xtrema]

Originally posted by ercchry
at what point is a boom no longer considered a boom? 10 years? 20 years? every year they say its going to fall apart, yet it continues to grow :dunno:

I don't consider 2007-2012 as much of a boom for RE.

If you ask someone if they can get the price they paid for in 2007, most of the time, that's a no (although with the recent boom, it's getting there).

Calgary RE is booming the last 7 months from external forces. This is probably because we have been bullish for most of 2012 and attract a lot of out of province people coming here for jobs.

Now the doom and groom is here, the job market cool down a lot since the Christmas holidays. How long before it put a damper on the current RE boom, I don't know. I still think we should have a good run up in spring before things stabilize or drop in the 2nd half of 2013.

[ercchry]

"Prices in Calgary’s resale housing market continue to climb as an all-time average sale price record was set in February, eclipsing the mark which has stood since the boom in July 2007."

if the bubble "burst" in 08... and we just set a new all time high average... i'd call it a correction, not a boom. could prices drop 10% over 3-5 years? maybe? could they also increase 10%? sure...

will they drop back down to "pre-boom"

fuck no, should it matter either way? will this really affect new home buyers? ...imo, it shouldnt. even a 10% drop over 3 years and for whatever reason you MUST sell in 3 years... its still cheaper than renting

[Xtrema]

Originally posted by ercchry
fuck no, should it matter either way? will this really affect new home buyers? ...imo, it shouldnt. even a 10% drop over 3 years and for whatever reason you MUST sell in 3 years... its still cheaper than renting

Owning isn't cheaper than renting right now, although rental is catching up due to shortage.

I can bet you that renting is at least $100 less than mortgage+tax monthly (mortgage is 5% down, 25 year amort, 3% @ 5 yr term)

[ercchry]

im basing that on just loss due to sale, for the overall argument, owning always wins... over a long enough term

[ZenOps]

Its important to factor in the monetary supply when calculating $ value of anything.

While the US has tripled the monetary supply in the last decade, Canada has actually closer to quadrupled the $CDn. The US is now in open ended Quantitative easing at $85 Billion extra per month and will "catch up" to Canada very quickly.

So, while it is possible that Housing is overvalued by 20% today, you are only talking about it being 20% overvalued in 2013 dollars. If Canada intends to print 20+% more money year over year, it will no longer be overvalued in 2014 dollars, even if the asset depreciates in real value because you are still measuring it in dollars.

Mike Maloney explains in fairly well @ 17:00 (not to sound like an advertisement) in his little infomercial:

DyV0OfU3-FU

Save those nickels.

[Feruk]

Originally posted by ercchry
even a 10% drop over 3 years and for whatever reason you MUST sell in 3 years... its still cheaper than renting
Some seriously flawed math. Same guy can decide whether to buy or rent:

1) Buys 450K house, 25% down (so $112,500), and a generous 2%/year appreciation, mortgage of 2.5% (first 5 years), 4.5% (next 5), 5.5% (remaining 15 years). So WAY better than your 10% drop case.
2) Renting for $1,400/month, investment annual ROR of 6% (underperforming ETF portfolio).
Some other minor costs, taxes, ect in there too. I have this in a spreadsheet, but these are generally pretty small so I'll exclude them here.

Whose ahead after 30 years? The answer: THE RENTER, ding ding ding! Now the scary part. How much by? Nearly $980,000!!! Every idiot and his mother advertise how a house is such a great investment, but they forget to take into account that THE RENTER HAS A $112,500 DOWN PAYMENT he can invest elsewhere!

[ercchry]

a) you are not getting a $450k house for $1400/month b) where is your rental inflation over the next 30 years?

[Disoblige]

My one bedroom apartment in downtown has increased ~$200 in rent over the past 5 years. Says a lot.

[dj_patm]

Good luck finding anywhere to rent anyways.

One bedrooms in the suburbs are renting for 1200... Its absolutely ridiculous.

[LOLzilla]

http://www.cbc.ca/news/canada/calgary/story/2013/03/04/calgary-real-estate-prices-alberta-fitch.html

Real estate board says you are wrong.

[Feruk]

Originally posted by ercchry
a) you are not getting a $450k house for $1400/month b) where is your rental inflation over the next 30 years?
a) Re-ran at $1,800/month rent. Still ahead renter by $470K after 30 years
b) 2%/year compounded annually assumed in both cases

[ercchry]

with your pipe dream of a 6% average ROI?

the fact that i can buy a house and cash flow substantially right away from renters leads me to believe that your math is a little... unrealistic

PS: $1800 is still low

[v2kai]

Originally posted by LOLzilla
http://www.cbc.ca/news/canada/calgary/story/2013/03/04/calgary-real-estate-prices-alberta-fitch.html

Real estate board says you are wrong.

comments says he's right:rofl:

[Type_S1]

What is with all the real estate doom and gloom talk?

People keep saying the same things. We will see a growth in the AB economy over the next 5 years. Tons of $$ will be coming into calgary due to things like pipelines going east/west/south and increased Asian investment.

House prices will fluctuate but aren't going to crash like some idiots say. Just a stupid comment. We aren't going to end up like the US. Renting is not better. Every renter would buy if they weren't either scared shitless or could afford it.

[ercchry]

okay, i really didnt want to start doing math today, but this is bugging the shit out of me.

bare minimum rent=mortgage+insurance+property tax on a FRESH 25 year mortgage with 5% down, why? cause thats the market value of that house in the here and now. rent reflects THAT price

so i buy a house with 25% down... why not...

in 30 years i have been mortgage free for 5 years, my house at 2% annual increase is worth $815k

my 6% return on $112.5k after 30 years? $646k.... why is my ROI better even at a lower return? oh, i dunno... cause it was leveraged at 4:1 :nut:

so there is a win already... now lets look at day to day life...

so using my formula of rent, and your 5.5% rate... that same house now rents for $5300/month+utilities

the owner of the house hasnt had a mortgage for 5 years... he has a monthly bill of insurance+tax+utilities... where is he at then? $600+utilities

so over those 5 years of no mortgage he has saved ~$282k over the renter! guess what? the longer life continues past this point, the MORE he saves!

[ddduke]

Originally posted by Feruk

a) Re-ran at $1,800/month rent. Still ahead renter by $470K after 30 years
b) 2%/year compounded annually assumed in both cases

I don't even know why you're wasting your time arguing with him. He bought a rental in the last year and also owns his primary residence and now he thinks that he's a real estate guru, you'll never win.

[ercchry]

Originally posted by ddduke


I don't even know why you're wasting your time arguing with him. He bought a rental in the last year and also owns his primary residence and now he thinks that he's a real estate guru, you'll never win.

its math... his spreadsheet is either full of a bunch of other variables, or his math is flawed... im using his future numbers

oh, and that was the replacement rental, already bought and sold the first :thumbsup:

[blitz]

Economic warriors fighting over hypothetical economic situations based on a dozen variable assumptions FTW!

[ercchry]

yeah, why not? thats what this sub-forum is here for, right?

[Neons4life]

And here's something you havn't factored in yet. Who ever owns just one house in their life time. I already bought and sold 2 times, lots of fees to factor in there. Plus with renting you would never have to "FIX" a single thing!!!

[Cos]

.

[mobius]

One major flaw everyone here is missing when comparing rent/own...... maintenance/repair/renovations.

[sputnik]

Originally posted by Xtrema
doom and groom

Asian?

[blitz]

Originally posted by ercchry
yeah, why not? thats what this sub-forum is here for, right?

Both of you guys are over-simplifying the situation, and then arguing over a few hundred k in value 30 years from now.

[ercchry]

^^ yeah, i never wanted to get into it, but his numbers bugged the shit out of me. also if you add it all up and actually went into detail of the difference of the more or less fixed amount every year for the owner vs the constant increase in rent over 30 years, im sure its even more $$


Originally posted by mobius
One major flaw everyone here is missing when comparing rent/own...... maintenance/repair/renovations.

not really, its hardly anything in the grand scheme of things. what are your wear items? furnace, roof, and hot water tank, right? so $5k, $10k, and $2k.... every 20 years or so...

it really should be a simple argument. you enjoy the town you live in? see yourself there for a while? buy. if you like to move around every year or so... rent.

buying a "starter home" that you know you will outgrown is fine and all... but just make sure if there is a downturn and you are under water on it that you can live with it for an extended period of time :dunno:

or purchase something you can add value to

[Sugarphreak]

...

[Xtrema]

Originally posted by sputnik


Asian?

Lol sure am.

Its a bit exaggerated but you can't deny that projects are stopping and job market is cooled. No 2008 tho.

[G]

Originally posted by Sugarphreak


Don't forget to put a value on quality of life... there is something comforting knowing your home is in fact yours, and not somebody else’s.

It's not yours until every last dime has been paid off. Look on your home insurance policy and see who gets paid first.

[Maxt]

Originally posted by G


It's not yours until every last dime has been paid off. Look on your home insurance policy and see who gets paid first.
lol exactly, owning a debt and owning a house are really 2 different things.
Really make the home yours, and beat the bank... Buy below your maximum means and pay it off in 3-5 years instead of 30... That alone saves a huge amount of money. If I was worried about the cost, and saving., I wouldn't be taking a 30 year amortization.

[ZenOps]

There is also the idea that locking your wealth into one thing can be better off put to something else.

Like buying a ton of pennies (or at least you could have done that, until they took the ability away) or a ton of nickels instead.

Ask yourself: What are the banks buying? What are the banks "pushing"? Does a drug dealer always push the thing that he can make the biggest profit margin on? Does the drug dealer always take away and keep the thing that has the longest term wealth potential?

Mortgages at 2.99%. No pennies. Hmm....

[Akumaz]

6% ROI seems a bit high
there is no garunteed investments
and current GICs has almost none existent interest rates

buying a house, you should always be ahead than renting
if someone had a down payment of 112k, i garuntee you
95%+ of the people would much rather buy, than rent
given, the individual had the intent to reside with in the city

after 30 years, one would still be paying for rent at what ever rate it is at that time
while the house owner will no longer have to worry about mortgage/rent, for most ppl/familys, the largest expense

[Mibz]

Originally posted by Xtrema
Lol sure am.

Its a bit exaggerated but you can't deny that projects are stopping and job market is cooled. No 2008 tho. He's referring to the fact that the phrase is "Doom and gloom". The fact that you, as an Asian, replaced the L with an R is hirariousry raughabre.

[KappaSigma]

People had their chance to buy at good prices when the market dropped and sales slowed late ~2009.

[Sugarphreak]

...

[G]

Originally posted by Sugarphreak






Not really, even if you still owe some money on a house (or car for that matter) you can still modify and customize it to your liking. Shitty gold faucets from the 70’s with wall paper to match? Instead of living in somewhere that makes your parents feel young, you can update them… in a rental, best you can do is put up a disco ball and grow a sweet handlebar stash.

More like comparing owning a nice BMW (owing money or not) to renting something from Budget.

Don't get me wrong I think RE has it's place (I OWN my house and a rental) but to be overly bullish and act like it's a sure win is foolish.

Those who think after the 30 year mortgage you don't have to pay a cent again and it's all gravy...I don't think a 30 year old home built now will not need major repairs and upkeep. Look at all the fancy stuff people are putting in their homes like infloor heating, near commercial HVAC systems, fancy expensive appliances, home automation, structured wiring....all this stuff does not keeping working for enternity eventually you will have to replace/repair it.

[Xtrema]

Originally posted by Mibz
He's referring to the fact that the phrase is "Doom and gloom". The fact that you, as an Asian, replaced the L with an R is hirariousry raughabre.

Ah fuck lol.

[ercchry]

Originally posted by G

Those who think after the 30 year mortgage you don't have to pay a cent again and it's all gravy...I don't think a 30 year old home built now will not need major repairs and upkeep.

well for me personally i like to fix and sell as i build up... but lets say i bought a fresh new build and held it for 30 years...

besides the basic wear items, what are the major issues? i dont think anything will just "arise" after 30 years. over the entire life of the house you will be doing the odd job here and there, which should just be factored into home ownership anyways... its still way cheaper than what future house values will be at in 30 years

[msommers]

If we go back 30 years from now, what were interest rates like over that time? It's certainly not a fixed situation.

Don't get me wrong, right now is a great time to buy because of record lows. But because of that, it's hard to say that the price you're paying per month now is the same or even simliar to what you're going to be paying in 15 years. How long can record low interest rates really last?

An interesting graph would be inflation vs. interest rates vs. increase in rental prices over 30 years.

[HiTempguy1]

Originally posted by Sugarphreak

Not really, even if you still owe some money on a house (or car for that matter) you can still modify and customize it to your liking.

Yep, plus more space.

I have a ton of cool ideas I'd love to do to my room I currently rent, but that is exactly it, I "rent". I have to only do things that can be put back easily, which basically gets to a "whats the point"?

I've saw the way my parents have handled the real estate market. They are average people who work hard, and housing has rewarded them nicely. Another factor in owning a place, it's practically a forced savings plan. A shitty one? Possibly. But it still forces you to build equity rather than pissing your money away for an eternity.

[ercchry]

Originally posted by msommers
If we go back 30 years from now, what were interest rates like over that time? It's certainly not a fixed situation.

Don't get me wrong, right now is a great time to buy because of record lows. But because of that, it's hard to say that the price you're paying per month now is the same or even simliar to what you're going to be paying in 15 years. How long can record low interest rates really last?

An interesting graph would be inflation vs. interest rates vs. increase in rental prices over 30 years.

you are always paying current market value for a rental though, so it should reflect all those changes, when i say similar though i mean within the same ballpark, your borrowed amount does not increase with inflation... rent does.

so lets say 15 years from now your house has increased an average of 2%/year, so its gone from $450k to $600k

so just to make this simple, lets say you have averaged a 5% interest rate over the first 15 years... so payment would have been an average of $2600/month

lets say rates jump to 15%, oh noes! so $5600/month, cant afford it? wtf were you doing with that last 15 years of your life that your income didnt increase enough to cover that?!

never fear! you only owe $250k, so you can refinance! so put it over 25 years again, since you acquired a gambling or drug problem over the last 15 years and have no savings...

and your monthly cost is now $3100/month

rental? well whats the market at? $600k house, 5% down, 15% interest, and 25 year amortization...

ballpark rent...

$8k/month

[blitz]

Originally posted by ercchry


well for me personally i like to fix and sell as i build up... but lets say i bought a fresh new build and held it for 30 years...

besides the basic wear items, what are the major issues? i dont think anything will just "arise" after 30 years. over the entire life of the house you will be doing the odd job here and there, which should just be factored into home ownership anyways... its still way cheaper than what future house values will be at in 30 years

Have you been in a house built in 1983 with no renovations done recently? If so, was it nice? I spent 100k over the last few years reno'ing my 1976 built house. You think a house built in 2013 is going to be immune from that in 2040?

[msommers]

Originally posted by ercchry


you are always paying current market value for a rental though, so it should reflect all those changes, when i say similar though i mean within the same ballpark, your borrowed amount does not increase with inflation... rent does.

so lets say 15 years from now your house has increased an average of 2%/year, so its gone from $450k to $600k

so just to make this simple, lets say you have averaged a 5% interest rate over the first 15 years... so payment would have been an average of $2600/month

lets say rates jump to 15%, oh noes! so $5600/month, cant afford it? wtf were you doing with that last 15 years of your life that your income didnt increase enough to cover that?!

never fear! you only owe $250k, so you can refinance! so put it over 25 years again, since you acquired a gambling or drug problem over the last 15 years and have no savings...

and your monthly cost is now $3100/month

rental? well whats the market at? $600k house, 5% down, 15% interest, and 25 year amortization...

ballpark rent...

$8k/month

Thanks man!

[G]

Originally posted by ercchry


you are always paying current market value for a rental though, so it should reflect all those changes, when i say similar though i mean within the same ballpark, your borrowed amount does not increase with inflation... rent does.

so lets say 15 years from now your house has increased an average of 2%/year, so its gone from $450k to $600k

so just to make this simple, lets say you have averaged a 5% interest rate over the first 15 years... so payment would have been an average of $2600/month

lets say rates jump to 15%, oh noes! so $5600/month, cant afford it? wtf were you doing with that last 15 years of your life that your income didnt increase enough to cover that?!

never fear! you only owe $250k, so you can refinance! so put it over 25 years again, since you acquired a gambling or drug problem over the last 15 years and have no savings...

and your monthly cost is now $3100/month

rental? well whats the market at? $600k house, 5% down, 15% interest, and 25 year amortization...

ballpark rent...

$8k/month

So many assumptions.

-Houses do not appreciate all the time just look at Japan it has been flat for the last 20 years.

-Although the 500k borrowed today won't increase do to inflation but every thing else that you spend money on will so you will be spending more to get the same amount x.

-So if the monthly payments doubled but your income doesn't go up at the same rate you're fucked? Most people are already tapped out making 6 figures. Yeah easy to go from 40k to 100k but from 100k to 200k+? If you make that kind of coin you wouldn't have to worry about any of the above.

-What makes you think that at 15% there will still be a strong demand for homes?

-At 15% the economy would've tanked good luck getting 8k rent....you can rent a big house in the SW for $2400 today...http://www.homerent.ca/property/L16912 with a 500k mortgage the rent just covers the mortgage and this is with the lowest rate in history...what about maintenance? Insurance? Taxes? At 15% how long you can let that house sit empty while you wait for the 8k renter.

-You are also assuming you will always have a good paying job, you will never get sick and there is never any emergencies in life.

Using the last 10 years as a benchmark is just stupid.

[Xtrema]

Originally posted by blitz


Have you been in a house built in 1983 with no renovations done recently? If so, was it nice? I spent 100k over the last few years reno'ing my 1976 built house. You think a house built in 2013 is going to be immune from that in 2040?

My experience is roughly $20-30k every 15 years. Fixing only what's necessary for the place to be competitive and presentable.

But the 2 housing booms cover that cost and some more. Without the booms, I'm only seeing 3%/yr of return on average. Last 5 years it outperforms GIC but it does not the 10 before that.

I'm with G that I'm not really fanatical on ownership but it's just part of a balance investment portfolio. We all know how stocks can go if you look at RIM or Nortel. At lease housing won't swing that fast or drastic.

[Maxt]

Originally posted by Sugarphreak






Not really, even if you still owe some money on a house (or car for that matter) you can still modify and customize it to your liking. Shitty gold faucets from the 70’s with wall paper to match? Instead of living in somewhere that makes your parents feel young, you can update them… in a rental, best you can do is put up a disco ball and grow a sweet handlebar stash.

More like comparing owning a nice BMW (owing money or not) to renting something from Budget.
You can still pay off early and do some things to a house, but people sometimes need to curb their tastes, banks prey on peoples want to have things that are really beyond their financial reach.. Once your mortgage is gone, you have 1500-2000 a month to buy all crap you want for your house, instead of paying double for the house.

[Sugarphreak]

...

[G]

History as proven that RE is cyclical what does up must come down and what goes down will come back up I agree with this 100%. If you can time your life to coincide with the RE cycle than you will make a killing. But when the RE cycle goes down it may stay down for years and years. Just make sure you don't count on RE to be up when it is down. People jumping into the game now is doing so at or near the top of the cycle so I would be very careful. Yes a broken clock is still right twice day but I wouldn't brush off all these warnings as a non issue. Even the biggest fall in the RE game just look at Torrode/Callebaut and countless other mom and pop investors.

[G]

Originally posted by Sugarphreak


And I agree with you, I was just saying that you have to also be considering what value it adds to the quality of your life in the comparison... that has a dollar figure attached to it, although it is far more subjective as to just how much.





I believe that 100 year mortgage is not uncommon in Japan... and that it takes generations to pay off a home. Which is probably why the prices there have stopped increasing.

Yes all that stuff increases quality of life but at what price? I paid off my house before I put in the 75k basement. I am sure to pay double that if I mortgaged it. I can wait a few years to get what I want just to save some money...the asian in me rules.

[ercchry]

Originally posted by G


So many assumptions.

-Houses do not appreciate all the time just look at Japan it has been flat for the last 20 years.

-Although the 500k borrowed today won't increase do to inflation but every thing else that you spend money on will so you will be spending more to get the same amount x.

-So if the monthly payments doubled but your income doesn't go up at the same rate you're fucked? Most people are already tapped out making 6 figures. Yeah easy to go from 40k to 100k but from 100k to 200k+? If you make that kind of coin you wouldn't have to worry about any of the above.

-What makes you think that at 15% there will still be a strong demand for homes?

-At 15% the economy would've tanked good luck getting 8k rent....you can rent a big house in the SW for $2400 today...http://www.homerent.ca/property/L16912 with a 500k mortgage the rent just covers the mortgage and this is with the lowest rate in history...what about maintenance? Insurance? Taxes? At 15% how long you can let that house sit empty while you wait for the 8k renter.

-You are also assuming you will always have a good paying job, you will never get sick and there is never any emergencies in life.

Using the last 10 years as a benchmark is just stupid.

of course there are assumptions, no one can predict the world in 15 years. im using the numbers that someone else posted earlier with the "what if" of interest rates increasing. i made that increase dramatic so its easy to see the difference. its just me running numbers, not predicting the future.

also that is for a rent vs buy scenario, not a "should i buy a rental property"

btw, i am renting out a big house in the sw... and the mortgage isnt close to that ;)

but that example falls in line with my formula, now doesnt it?

[Feruk]

Originally posted by ercchry
with your pipe dream of a 6% average ROI?

the fact that i can buy a house and cash flow substantially right away from renters leads me to believe that your math is a little... unrealistic

PS: $1800 is still low
I don't think 6% is unrealistic at all. Pre-inflation TSX historical average is 9.4% (as per article below), and the stat I read on S&P 500 a couple weeks back was 11.25%. Clearly 6% isn't a pipe dream.
http://business.financialpost.com/2010/12/17/tsx-expected-to-return-8-to-9-over-next-decade/

I quickly went on Rentfaster. I think the $1,800-$2,000 range is reasonable.


Originally posted by ercchry
bare minimum rent=mortgage+insurance+property tax on a FRESH 25 year mortgage with 5% down, why? cause thats the market value of that house in the here and now. rent reflects THAT price

so i buy a house with 25% down... why not...

in 30 years i have been mortgage free for 5 years, my house at 2% annual increase is worth $815k

my 6% return on $112.5k after 30 years? $646k.... why is my ROI better even at a lower return? oh, i dunno... cause it was leveraged at 4:1 :nut:

so there is a win already... now lets look at day to day life...

so using my formula of rent, and your 5.5% rate... that same house now rents for $5300/month+utilities

the owner of the house hasnt had a mortgage for 5 years... he has a monthly bill of insurance+tax+utilities... where is he at then? $600+utilities

so over those 5 years of no mortgage he has saved ~$282k over the renter! guess what? the longer life continues past this point, the MORE he saves!

Leverage does work to better the numbers while coming with higher risk. What works even better is an investment property, but that's outside this discussion scope as this is about renting vs buying.

Your return on the renting isn't just the $646K. You also have to include the yearly cash surplus of renting vs owning and ongoing 6% return on that money! Your return after 30 years is almost $1.3M, not $646K. Completely agreed on your house worth of $815K. So that puts you DOWN $470K (at 5% down), NOT up.

Your formula for rent has no basis in reality. Nobody's paying you rent of $5,500/month for a $450,000 property. If that was realistic, I'd be the first to cheer on buying.

[Isaiah]

Looks like many have missed a key variable in the article:


American-based agency Fitch says...

[msommers]

Fuck I'm so confused now lol

[ercchry]

Originally posted by Feruk




Your formula for rent has no basis in reality. Nobody's paying you rent of $5,500/month for a $450,000 property. If that was realistic, I'd be the first to cheer on buying.

thats on a $815k house... the in 30 years rent that you would be paying.

you have no monthly savings over buying, so you are double dipping on your savings that dont exists. rent ramps up over time... the value that you "locked" the house in will not, only borrowing costs are left as a variable

[Feruk]

Originally posted by ercchry


thats on a $815k house... the in 30 years rent that you would be paying.

you have no monthly savings over buying, so you are double dipping on your savings that dont exists. rent ramps up over time... the value that you "locked" the house in will not, only borrowing costs are left as a variable
Look where the market is... You'll get $2,000/month for a $450K place. You won't get anywhere near $5,500. If you could get $5,500, you'd be right. But unfortunately you won't find a renter. If you could for that price, they'd just BUY A HOUSE!

At $2000/month. Rent is $24K/year vs cash outlay for buyer of $35K (24K mortgage, 5.5K maintainance, 4K property tax, 1K insurance). That's a difference of 46% for renter in just 1 of 30 years.

[Twin_Cam_Turbo]

Reading this thread makes me worry that I made a poor decision to buy now :(

[ercchry]

EDIT: ^^^ dont worry, you will be fine... you have an added variable that adds instant win... roommates. you are probably not paying a dime in interest with that added in

you are still not listening...

i personally am renting out a house that i purchased a year ago... it cash flows, the house before that that i rented out? it also cash flowed... you think anyone is going to rent out a house that isnt going to cash flow and they have to dump money into? nope.

but here is my number for a 2013 $450k rental... ready?

$2300+utilities... the same price as buying a $450k house with 5% down today

so if you put 25% down in this example, $1900+utilities for owning, so a $400/months savings right now.

and yes, sure maintenance... no one is dumping $5k into a home every year unless they are doing upgrades.

$30k over 20 years seems better to me, so an extra $125 a month

[G]

Originally posted by ercchry
EDIT: ^^^ dont worry, you will be fine... you have an added variable that adds instant win... roommates. you are probably not paying a dime in interest with that added in

you are still not listening...

i personally am renting out a house that i purchased a year ago... it cash flows, the house before that that i rented out? it also cash flowed... you think anyone is going to rent out a house that isnt going to cash flow and they have to dump money into? nope.

but here is my number for a 2013 $450k rental... ready?

$2300+utilities... the same price as buying a $450k house with 5% down today

so if you put 25% down in this example, $1900+utilities for owning, so a $400/months savings right now.

and yes, sure maintenance... no one is dumping $5k into a home every year unless they are doing upgrades.

$30k over 20 years seems better to me, so an extra $125 a month

It may work in YOUR case but I am thinking about the market as a whole.

[ercchry]

Originally posted by G


It may work in YOUR case but I am thinking about the market as a whole.

i think it works right now, not many people want to subsidize rentals. also those who purchased farther back would like to see an increase in rent ever year as well. so once it doesnt make sense people will drop their income properties, lowering inventory and correcting price back to a sustainable level

[kvg]

Not entering the debate, but I do have a question. Isn't your rental furnished Eric? How much of a difference in rent do you think that makes if you don't mind me asking.

[ercchry]

Originally posted by kvg
Isn't you rental furnished Eric? How much of a difference in rent do you think that makes if you don't mind me asking.

its not much, honestly with the interest i got i think i was too low on my asking price to begin with. i bet i could rent it out unfurnished for the same amount right now... but it also would have cash flowed unfurnished at my original asking price

and the property before that was below market and cash flowed since one of the tenants was related to the mrs...

[kvg]

Is there a big demand for furnished rentals with all the easterners coming out?

[ercchry]

Originally posted by kvg
Is there a big demand for furnished rentals with all the easterners coming out?

it didnt seem like it... out of everyone that came through in that one day i did viewings. these guys were the only ones that for sure wanted it furnished, the others were either no, or a maybe. but also i think this was the only family from out east that i got too? some were young people from BC, others were already situated in calgary.

these guys wanted it furnished though cause they left the woman of the family back home till school and what not was done for the kids. so they didnt want to buy all new stuff since they planned to move out their current stuff from back home

[Feruk]

Originally posted by ercchry
i personally am renting out a house that i purchased a year ago... it cash flows, the house before that that i rented out? it also cash flowed... you think anyone is going to rent out a house that isnt going to cash flow and they have to dump money into? nope.

but here is my number for a 2013 $450k rental... ready?

$2300+utilities... the same price as buying a $450k house with 5% down today

so if you put 25% down in this example, $1900+utilities for owning, so a $400/months savings right now.

and yes, sure maintenance... no one is dumping $5k into a home every year unless they are doing upgrades.

$30k over 20 years seems better to me, so an extra $125 a month

Yes, this works. Your break even is about $1,925/month start assuming about 2% appreciation through the 30 year period. If you have to pay above this in rent, it's better to buy. There's always a break even price.

I think the mistake you're making is to assume that just because the rental market has suddenly sky rocketed, that there is any measure of sustainability there.

[Twin_Cam_Turbo]

They also say Alberta is the least over valued according to the article in the Herald today as well, thats a positive I guess.

[KappaSigma]

Originally posted by mobius
One major flaw everyone here is missing when comparing rent/own...... maintenance/repair/renovations.

A smart landlord bases these costs slowly onto rentors through rental increases for recovery.

[KappaSigma]

Originally posted by Feruk

Look where the market is... You'll get $2,000/month for a $450K place. You won't get anywhere near $5,500. If you could get $5,500, you'd be right. But unfortunately you won't find a renter. If you could for that price, they'd just BUY A HOUSE!

At $2000/month. Rent is $24K/year vs cash outlay for buyer of $35K (24K mortgage, 5.5K maintainance, 4K property tax, 1K insurance). That's a difference of 46% for renter in just 1 of 30 years.

Wrong. You forgot to factor in while opwning you have (in your example) $35K cash outflow...you still hold value in lowering your debt and having something to less. While the rent will always be a cash outlay.

[Xtrema]

The only surprise is, is heavyfuel having a day off? :rofl:

[KappaSigma]

Lets put it this way....how many people get "richer" from renting all their life versus people who have multiple investmnet properties.

Ive yet to hear about people saying hey, Im 50 and retired because I rented all my life. Yet Ive knowna ton of people who have and continue to make serious coin being smart about investment properties.

[masoncgy]

^ It takes the right person to be investment property savy, not your usual run-of-the-mill HGTV idiots that line up and buy condos at top dollar with little to no foresight.

[KappaSigma]

Originally posted by masoncgy
^ It takes the right person to be investment property savy, not your usual run-of-the-mill HGTV idiots that line up and buy condos at top dollar with little to no foresight.

Yup. And the other part is to be patient. There is a ton of property. If you have your financing ready to go there are ltos fo excellent deals but they get snatched up very quick.

[blitz]

Originally posted by KappaSigma
Lets put it this way....how many people get "richer" from renting all their life versus people who have multiple investmnet properties.

Ive yet to hear about people saying hey, Im 50 and retired because I rented all my life. Yet Ive knowna ton of people who have and continue to make serious coin being smart about investment properties.

Counterpoint, how many people in the US were financially ruined by foreclosure?

[Cos]

.

[thetransporter]

banks are dropping interest rate to help mortgages as debts are too high.

please do not buy homes foolishly - do research and long term thinking/planning

[Feruk]

Originally posted by KappaSigma
Wrong. You forgot to factor in while opwning you have (in your example) $35K cash outflow...you still hold value in lowering your debt and having something to less. While the rent will always be a cash outlay.
Factored in.

[Sugarphreak]

....