Coronavirus

[ChrisCBR]

A few things:

1) You've cherry-picked the hottest RE market (well, next to Vancouver) in one of the highest growth periods in Canadian RE history with the benefit of hindsight. There's a saying in investing: "Past performance is not an indicator of future returns". If you buy a house in Toronto in 2020, it may stay stagnant or even decline in value, despite what's happened between 2000-2020.

2) In your calculations, you've missed the 20% down payment that the renter would have invested. 20% of $245K = 49K, which 7% compounded over 20 years is $190K, after cap gains tax is probably $160-$170K net, depending on your tax bracket

3) As per cherry-picking the RE location and the time period, if you're going to do that for RE instead of using national historical averages, then you must do that for your stock picks as well. So instead of investing the 20% downpayment of 49K in an S&P ETF, say the renter bought Apple stock instead in 2000. The renter's $49K would be worth close to $10MM today! Far outstripping the RE returns in the Toronto market over the last 20 years.

It's an interesting thought experiment to play "What If?" but nobody has a crystal ball. All we can do is rely on aggregate averages, otherwise we'll all be cherry-picking the best data to prove our points.

Your right I forgot to include the $49k down payment. Still puts the buyer $600k ahead.

I wasn’t cherry picking. I simply stated looking at the GTA (this is GTA motorcycle and most people here are from the GTA).
Could renting beat out owning, absolutely, just not here over the past 20 years.

Instead of Apple, how about Nortel or Worldcom or almost any other dot-com? You would have $0 now.

You are right, past performance doesn’t guarantee future returns.
I am confident that 20 years from now the avg GTA home will not be 3.64x what it is now.
Salaries have barely kept up with inflation and debt levels are too high.
Renting now instead of buying makes some sense, which is why I rent a 400 sqft basement for $900, rather than spend $2700+ a month on total costs to own a 400 sqft condo in Vaughan.

 

[ChrisCBR]

I don't know. My post wasn't even looking at rental costs. It was looking at rates of return in the stock market vs RE market.

Focusing on the GTA RE market is fine. As long as you're also okay with comparing returns to individualized stock picks as well, as opposed to an average rate of return like the S&P/TSX. That was the point.

RE is a leveraged investment and tax free on your primary residence.
You have to live somewhere so one is forced to participate in the RE market either as a buyer or a renter.
As far as comparing to individual stock picks:
IIRC 90% of the gain in North American stocks since the 1929 depression have come from only 5% of companies. It’s the reason 90% of fund managers can’t beat the index over the long term

 

[mimico_polak]

Park full of Karen's think the rules don't apply to them....because their crotch goblins need play time.

https://www.reddit.com/r/PublicFreakout/comments/g62gb9

And here's the followup....

https://www.reddit.com/r/PublicFreakout/comments/g69sul

Apparently this was all a planned event by some anti-vaxxer ******** group. She set this up and organized the entire event with the anticipation to have a confrontation with the cops (but I didn't look beyond that). Glad they didn't take her ******** and took her away. Idiots.

 

[crankcall]

We've had a great run, since 2008 its been a full on party, low interest mortgages, steady employmnet for most, reasonable returns on investments were pretty steady.
This culling of levered to the tits wannabe investors with multiple homes, people that needed that Jaguar (because the company car allowance covered a Jag) and the 32yr olds in 1.8m houses because they could cover the monthly has been coming for a long time. Its here folks.
Leases on restaurant equipment will be about 100% default, trucking/construction equipment about the same, commercial real estate once its clear half the GTA can work from home will implode.
There are a lot of innocents that will get burned in this pandemic, but a lot of over levered dum dums are going to get it to.

I sure as heck wouldn't want to be the guy thats been leasing equipment to companies that dont own it because they made the monthly. You can repo 3,000 steak grilling salamanders, then what?

 

[Trials]

.... just so you know, some of us don't get any sound when viewing those playground protester videos, although i doubt we are missing anything.
Bring back spanking! Any mommy that teaches her kids to publicly confront and defy a police officer should get a good spanking.

 

[mimico_polak]

.... just so you know, some of us don't get any sound when viewing those playground protester videos, although i doubt we are missing anything.
Bring back spanking! Any mommy that teaches her kids to publicly confront and defy a police officer should get a good spanking.

Click the link and you'll get sound in reddit. But you're not missing much in all honesty. Funny to hear them justify their actions and try to argue a point though (especially the first video)...

'Someone call the poli....oh wait...'
'Our taxes pay your salary, I own you, and I pay for this park. Will I get a refund from the city for it being closed down? We just want our children to play!'

 

[Trials]

Bring back spanking! Any mommy that teaches her kids to publicly confront and defy a police officer should get a good spanking.

Can you imagine the reaction of all the kids and the parents if the cop had just gone straight up to her and spanked her! The rest of the kiddies and their mommy's would have pi**ed themselves all the way home.

 

[GreyGhost]

We've had a great run, since 2008 its been a full on party, low interest mortgages, steady employmnet for most, reasonable returns on investments were pretty steady.
This culling of levered to the tits wannabe investors with multiple homes, people that needed that Jaguar (because the company car allowance covered a Jag) and the 32yr olds in 1.8m houses because they could cover the monthly has been coming for a long time. Its here folks.
Leases on restaurant equipment will be about 100% default, trucking/construction equipment about the same, commercial real estate once its clear half the GTA can work from home will implode.
There are a lot of innocents that will get burned in this pandemic, but a lot of over levered dum dums are going to get it to.

I sure as heck wouldn't want to be the guy thats been leasing equipment to companies that dont own it because they made the monthly. You can repo 3,000 steak grilling salamanders, then what?

The smaller ones can make it into the kitchen/outdoor kitchen renos of the people that were able to profit from this. The larger ones are lepers. On the upside, you can probably pick up additional space cheap to store all your repoed equipment.

 

[PrivatePilot]

It's only just peaking, we have weeks to go yet easily.

Look at the numbers beyond the infections however. And arguably, the only reason the infection numbers are still where they are (plateaued as they are) is because testing has increased. Positive tests today are possibly people that are on the tail end of their infection period and arguably only a window to the reality of 2 weeks ago.

Then lets look at the forecasts versus reality.

- By the end of April (which face it, we're getting close to) the original best case scenario we were forecasted to have 1600 deaths. As of today, we have 659.

- We were forecasted under best case scenarios to have 1200 people in ICU's as of today. Currently as of 2 days ago there was only 250, and I believe that went down yesterday.

- Projections under best case scenario were for 80,000 infected people in Ontario by the end of the month. Current reality with basically a week to go in the month is 11750 as of 2 days ago.

So, reality is....we are doing WAAAAAY better than anticipated.

IMHO this arguably means we need to reassess the current restrictions. I'm not saying we just do like the USA, yell and scream about things, claim it's all a conspiracy, forget about social distancing, etc etc etc..

I'm saying perhaps we should objectively look at reality versus what was forecasted and realize that in the interest of lessening the economic devastation, consider moving forward carefully with continued precautions such as mandatory masks, continued social distancing, and continuing to limit and restrict large gatherings.

Reality is we need to consider the bigger picture. I totally respect the health professionals and such, but I increasingly think that if they had their way we'd all sit locked in our houses until we come up with a vaccine. They aren't necessarily looking at the bigger picture and are perhaps not necessarily looking at things from teh perspective of "managing the risk" versus "eliminating the risk".

At the very least they need to manage it on a geographic basis. If Toronto is still a problem, keep Toronto restricted. But the rest of the province? Wear masks. Social distance. Wash your hands. Be careful. But remove some of the restrictions.

 

[GreyGhost]

Look at the numbers beyond the infections however. And arguably, the only reason the infection numbers are still where they are (plateaued as they are) is because testing has increased. Positive tests today are possibly people that are on the tail end of their infection period and arguably only a window to the reality of 2 weeks ago.

Then lets look at the forecasts versus reality.

- By the end of April (which face it, we're getting close to) the original best case scenario we were forecasted to have 1600 deaths. As of today, we have 659.

- We were forecasted under best case scenarios to have 1200 people in ICU's as of today. Currently as of 2 days ago there was only 250, and I believe that went down yesterday.

- Projections under best case scenario were for 80,000 infected people in Ontario by the end of the month. Current reality with basically a week to go in the month is 11750 as of 2 days ago.

So, reality is....we are doing WAAAAAY better than anticipated.

IMHO this arguably means we need to reassess the current restrictions. I'm not saying we just do like the USA, yell and scream about things, claim it's all a conspiracy, forget about social distancing, etc etc etc..

I'm saying perhaps we should objectively look at reality versus what was forecasted and realize that in the interest of lessening the economic devastation, consider moving forward carefully with continued precautions such as mandatory masks, continued social distancing, and continuing to limit and restrict large gatherings.

Reality is we need to consider the bigger picture. I totally respect the health professionals and such, but I increasingly think that if they had their way we'd all sit locked in our houses until we come up with a vaccine. They aren't necessarily looking at the bigger picture and are perhaps not necessarily looking at things from teh perspective of "managing the risk" versus "eliminating the risk".

At the very least they need to manage it on a geographic basis. If Toronto is still a problem, keep Toronto restricted. But the rest of the province? Wear masks. Social distance. Wash your hands. Be careful. But remove some of the restrictions.

I've had issues with overly conservative medical treatment before. After my shoulder was out for 10 days, the doc put it in and then told me to keep it immobile for three months then come back for a checkup, then start physio. When I started physio, my guy lost it. If I had been doing some minor physio during the three months I wouldnt have been so royally screwed up when proper hard core physio started. The conservative approach actually created a much longer path to being back to normal.

As much as a hate management by committee, with so many conflicting priorities here, having a group of smart people discuss their thoughts is probably better that exclusively following the docs orders.

 

[PrivatePilot]

Typically a place will rent out cheaper than what the mortgage will cost if you had bought it. If it didn't, then everyone would just get a mortgage. Why would you rent a place for the exact same cost as the mortgage? Doesn't make sense.

The idea is then to take the delta between rent and mortgage+prop tax+maintenance+etc and invest the difference. Choose a 7% average year over year return compounded.

Please show me any low risk investment that has yielded a 7% return in the last 10 years. Only the stock market yields those sorts of returns, and those rose coloured glasses calculations you've posted fail to take into consideration the reality of exactly what's happening right now where the stock market has tanked and many of those 7% yield investments have lost a massive percentage of their value.

Sure, one could take those numbers you are quoting and invest in a high risk category and I'm sure the numbers will look even more fantastical. Until they don't, which in the high risk category, tends to happen kinda frequently.

Even in the 7% return category, re run your numbers with what's happened to those investments in the last 8 weeks and see how they look then versus the homeowner category.

:\ We couldn't find those prices in the eighties. It was difficult to even find a place period.

We couldn't find those numbers in OSHAWA in the 2000's much less the 80's. We were paying $1100/month for a 2 bedroom (albeit in a nice, but hardly "fancy" building, it was a co-op (!), but we were in the market rate category) in 1998!

Wow, that website seems out to lunch. If we're going to have a serious conversation over financial numbers we need to have them based in reality.

 

[Lightcycle]

Look at the numbers beyond the infections however. And arguably, the only reason the infection numbers are still where they are (plateaued as they are) is because testing has increased. Positive tests today are possibly people that are on the tail end of their infection period and arguably only a window to the reality of 2 weeks ago.

Then lets look at the forecasts versus reality.

- By the end of April (which face it, we're getting close to) the original best case scenario we were forecasted to have 1600 deaths. As of today, we have 659.

- We were forecasted under best case scenarios to have 1200 people in ICU's as of today. Currently as of 2 days ago there was only 250, and I believe that went down yesterday.

- Projections under best case scenario were for 80,000 infected people in Ontario by the end of the month. Current reality with basically a week to go in the month is 11750 as of 2 days ago.

So, reality is....we are doing WAAAAAY better than anticipated.

IMHO this arguably means we need to reassess the current restrictions. I'm not saying we just do like the USA, yell and scream about things, claim it's all a conspiracy, forget about social distancing, etc etc etc..

I'm saying perhaps we should objectively look at reality versus what was forecasted and realize that in the interest of lessening the economic devastation, consider moving forward carefully with continued precautions such as mandatory masks, continued social distancing, and continuing to limit and restrict large gatherings.

Reality is we need to consider the bigger picture. I totally respect the health professionals and such, but I increasingly think that if they had their way we'd all sit locked in our houses until we come up with a vaccine. They aren't necessarily looking at the bigger picture and are perhaps not necessarily looking at things from teh perspective of "managing the risk" versus "eliminating the risk".

At the very least they need to manage it on a geographic basis. If Toronto is still a problem, keep Toronto restricted. But the rest of the province? Wear masks. Social distance. Wash your hands. Be careful. But remove some of the restrictions.

I agree we can't all stay locked in at home with businesses closed until a vaccine is developed. That's far too long a disruption to the economy.

However, I don't think we have a handle on what is safe and best practices. Not when there are still hotspots like New York State acting as a warning if we do let up our guard. The exponential infection rate combined with the delay in the onset of symptoms means we have to err on the side of caution because "too late" comes too fast.

N95 masks are still not widely available. I've been reading stories about the virus being spread through the air conditioning system in a restaurant. Health care workers now have to disinfect the soles of their shoes because that's another vector of propagation in hospitals... What else do we not know?

 

[PrivatePilot]

As much as a hate management by committee, with so many conflicting priorities here, having a group of smart people discuss their thoughts is probably better that exclusively following the docs orders.

Exactly.

Don't get me wrong, it's great to see the people in charge paying attention to the health specialists that know more than them.

But those same health specialists are seeing things through a very shallow field of vision. Eliminate 100% of the risk. They'd love to see the hospitals literally empty and the numbers slowly drop to zero.

But including a few other professionals including an economist and a statistician (and a few others) in the mix, carefully take advice from all of them together, and find the happy medium. IMHO it's that path we need to be looking at right now.

 

[Lightcycle]

Please show me any low risk investment that has yielded a 7% return in the last 10 years. Only the stock market yields those sorts of returns, and those rose coloured glasses calculations you've posted fail to take into consideration the reality of exactly what's happening right now where the stock market has tanked and many of those 7% yield investments have lost a massive percentage of their value.

I *was* talking about the stock market when I quoted 7%. The discussion was about RE returns vs stock market returns.

As for rose-coloured glasses and not taking into account the last 8 weeks, 7% is the universally accepted long term historical average returns of the stock market. Since like 1950, I believe. Which includes several recessions.

 

[PrivatePilot]

Not when there are still hotspots like New York State acting as a warning if we do let up our guard.

NYC is a 100% a lesson in what happens when you don't react fast enough. Their situation is not a result of having "let up too early". Entirely different situation.

We have avoided a NYC situation here because we DID act fast enough, and now we need to plan the path ahead based on that reality, not "what iffs".

N95 masks are still not widely available. I've been reading stories about the virus being spread through the air conditioning system in a restaurant. Health care workers now have to disinfect the soles of their shoes because that's another vector of propagation in hospitals... What else do we not know?

We cannot compare a hospital environment to non hospital environments. Of COURSE hospitals are going to be a high risk vector because they're typically full of sick people. This has been reality forever, and will continue to be.

But is re-opening (for example) big box stores in even remotely the same risk category? Categorically no.

And N95's are not going to be a "necessary" thing outside hospital environments. N95's filter INCOMING air to protect the wearer in an environment where exposure to an infective risk is unavoidable. The key to curbing spread in public environments is covering your face when you cough (or wear a non medical mask to catch any unexpected "spray" since that's the overwhelming majority of the spread vector) and personal hygiene - wash your hands. Don't touch your face. Those things have been drilled into our head in the last 6 weeks and people understand them now.

 

[mimico_polak]

At the very least they need to manage it on a geographic basis. If Toronto is still a problem, keep Toronto restricted. But the rest of the province? Wear masks. Social distance. Wash your hands. Be careful. But remove some of the restrictions.

I agree with this. I think we're doing a good job, and although the numbers are still high, it's better than the 'worst case scenario' presented earlier. This will pass...but how painful it will be overall will depend on how quickly we can start to return to a new 'normal'.

Definitely don't open high volume / risk activities and gatherings, but low risk, low volume, and low concentration of people can definitely be looked at more closely for earlier opening.

As previously mentioned, we can say goodbye to high capacity events (concerts, amusement parks, clubs, sporting events, etc.) for the foreseeable future.

 

[PrivatePilot]

I *was* talking about the stock market when I quoted 7%. The discussion was about RE returns vs stock market returns.

As for rose-coloured glasses and not taking into account the last 8 weeks, 7% is the universally accepted long term historical average returns of the stock market. Since like 1950, I believe. Which includes several recessions.

So re-run your numbers now like I said. The markets have lost between 25% to 30% of their valuations. Some moderate risk investments have lost 50% of their values.

Our houses, however, have arguably not suffered any looses whatsoever. If any, it's a few percentage points at most.

So, again....re run those numbers taking these new realities into consideration, and remember to include the reality that it might take between 5 to 10 years for those who invested in the markets versus a home to regain their losses, much less continue to yield a profit again.

 

[Lightcycle]

So re-run your numbers now like I said. The markets have lost between 25% to 30% of their valuations. Some moderate risk investments have lost 50% of their values.

Our houses, however, have arguably not suffered any looses whatsoever. If any, it's a few percentage points at most.

So, again....re run those numbers taking these new realities into consideration, and remember to include the reality that it might take between 5 to 10 years for those who invested in the markets versus a home to regain their losses, much less continue to yield a profit again.

Did you not read what I just wrote?

7% is the long term average return of the stock market including several 50%+ drops. As for running the numbers with that stat, I don't need to do that. It's already been done, there was a video posted earlier:

 

[klr_guy]

Well, you're only Yonge and Eligible once in your life...

YOLO!

That gave me a chuckle as my parents are still in the first and only home they ever bought near Mt. Pleasant and Eglinton. Great area to grow up, I can't get over how much it's changed.

 

[crankcall]

I'm in a bit of a different catgory since my business is just fine in this pandemic so far, and we are expecting a boom coming out the other side.
My wife on the other hand is a front line worker right now, in a large GTA hospital. She's gowned/masked/face shield and booties all day. And we are both THRILLED the hospitals are under whelmed and over equiped for the rush we aren't getting. Its awesome to have nurses and aids actually getting dinner breaks for a change, because pre pandemic , 50% of the time 12hr shifts went with coffee for lunch and no dinner. The Pandemic has been great for ER doctors because morons that treat ER as a walk in clinic are scared away, the doctors and nurses have a chance to treat actual sick people,

Keep the programs we have in place to keep stupid people at home. Some easing sure, and if a lot of businesses fail? Well that sucks, but buggy whip manufactures went away to.

We are well under the curve since medical professionals preached "close it down" , not enjoy your march break and we'll sort this out. Open too soon and we will be F'd.