The $262k was the home cost, not the downpayment.
Incomes havent even come close to doubling in the past 2 decades but houses have 5-6x. Crazy
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COVID and the housing market
- Thread starter mimico_polak
- Start date
Incomes havent even come close to doubling in the past 2 decades but houses have 5-6x. Crazy
They leveraged the 13,100. It's not fair to compare that money in the market without leverage. If they had leveraged that at 20:1 in the market (not simple and crazy risky compared to real estate) the end result is much much different. Most of the monetary difference in your calculation is due to lack of leverage it has nothing to do with market/real estate etc.
I also don't like S&P for various reasons. Nasdaq from 2002 to 2020 was up 970%.
When risk is considered, real estate in canada vastly exceeds the reasonable rate of return. Markets present more risk but can beat real estate returns.
Mad Mike
Well-known member
That’s not a doable plan for a few reasons. You mentioned cash flow, to fund that you would needed somewhere around $50k after tax in 2001 to fund the investment and rents.
Next it would be next to impossible to get unsecured credit of $250k, with only $20k equity. You would need a personal income of somewhere around $150k in 2001. And it would be very expensive credit.
Next, if one could get 15% annual return year after year, that might work.
Now what about risk? In 2008 and 2019 those loans might have been called, ( presuming they are margin borrowing) if you couldn’t cover you would be back to zero.
Had you bought the house in 2001, paid the mortgage for 5 years you could refinance invest using cheap mortgage. That might work but still has cash flow hurt and remains risky.
How do you 20x leverage the market over the course of 20 years? Can it even be done without huge cost and downside risk?
That's the benefit of real estate, when you buy you use leverage.
Dont get me wrong, I like markets better. A lot of the gains in Canadian real estate the past decade are most definitely not normal. A myriad of factors has contributed to this huge bubble and if it continues to be this difficult for people not in the real estate market to get in, Canada will have big problems in the future.
So your parents would have doubled their (leveraged) capital in about 9 years (2010). Then about 10 years for the next doubling (~2020). After 19 years your mortgage payments are likely well below market rent but you have a lot of expenses along the way. Doubling every 9 or 10 years is solid but nothing to write home about as an investment.
Now, as places for people to live with salaries barely moving and house prices doubling every 10 years that's a much crappier story.
I know, getting access to credit to put in the market leveraged like that is orders of magnitude harder than getting similar credit for a house. In reality, the investment portfolio to match the house would like be whatever capital/leverage you could get your hands on and then 3x etf to turn the screws. So much more risky than real estate it's crazy. The risk collapses substantially if you are sitting on a windfall in year one and deciding whether to put it into the house or markets.
My family background is "Money under the mattress AKA bank savings account (0.2%)". Many others are the same. If they are covered for the future and it let's them sleep at night, more power to them.
Investing is, in a way, like a Ponzi scheme. Even blue chip stocks fail. It depends on when you get on the train.
My comment about rents is for the ones that think the future and rents will never change. Socialism only goes so far.
There are advantages to renting an apartment except for bikes being stolen.
Moving is cheap with no real estate fees if you don't like the neighbours.
No maintenance duties.
If you don't have pets or plants and you want to take a trip, lock and walk. OK, have the super clear your mailbox or suspend service.
Investing is, in a way, like a Ponzi scheme. Even blue chip stocks fail. It depends on when you get on the train.
My comment about rents is for the ones that think the future and rents will never change. Socialism only goes so far.
There are advantages to renting an apartment except for bikes being stolen.
Moving is cheap with no real estate fees if you don't like the neighbours.
No maintenance duties.
If you don't have pets or plants and you want to take a trip, lock and walk. OK, have the super clear your mailbox or suspend service.
D
Deleted member 50930
Guest
^
Apartment renting is so expensive now that it's total BS. Easily $2000++++
You are gonna be wayyy ahead leveraging a house + HELOC with low interest that you throw into stock or another property or smith manouver
When interest rates go back up then this type of thinking is probably too risky
Apartment renting is so expensive now that it's total BS. Easily $2000++++
You are gonna be wayyy ahead leveraging a house + HELOC with low interest that you throw into stock or another property or smith manouver
When interest rates go back up then this type of thinking is probably too risky
Yup. My buddy was literally telling me his DOGECOIN is up 7x since he bought. Telling me I should buy in before I miss out!
At least if you buy meth you are investing in something. The amount of capital invested in vapour is astounding.
D
Deleted member 50930
Guest
More doom and gloom
www.theglobeandmail.com
Opinion: The housing boom is ripping apart the financial fabric of Canadian life
The rapid acceleration in housing prices is causing tremendous stress to the personal finances of individual households and the nation as a whole
www.theglobeandmail.com
Would like to know more about this 38% more complaints against agents...
apple.news
'Bad things happening' in Ontario real estate market as homebuyer complaints surge — CBC News
With an overheating Ontario housing market, "bad things are happening," says one agent. But those bad things are hard to prove.
apple.news
And no increase in enforcement actions. "we're looking into it". Ontario's system of blind bidding is horrendous and designed to warp the markets (and skyrocket the returns for the haves at the expense of the want to haves). We should have switched to public auction long ago for hot properties. Either a straight auction from the beginning (eg here are pics, auction will be May 15) or a conventional listing and if multiple offers are received that triggers an auction among those people only. Maybe use phone in with the agents providing the bids to provide some isolation and anonymity for the potential buyers. Bidding 151K over (and winning) when 51K over would have won is not a healthy marketplace.Would like to know more about this 38% more complaints against agents...
'Bad things happening' in Ontario real estate market as homebuyer complaints surge — CBC News
With an overheating Ontario housing market, "bad things are happening," says one agent. But those bad things are hard to prove.
It would be great if we could nuke the entire ponzi scheme that is real estate agents. So much money kicked up hill to people that do almost nothing other than hold the license. Similar to taxi licenses where the people making the most money are doing the least work. Change the regulations and poof, the sit back and get rich for contributing nothing job evaporates.
bigpoppa
Well-known member
I have more faith in a really capable viral/helpful app replacing them like netflix did Hollywood and uber did taxi drivers.
Something so powerful and fast, that these leeches wont be able to mobilize an effective lobbying response in time.
ifiddles
Well-known member
My brother owned a real estate firm for 35 years or so...I worked for him part time in 2004 when I went back to school to become a teacher...he had me doing odd jobs around the offices (he had two locations) and help the 150 or so agents he had working for him...I did payroll a few times and man oh man, the commission checks were outrageous for the hard working agents...the ones who sat around doing nothing but twiddle their thumbs, their pay was definitely less...not all agents are bad...however, in today's market and with today's advancements in technology (drone footage) and do-it-yourself know how, they do seem to be less needed than before.
Update on the friend who is selling his place...apparently he's had 4 offers over list, yet the agent is so lazy, that they expired before he even got back to the buyer's agents...SMH
Update on the friend who is selling his place...apparently he's had 4 offers over list, yet the agent is so lazy, that they expired before he even got back to the buyer's agents...SMH
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