Housing during SARS-CoV-2 lockdown, before, during and after - Renting vs Owning

[nobbie48]

This has been a very interesting discussion to follow. How many of our decisions are also based a bit on culture, ethnicity and back stories? With my parents it was pretty much a 'given' that people that didnt own homes lacked responsibitity and renters were somewhat lesser achievers. No facts behind it at all, thats just how my family thought about things.
Partly because owning property in the old country was hard at the time, estate was considered success.
It formed my opinion that rent was money wasted, at that time.
I also had no clue growing up on a farm that regular people could travel the world, work part time to top up the travel fund, own vacation homes, motorcycles like the ones in magazines, not beaters, or yachts.

Stuff I wish somebody told me was possible when I was 10

I grew up with a lot of "What for's"

It's OK to be frugal but at some point you have to shift gears to really get going. People die in their eighties with millions in the bank that they were saving for their old age. Be realistic with how much money you have to hoard. It's just expensive toilet paper.

 

[nobbie48]

I mostly agree with this. The way I see it is that salaries have risen at about 2% per year here since 1980. Twenty years from now the median salary is going to be around $90K. With small homes at $3.3m and 1-bed condos at 1.5+ I fail to see how any new buyers can get into the market.
At $1.5m for the condo, it follows rent should be $5500, which is not affordable for anyone making anywhere near $90K gross, maybe not even for $150k gross.
Something is going to have to give. Either that or its going to be only wealthy immigrants and old money that can buy here.
People like to make the argument sometimes that Toronto and Vancouver are expensive but not as much as SF, NYC or London but if you look at salaries they are much higher there.

I'm not in touch with the rental market at all but years back a friend's mother-in-law had a rental property and I initially thought the rental ROI was poor, about the same as bank interest back then. However the capital gain made it decent.

The $1.5M condo at $5500 a month gives a ROI of 4.4% if the tenant pays all expenses (Unlikely the tax and maintenance) so more like 3%. That's better than the bank and theoretically as secure, long term. Add a couple percent capital gain and it looks better. The rent could be lower and still a safe investment.

 

[mimico_polak]

I'm not in touch with the rental market at all but years back a friend's mother-in-law had a rental property and I initially thought the rental ROI was poor, about the same as bank interest back then. However the capital gain made it decent.

The $1.5M condo at $5500 a month gives a ROI of 4.4% if the tenant pays all expenses (Unlikely the tax and maintenance) so more like 3%. That's better than the bank and theoretically as secure, long term. Add a couple percent capital gain and it looks better. The rent could be lower and still a safe investment.

As you said, the month to month may not be great, but the capital gains is great. When I was living in one of our units, we covered all the expenses with the rental. Once I moved out, that was an additional $1250/month.

However, the capital gains in that same 10 years went 3x from our original purchase price. So a lot of landlords are happy as long as their operating costs are taken care of. Theoretically your mortgage keeps going down, rent keeps going up, and capital gains is going through the roof.

 

[GreyGhost]

As you said, the month to month may not be great, but the capital gains is great. When I was living in one of our units, we covered all the expenses with the rental. Once I moved out, that was an additional $1250/month.

However, the capital gains in that same 10 years went 3x from our original purchase price. So a lot of landlords are happy as long as their operating costs are taken care of. Theoretically your mortgage keeps going down, rent keeps going up, and capital gains is going through the roof.

It is interesting how different the economics are with the crazy gta house price increases. Lots of places in the US are hovering close to 0% increase. That rapidly pushes the economics in favor of renting. Being able to secure housing security for very low six-figures though (especially with a mortgage interest rate fixed for the entire length of the mortgage) may be worth more than the economics would show.

 

[mimico_polak]

It is interesting how different the economics are with the crazy gta house price increases. Lots of places in the US are hovering close to 0% increase. That rapidly pushes the economics in favor of renting. Being able to secure housing security for very low six-figures though (especially with a mortgage interest rate fixed for the entire length of the mortgage) may be worth more than the economics would show.

One of the reasons we broke even (instead of making additional $) is because I was very aggressive with paying down the mortgage. Maybe about $300-500/bi-weekly. Had it not been like that, we would've definitely been more cash flow positive but didn't need it so long as the expenses were covered.
The rent covered the mortgage, insurance, pre-payments, all utilities, and the taxes at the end of the year that needed to be paid from the income. Basically just had a separate bank account for the rental property, and once in a while if needed I'd transfer some cash, but overall never went negative in a single year. The negative months were always winter, when heating costs went from $100/month up to $1000/month.

 

[crankcall]

1,000 month heating? did you rent an airplane hanger?

 

[shanekingsley]

Friends used to rent an older place with baseboard heating - their winter bills were insane.

 

[GreyGhost]

1,000 month heating? did you rent an airplane hanger?

Electric resistance heating can get there quickly. At the inlaws cottage (~1000 sq ft), they keep it at 50F in the winter but one winter the thermostat went crazy and the monthly hydro bill was over $1000.

 

[GreyGhost]

1,000 month heating? did you rent an airplane hanger?

A friend bought a house with a pool. Previous owners were on equal payment plan for gas. They got their first bill and called the gas company as apparently the expected average gas bill was over $700. The old owners kept the pool at 90 (unheated it floats around the low 70's). Jeebus.

 

[Jayv]

Loving it!

Some people are house people. We've figured out we're lifestyle people.

To each their own!

Hey Gene what’s the long term plan for you and the wife when you guys show down. I know you are already an old man... but what about the wifey? Rent till u die ?

 

[Lightcycle]

Hey Gene what’s the long term plan for you and the wife when you guys show down. I know you are already an old man... but what about the wifey? Rent till u die ?

No, we'll probably end up buying a place again when we're done. As others have mentioned, there are benefits to not having to worry about being renovicted, kicked out because the landlord wants to move back in, or wants to sell up. Issues that don't really concern us right now, but probably will be if we're in one place for the long haul.

Just gotta nail down *where* we want to live first though.

And thanks for the old man comment. You know it hurts more when it's true.

Bastage.

 

[mimico_polak]

1,000 month heating? did you rent an airplane hanger?

Water radiator heating with an old out of shape boiler. And a cold as **** winter.

 

[Lightcycle]

I just want to add that I am very impressed with the young people posting on this thread, @Evoex and @K20EF8 and others who are currently entering the housing market

I don't want to speak for all X-ers and Boomers, but when I first bought my place, I just went to the bank where I had my chequing account and asked them to help me out. I knew nothing going in and ended up signing forms and agreements without really understanding what was going on. Talk about a sheep asking the wolf for directions!

But back then, if you did what everyone else around you was also doing, chances are you'd end up okay 20-30 years later.

Today, the situation is so much murkier. Insane housing prices, wage stagnation, interest rate roulette, having to compete with foreign investors and RE speculators with what seems to be limitless access to capital and cheap credit... A wrong decision could set you back in a manner that just wasn't possible in my day (OMG, did I just say, "in my day?").

I don't believe the older generation gives you guys enough credit. I think we had it waaaay easier than you.

You've approached this situation with a lot more thought, research and maturity than I ever did.

Nobody knows what's going to happen in the local housing market over the next 20-30 years, but I just want to say, hats off to you, and best of luck. I wish you great success and prosperity for the future. You deserve the same chances and opportunities that we had.

 

[GreyGhost]

I just want to add that I am very impressed with the young people posting on this thread, @Evoex and @K20EF8 and others who are currently entering the housing market

I don't want to speak for all X-ers and Boomers, but when I first bought my place, I just went to the bank where I had my chequing account and asked them to help me out. I knew nothing going in and ended up signing forms and agreements without really understanding what was going on. Talk about a sheep asking the wolf for directions!

But back then, if you did what everyone else around you was also doing, chances are you'd end up okay 20-30 years later.

Today, the situation is so much murkier. Insane housing prices, wage stagnation, interest rate roulette, having to compete with foreign investors and RE speculators with what seems to be limitless access to capital and cheap credit... A wrong decision could set you back in a manner that just wasn't possible in my day (OMG, did I just say, "in my day?").

I don't believe the older generation gives you guys enough credit. I think we had it waaaay easier than you.

You've approached this situation with a lot more thought, research and maturity than I ever did.

Nobody knows what's going to happen in the local housing market over the next 20-30 years, but I just want to say, hats off to you, and best of luck. I wish you great success and prosperity for the future. You deserve the same chances and opportunities that we had.

The upside to the pandemic is it will help them get it. By setting back everybody else a few years, it gives them a chance to get in (housing or equities) as if they had the money years ago.

 

[Lightcycle]

The upside to the pandemic is it will help them get it. By setting back everybody else a few years, it gives them a chance to get in (housing or equities) as if they had the money years ago.

Unfortunately, the government is propping up both the stock market and the housing market with their policies (do I hear a QE5? How about a QE6 and 7?), because their voting base is older and *their* interests centre around capital preservation instead of allowing market forces to prevail.

 

[mimico_polak]

Unfortunately, the government is propping up both the stock market and the housing market with their policies (do I hear a QE5? How about a QE6 and 7?), because their voting base is older and *their* interests centre around capital preservation instead of allowing market forces to prevail.

For sure. All these programs are great. But let’s not fool ourselves that these aren’t being pushed through to ensure the current party can say “look how much we helped you guys out when COVID happened....were the good guys ol buddy ol pal!” Now give us a majority please!

 

[Evoex]

For sure. All these programs are great. But let’s not fool ourselves that these aren’t being pushed through to ensure the current party can say “look how much we helped you guys out when COVID happened....were the good guys ol buddy ol pal!” Now give us a majority please!

current spending situation is a liberals wet dream.

 

[AllistonGT]

By the way lets not forget, all this money the feds are spending is our money and will have to be paid back. Look out!

 

[JTR]

Alot of own vs. rent talk. What about the people who for some unknown reason, willingly make the decision to do both? I just don't understand it. What possesses a person, to spend hundreds of thousands(maybe over a million depending on location) to "buy" what basically amounts to an apartment, only to also pay rent on it in the name of condo fees? Same goes for HoA's. Why would you buy a place, where you have to pay people to tell you what to do? I remember my dad's wise words "My house, my rules. When you pay the bills, you can make the rules". Way I see it, if somebody else can tell you what to do and not do, you don't own ****.

 

[GreyGhost]

Alot of own vs. rent talk. What about the people who for some unknown reason, willingly make the decision to do both? I just don't understand it. What possesses a person, to spend hundreds of thousands(maybe over a million depending on location) to "buy" what basically amounts to an apartment, only to also pay rent on it in the name of condo fees? Same goes for HoA's. Why would you buy a place, where you have to pay people to tell you what to do? I remember my dad's wise words "My house, my rules. When you pay the bills, you can make the rules". Way I see it, if somebody else can tell you what to do and not do, you don't own ****.

One building that I worked on had very expensive condos. One recently came on the market. It is 2000 sq ft, the price has doubled in eight years. Condo fees are roughly 1.50/sq ft. Cough. The condo fees are enough for a good size mortgage. That includes a gym, valet parking, obviously 24 hour concierge and fancy finishes in the common areas.

I for one dont like condo fees, by definition they cost more than the maintenance on an equivalent house as condos do things like replace hallway carpet every eight years. What homeowner do you know that replaces flooring that often? Otoh, if you dont have a car, work downtown, have limited money and want to own your home, you have few alternatives. I think that person would be much further ahead by renting.