Buying Apartment

[taylor192]

Originally Posted by freakshow

Thanks taylor, that helped a lot!
I'm sure I'll have a few more questions for you and Chuck as I attempt to educate myself.

btw, i also spotted your coming down around westminster & 7/8 road a few weeks ago.

No prob dude.

I'm a rental property owner and learned most of it by asking other rental property owners that have been doing it for years, best way to learn. I found a couple property owners in Ottawa and took them out for beers to pick their brain, best investment I made: $20 in beer for a mountain of first-hand knowledge.

There are places in Vancouver where you can buy a place and rent it out for a positive cash-flow, yet the amount you're going to make is soooooooo little you might as well put it in a GIC. The only way to make money in this market is to have lots of $$$ to leave huge downpayments and have a low monthly mortgage payment. Yet anyone with lots of $$$ would know wrapping it up in a risky asset with sub-par returns isn't a wise investment.

You best bet is to buy a rental property in a different city/province. I looked at small towns in Ontario, rents were cheap ($300-500) yet I could buy 3-4 unit buildings for $100K, and if all were rented I'd be making $1000/mn. It was ultimately not an investment I felt comfortable taking the risk cause vacancy rates are higher and places can sit empty for months or years.

There's also rental co-ops, my uncle just bought into one near Western University. He gets $100/mn profit for a $20K initial investment if all the units in the building are rented. If some are vacant, that $100 decreases. No one owner suffers if "their" unit is vacant, the profit and pain is shared amoung all the investments. The purpose of this investment is to make small cash flow and build equity slowly with very little risk since the risk is shared unlike if you own a single rental property and have to cover it for a few months unrented.

OK before I start ranting, my point is there's tons of investment strategies out there. Real estate isn't the magical money maker people make it out to be, especially since the bubble has passed. We missed out, it sucks, save for the next bubble.

[6793026]

Please also keep in mind, whe you rent your apartment out, there are things called "cost of doing business"
i have two properties and throughout these few years, I've replaced 2 fridges, 1 broken water pipe, water leak, oven, washing machine etc.
there are fees and of coruse hte shitty tenants you gotta deal with, just FYI. If you aren't ready to deal with the stuff, get someone else to do it but it'll cost ya.

I've had great tenants paying rent every month to kicking a tenant out and suing his ass all the way to having a tenant calling me on Christmas telling me the toilet water back flushed.

[Chuck Norris]

This is going to be another long post so grab some popcorn. This is pretty much my story on my experience in real estate investing.

One thing I've learned is to only do commercial real estate. In the beginning this was not an option as I didn't have much money. Now that I have a lot more cash and a high net worth, I will only do commercial real estate. I will never do residential for the rest of my life.

If I knew what I know now, I would have never done residential but as I mentioned, you need a lot of cash in order to get involved in it (unless you pick little shitty places but then you're right back where you started with the residential problems).

There is so much bullshit to deal with in residential real estate. I got into it because I thought it would be easy money. The idea is simple. Someone pays the rent which covers your mortgage and the capital appreciation makes me rich in the future. This has been the big Vancouver dream over the last decade. While the benefits are mostly true, the road to getting there is a lot of work. This work was not something I was ready for.

What I thought would be my ticket to financial freedom was my ticket to many problems and headaches.

When Jay Z had that song 99 problems my friends said it was about me because I had 99 problems and a bitch wasn't one, they were all related to my investment and rental properties.

I needed to fix a leaky washer that ended up fucking up the unit below (wood building). Hours on the phone with insurance company plus dealing with people below that wanted to know why there was a puddle in their living room.

The rent isn't paid on time so I come there and scare them into paying up. Next month they take off and fuck up the whole inside of the unit. You think damage deposit will cover the mess? Yeah right.

You're probably thinking, yeah you didn't know how to get a good quality tenant. That's the thing, I knew exactly what I was doing with renters.

One was a school teacher, another one a nurse. Another was a family with two working parents and a kid. Another was an accountant etc. These were just some of the dirty bitches who didn't pay the rent, broke shit and needed me to come over to fix the dumbest things such as a screen door that came off the tracks.

People who think being a landlord is some kind of holiday where the money rolls in is on more crack then the last tenant I had (who was another teacher I might add).

It's hard work and if you want to make a lot of money you will put in twice as much time as a normal job.

I remember I was just about ready to sit down and enjoy a nice dinner when the phone rings. Hot water tank exploded in a house of mine. I look at my gf and say, I have to go. I ended up grabbing a burger on the way there.

Needless to say, as time went on, my gf is now my ex gf. If you want to be good at investing and real estate you have to put it first and it's not easy at all.

I've learned my lesson with managing my properties. Lucky for me, I have managed to sell off most of my holdings and thank goodness because I don't know if I could take it any more.

Commercial real estate from here on in.

[sh0n]

Very valid post from CN.

There's a reason why landlords are known as slumlords - you get a slum of a tenant and have to deal with every single issue they throw at you.

There are always going to be problems with a property whether its brand spanking new or its the 100 year old timer - just a matter of fact if you maintain it well by doing it yourself or having someone to come in.

But whatever floats your boat, being a landlord is not as easy.

It's nice when you collect the rent and the money flows in every month but dealing with all the issues....Good luck

[SumAznGuy]

My only few experiences with renters are basically like what CN said.

A co-worker rented out her house to what she thought was a nice japanese exchange student, who was here to learn english and maybe find a nice white bf while selling some of her used panties.
As it turned out, she had a few *friends* who used the house as a grow op and by the time my co-worker found out, the house was completely trashed and the police cut the power to the house and threated to send her the cleanup bill.

My wife's parents use to rent out their basement when we were dating. Over the years they had a few different families live there. The first family wasn't too bad, but the grandmother would always be spying on people and gossiping to my wife's parents. That included the type of car/person that picked up their daughter.
The second family, the husband was laid off and was home all the time. There was a few times where he was watching porn with the volume on at a decent level where everyone in the house knew what he was watching.
The third family, which happened to be the last one, was the worst. It was a family of three. Husband who was a financial planner, mom, and daughter. On a few occasions, they over stuffed the washing machine which caused the washer to fail. They stuck their wet shoes in the dryer a bunch of times, and on a few occasions overstuffed the dryer to the point the dryer broke down. So the washer was replaced but not the dryer and washing hour restrictions were implemented.
As times got tough, the rent got late but the father would make threats of going to Revenue Canada if they were evicted for the late rent.
This went on for a while till the daughter moved away to attend McGill U. That was when the father went back to China for business and the mom started to sublease the spare bedroom (s).
I use the (s) because we suspected her of using the basement as a brothel to sell herself as strange white men were coming and going at night, but when she was comfronted, just said they were co-workers. Hmmmm.... co-workers for someone who doesn't work.

[wouwou]

^So your wife's parents are operating illegal suits?

Otherwise why would a threat of going to CRA work on them?

[Gt-R R34]

i'm seriously considering Sticky this.

Good all around post.

[SumAznGuy]

Originally Posted by wouwou

^So your wife's parents are operating illegal suits?

Otherwise why would a threat of going to CRA work on them?

Because like all people in Vancouver, they are taking cash renting out their basements.

And like all asian people, they don't know the laws or their rights and the minute someone threatens them by going to the cops/government, they get scared.

[taylor192]

Originally Posted by wouwou

^So your wife's parents are operating illegal suits?

Otherwise why would a threat of going to CRA work on them?

Lots of people rent out rooms/suites without declaring it to CRA, cause if they did, the taxes alone makes it very less worthwhile, especially since its taxed as income ontop of your own income.

[SlySi]

Jack,
Some good valid points from everyone.

Either road you chose. Just do more research.

I was in similar shoes as you. Although I wasnt making 80k at 24..
Thats pretty impressive.

If you do have 100k saved up.
"consider" to put it on a downpayment for a smaller condo or older condo.
Your mortgage will be small and you can rent it out.
Possibly look into creating a incorporated business, there are tax benefits and expense benefits as well.

Keep doing research....

I went into buying properties at your age and still lived at home.
Iv moved out a long time ago, thank gawd I planned early like you.


The debate for renting vs buying is relentless and will never end.
Buying property or not buying, its a headache. Just do your research.

You can never go wrong finding a good deal on a property.
They are out there.

My friend bought a home roughly a year ago, spent about 70k in reno's. Was able to still sell it last month for another 80k profit.
And at the time when the world was "suppose" to end.
Go figure.....

Just remember, you got a good thing going.
100k saved, excellent paying job.
Pave it forward and you got a good future for yourself.

[wouwou]

Originally Posted by SumAznGuy

Because like all people in Vancouver, they are taking cash renting out their basements.

And like all asian people, they don't know the laws or their rights and the minute someone threatens them by going to the cops/government, they get scared.

see this is the problem:

it's hard enough for landlords to protect their own rights when they are renting out their condos LEGALLY, if someone doesn't have a clue on how the popo/gov works, s/he should NOT simply rent out his/her bsmt for cash.

9 out of 10, the landlords did not have all the angles covered.

[jackmeister]

Hey guys,

I've been taking a lot of information here into consideration when I am making the purchase. That penthouse I was looking at was sold at the price I was aiming, but unfortunately someone made an offer right before I got around into doing so Its ok though I hope something nice comes up along the way.

I've been trying to look up more information online but because Vancouver's real estate market is such an anomaly I can't take it into consideration. And the selection is drying up fast. The area I was looking at had a lot of available listings but over the past 2 weeks a lot of them disappeared. Did I miss the last boat or something?

I really hope the prices start to drop now because if not I'll be punching myself in the crotch. Right now I'm setting my budget at around 550,000. Of which, 100k savings, 250k-300k mortgage (pre-approved for 350k), and the rest will be parent loans (not sure when I need to pay it back).

It's going to be in Richmond because I work there and don't like going through bridges daily. Definitely not looking for a house because I don't have the time and $$$ to deal with the miscellaneous bullshit when I already work long hours at the office. And I am certain I do not want to deal with renting my basement or a room out. I don't want to share my space with anyone and deal with the stupid shit that comes with collecting rent. I'm looking for a newer condo/apartment because I actually plan on living in it for a long time (7-8 years), so I am taking my time to find a nicer place in a nicer area.

My brother bought an old house a couple of years back right before the prices jumped and sold it this year for a nice profit, but he probably put in an extra 70k into reno/roof/repairs. He didn't have much time for it because he works pretty hard too so it ended up like shit. Luckily he moved into an apartment now and much less stress.

I know the prices in Surrey and New West are much more affordable but then I just can't stand living in those 2 cities because I'll be far away from everything I do normally. For me, convenience is quite important.

The hunt continues....

[SumAznGuy]

Originally Posted by wouwou

see this is the problem:

it's hard enough for landlords to protect their own rights when they are renting out their condos LEGALLY, if someone doesn't have a clue on how the popo/gov works, s/he should NOT simply rent out his/her bsmt for cash.

9 out of 10, the landlords did not have all the angles covered.

And your point?

Seriously, I have no idea what you are trying to get at.

Are you saying it is a good thing or bad thing to rent out your basement/condo?

[underscore]

fuck man, for all you guys owning properties for rental, I have two words: property manager. My parents have one for the 2 places they have rented out, and it's set up so that is anything under $100 needs doing, it gets done right away by the property management companies handyman and they tell my parents, anything above $100 has to get approved by my parents first. the PM takes all the rent and background check headaches out of it.

[SumAznGuy]

Originally Posted by underscore

fuck man, for all you guys owning properties for rental, I have two words: property manager. My parents have one for the 2 places they have rented out, and it's set up so that is anything under $100 needs doing, it gets done right away by the property management companies handyman and they tell my parents, anything above $100 has to get approved by my parents first. the PM takes all the rent and background check headaches out of it.

And how much do property managers charge?

[underscore]

not sure, as I recall it's not a bad deal. I'll ask my parents next time I talk to them.

[jackmeister]

Originally Posted by SumAznGuy

And how much do property managers charge?

my mother had a property manager once and she charged 8% of rent i think.

but we had to cut her when she took too much vacation time

[wouwou]

Originally Posted by SumAznGuy

And your point?

Seriously, I have no idea what you are trying to get at.

Are you saying it is a good thing or bad thing to rent out your basement/condo?

I am saying, it is a VERY BAD IDEA to rent out a bsmt suite ILLEGALLY when you know shit about the legal system

[taylor192]

Originally Posted by jackmeister

I've been taking a lot of information here into consideration when I am making the purchase.

Please get some more, you're still very uniformed.

Originally Posted by jackmeister

And the selection is drying up fast. The area I was looking at had a lot of available listings but over the past 2 weeks a lot of them disappeared. Did I miss the last boat or something?

No.

Active listings doubled in late 2008 when the markets crashed. They have fallen back to 2002-2007 levels. There's still lots of inventory.

Originally Posted by jackmeister

I really hope the prices start to drop now because if not I'll be punching myself in the crotch.

There's 2 schools of thought on this:

Inflation will cause prices to crash. Rates will have to go up, fast, to fight inflation. This will make housing unaffordable and cause people to default when they are not able to renew.

Deflation will keep rates where they are. Yet unemployment and taxes will increase, driving the prices down on everything including houses.

Originally Posted by jackmeister

Right now I'm setting my budget at around 550,000. Of which, 100k savings, 250k-300k mortgage (pre-approved for 350k), and the rest will be parent loans (not sure when I need to pay it back).

Read up on the sub-prime market in the US and how people were taking 2nd mortgages to finance the downpayment, you're a candidate. You cannot actually afford this place without taking out a second loan (from your parents, I hope they never expect it to be paid back), so what happens if you hit any financial difficulty?

[jackmeister]

Originally Posted by taylor192

Read up on the sub-prime market in the US and how people were taking 2nd mortgages to finance the downpayment, you're a candidate. You cannot actually afford this place without taking out a second loan (from your parents, I hope they never expect it to be paid back), so what happens if you hit any financial difficulty?

Yea I do know quite a bit of the sub-prime mortgage stuff since I went through my undergrad reading about it everyday and doing a project on it. But there are differences in the markets between Canada and US and in the situations between mine and other people.

The loan from the parents I will pay them back if:

A) I sell this place in the future and make plenty of money, OR
B) I have excess money left over (if that ever happens) and return it to them.

Preferably I would like to pay them back, but it won't be a set schedule so I could potentially pay them off in 1 year, 5 years, or even 10 years. If they forget, I wouldn't even pay them back! lol

[taylor192]

Originally Posted by jackmeister

Yea I do know quite a bit of the sub-prime mortgage stuff since I went through my undergrad reading about it everyday and doing a project on it. But there are differences in the markets between Canada and US and in the situations between mine and other people.

This is why I think university is a sham.

Come on, if you researched this subject you'd know that subprime was caused by:
- people buying more than they can afford (aka you)
- people taking out loans to finance downpayments (aka you)
- people taking mortgages with rates that will go up, yet they cannot afford on paper when rates go up (aka you)

What do you do in 5 years if rates are much higher and you cannot make the TDS or GDS? I know you're not maxing out the $350K pre-approval, yet even at $300K you're not leaving a lot of wiggle room considering you've borrowed $150K from your parents.

You are correct in that the US and Canada are different, we have recourse mortgages, the US does not. US buyers could walk away from bad mortgages and leave the debt with the bank. Canadians cannot. If for some reason you cannot renew, and housing prices drop, the bank is allowed to take back the house, sell it at a loss, and sue you for the difference. If the bank doesn't do that, CHMC will.

Originally Posted by jackmeister

If they forget, I wouldn't even pay them back! lol

LOL I wish I had parents that wouldn't miss $150-200K.

[SumAznGuy]

Originally Posted by taylor192

Come on, if you researched this subject you'd know that subprime was caused by:
- people buying more than they can afford (aka you)
- people taking out loans to finance downpayments (aka you)
- people taking mortgages with rates that will go up, yet they cannot afford on paper when rates go up (aka you)

I just think we wasted our time with this guy. From the sounds of it, looks like mommy and daddy will be buying him his new pad. If he *thinks* he is going to be in any financial difficulty, I am sure they will give him another "loan" so he wouldn't default on his loans.

Damn attention whore.

[Chuck Norris]

Originally Posted by taylor192

This is why I think university is a sham.

I'm glad Taylor is posting but I have to elaborate on his post as it really struck a chord with me.

School is a sham for some things, but not for everything. For med or law I can see value in school. A technical element of some kind is important. School has it's place. The problem is, the school is a business that has done a great job of brainwashing everyone into buying into their lies and false promises.

While I can also see value for those who wish to learn 'some' elements of something, it is important not to live in a box taking everything the school says as the law of the land. World, life and experience holds the key.

This is why many university grads end up starting at the bottom of the corporate ladder anyway. Employers also like university grads because if you could be the school's bitch for 4 years, chances are, you'll be their corporate bitch for 40. Never questioning, never stepping out of line. The perfect little bitch.

I think most business schools and finance classes are pointless and actually lead you down the wrong path. I'm a University Grad with plenty of designations after the fact. The reason? I finished school hoping to have it made and I didn't. I took designation after designation hoping that I would be enlightened and learn how to make money.

I made money using NONE of the tools that were given to me through professional education. In fact, in many cases, I had to defy those rules that were pounded in my head during my formal education. In the end, I learned by actually understanding the HOW and then actually doing it the way others do. Not the way a text book told me to.

I'm not going to thread-jack but I could write a book on this.

Originally Posted by taylor192

Come on, if you researched this subject you'd know that subprime was caused by:
- people buying more than they can afford (aka you)
- people taking out loans to finance downpayments (aka you)
- people taking mortgages with rates that will go up, yet they cannot afford on paper when rates go up (aka you)

To get even more technical, most people out there don't even know what 'Sub-Prime' is. Prime is the perfect situation for the right client. Sub Prime is anything that breaks that norm. Another way to think of it is lending beyond the standardized acceptable historical norms.

This means extending amortization periods beyond 25 years, buying with less than the previous required minimum down payment (if anyone mentions CMHC as a safety net, I suggest you research), buying based on inflated income in cyclic industries and the list goes on.

Most buyers recently (2008/2009 data) statistically purchase with 5% down (this 5% in 45% of the cases is borrow from other lines of credit because the current value is so cheap). The average amortization of mortgage is 35 years (previously 25) and plenty over the last few years took 40 years while they were available). The average person's debt ratio is within 2% of their threshold. Their debt ratio in over 80% of the cases is based on dual income. Only one person needs to be laid off or have a wage decrease and the family is in trouble.


The scary thing is, the real estate world in Vancouver is like a perpetual machine. I'm not saying prices can't go up, but when they run too hard and too fast, there is trouble. If a builder is buying up condos because they are making $100,000k a year building. What do you think happens when the market slows down? The wages go down and the price goes down and the demand goes into the toilet.

The biggest irony of all, sub-prime is and was not the cause of the bubble in the US nor is that the real problem in Canada contrary to what the news says (the news is also about as reliable as a fortune teller hence why I do not have cable TV)

Real estate bubbles (especially in Vancouver) have happened again and again and will continue to happen again and again. The reasons are always different but there is always some kind of catalyst to make people feel smart.

Originally Posted by taylor192

What do you do in 5 years if rates are much higher and you cannot make the TDS or GDS? I know you're not maxing out the $350K pre-approval, yet even at $300K you're not leaving a lot of wiggle room considering you've borrowed $150K from your parents.

While Taylor mentions this, many people either just don't listen or think it can't happen to them. Well, it can. It will. Just wait.

It was only a few years ago that prime was at 6.25%, people forget that pretty quick. Besides, interest rates are irrelevant if someone doesn't even have a job to make the mortgage payments anyway. It's easier and feels nicer to pretend everything is okay. While these people live in fantasy land, I get to make money off their backs.

Does that make me an asshole? No, it makes me forward thinking and lemmings always drown.

Originally Posted by taylor192

You are correct in that the US and Canada are different, we have recourse mortgages, the US does not. US buyers could walk away from bad mortgages and leave the debt with the bank. Canadians cannot. If for some reason you cannot renew, and housing prices drop, the bank is allowed to take back the house, sell it at a loss, and sue you for the difference. If the bank doesn't do that, CHMC will.

Which makes our situation potentially worse. CMHC also is back by the taxpayer so guess who has to pay if something goes sour? They are not looking too good right now either. If their balance sheet was a company and they were on the stock exchange they would be getting delisted right about now.

Originally Posted by taylor192

LOL I wish I had parents that wouldn't miss $150-200K.

You do and you don't. I think you're the kind of person who'd rather do it themselves. You know how it is with hand outs. It's just like a baller version of the soup kitchen.

The bums are right back the next day waiting for the next bowl. Very few learn to make their own soup

[Hehe]

People don't think on numbers when it comes to perhaps their biggest purchase of their life or one of the biggest. And coming from a family who invested heavily in RE in different part of the world, I never understood what's so hard about it.

It's all opportunity cost. Let's say you could borrow half a mil, and just think what you can do with that here in Van. With some luck, you could get a condo that rents for 1.5K a month. Do you know what could you get in Argentina? in US? or any other country for that matter.

Seriously, if you are fortunate enough to be born in a wealthy family, take the opportunity and go see more. I am into commercial real estate myself and I have travel through many cities in the world to have a better understanding what makes a location attractive.

My friend, on the other hand, he spent some serious time and money playing stocks. Now he manages funds for his parents and friends to invest in the stock market.

He only lose about 12% during the meltdown and he is up 30%+ this year alone.

What I really want to say is, if you don't know what to do with the money, invest it in yourself rather than buying something you have no idea in.

[taylor192]

Originally Posted by Chuck Norris

I'm glad Taylor is posting but I have to elaborate on his post as it really struck a chord with me.

We should have a beer one day, your posts are always bang on!

Originally Posted by Chuck Norris

School is a sham for some things, but not for everything. For med or law I can see value in school. A technical element of some kind is important.

Agreed. Trades (electrician, plumber, ...) included in technical elements.

I will also add management and human resource skills. These are in huge demand as finding capable people who can manage or interact with others is not easy. There's lots of management promoted into positions without adequate training.

Originally Posted by Chuck Norris

School has it's place. The problem is, the school is a business that has done a great job of brainwashing everyone into buying into their lies and false promises.

While I can also see value for those who wish to learn 'some' elements of something, it is important not to live in a box taking everything the school says as the law of the land. World, life and experience holds the key.

Have you read Ishmael? or either of the sequels Story of B or My Ishmael? Quinn does an excellent job of outlining how school is just part of the system that keeps young people out of the workforce longer, cause the workforce cannot sustain so many workers.

Trades jobs in the past were all about apprenticeship, now you have to go to school before apprenticing, learning more than you'll need.

Originally Posted by Chuck Norris

This is why many university grads end up starting at the bottom of the corporate ladder anyway.

As Quinn points out, its part of the system. If a university degree was worth what its advertised to be, you'd start near the middle (or top if you're good). Yet the system couldn't sustain older employees being replaced by more educated, vibrate and energetic grads, so the system was designed to stuff them into the bottom of the rung even with all the advanced education.

Originally Posted by Chuck Norris

I think most business schools and finance classes are pointless and actually lead you down the wrong path. I'm a University Grad with plenty of designations after the fact. The reason? I finished school hoping to have it made and I didn't. I took designation after designation hoping that I would be enlightened and learn how to make money.

I made money using NONE of the tools that were given to me through professional education. In fact, in many cases, I had to defy those rules that were pounded in my head during my formal education. In the end, I learned by actually understanding the HOW and then actually doing it the way others do. Not the way a text book told me to.

You needed my mom. She gave me the best advice ever when I set off for school:

The day you enter university is the day you receive your degree, as long as you stick with it you'll get it. Don't get discouraged cause you won't learn what you want, the courses won't go at the high pace you desire, cause the piece of paper is a necessary evil to open more doors. Have fun, here's a case of beer.

My engineering degree has for the most part been useless in the real world, yet it opened the doors I needed and I've learned the rest myself.

A love of reading is the best asset to get far in life.

Originally Posted by Chuck Norris

I'm not going to thread-jack but I could write a book on this.

There are books written on this I can lend you some.