Most unaffordable housing market in the world? Vancouver.

[Meowjin]

Originally Posted by johny

the best way to fix it is to pass law allowing the ownership of only one household in the GVRD per person, and they must live in it.

housing is not a game, it's not an investment to play with, it's a human right and these people trying to make money off it are interfering with my human right to have shelter over my head.

a house is something you buy, live in for 50 years, then pass on. and should be nothing more. and people's attitudes need to change to reflect this.


this would drop prices overnight to reasonable values. ~100k for condos and ~300k for houses. regular people would be able to afford to own, people would have lots more disposable income which would be put back into the economy. the economy would boom hard. and it would be a real economy, not a fake one based on falsely inflated housing values.

just imagine how busy restaurants, theaters, sporting events, ski mountains, travel agency's etc would be if family's had 100k mortgages instead of 800k mortgages. the city would boom and new jobs would be created everywhere.

yes and no.

It's a free market... there is alot of good people in this province who have made money in real estate and given back to their communities. Robert H Lee is one from the top of my head.

It's funny because alot of them were hong kong immigrants from the 50's to 70's. My doctor immigrated from hong kong in the 70's and I think he's had a bigger impact in his east van practice in his community.

I honestly respect those guys alot. I'm not hating on their success. What I'm hating on is this new wave of immigrants.

I honestly could see some amazing things happen for this city, if the province was willing to follow the singapore model.

I'm just a spectator. Just gotta learn how to take advantage of the system I guess. Maybe one day I'll be passionate enough to run for office.

[cheapskate]

Big fail to those who think "profiling" immigrants is the way to go. It may 'sound reasonable' to admit only those that have the "proper credentials" but in reality this is a disastrous policy. If only people would stop getting their information from know-nothing-pundits on TV and instead direct their attention to sources that are academic/peer-reviewed and/or sources that have been rigorously scrutinized (i.e. journalistic sources)--I am confident that most views on said topic would be completely different.

Those individuals (regardless of what "credentials" one may not have) who have made the decision to leave their home country, the only world that they know, and risk everything to move to a completely new and unfamiliar world are not 'ordinary folk.' They are the most courageous and most industrious people on earth. I dare any of you pack your bags and move to a completely foreign country, a country where you are totally unfamiliar with, a country in which you can't even speak the native tongue. Very few of us, myself included, has enough audacity to do such a thing yet we deplore those that are courageous enough. These kinds of qualities (courage, industriousness) are the very qualities we want in immigrants. It just happens that oftentimes, these immigrants don't have the "proper credentials" to get pass our immigration policies (which is largely dictated by the poorly informed public). The result is that we are losing the best kind of immigrants. The kind that adds to our diversity and invigorates our characters. The kind of immigrants that are willing to work long hours in low-paying jobs that none of us "natives" would even think of doing. They (the industrious immigrants) also tend to raise their children according to more "traditional" child-rearing methods which adds further diversity to our culture when they become adults (re: Tiger Mothers). A byproduct of this diversity in our workforce is tremendous adaptivity and raising of the bar of acceptable standards-which results in a much more competitive economy vis-a-vis other economies that lack such diversity. Diversity breeds strength, if properly understood and executed (which is the hallmark of all the world's most industrious economies).

Conversely, when our immigration policy over emphasizes "credentials" and other such measures, we oftentimes end up in lose/lose situations. For example, there is a escalating trend on the part of the Canadian immigration authority to allow entry only to those who have the proper "education" or "experience" that we deem valuable. Yet in reality, when said "educated" immigrants land on our shores, they are unable to find jobs that pertain to their expertise because their credentials are not (imo rightly) recognized by our professional institutions here. For example, who here would want to be operated on by a doctor from the Czech Republic? I sure wouldn't. So what happens is that these "high-qualified" immigrants are then compelled to take on the most menial of jobs. This is where the regularity of "taxi-drivers with engineering degrees" comes from. And oftentimes, they become resentful of the host country (in this case Canada) for not ponying-up the "dream" that was promised to them.

For those who are interested in delving deeper into this topic I highly recommend Philippe Legrain's book, "Immigrants: Your Country Needs Them." It is the most revealing and thought-provoking expose I have encountered on the topic of immigration.

[Meowjin]

Originally Posted by cheapskate

Big fail to those who think "profiling" immigrants is the way to go. It may 'sound reasonable' to admit only those that have the "proper credentials" but in reality this is a disastrous policy. If only people would stop getting their information from know-nothing-pundits on TV and instead direct their attention to sources that are academic/peer-reviewed and/or sources that have been rigorously scrutinized (i.e. journalistic sources)--I am confident that most views on said topic would be completely different.

I stopped reading there. You do realize there is ALOT of peer reviewed sources, that state canadian immigration policy is BROKEN.

http://www.theglobeandmail.com/repor...1808967/page5/

Infact reading the rest of your post you just regirgitated what i said and tried to pretend you were more right.

The immigrants of today in vancouver are 10000000000 times different than when my parents/relatives immigrated here from greece in the 70's.

[MoBettah]

Originally Posted by MajinHurricane

The immigrants of today in vancouver are 10000000000 times different than when my parents/relatives immigrated here from greece in the 70's.

10000000000 times? I guess that makes sense coming someone who would quote Globe and Mail as the gospel.

Greece? Ha! You mean the same Greece that's now gonna be in the financial shitter for the better half of the next century because of your parents/relatives generation?

[taylor192]

Originally Posted by UFO

ie. our current condo was just assessed at $390k; in 2001 it was purchased for $148k. If I recall, even 2005 it was assessed at ~250k. However, brand new in 1995 it sold for 210k so the original owners who bought it as an investment lost 30%.

That $210K in 1995 is $296K in 2009 dollars when adjusted for inflation.
Thus over 15 years the property made 4.5% annualized ROI.

Originally Posted by UFO

Considering a simple change of fate or luck, if you believe in that, could have turned out disastrous and owners who have now cashed out large can potentially be sitting on 2, 3, 4 properties up for foreclosure. Hard work, research, etc etc can only HELP you avoid that, but at the end of the day I believe you are still at the disposal of lady luck to a certain degree or else the US market would not have collapsed the way it did.

If that same property was bought in 1996 it would probably be worth close to $148K as the market dropped quickly and flattened for several years. Lets assume the price was $148K in 1996, so with only one year difference the annualized ROI becomes 7.7%. Now consider the property bought in 2001 and the annualized ROI becomes 12.4%.

Originally Posted by UFO

There are compelling arguments on both sides of where Vancouver's market is headed, and not all of these guys can be right.

To add to that: anyone who tries to time the market will more often than not be wrong. The market is ruled by emotion, not fundamentals. If it was ruled by fundamentals, prices would have dropped in Vancouver already and prices would be increasing in the US as rent ratios now favour owning... yet prices continue down there and up here.

Since the market is ruled by emotion it cannot be timed. The best we can do is protect ourselves from fluctuations when levels of risk increase. I think we can all agree the level of risk has certainly increased for Vancouver real estate.

[taylor192]

Originally Posted by MajinHurricane

I stopped reading there. You do realize there is ALOT of peer reviewed sources, that state canadian immigration policy is BROKEN.

The immigrants of today in vancouver are 10000000000 times different than when my parents/relatives immigrated here from greece in the 70's.

I agree with your underlying argument, just not your tone.

Immigration was better decades ago cause there were more blue collar jobs here for immigrants to fill. The quality of immigration was better, coming from 1st world countries in Europe and Asia. Today more immigration comes from 2nd and 3rd world countries, and there are not as many blue collar jobs for them to fill. Studies show every new immigrant today only generates an 80% return on the costs associated with immigration.

Is it a bazillion times different than the 70s? No. If there were more blue collar jobs the difference would be minimal.

[taylor192]

Originally Posted by johny

the best way to fix it is to pass law allowing the ownership of only one household in the GVRD per person, and they must live in it.

housing is not a game, it's not an investment to play with, it's a human right and these people trying to make money off it are interfering with my human right to have shelter over my head.

a house is something you buy, live in for 50 years, then pass on. and should be nothing more. and people's attitudes need to change to reflect this.

I agree in principle, yet not in practice.

Germany never experienced a housing bubble despite what happened in the rest of the world - why?

1. Downpayments of 30% are required. This means if you're going to buy a home, you've proven you can save enough to afford it.
2. Houses are taxed if flipped within 2,5 and 10 years (depending on type of property). If you own it more than 10 years it is completely tax free.

I think #2 should be implemented here, immediately. This would discourage people from flipping homes quickly for money if they were taxed hugely on the profit.

Germany is one of the most productive countries in the world, and one of the wealthiest - any guesses on what the rate of home ownership is? < 50%. We're currently > 70% with a housing bubble. We have a lot to learn.

[Meowjin]

Originally Posted by MoBettah

10000000000 times? I guess that makes sense coming someone who would quote Globe and Mail as the gospel.

Greece? Ha! You mean the same Greece that's now gonna be in the financial shitter for the better half of the next century because of your parents/relatives generation?

The same greece my parents fled for a better life in the 70's /rolleyes

We are Canadians first. I am born in Canada, and proud to be here.

Seem pretty bitter.

I did a simple google search and found

http://scholar.google.ca/scholar?q=c...=1&oi=scholart

go nuts.

[quasi]

Originally Posted by taylor192

I agree in principle, yet not in practice.

Germany never experienced a housing bubble despite what happened in the rest of the world - why?

1. Downpayments of 30% are required. This means if you're going to buy a home, you've proven you can save enough to afford it.
2. Houses are taxed if flipped within 2,5 and 10 years (depending on type of property). If you own it more than 10 years it is completely tax free.

I think #2 should be implemented here, immediately. This would discourage people from flipping homes quickly for money if they were taxed hugely on the profit.

Germany is one of the most productive countries in the world, and one of the wealthiest - any guesses on what the rate of home ownership is? < 50%. We're currently > 70% with a housing bubble. We have a lot to learn.

I like number two as well, would probably help a lot.

I also got lucky and got in the market early enough to build enough equity to actually live within my means today. We bought a new house 3 years ago and our mortgage payments are around what it would cost to rent a 2 bedroom apartment in the burbs. We were lucky that we got it when we did on our first place 9 years ago it set us up.

I feel sorry for all those looking or getting ready to buy their first place on an average or even an above average income you're probably going to be struggling large.

[Carl Johnson]

Originally Posted by taylor192

I agree in principle, yet not in practice.

Germany never experienced a housing bubble despite what happened in the rest of the world - why?

1. Downpayments of 30% are required. This means if you're going to buy a home, you've proven you can save enough to afford it.
2. Houses are taxed if flipped within 2,5 and 10 years (depending on type of property). If you own it more than 10 years it is completely tax free.

I think #2 should be implemented here, immediately. This would discourage people from flipping homes quickly for money if they were taxed hugely on the profit.

Germany is one of the most productive countries in the world, and one of the wealthiest - any guesses on what the rate of home ownership is? < 50%. We're currently > 70% with a housing bubble. We have a lot to learn.

That would stop a lot of the speculative money that is flowing into this country from overseas. It will separate the people who actually needs to own a home like new family from the speculators that is building and flipping houses in the lower mainland.

I also read that our finance minister Jim Flaherty is worried about Canadians taking on too much debt in relation to their income. That means the banks are going to be pretty tight with their lending policy this year. With a combination of what you suggested, it could have a nice cooling effect that would see a 5 - 15% correction in real estate prices.

[jameswift]

Oh Boy, this is a subject that's been around the block a few times.

I'm not going to comment on what's affordable to person A or person B because we're all different.

I'm a business owner that deals with business risk management and corporate law. It's a business that in a few short years has generated a lot of financial independence. I'm not saying this to brag, but to illustrate that you can move forward very far before you're 30.

Many of the people I do business with and many friends of mine as well are also sub 40 and have what the 'average' person on the street would consider copious wealth.

Is this city a difficult place to afford compared with the average incomes? Yes, it is. There are cities in Saskatchewan where the average home costs $150,000 and the average wage is $77,000 a year.

Difficult and unaffordable are two different things.

Some people want to blame the wealthy immigrants from other countries that make their millions elsewhere and come here to park their cash in real estate. Blame globalization. Blame being just a bit too young to have missed the golden age. Blame whoever you want but at the end of the day, blaming the world won't improve your situation.

From a numbers game, the figures point to a dangerous situation waiting to happen for real estate in Vancouver and the lower mainland. That's just the numbers and nothing more. If I were to make a bet, and I am a betting man, I'd learn more towards things going down rather than up.

That said, nobody really knows what will happen. As expensive as things are, I know too many people that are willing to go the distance to make their dreams a reality.

What do I mean by that? Rather than saying "Prices are too high I'm going to wait", people will find ways to make it work because we live in a society that doesn't want to wait.

People don't want to wait for anything anymore. Everything is on credit, get now pay later.

People will take a second job, extend their mortgage to 40 years (can't do that anymore) and sacrifice the quality of their daily life in order to achieve home ownership. Many people don't save a dime for retirement because they can't. Somehow, people feel that a home is the holy grail and it will take care of them in more ways that could ever be imagined.

There is also a huge part of population that feel this sense of entitlement. It used to be the only people that could afford a benz was a wealthy person. Now you have kids driving around in that stuff because it can be leased or financed.

We've all grown accustom to the finer things in life and truth is, most of the people out there do not deserve it. I'm sorry if that sounds harsh but think about it for a moment. If I have a million dollar business and I have to really think long and hard about a car that's going to cost me $20k a year, and some kid out of school making $40k a year can go and get a $60k benz, I rest my case.

It's a society thing. We want all the toys and gadgets and don't seem to see that there is a price associated with it.

Being able to afford a house is hard, but the real reason it is so hard for so many is that nobody wants to make the sacrifices to get their. You don't start off with a huge house. You start off with a small or an older condo, build up some equity, then work hard to advance your career.

I'm not trying to make light of everything but I'm just sick of people complaining about how they don't have any money or they can't afford the latest this or that when they're making $60k a year.

I'm sorry but even $100k a year doesn't entitle you to nothing more than what it brings you. Maybe that sucks but this is a competitive marketplace. Bring your A game or stop complaining.

[taylor192]

Originally Posted by jameswift

People don't want to wait for anything anymore. Everything is on credit, get now pay later.

http://www.financialpost.com/persona...151/story.html

Annual growth in personal credit lines slowed by more than half to 8.9% in November, from 21% in August 2009, according to Bank of Canada statistics. Personal loan growth dropped to 11% from a July 2009 high of 17%. Growth in credit-card balances plunged to 7% from a seven-year peak of 23% in February 2008.

Mish (http://globaleconomicanalysis.blogspot.com/) has been pointing out the problem is credit expansion and there is a credit bubble building. I agree, how can credit grow 27-61% each year and be sustainable? That's not even including mortgages.

Canadians had about $865.7 billion in household debt as of November, according to Bank of Canada. Of that, 60% was mortgages, 25% credit lines, 7.2% from personal loans, and 7% from credit cards. That’s more than doubled since 2000, when Canadians had $349.7 billion in debt, with 70% from mortgages.

Thus despite more Canadians taking on bigger mortgages as the ownership rate increased from ~65% to > 70%, mortgages are a smaller portion of overall debt. Yikes! So much for building equity when it is just being spent on credit instead!

[taylor192]

Originally Posted by jameswift

If I have a million dollar business and I have to really think long and hard about a car that's going to cost me $20k a year, and some kid out of school making $40k a year can go and get a $60k benz, I rest my case.

I just spent a week in the US and was surprised by some of the comments I heard. I was asking how they felt about the housing and vehicle incentives, like $8K to buy a house, or cash for clunkers, or mortgage refinancing without penalty, ...

Everyone I spoke to thought it was disgusting - that the government was bailing out people who made bad choices and encouraging more bad choices.

Thus that the kid who bought the $60K Benz may potentially be subsidized by your tax dollars when he cannot make a payment.

It kinda takes all the incentive out of being a good citizen. I could ball on credit, have a blast, live it up, and know someone will be around to bail me out or I can walk away without penalty. Fuck.

[bing]

Originally Posted by johny

the best way to fix it is to pass law allowing the ownership of only one household in the GVRD per person, and they must live in it.

housing is not a game, it's not an investment to play with, it's a human right and these people trying to make money off it are interfering with my human right to have shelter over my head.

a house is something you buy, live in for 50 years, then pass on. and should be nothing more. and people's attitudes need to change to reflect this.


this would drop prices overnight to reasonable values. ~100k for condos and ~300k for houses. regular people would be able to afford to own, people would have lots more disposable income which would be put back into the economy. the economy would boom hard. and it would be a real economy, not a fake one based on falsely inflated housing values.

just imagine how busy restaurants, theaters, sporting events, ski mountains, travel agency's etc would be if family's had 100k mortgages instead of 800k mortgages. the city would boom and new jobs would be created everywhere.

wow talk about entitlement. owning a home is an ideal and living in BC is a privilege and choice. It is not a human right.

[Meowjin]

dear god im not blaming rich immigrants. I'm saying screen the program better so people that get free citizenship for bringing a million dollars here dont open up a food establishment or a retail store.

[RFlush]

Have you guys ever thought that the rich immigrants who buy up these multi million dollar houses also contribute to the economy? After reading through these 9 pages, it appears most people are quite upset with the newly immigrants that come from 2nd/3rd world countries.

First, those people aren't the ones buying up real estate. It is the ones with money. They also help contribute by paying tax on their property and also by living in Canada. Yes, some will argue they buy property here and then go back to where they are from and use it as a tool as investment. That might be true, but it is also true that a lot of them LIVE here for a better life. They also have kids who go to schools. UBC, SFU etc, they help pay for tuitions thus increasing in funds for research. They also buy cars, thus giving people jobs and also tax to the government.

For those of you who are asking for prices to drop, that is simply the worst situation that can happen. It will screw over the people who are in the middle class who worked hard and earned their $400,000 house, and if property dropped to lets say $300,000, well they just lost $100,000 which is a hard take. They aren't in it for investment, but no one wants to lose $100k in equity. You really think that a drop will hurt the rich investors?

This is the same problem that is happening in HK. I was born and raised in Van and emigrated to HK 2 years ago. Here, it is even worse. There are filthy rich people who come here and bring up real estate prices and its creating a bubble. More than half the population of HK were born outside of HK and its a real estate nightmare here. Yet, these are the same people that are bringing in money to provide jobs and sales. It really is a double standard. People don't want outside people to come in and drive real estate, yet they want them to come and shop so it can provide more tax and jobs? How does that work out?

Some of you guys really need to see things from a different perspective. There will always be goods and bads and you can't have one without the other. Maybe loosen up, don't feel you are entitled a house or get jealous that someone else has it so easy.

[Tapioca]

Originally Posted by RFlush

First, those people aren't the ones buying up real estate. It is the ones with money. They also help contribute by paying tax on their property and also by living in Canada. Yes, some will argue they buy property here and then go back to where they are from and use it as a tool as investment. That might be true, but it is also true that a lot of them LIVE here for a better life. They also have kids who go to schools. UBC, SFU etc, they help pay for tuitions thus increasing in funds for research. They also buy cars, thus giving people jobs and also tax to the government.

It could be argued that the property tax that they pay on their million dollar homes (which is fairly small, <10K/year) has little impact on regular Joe Canadian who makes 50K/year and can't afford to rent (let alone buy) a place to live in on his own.

For those of you who are asking for prices to drop, that is simply the worst situation that can happen. It will screw over the people who are in the middle class who worked hard and earned their $400,000 house, and if property dropped to lets say $300,000, well they just lost $100,000 which is a hard take. They aren't in it for investment, but no one wants to lose $100k in equity. You really think that a drop will hurt the rich investors?

No, it won't hurt the rich investors, but too bad for those stupid enough to buy more than they could afford (so the argument goes.)

This is the same problem that is happening in HK. I was born and raised in Van and emigrated to HK 2 years ago. Here, it is even worse. There are filthy rich people who come here and bring up real estate prices and its creating a bubble. More than half the population of HK were born outside of HK and its a real estate nightmare here. Yet, these are the same people that are bringing in money to provide jobs and sales. It really is a double standard. People don't want outside people to come in and drive real estate, yet they want them to come and shop so it can provide more tax and jobs? How does that work out?

People will dispute the impact of the money the wealthy are bringing in. Retail and service industry jobs don't raise the standard of living - these people need to establish factories, or companies that sell (for lack of a better term) "high level services" in order to actually have a positive impact on the communities in which they invest.

And it's debatable whether these people that are "new money" earned the money the right way. Many benefited from corruption. And of course, there is a little racism at play too.

[Blinky]

gah. forget it. (post deleted).

[taylor192]

Originally Posted by RFlush

For those of you who are asking for prices to drop, that is simply the worst situation that can happen. It will screw over the people who are in the middle class who worked hard and earned their $400,000 house, and if property dropped to lets say $300,000, well they just lost $100,000 which is a hard take. They aren't in it for investment, but no one wants to lose $100k in equity. You really think that a drop will hurt the rich investors?

People have not "earned it" in the traditional sense you mean.

Anyone that knows real estate knows it goes up and down, sometimes wildly, yet over the long haul appreciation barely beats inflation. Using your example, those who are up $100K either know they must sell now and realize the gains, or hold for a long time and accept that the ups and downs average out to barely beat inflation.

If they sell I will agree, they have "earned" the $100K cause they made a good decision and beat the market.
If they hold, then I don't agree they've lost $100K. They've accepted that holding a house for a long period of time nets gains slightly better than inflation and that the $100K loss will eventually be erased with time.

The problem is most people don't know this, especially young people.
- They only know that real estate is the path to riches.
- They don't know about the big drops in Vancouver real estate in 1981, 1989 and 1995.
- They don't know that prices in 2002 matched those of 1995.
- They don't know that adjusted for inflation it was 2005 before prices matched those of 1995.

Worse, as has been pointed out before, people have a "I want it now" mentality right now. Thus they are not thinking long term, only about making the next quick buck.

[johny]

Originally Posted by RFlush

For those of you who are asking for prices to drop, that is simply the worst situation that can happen. It will screw over the people who are in the middle class who worked hard and earned their $400,000 house, and if property dropped to lets say $300,000, well they just lost $100,000 which is a hard take. They aren't in it for investment, but no one wants to lose $100k in equity. You really think that a drop will hurt the rich investors?\

how so? their mortages will remain the exact same amount. so their daily life will remain identical. if they they live in it long term untill they die they will never even notice anything.

now if they bouht it to try to flip it a year later for a profit, they lose, and sucks to be them. better luck next time.

[Carl Johnson]

^
It will have a negative effect on consumer confidence. Even thought it might seem like a paper loss of $100,000, but in reality most people will still feel as if it was a real loss just how the psychology works, therefore it is going to affect people's buying behavior. Look up the term - wealth effect - and you will see.

[Nightwalker]

I'm not in the Vancouver market, but I have a question for people in this thread.

Say my gains are only slightly better than inflation, isn't my investment actually better than that when renting out? Right now I have a roommate, they're paying 87% of my mortgage, I'm paying the remainder, utilities, and the strata fee.

Later, I may rent it completely. Rental prices in this area show that I may be able to do so and break even or better on my monthly payments.

So, except for my initial down payment, I'm not even paying for this investment.

I know that my next goal is to start pumping into my RRSP (haven't even opened one) since the amount saved on tax alone seems insane not to take advantage of, but I want to buy more property in the not so distant future.

[bengy]

Originally Posted by Nightwalker

I'm not in the Vancouver market, but I have a question for people in this thread.

Say my gains are only slightly better than inflation, isn't my investment actually better than that when renting out? Right now I have a roommate, they're paying 87% of my mortgage, I'm paying the remainder, utilities, and the strata fee.

Later, I may rent it completely. Rental prices in this area show that I may be able to do so and break even or better on my monthly payments.

So, except for my initial down payment, I'm not even paying for this investment.

I know that my next goal is to start pumping into my RRSP (haven't even opened one) since the amount saved on tax alone seems insane not to take advantage of, but I want to buy more property in the not so distant future.

Sure, as long as your tenants don't completely trash your rental house?

[Tapioca]

Originally Posted by Nightwalker

I'm not in the Vancouver market, but I have a question for people in this thread.

Say my gains are only slightly better than inflation, isn't my investment actually better than that when renting out? Right now I have a roommate, they're paying 87% of my mortgage, I'm paying the remainder, utilities, and the strata fee.

Later, I may rent it completely. Rental prices in this area show that I may be able to do so and break even or better on my monthly payments.

So, except for my initial down payment, I'm not even paying for this investment.

I know that my next goal is to start pumping into my RRSP (haven't even opened one) since the amount saved on tax alone seems insane not to take advantage of, but I want to buy more property in the not so distant future.

Where would you live if you rented the entire apartment? You still need a roof over your head and I don't see how you'd come out ahead unless you downgrade your living arrangements significantly (for example, live in a dump of a basement suite with several students.)

To buy more property, you could take the risky approach and leverage your existing equity in your current home. This is what my friends did, but they did this several years ago when the market was still rising.

[taylor192]

Originally Posted by Nightwalker

I'm not in the Vancouver market, but I have a question for people in this thread.

Say my gains are only slightly better than inflation, isn't my investment actually better than that when renting out? Right now I have a roommate, they're paying 87% of my mortgage, I'm paying the remainder, utilities, and the strata fee.

Later, I may rent it completely. Rental prices in this area show that I may be able to do so and break even or better on my monthly payments.

So, except for my initial down payment, I'm not even paying for this investment.

I know that my next goal is to start pumping into my RRSP (haven't even opened one) since the amount saved on tax alone seems insane not to take advantage of, but I want to buy more property in the not so distant future.

You need to calculate your cap rate: http://en.wikipedia.org/wiki/Capitalization_rate

If you're breaking even, your cap rate sucks. Your downpayment would be earning more in other investments, with less risk, so you should sell and investment the equity.

I will point out a couple things you've missed in your overly-simplified example:
1. Once you convert the property into a full rental you have to pay income tax on the rent. You can deduct fees, property taxes, insurance costs, and mortgage interest - yet you cannot deduct mortgage principal repayment. Here's an overly simplified example: You're renting your place for $1000 to cover the $1000 in mortgage payments. The mortgage payment is $700 interest, $300 principal repayment. You can only deduct $700 of expenses from the $1000 rent, leaving $300 taxable at your highest tax bracket. Lets say that is 33%, so now you owe the government $100.

Thus you are not breaking even, you're losing $100/mn.

2. Condo insurance does not cover rental properties usually. You have to buy extra insurance, which is usually double or triple the cost.

3. If you're not making any cash, how are you going to cover:
- repairs
- vacant periods (> 2% currently)
- lawyers, time off, ... to deal with bad tenants

Essentially you're keeping an investment that has a horrible ROI with a lot of unknown risk. Sell it, invest and wait. Buy back in when prices start to rise again.