Why not rent it out?
You rent something out for two reasons. One, you rent it out so it will cover itself and/or generate a monthly or yearly profit.
You rent something out for a loss each month with the expectation that the price will increase at a greater rate than your monthly loss (speculation of price).
Right now, the main reason there is a problem with prices is due to price/rent multiples. For example:
Down the street from my dad's, there is a home that would sell for about $6 million or so. You mortgage would be $26,000 per month plus taxes insurance and if something goes wrong, you're on the hook for it. You can rent the home out for $12,000 which is less than half the price it would sell for.
The only reason someone would buy it is because they are either retarded and don't know what they are doing or they have an expectation that prices will go up.
Here is where things get a little interesting. Are rents going to go up or are prices going to come down? The house example is a bit different but condos are VERY reliant on investors as rental condos are often rented out in greater numbers than houses.
Right now, you can rent a nice place in Vancouver for about $1400 a month. You can mortgage the same place for about $1800 a month plus strata (usually $150 -$250) and then taxes (usually about $100 per month) so a total of $2000 a month.
Now, if prices are going up, renting is a poor choice but when the gap between rents and ownership divide too much, renting is a better alternative. Comparatively, the owners renting out the units want better returns.
If you purchased a home to rent out at the beginning of this year rather than put that money in the market, your returns would be minute in comparison. Rents can't really go up much higher because incomes in this city do not support much higher rents. When I tried to rent out my condo in Coal Harbor it was next to impossible. Who can afford $3000 a month in rent?
So if investors want higher returns, rents have to go up. If rents can't go up, investors do not want to bother with buying real estate. If it is cheaper to rent, renters will just keep renting.
The only fuel has been low interest rates coupled with the uniqueness of really stupid people making as much or more money than smart people. This is a phenomenon in Vancouver I don't see often when I travel abroad. Prices can and will go down simply because they are too high. They are too high because people cannot afford to buy them.
So who is buying? People who are afraid of being priced out of real estate forever which is actually an impossibility because our society would fall apart. Young people that are 30 are taking out 35 year mortgages that 2 people will be chained to for the rest of their life.
Obviously I am bearish towards real estate but for good reason. Buy in the US or something if you HAVE to buy.
A lot of people in this city would argue with me, but then again, most of the people who have purchased would rather keep their head in the sand and hope rather than look at the obvious.
The US had a similar situation and please do not say subprime because that had almost nothing to do with it. It was a buzz word to make people feel smart. The average US person has no clue wtf subprime even means or what it's defined parameters were when it was blamed as the culprit.
I'm not saying this to be a dick. I'm genuinely trying to help so please do not take it the wrong way
