Quote:
Originally Posted by Hondaracer
i want to own property so i can make it my own through big time reno's/construction, or even build my own
at the same time i dont for the ultimate freedom you have in not being tied down by ownership
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You shouldn't be at all worried about never living in the property you own.
People have it in their mind that they must own real estate as real estate, effectively, has always gone up along with inflation (2-3% per annum), and with 4:1 leverage (20% down) u can see the growth in your downpayments, assuming monthly payments are manageable and that increase in equity outside what u pay down more than makes up for the ownership premium one pays
Also consider these gains aren't taxed on principle residents (although its irrelevant as you buy a bigger house, and your gain just goes into the new property, so have u really gained? Only gains are realized when u sell up and don't buy again, or undownsize, but that's another conversation)
Now, prices of late have gone apeshit because, mainly, due to cheap money - prices must equate the difference between rents and ownership costs - as money gets cheap, monthly payments go down, so clearly prices must go out for all too equate - equally, as money gets more restricted and less cheap, monthly payments go up, so to counter this, prices go down
So, why have I talked so much? Well, now, we won't see the inflation rise in real estate over the next 5-10 yrs, so the value of ownership has gone
What are the other disadvantages of not owning where u live? No security that u will live in the same house next year? Well, not a big deal, there are other houses for rent, I know moving is a pain, but really, if ur a good tenant, ur landlord won't want u gone - I know that's the situation for me, both as a tenant in this city and landlord in the states
You can't control ur rent? Well u can't control ur mortgage past every 5 years, and rents can only go up so much every year, and at that rents don't increase more than inflation, generally, I haven't had a raise in rent in 3 yrs - because I'm a good tenant and my landlord doesn't want to risk 1 empty month to get a new tenant who may suck
The biggest disadvantage of not owning the place unlike - the use of leverage, but if prices are not going up, leverage will f u over, so not a disadvantage today
Real estate, whether u live in it or not, is an investment - never forget this
I own mnay properties in the US, they pay me a good return and have appreciated a lot, i rent in Vancouver - all of these decisions are investment decisions. I could afford the place I live in with 20% down (I would never use CMHC, as you are exposing ur self up to too much leverage and risk), but why would I when I see price depreciation and it would cost, at today's rates, $900 more a month in costs and opportunity cost (returns on my 20% down) - ignoring the effect of price decreases and the ownership buy/sell costs - which are significant
Sorry that was so long, one last thing, if anyone ever wanted to buy and sell houses for capital appreciation, the selling costs are usually so high u have to make so much in appreciation just to cover these - never sell real estate if u have cash flows, just take the equity increase out via mortgage products (80% max), assuming u r still diversified and not too heavily in real estate - crashes ca and will happen, u don't want to be left with ur pants down, but if ur cash flows make sense (think of what reits do), property value is only important if u need to sell or u want to pull money out to reinvest