Real Estate

Did we just hit the peak of the Toronto RE bubble?

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  • Dec 11th, 2017 9:00 pm
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Sep 9, 2014
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Vancouver
aviator_13 wrote:
Dec 7th, 2017 5:40 pm
Not sure when this thread turned into a renting vs. buying debate but the best answer is entirely situational/personal.

Yes renting seems like money going "poof" in theory but when you consider the amount and effort you put into maintaining a home along with the opportunity cost of what you could have done with the money otherwise, it isn't all that clear cut in each case.
I disagree with that. Saying everybody is different or every situation is unique is at best dodging the question, at worse being anti intellectual. The fact is we can do the financial calculations to determine what is/was best. This is exactly what I was doing and talking with the other guy before you decided to write your comment.
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BryanBreguet wrote:
Dec 7th, 2017 6:05 pm
I disagree with that. Saying everybody is different or every situation is unique is at best dodging the question, at worse being anti intellectual. The fact is we can do the financial calculations to determine what is/was best. This is exactly what I was doing and talking with the other guy before you decided to write your comment.
I agree that you can do calculations to see what was best. If you're going to have an "intellectual" conversation, then you'd best start including all the relevant factors is all I am saying
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ahlaker wrote:
Dec 7th, 2017 4:28 pm
...
Ok boys - I know I'm being blasphemous to suggest that renting isn't a waste of money, but hear me out. In 2011, I put down a $180k down payment on a $900k house in Calgary. Over the past 7 years I've been living there and have been averaging ~$3000 in housing costs which is ~$2500 in mortgage+interest along with ~$550 in property tax, house insurance and maintenance costs (averaged). I could've been renting a similar house for about $3,250 (on average for the past 7 years, rentfaster.ca will show you what you can expect for $3,250). Last piece of information: my house is now worth about $950k (sadly I didn't hit the lottery like you folks in the GTA). So, to be in the same place financially (renting versus buying) I would've had to have earned, after-tax, about 9% annualized on my $180k. Could I have realistically done that? The bottom line is that even after levering my initial $180k by 5x, and even after accounting for the fact that any principal residence gains are tax free, I still haven't blown "renting and investing" out of the water. The moral of my story is that renting is not "lighting money on fire" and you can indeed come out ahead.
Rent "can" come out ahead... sure I guess. But your story/numbers certainly isn't convincing about that.

What you just said basically....
- In a relative flat RE market in Calgary, you still gained 9% annualized ?
- Your "housing cost" is $3000 while renting the same would be $3250. Not to mention you included the mortgage principle in your "housing cost", but that's actually going into equity of the property, unlike the sunk cost of interest or rent.

Or put it this way, would you sell your house now and put all that equity into stocks? Which stocks/ETF will you be buying to get that 9% after-tax cap gain? Or are you going to go for dividend stocks, but do you have enough of an investment to generate dividend to cover the rent?
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Sep 9, 2014
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Vancouver
aviator_13 wrote:
Dec 7th, 2017 6:37 pm

I agree that you can do calculations to see what was best. If you're going to have an "intellectual" conversation, then you'd best start including all the relevant factors is all I am saying
It is definitely not what you were saying. If anything the other guy and I were having a nice discussion with facts and numbers before you decided to throw it off with your mention that is "personal".

But feel free to join our conversation if you want. Here's hoping your contribution will be more useful than your previous interruption.
Last edited by BryanBreguet on Dec 8th, 2017 3:25 am, edited 1 time in total.
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boyohboy wrote:
Dec 8th, 2017 2:59 am
Rent "can" come out ahead... sure I guess. But your story/numbers certainly isn't convincing about that.

What you just said basically....
- In a relative flat RE market in Calgary, you still gained 9% annualized ?
- Your "housing cost" is $3000 while renting the same would be $3250. Not to mention you included the mortgage principle in your "housing cost", but that's actually going into equity of the property, unlike the sunk cost of interest or rent.

Or put it this way, would you sell your house now and put all that equity into stocks? Which stocks/ETF will you be buying to get that 9% after-tax cap gain? Or are you going to go for dividend stocks, but do you have enough of an investment to generate dividend to cover the rent?
Exactly my point. His story is a mix of a really bad performing real estate market while the stock market was on fire and yet, he still came out ahead by buying (or very close to it).

His story is actually incredible to illustrate how buying is usually the better option.
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Aug 25, 2009
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BryanBreguet wrote:
Dec 8th, 2017 3:25 am
It is definitely not what you were saying. If anything the other guy and I were having a nice discussion with facts and numbers before you decided to throw it off with your mention that is "personal".

But feel free to join our conversation if you want. Here's hoping your contribution will be more useful than your previous interruption.
My apologies professor - let me know how to get to detention.
Also let me know where I can purchase your consulting services because clearly you've got it all figured out
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Apr 17, 2017
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BryanBreguet wrote:
Dec 8th, 2017 3:25 am
It is definitely not what you were saying. If anything the other guy and I were having a nice discussion with facts and numbers before you decided to throw it off with your mention that is "personal".

But feel free to join our conversation if you want. Here's hoping your contribution will be more useful than your previous interruption.
I don't see what the big deal is. It's pretty well accepted that buying a home is often a personal decision and may well defy financial metrics. I agree with aviator on that.
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Sep 19, 2012
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Calgary
boyohboy wrote:
Dec 8th, 2017 2:59 am
Rent "can" come out ahead... sure I guess. But your story/numbers certainly isn't convincing about that.
A levered return of 9% (at 80/20) over 7 years isn't that great. I could've earned better than that with many different investments. So, we can agree to disagree .
boyohboy wrote:
Dec 8th, 2017 2:59 am
Not to mention you included the mortgage principle in your "housing cost", but that's actually going into equity of the property, unlike the sunk cost of interest or rent.
Yes - I included the principal repayment as would any investor. Despite what many believe, your equity is indeed at risk and you're not guaranteed to recover it.
boyohboy wrote:
Dec 8th, 2017 2:59 am
Or put it this way, would you sell your house now and put all that equity into stocks? Which stocks/ETF will you be buying to get that 9% after-tax cap gain? Or are you going to go for dividend stocks, but do you have enough of an investment to generate dividend to cover the rent?
100% yes. I'll even put my money where my mouth is: if there are any aspiring landlords here I'd happily sell you my house (we do it privately and I'd happily sign for $925k) and rent it back for $3250 a month! I'd probably invest the equity in a combination CCP type portfolio and a dividend growth portfolio (that's how my other investments are currently setup). I wouldn't need enough investment income to cover the rent - I only need to come out ahead or the same as if I owned my home.
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May 31, 2007
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Both have different utility but stock market is the ultimate utility and the life blood of the economy.

People would be better off to have less debt and burden when buying expensive real estate, vs savings and investment in stock market. In Van or Toronto RE has wiped out a new middle class. Capital used to expand economy via business investment, research, innovation and proper infrastructure would be more productive than having to focus such large sums in RE equity.
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Feb 9, 2013
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ahlaker wrote:
Dec 8th, 2017 12:00 pm

100% yes. I'll even put my money where my mouth is: if there are any aspiring landlords here I'd happily sell you my house (we do it privately and I'd happily sign for $925k) and rent it back for $3250 a month! I'd probably invest the equity in a combination CCP type portfolio and a dividend growth portfolio (that's how my other investments are currently setup). I wouldn't need enough investment income to cover the rent - I only need to come out ahead or the same as if I owned my home.
$925k in Calgary? How big is your home?
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Jungle wrote:
Dec 8th, 2017 1:02 pm
Too much RE eggs in the basket?

1/5 of Canadians own two or more properties: Statscan

Canadians family debt JUMPED 25% in 5 years

Median net worth seems low too @ 295k

http://www.cbc.ca/news/business/statist ... -1.4437137
If you are talking about properties then Median net worth is kind of useless because the bottom half are renters and have no property. You would want to look at the Median of homeowners. Average networth in Toronto is over $1.1m, debt might be high but assets are WAY higher. And before you go on about homes being overvalued they only account for 1/3 of that net worth and I will remind you that is net which already factors in debt.
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Feb 9, 2009
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Jungle wrote:
Dec 8th, 2017 1:02 pm
Too much RE eggs in the basket?

1/5 of Canadians own two or more properties: Statscan

Canadians family debt JUMPED 25% in 5 years

Median net worth seems low too @ 295k

http://www.cbc.ca/news/business/statist ... -1.4437137
Over time there will be families with large property portfolios just like you see in some older cities ... Toronto is just a toddler on the global scene, with due time it’ll get there ...
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rjg4235 wrote:
Dec 8th, 2017 1:09 pm
If you are talking about properties then Median net worth is kind of useless because the bottom half are renters and have no property. You would want to look at the Median of homeowners. Average networth in Toronto is over $1.1m, debt might be high but assets are WAY higher. And before you go on about homes being overvalued they only account for 1/3 of that net worth and I will remind you that is net which already factors in debt.
Ive seen that TO networth figure on some hard to find articles that didn't really have back up stats, perhaps do you know of any that explore this a little more?

Sure with average detach @ 1.3m this is pulling up net worth.

I would be surprised if majority is not because of re.

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