Real Estate

Investor Sentiment

  • Last Updated:
  • Mar 20th, 2017 3:48 pm
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Deal Addict
Nov 26, 2004
1999 posts
204 upvotes
Would it be better off for the investor to refinance the property at 50% of current value and avoid paying capital gain taxes and selling expenses?
Sr. Member
Jan 14, 2009
806 posts
289 upvotes
Vancouver, BC
oasis2002 wrote:
Mar 20th, 2017 10:38 am
Yeah but wouldn't it make sense to flip over those profits into much higher yielding assets - say real estate elsewhere? Toronto rental yield is currently stupidly low.
It is not easy to find such assets though. Also, most people do not hold real estate exclusively. Just take a look at the RFD investing forum. We may choose not to allocate more capital to real estate but to outright liquidate is not very common.
[OP]
Member
Sep 16, 2009
267 posts
84 upvotes
zakarydoks wrote:
Mar 20th, 2017 2:09 pm
It is not easy to find such assets though. Also, most people do not hold real estate exclusively. Just take a look at the RFD investing forum. We may choose not to allocate more capital to real estate but to outright liquidate is not very common.
Not allocating more to RE - I think doing that as an investment right now is a bit crazy. But if one is sitting on substantial gains on a secondary property? Normally one would want to have a secondary property to provide an annuity like income in retirement - but if it appreciates beyond what you ever thought, then perhaps it makes sense to not wait till you retire. The old thinking would be that its generating yield, but not looking at it from a numerical standpoint is probably incorrect. And yet, its such a big transaction - there's analysis paralysis.
Deal Addict
May 31, 2007
4239 posts
1375 upvotes
at1212b wrote:
Mar 20th, 2017 11:47 am
How about those who bought last month, only to see comparables this month already jump 10%. Closing isn't even until another month or two? That type of activity is what's keeping people buying in. Or those that bought last year. Who's to say this won't last another 2 years. So those foolish and risky now will still be cushioned? The hope is the sooner one can get in before any peak, the more 'safer' they are. The extreme example being those who took great risk and leverage to get in 2010. Housing can crash 50% or more and they'll just be where they started off. But now, there is 7 years of principal paydown to add further cushion.
The risk is much higher today to expect the same appreciation return going forward. The 10% monthly jump you suggested would be based on speculation and personally I would not suggest investors use speculation as there reason why to buy rental right now, because you must assume large amounts of carrying costs, tenant risk, higher amounts of leverage required now going foraward and problem is, the cost of money is creating up slowly. IN addition, rental income may not be deductible, because it will more likely run cash flow negative. There is rumour they are also increasing capital gains tax this week too.

Any valuation of house to income, cap rate, market rent to house price clearly shows the investment is overvalued and should expect poor return going forward. This compiled with tenant, tax and debt risk does not justify the investment.
Deal Addict
May 31, 2007
4239 posts
1375 upvotes
oasis2002 wrote:
Mar 20th, 2017 3:10 pm
Not allocating more to RE - I think doing that as an investment right now is a bit crazy. But if one is sitting on substantial gains on a secondary property? Normally one would want to have a secondary property to provide an annuity like income in retirement - but if it appreciates beyond what you ever thought, then perhaps it makes sense to not wait till you retire. The old thinking would be that its generating yield, but not looking at it from a numerical standpoint is probably incorrect. And yet, its such a big transaction - there's analysis paralysis.
You are right to think the yield on such investment has lost its appeal when the capital appreciation may have dwarfed beyond anyone's expectation.
Was listing to investor on talk radio he bought in Markham about 6-7 years ago only to see his property go up over 1M in gains now. Originally he bought so rent cheques could supplement his retirement in the future, but now the appreciation gain is so large it would make sense to sell, cash out and make that equity more productive in investment with better utility or higher yield. (stocks) Also depending this could reduce tenant, debt risk and tax liability.
Last edited by Jungle on Mar 20th, 2017 3:47 pm, edited 2 times in total.
Sr. Member
Jan 14, 2009
806 posts
289 upvotes
Vancouver, BC
oasis2002 wrote:
Mar 20th, 2017 3:10 pm
Not allocating more to RE - I think doing that as an investment right now is a bit crazy. But if one is sitting on substantial gains on a secondary property? Normally one would want to have a secondary property to provide an annuity like income in retirement - but if it appreciates beyond what you ever thought, then perhaps it makes sense to not wait till you retire. The old thinking would be that its generating yield, but not looking at it from a numerical standpoint is probably incorrect. And yet, its such a big transaction - there's analysis paralysis.
For sure. Reallocate if you can identify a better investment opportunity and it adds to diversification. However, Toronto real estate returns are not that amazing if you compare them to the s&p 500 and taking into account of currency. I used ticker HXS and its return since 2013 is 20%+. I'm not making a case for either stocks or real estate but rather highlighting that both are critical to wealth building.

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