Real Estate

Locked: RE Price Drop = Good for Everyone (especially for the bulls)

  • Last Updated:
  • Nov 14th, 2018 9:07 am
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote:


I don't create wealth through real estate. At least not now. I will wait. I will wait until value catches up with price.
How do you evaluate that? Is it purely monthly carrying costs, or do you take into account principle made on the mortgage?
Deal Addict
Jan 17, 2006
2496 posts
2740 upvotes
Toronto
CollegeGraduate wrote: I would never classify cars and iPhone as assets.
Those both are depreciable assets, if you can't write them off in one shot for busuness purposes then it fits into definition.

What a combination, 1.7k iPhone and corolla.
6k bag and rav4 and no own place to live.
You are quite a individual.
Anyways just request to delete your thread, you said too much already.
Banned
Aug 19, 2016
1903 posts
762 upvotes
ilim wrote: Anyways just request to delete your thread, you said too much already.
So according to you, real estate is the only source of wealth. If my view contradicts yours, you want the thread gone.

Not even president of United States can do that.
Deal Addict
Jan 17, 2006
2496 posts
2740 upvotes
Toronto
CollegeGraduate wrote: So according to you, real estate is the only source of wealth. If my view contradicts yours, you want the thread gone.

Not even president of United States can do that.
Suggestion was for your sake, to stop exposing yourself in bad light.
I never stated anything about source of wealth.
Banned
Aug 19, 2016
1903 posts
762 upvotes
WinterSleep wrote: How do you evaluate that? Is it purely monthly carrying costs, or do you take into account principle made on the mortgage?
If you view buying a house using pure cash, then you will understand what I am trying to imply.

Money is not free, and the fact that the Banks let you borrow 10 to 1 doesn't mean the money is yours. You return the money to the bank over time.

Now then, if you must use leverage, then consider using 100% leverage for simplicity purpose. That means the bank will lend you 100% of the money at a reasonable interest rate, say 3.5%.

For simplicity purpose, assume the bank don't want the money back, you just need to pay interest on it. Assume a house cost $800,000, I need to pay $2,333 a month to the bank because I am now renting money instead of renting a house.

Since I don't need to pay the principle on the house, I can then invest that money elsewhere.

Now then, you would say that the house will go up over time. Yes, that is true, but the going up part have mostly been depleted.

Say if the interest rate jumps to 6%. I will then need to pay the bank $4,000 a month. That is way higher than the amount I am paying now to my landlord.

However, if the landlord is able to raise the rate up to $4,000 a month, then I will consider getting a house at 6% if I have to.

The only reason why I don't like real estate at their current price level is because I generated well over 20% a year on the money otherwise would have been paid to the bank as principle payments. And I did that without using leverage.

Real estate is a highly leveraged asset. Therefore, it should fluctuate greatly with the adjustment of the interest rate.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote: So according to you, real estate is the only source of wealth. If my view contradicts yours, you want the thread gone.

Not even president of United States can do that.
No, but it's one source, especially for people with low self discipline who need to be forced to save as opposed to buying $5k bags which go out of style every year. You feel rich because you look at your investment account because you are convinced RE will drop. If it doesn't, your money will not go very far when you are forced to buy. And your wife won't care about 5k bags, BMWs, or iphones when all her friends tell her how come she is still renting, which carries quite a stigma in our culture (much more than the positive effects of those flashy symbols)
Banned
Aug 19, 2016
1903 posts
762 upvotes
ilim wrote: Suggestion was for your sake, to stop exposing yourself in bad light.
I never stated anything about source of wealth.
I am just using it as an example.

People would buy a house first. And then borrow from their houses via HELOC to buy those handbags and luxury cars. I see this all over the place. They are just renting money.

When I do the reverse, you think I am crazy. iPhone first, BMW second then a house.

If the house gets cheap enough, I will ditch the cars and iPhone and go straight to the house 1st.

You wouldn't believe how many people asked me to join them in their real estate ventures. Promising 10% return on my money, and they keep the rest. That was when flipping was super profitable. Those guys all got burned by now.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote: If you view buying a house using pure cash, then you will understand what I am trying to imply.

Money is not free, and the fact that the Banks let you borrow 10 to 1 doesn't mean the money is yours. You return the money to the bank over time.

Now then, if you must use leverage, then consider using 100% leverage for simplicity purpose. That means the bank will lend you 100% of the money at a reasonable interest rate, say 3.5%.

For simplicity purpose, assume the bank don't want the money back, you just need to pay interest on it. Assume a house cost $800,000, I need to pay $2,333 a month to the bank because I am now renting money instead of renting a house.

Since I don't need to pay the principle on the house, I can then invest that money elsewhere.

Now then, you would say that the house will go up over time. Yes, that is true, but the going up part have mostly been depleted.

Say if the interest rate jumps to 6%. I will then need to pay the bank $4,000 a month. That is way higher than the amount I am paying now to my landlord.

However, if the landlord is able to raise the rate up to $4,000 a month, then I will consider getting a house at 6% if I have to.

The only reason why I don't like real estate at their current price level is because I generated well over 20% a year on the money otherwise would have been paid to the bank as principle payments. And I did that without using leverage.

Real estate is a highly leveraged asset. Therefore, it should fluctuate greatly with the adjustment of the interest rate.
Is it true that if you were to go out now and rent, it would be 2300$? Or would it be that price because you are already rent controlled? Looking in my area, houses go for 3k+/month, and 2 bed condos for $2400+, yet those condos cost much less than $800k.

Also, why should interest rates jump to 6%? It could just as easily go towards 0%, so how can you make a bet on that? You have no control over that so can't really say IF it happens. If it goes to 6%, that means rates go 300 basis points higher than now... that is freaking huge. It's a risk, for sure, but is it likely? Could it hover around 3.5% for the foreseeable future? Maybe 4%? Can't say.

You are investing your money in equities, I imagine, which could also drop by 40% any day. Can't control that either.

Think about it another way - if prices drop so much that your scenario makes sense, then you wouldn't be the only one lining up to swap up properties. Your bet is an economic shock like 6% will happen forcing prices to drop, which seems more like gambling than anything else.
Banned
Aug 19, 2016
1903 posts
762 upvotes
Never in any of my posts on this thread mentioned anything about condo. I said house, house, and more house.

I remember back in the olden days (like 2015), people never mentioned condo, they only cared about houses. Now all of the sudden, it is condo this and condo that.

Why would I buy a condo? What value do I get out of a condo? It is more of a liability than an asset if you do the calculation long term.

The reason why you brought up the condo is because it is going up in price. Mind you, the only reason why condo is going up is because it is within the price range that is affordable, or so they thought.

It is like saying why spend $1,700 buying an iPhone when you could spend $300 buying a Chinese Android phone. They are not the same.

For condo, there is maintenance cost. Currently, house prices is out of reach for most people, they all piled into condo. More demand = higher price.

But one day, they will realize that paying $600k for a condo is not a smart move. You have this management office leeching off you. And the fee will go up each year as the building gets older.


I remember back in the days when I asked my dad why would people pay $1,000,000 (house) so that they can rent it out for $2,000 a month instead of paying $250,000 (condo) and rent it out for $1,600/month? As a result, I received an hour of lecture on how valuable a house is and how a piece of junk a condo is. Now all of the sudden, condo is so valuable.

So either house price has to come down and/or condo price has to go up. So far it has happened.


According to the data I get from people around my neighbourhood, the amount I am paying now is the market price. Some houses will settle for $2,000 a month if I pay with cash.

I don't live in downtown. Don't like the crowdness.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
Oh shoot, totally forgot they build maintenance-free houses... The new roof, asphalt technology that never need upkeep, or the new service provided by government for free snow removal, gardening, not to mention free gas, water, hydro, and insurance for houses.
Banned
Aug 19, 2016
1903 posts
762 upvotes
WinterSleep wrote: Oh shoot, totally forgot they build maintenance-free houses... The new roof, asphalt technology that never need upkeep, or the new service provided by government for free snow removal, gardening, not to mention free gas, water, hydro, and insurance for houses.
Now all of the sudden you are bullish on condo. So condo to the moon? Instead of the old houses to the moon.

Man, you fake bulls are making this into why the price will go up, not discussing about the OP.

I give up.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote: Now all of the sudden you are bullish on condo. So condo to the moon? Instead of the old houses to the moon.

Man, you fake bulls are making this into why the price will go up, not discussing about the OP.

I give up.
I never talked about condo vs house. It depends on your needs. Condo is closer to town but smaller, but house good for family. You mentioned condo fees and I'm saying condo fees take care of many things that houses also come with but they are less noticeable because it's not in your face. A portion of your monthly condo fees go toward reserve fund which is a long term investment in the future health of the building, which is money people never put aside for house and think they are not paying it but they will one way or another.
Banned
Aug 19, 2016
1903 posts
762 upvotes
I guess I have been defeated.

People prefer to pay more for assets. The higher the price, the more they are willing to pay. I guess this is just human nature.

Good luck to you fake bulls, and maybe some real bulls.

Mod, please close thread.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote: I guess I have been defeated.

People prefer to pay more for assets. The higher the price, the more they are willing to pay. I guess this is just human nature.

Good luck to you fake bulls, and maybe some real bulls.

Mod, please close thread.
17 pages and you still repeating the same nonsensical statement. You must be trolling. There is no way a person who has enough IQ to form sentences properly can be this clueless.


I also find it endearing how OP puts so much trust in his Apple shares, which is mainly based around a marketing strategy as opposed to any tangible hardware/software superiority. Anybody recall how RIM fell on hard times from its peaks? Could OP lose a large amount of his savings as many did with RIM?


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November 14, 2018 (today's news): Apple shares drop as iPhone suppliers issue warnings
Lumentum Holdings Inc, the main supplier of the Face ID technology in the latest generation of iPhones, cut $70-million off its forecasts for revenue on Monday, knocking another 5 per cent, or around $50-billion, off Apple’s value in morning trade on Wall Street.
Image

But he finds more risk in Canada's largest city, which has multitudes of different sectors thriving, has a resilient economy, and is the center for many innovation hubs. Not to mention the comparably higher quality of life (education, health care, safety, etc.) compared to other North American cities, and the very fact that his own family has called it home and has no plans to move.
Deal Addict
Mar 13, 2017
1042 posts
1194 upvotes
WinterSleep wrote: 17 pages and you still repeating the same nonsensical statement. You must be trolling. There is no way a person who has enough IQ to form sentences properly can be this clueless.


I also find it endearing how OP puts so much trust in his Apple shares, which is mainly based around a marketing strategy as opposed to any tangible hardware/software superiority. Anybody recall how RIM fell on hard times from its peaks? Could OP lose a large amount of his savings as many did with RIM?


Image

November 14, 2018 (today's news): Apple shares drop as iPhone suppliers issue warnings


Image

But he finds more risk in Canada's largest city, which has multitudes of different sectors thriving, has a resilient economy, and is the center for many innovation hubs. Not to mention the comparably higher quality of life (education, health care, safety, etc.) compared to other North American cities, and the very fact that his own family has called it home and has no plans to move.
I'm with you on the 17pages and still nonsensical. And I'm engaged by your comp of Blackberry to Apple and how one consumer good may follow the other into a depreciating vortex thereby establishing why RE as an appreciating asset makes these toys look silly.

Blackberry aside, I would suggest that Apple and GTA RE are more connected that you would suggest above. The diverseness you paint for GTA RE as an investment contrasts the fall of Blackberry nicely, but also demonstrates why Apple shares should be fine long term.

This coming from an old dude who has never carried an Apple device in his pocket.
Banned
Aug 19, 2016
1903 posts
762 upvotes
Why not compare Apple stocks to Nortel while you are at it?

I know I know, higher asset prices is in the dream of 99.99% of the people out there. You would rather buy 1 house with your $1m instead of 2 houses in the same area.
I get it now, okay?

There is no point in keeping this thread alive since I have already conceded.
Deal Addict
Jan 26, 2016
2240 posts
2272 upvotes
Toronto, ON
CollegeGraduate wrote: Why not compare Apple stocks to Nortel while you are at it?

I know I know, higher asset prices is in the dream of 99.99% of the people out there. You would rather buy 1 house with your $1m instead of 2 houses in the same area.
I get it now, okay?

There is no point in keeping this thread alive since I have already conceded.
No you are just reiterating the fake vs real bull argument, saying that fake bulls like their assest go up while real bulls want them to fall, suggesting the former is the dubious crowd while the latter is the financially shrewd one. So no you didn't get the point after 17 pages or modify your argument. Just repeating the same mentra about price falling is good because you grab two properties.

I bet if one day you yourself buy a property, you'd want it to go up too. If you expected to go down, you would wait till it bottoms out. And once you buy, you'll lack credit to buy another one unless you're infinitely rich so no use for it to drop.

Btw i have apple stocks too through ETFs and mutual funds, which combine diverse companies. But i wouldn't bet for or against any single company. If anything, the real money would chase peomising startups as opposed to the huge mammoth that is Apple.
Banned
Aug 19, 2016
1903 posts
762 upvotes
WinterSleep wrote: No you are just reiterating the fake vs real bull argument, saying that fake bulls like their assest go up while real bulls want them to fall, suggesting the former is the dubious crowd while the latter is the financially shrewd one. So no you didn't get the point after 17 pages or modify your argument. Just repeating the same mentra about price falling is good because you grab two properties.

I bet if one day you yourself buy a property, you'd want it to go up too. If you expected to go down, you would wait till it bottoms out. And once you buy, you'll lack credit to buy another one unless you're infinitely rich so no use for it to drop.

Btw i have apple stocks too through ETFs and mutual funds, which combine diverse companies. But i wouldn't bet for or against any single company. If anything, the real money would chase peomising startups as opposed to the huge mammoth that is Apple.
Okay okay. How do I make you "bulls" happy? I have already conceded.

I, CG now concedes to the RE bulls out there, and now believes that the RE market will always go up. The higher the price the better for everyone's lives.
On the other hand, stocks will always be inferior to RE. The End

There, happy?


PS: These guys on RFD are more convincing than my parents lol. I would have never made a statement like that in real life.

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