Where to put $18,000 in Savings? - Buy Investment Condo or Invest in Stock Market?

[BoxsterS]

Putting the money into a saving account? Do you know that the avg inflation is 2.7%. There is no growth at all. 2.5% of 18,000 is only 450 a month. I don't really consider that as living large.

Trailers?? Most of the property that holds trailers are low value and low demand. Unless is at tourist area, land takes a long time (10,20,30 years)to raise in prices.

Condo is good if u have good tenants. It really up to u to see what u want. If you love real estate, get into it. If u like stocks get into that. There is money to be made in either way. The most important is to do something u have an interested and do your homework.

I wouldn't suggest follow hot stock tips off the net. That is the same as going down the street and asking anyone for suggestions. Most important to look at is ppl who have done it. They can at least give u advice on what to and what not to look for.

It's great that u are considering to invest with the money. Leaving in the bank is the worst thing you should do. Actually the wrost is spending it .

Actually, the initial monthly return on a principal of $18,000 at 2.7 % APR is about $41. But I do like your math better. As for stocks, perhaps would you like to entertain us with the topology of your peaks and valleys of your portolio. Unless you have some inside information, you'll never see a major return. The only sensible advice when it comes to stocks is to have a balance of stocks and bonds.

[ctam]

Actually, the initial monthly return on a principal of $18,000 at 2.7 % APR is about $41. But I do like your math better. As for stocks, perhaps would you like to entertain us with the topology of your peaks and valleys of your portolio. Unless you have some inside information, you'll never see a major return. The only sensible advice when it comes to stocks is to have a balance of stocks and bonds.

Sorry, my math is off by a bit. :P In regards to what to invest and what not to, it depends on your risk level and your time frame. To blurb out what is the best is like telling everyone that the best car for them is a NASCAR stock car. It might be best for racing but not for family driving. It is impossible to pick one stock/one investment strategy/type/product for everyone. The only method is do your own research. Go and find out what is best for you. This involves, reading lots of books, going to different financial planner and looking at different strategies.

Yup, unless u have inside info, u will never see a great return. Or you are very lucky. If it is the latter, then you are more gambling than investing.

[hot_potato]

I think it all depends on the type of property and the location. Back in '83 they were selling condo units at Queen's Quay Terminal for about $300,000 on the harbourfront. In 2000, the same unit was selling for $2,500,000! Overall, I think luxury properties tend to maintain their value more compared to average condos. In your case, since $18,000 is not enough to invest in a higher end property, I would advise against purchasing a condo (and expect to make any money) unless you were living in it yourself. In which case, it would make more sense because you could build equity instead of squandering it on rent. Since you're living rent free, it's a good idea to try to save as much as possible and put your money in a diversified portfolio (stocks, mutual funds, bonds). When you're ready to move out in two years time, I would take a look again at the condo market with an eye on purchasing (of course, it would depend on market conditions - hard to say if mortgage rates will stay as low as they have been). In those two years, you will have saved more money for a bigger downpayment and your choice in properties will increase. If there is a lull in the housing market two years down the road, try to buy a condo/house closest to the most desirable neighbourhood as possible that you can afford. Good luck!

I have to disagree, because circumstances may vary and it really depends on personally situations. Although real estate seems to be the ultimate choice, but not necessarily so, especially in Canada when the real estate appreciation rate is rather slow comparing to may other places in the world due to the vast size of land we possess. Let me share with you a personal real case: my parents bought a very decent condo right on the lake in down town Toronto in 1982 for $140,000 and my mom sold it in 1998 for $255,000(245K after commission). You may say "wow" when you first look at the numbers, but then if you calculate the average compound annual rate of return on the property it turns out to be about 3.5%. Also, if you take inflation into consideration the 3.5% annual gain is wiped out completely. In the 80's the inflation rate was way up there in the 7 to 8% neighbourhood and gradually died down in the 90's to about 4 to 5%. What I am trying to say is that $140,000 in 1982 was probably worth more than $252,000 in 1998. Another thing is in 1982 when my parents bought the luxury condo unit the mortgage rate was outrageous: 1 year fixed term was 16.5% and they took a 5 year term for 23.5%! Of course the bank savings account rate was about 10% then as well.

I think it is inevitable if you mortgage a home for yourelf and your family to live in, but then if you borrow money to buy a property as investment you may only make money during boom time like the last 7 years in Canada, especially the 100K captial gains exemption was dropped in the 90's. Who knows much longer the real estate market will sustain this time. I have seen how the real easte in the 80's boomed and then just crumbled abruptly in 1991 for 5 years. I purchased my condo in 1992 during the midst of the recession and it cost me 161K, but just two years before that when it was brand new the previous owner had bought it for 249K! 90K difference in just two years, and that was a lot of money in 1990. Just my two cents.

[rc51]

Real estate is the way to go because land value pretty much only rises and never drops.

Tell that to the majority of mortgage holders back in the 80's when interest rates hit 18%-19%. If I remember correctly, people were simply walking away from their pretty much 'worthless' properties..they owed more than the properties were worth at the time.

Real estate values can go down... for many reasons, general economic conditions...zoning changes, etc etc.

[grant]

rc51 you're wasting your time... anyone who comes up with nonsense statements like that are impossible to reason with.

[plucky duck]

Saying property value never drops is like a stock is going to fly high and forever, not gonna happen.

If you're gonna go in doing a half ass job, might as well not do it. There are risks to real estate as well.

[swmc]

I know this thread is a little old but I stumbled on it and have to clear up a lot of misconceptions.

First, CUX is a high risk stock. Results are based not on tangible supply and demand, but a "chance" at finding a huge pocket of natural resources. (remember Bre-X?). Even so, look at the company's fundamentals. Do assets greatly outweight any debts? If the P/E ratio is so high, does the annual rate of growth justify it (Growth rate should always be much greater then PE)? Is there enough cash on hand to whether a potential bust in drilling?

If you want to truly understand the market, read Peter Lynch's book "One Up On Wall Street". This guy ran the largest and most successful mutual fund before retiring. He provides solid examples and backs them up with data, unlike Kiyosaki.

Stocks and mutual funds are not taxed at FULL rate. They are half taxed. That's why the rich get richer. The Canadian government encourages people to save up and invest because it is great for their long term financial health, and because you are only taxed on HALF of your capital gains. So let's say you bought and sold stocks and made 100k. You only calculate the tax for 50k.

There are only two times you should buy real estate:
1) when you are going to live in it.
2) when you don't need to mortgage it.

Let me explain number 2. Say you had $18k and put it as a down payment for a $170k condo and you might get $800/month in rent. As mentioned, that merely covers the mortgage. Yes you can write off the maintenance and taxes off your own income, you still end up losing money.

But let's say you had $170k and just bought the condo outright. Now you have all that equity. Go to the bank. Get a mortgage on that equity (safe to go with no more then 75%, but you can go higher). Take that money and put it in something dead safe like an index-linked fund or Royal Bank stock. Now rent out the condo. Now you can write off the interest paid on the mortgage because you used the money for investments. The rent also covers the interest. And on top of that, Royal Bank stock performs on average of 20% a year, which is only half taxed. Simple.

There's actually a lot more to this and even more ways to make money, but this is very basic info everyone should have.

Finally, real estate is about timing and it is hard to predict.
Yes, that condo on Queen's Quay sold for 300k in '83 and is worth 2.5 million now, but in '86 it was worth 2.5 million, then in '88, worth 250k. So depending on when you bought it, you could've either made a lot of money, or broke even.

[gorf]

rc51 you're wasting your time... anyone who comes up with nonsense statements like that are impossible to reason with.

Its true, the market was flooded with homes and buyers wouldn't assume mortages at such a high rate, they were looking for clear titles.