Real Estate

Stocks vs real estate in hot markets

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  • Jul 4th, 2021 3:33 pm
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Jan 14, 2009
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Vancouver, BC
vanclty wrote: Based on comments, Guess I'll buy a re 🤷🏿‍♂️
How is your stock investments doing relative to Vancouver RE? A lot of people saying to rent and invest the difference do not live in Vancouver. Vancouver has a very tight rental market, very low supply, and lots of immigration.

I'm investing and not buying atm but it's a losing fight for me. I can still afford to buy but not in the area I originally wanted in 2019.
If you buy vgro for a thousand years Vancouver homes will still be out of reach.
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Jun 14, 2018
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vanclty wrote: Based on comments, Guess I'll buy a re 🤷🏿‍♂️
How much more convincing do you need?

You're not going to get a definitive answer on if it's better to buy or continue renting. No one truly knows where real estate prices is going. It might go up or it might go down. If you think you eventually want to own something, the best time to do it is as soon as you can afford it, which looks like now is that time for you.

Don't think of buying now as you're going all in here. You're simply hedging your bets. This isn't going to be your first and only purchase. If you eventually start a family and have kids, you'll want to upgrade to something bigger and more expensive. Buying something now will make it so much easier for you to upgrade later on.
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Mar 30, 2017
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GVA
a picture is worth a thousand words
Image
Low = $16, now = $115
no leveraged real estate can beat this
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Penalty Box
Mar 27, 2004
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Toronto
seatiger wrote: a picture is worth a thousand words
Image
Low = $16, now = $115
no leveraged real estate can beat this
the chances you would dump 50k into this stock right at the bottom is next to zero. you might as well use shopify as example. ipo at like 33. now is 1850.
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Oct 21, 2016
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vanclty wrote: There is chatter about money printing, hyperinflation to come etc.

However, Toronto/Vancouver real estate is still more expensive than other major cities. Can house prices infinitely rise while wages move very less? Just worried about buying a place and then it tanks 10-20% in value.

So just thinking renting may be better in hot markets and investing in SPY index instead?

https://www.google.com/search?q=north+a ... d0nt6groVM
VOO is at an all time high and was on a 12 year bull run before March 2020 and continued to soar back to all time high post March 2020 crash. Are you worried the s and p is overvalued and will correct by 20 percent or more as fed is anticipated to raise rates in 2022 to cool down inflation. Diversify own stocks and physical real estate.
Last edited by Shaun80 on Jun 22nd, 2021 9:52 pm, edited 1 time in total.
Sr. Member
Oct 21, 2016
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seatiger wrote: a picture is worth a thousand words
Image
Low = $16, now = $115
no leveraged real estate can beat this
Perfect timing wow sell at the peak and buy at the very bottom unfortunately unless you have a crystal ball investing does not work like that.
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Oct 21, 2016
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RichmondCA wrote:
My neighbour who had a paid off home and cottage did this in 2019, sold both his house and cottage to rent while 'things cool down'. Sure he is sitting on decent cash in his sweet rental, but to replicate the life he had 2 years ago he'd need to cough up an extra million now.

Nailed it.
Did he put the cash from the sale in the stock market or leave it in the bank where it is being erroded by inflation
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Mar 30, 2010
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vanclty wrote: Based on comments, Guess I'll buy a re 🤷🏿‍♂️
That's exactly what I said before I bought.

I just called an agent one day and said "guess I'll buy a re" and he hooked me up.

I now own a re. 🤷‍♂️
RichmondCA wrote: Leading indicator on bear market, when you see this avatar start popping up in this thread
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Mar 2, 2017
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Shaun80 wrote: Did he put the cash from the sale in the stock market or leave it in the bank where it is being erroded by inflation
I am not sure what he did, if I had to guess he most definitely left it in a bank account. He was middle aged, super risk averse, and used to spaz out over everything.

He was the type to watch the snow fall in the winter and be the first to run out to shovel, 4 am, 5am, didn't matter, he always had to be first. Thankfully he didn't use his snow blower for his lunatic middle of the night snow clearing. After 7am tho that thing was guaranteed to be running. I am pretty sure I upset him once, had to feed my daugther at like 3am on a night with a fresh snowfall, just to screw with him I shoveled it right then and there. I got a text at 4 am asking what time I shoveled.

What a treat he was.
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oasis100 wrote: the chances you would dump 50k into this stock right at the bottom is next to zero. you might as well use shopify as example. ipo at like 33. now is 1850.
apple to orange.
SHOP is one stock.
TQQQ is passive index ETF.

EVEN if buying at the highest price during a year, for the past 10 years, the worst year you get 47% annualized return.
Average annualized return 57%
Image
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Shaun80 wrote: Perfect timing wow sell at the peak and buy at the very bottom unfortunately unless you have a crystal ball investing does not work like that.
you dont need that, even if you buy at the worst timing, ie, highest price during the last 10 years, the worst annualized return is 47% PER YEAR.
much higher return at any other price point.
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Mar 2, 2017
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Why not play with both, have your cake and eat it too?
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Jan 11, 2019
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vanclty wrote: There is chatter about money printing, hyperinflation to come etc.

However, Toronto/Vancouver real estate is still more expensive than other major cities. Can house prices infinitely rise while wages move very less? Just worried about buying a place and then it tanks 10-20% in value.

So just thinking renting may be better in hot markets and investing in SPY index instead?

https://www.google.com/search?q=north+a ... d0nt6groVM
Depends on what you’re planning for your future?

If you want to stay and live in Canada for the rest of your life, what difference would it make to you if the prices tank? You buy a place to live in, it doesn’t generate a cash flow if anything it costs you to maintain it… Canadians in general treat their homes as a retirement investment and a source of wealth which is very weird compared to Europe and other places where people own a home for generations

If your plan is to move somewhere else, rent… invest the difference in whatever you feel comfortable with, make your dough and bounce…

At the end of the day, do what makes you happy
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Jul 30, 2013
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GTA
seatiger wrote: apple to orange.
SHOP is one stock.
TQQQ is passive index ETF.

EVEN if buying at the highest price during a year, for the past 10 years, the worst year you get 47% annualized return.
Average annualized return 57%
Image
Are you really comparing the Canadian real estate market to a 3x leveraged ETF that very few professional investors would use long-term, let alone retail investors?
For a fair comparison, you'd have to calculate the return on real estate as well on the leveraged basis, feel free to use a 20% downpayment as an example (aka 5x returns).
I'm willing to wager that the returns on real estate will come out on top, and would definitely have a higher return on a risk/volatility adjusted basis.
Not to mention the drawdown, you could have lost up to 70% of your investment in Feb/Mar 2020 by investing in this ETF. Many (if not most) people wouldn't be able to sleep at night with that kind of volatility.
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Jun 19, 2007
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MarinersFanatik wrote: I'm neither a bear or a bull, but if you don't own real estate and can afford to buy one now, you just need to suck it up and buy one to get your foot in the door.

The absolute worst thing that can happen is you don't buy and prices continues to go up. Knowing that you could have bought at a lower price is a terrible feeling. Conversely, you could buy a condo and it immediately drops 20%, but the silver lining is that upgrading to a nicer and/or bigger condo costs less too. It's all about moving up the property ladder. The longer you wait to take that first step, the longer the road might become.

Buying now is the safer option and simply the lesser of two evils. You'll never have to worry about being priced out if you buy now. You don't want to be either all in or all out in this market. It's too dangerous of a game to play.
The problem with the "get your foot in the door" mentality, is it's entirely banking on the idea that prices will continue to accelerate faster than incomes, inflation, population, GDP, rents, # of dwellings, or your ability to save. While that has been the case for the last 10-15 yrs or so, it certainly hasn't always been the case. (ie RE was dead money for 17 years on an inflation adjusted basis in the 80s). In a stable and balanced market, those things should generally move in concert. ie if avg income doubles, and pop stays the same, prices should double. If salary stays the same, but population doubles, prices should double. If population doubles, and # of dwellings doubles, prices should stay the same.

That silver lining aside of being to upgrade for cheaper, the giant grey cloud is if it drops 20%, and you didn't put down a normal 20% down payment, is that you could very well find yourself in a negative equity situation and trapped unless you can come up with 50k or whatever to cover the shortfall. Don't forget that (aside from AB I think?) most provinces have full recourse loans.

From literally every metric, RE is the most expensive it's ever been, beyond where the US was when it fell off a cliff, and ownership rates are among the highest they've ever been. Doesn't mean they can't go higher, and frankly I'm surprised we got to this point, and the games the gov't has played to keep it going (crashing interest rates, playing with mortgage rules, free money for all), but I don't think even they are so reckless as to continue to print money or bring in negative rates to the point of serious inflation to let this go on for ever. Maybe 0% mortgage rates and interest only mortgages are next up? People could live for free and bid a billion dollars for a house. You're never paying it off anyways. At *some* point there simply has to be a return to normalcy where an investor looking to rent out a place won't lose $1k/mth on negative cashflow of $2k/mth banking entirely on huge capital gains. If it does go on forever, then the reductio ad absurdum is average family dwellings costing $100m, while incomes have grown to maybe $1m, and the stock market at 10,000,000.

All that said, if you're financially comfortable if rates double in 5 years, can cover the payments on a single income, and it's a place you want to be in for at least 10 years, have at least a 20% down payment, and could weather a 20% decline, then I'd say go for it. Unfortunately it seems (much like good profitable rentals on a cash flow basis) that's a nearly impossible task for the vast majority of people.
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Jun 14, 2018
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seadog83 wrote: The problem with the "get your foot in the door" mentality, is it's entirely banking on the idea that prices will continue to accelerate faster than incomes, inflation, population, GDP, rents, # of dwellings, or your ability to save. While that has been the case for the last 10-15 yrs or so, it certainly hasn't always been the case. (ie RE was dead money for 17 years on an inflation adjusted basis in the 80s). In a stable and balanced market, those things should generally move in concert. ie if avg income doubles, and pop stays the same, prices should double. If salary stays the same, but population doubles, prices should double. If population doubles, and # of dwellings doubles, prices should stay the same.
No, buying now doesn't mean you think prices will go up. No one knows for sure whether prices will go up or down in the future. It's just hedging against the possibility that prices will go up and protecting yourself in case it happens. This isn't going to be the first and only real estate purchase that OP makes. It's going to get more expensive as they decide to upgrade.

In the future, OP could be starting a family and might eventually need a townhouse, which could run $1 million in today's prices. By buying a $500k (for example) condo now, OP is guaranteeing that they would be, more or less, halfway to that eventual townhouse. The townhouse might increase in value or it could decrease, but now OP has an condo that will move hand-in-hand with that townhouse and doesn't have to worry about that townhouse getting too far out of reach.

On the other hand, OP could put all the money into index funds (and let's not get started on how dumb it would be to invest money you will eventually need in the short-term into index funds). This is where OP absolutely needs stocks to outpace real estate or they risk having real estate falling out of reach. There is just too much unpredictability in this scenario. No one knows how stocks will do (especially not in the short-term) and no one knows how real estate will do in the future.

This is about risk management. A lot of people sitting on the sidelines might look at buying real estate as the riskier decision, but it's likely that deciding not to buy is even more riskier. If you can afford to buy it now, you shouldn't let that opportunity fall out of your grasp.
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techkid wrote: Are you really comparing the Canadian real estate market to a 3x leveraged ETF that very few professional investors would use long-term, let alone retail investors?
For a fair comparison, you'd have to calculate the return on real estate as well on the leveraged basis, feel free to use a 20% downpayment as an example (aka 5x returns).
I'm willing to wager that the returns on real estate will come out on top, and would definitely have a higher return on a risk/volatility adjusted basis.
Not to mention the drawdown, you could have lost up to 70% of your investment in Feb/Mar 2020 by investing in this ETF. Many (if not most) people wouldn't be able to sleep at night with that kind of volatility.
it never fails to reach new high year after year. It is one of the most active trade etf around, lots of retails trade it. I own options of it, derivative on leverage! yay! lol
10 year record is a long enough proven time frame imho

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average annualized return is 57%, or ignore the 2 covid years, 53%.
the max draw down @72.84%, not for faint heart i agree,
but for long term it will recover, and it did recover and break record high within a year
and dont get too happy trashing tqqq, see your RE 20% down data below:

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max draw down is 49.27%, also not for faint heart lol
the return since Dec 2020 is very rapid and crazily good when annualized. I give you that,
but we all know it is flattening now and RE just simply cannot rise at this speed for longer term. it will rise, but just not at this speed.
32% average return annualized,
and drop to 20% long term return without counting the covid boom.
and I would argue the numbers will be at least a few % uglier once I factor in transfer tax, commission, transaction costs etc
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Penalty Box
Mar 27, 2004
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Toronto
5/11/18: profit YTD -3.50%
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oasis100 wrote: 5/11/18: profit YTD -3.50%
oh lol, i havnt updated it for a long time, over 100% profit from my last trade now after discovering the tqqq option lol

profit at 117.61% since 11/10/2020 to be exactSmiling Face With Sunglasses
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