Real Estate

Why would you buy this condo?

  • Last Updated:
  • Oct 22nd, 2020 12:14 am
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Sr. Member
Jan 15, 2010
636 posts
556 upvotes
Toronto
1LoveToronto wrote: Negative cash flow doesn't mean its a negative ROIC.

E.g if you net 10k a year on 40k down and 7k top up from negative cashflow

ROIC
Y1: 10/47=21%
Y2: 10.2/54=19%
....
Y10: 12/110=11%

All else being equal and potential of appreciation = potential for special assessment

I'd argue this is would be still be a decent diversification to most investment portfolios. I'd compare "negative cash flow" to the reinvestment risk of dividends and interest.
This basically sums it up. It seems like investors have been banking on capital appreciation in their calculations for a long time now. Though I'd argue that's a very bad idea in the short term (next 5 years). Assuming you can increase property value by 20k a year is in no way a safe assumption right now. Prior to 2016 the Toronto condo market had been relatively flat for about a decade (only gaining 2-3% a year). If we ever return to an environment like that, holding a cashflow negative property will hurt. And investing in stocks will likely turn out to be a much better idea.
Deal Addict
Mar 27, 2004
4628 posts
2277 upvotes
Toronto
This is like asking why are people buying precon condos for 1100$ a sqft , when the local area is selling for $900.
Full-time Realtor
Member
Jul 7, 2019
380 posts
290 upvotes
moeymoeymoeymoe wrote: How do you know their bleeding 600-700. Could have bought the condo in cash.
Yah not sure why its assumed the buyer put down the min 20% down.
Also, the buyer could have plans to rent it out in the short term and eventually move into it later on as their primary residence. Know several ppl that did the latter, and agreed on a short term lease with a tenant, bc they didn't want to leave ther unit empty (paying 2 mortgages) while they got their life/moving details in order.
Deal Addict
User avatar
Apr 27, 2005
2083 posts
469 upvotes
Scarborough
This is a horrible deal. Less than 600 sq ft for a 1+den with two washooms??!?!
Deal Fanatic
User avatar
Dec 27, 2009
7080 posts
4230 upvotes
Victoria, BC
Newuserid wrote: Maybe they dont have a mortgage. There's a lot of wealth out there
Then that would still be a very bad investment. There's better returns on $580K
Member
Nov 25, 2009
445 posts
185 upvotes
Terrace
mazda31509 wrote: https://condos.ca/toronto/the-park-club ... 5-C4839514

Condo was bought for $580k and now the landlord has it up for rent for $1900.

What's the logic there? Bleeding about $600-$700 a month, at 25 year amortization including all fees
You're assuming the buyer is taking a loan out for this.

What if they bought it all cash? Sure the stock market has better returns, but some people just don't trust the stock market.
Newbie
May 29, 2020
45 posts
72 upvotes
You guys assume this person put all their money into that condo, but they could have millions already invested in the stock market and wanted to diversify more.
Jr. Member
Jul 18, 2020
169 posts
246 upvotes
TheSpaceMonkey wrote: You guys assume this person put all their money into that condo, but they could have millions already invested in the stock market and wanted to diversify more.
+1 to this, one of my parents friend bought 2 condos in DT a few years ago just to diversify their portfolio, from what I know they have close to 10M in stocks already. They used to be bankers before they retired and I often get stock tips from them.

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