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Old 05-08-2016, 11:59 PM   #6051
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To be honest I really want to sell the pre sale unit I purchase. I mention this to a few friends and they all said if I plan to sell it let them know coz they have friends who are looking at that area and is all ready to pay up......

Got the place for 300k it about 350k now...... in just 2 years.

One of the reasons I am thinking of selling is I want to move to another city, also 1 bedroom 500sq is barely enough for myself let alone if I do get marry 2 person.Literally there are nowhere to go if say we argue. Also, if I am paying my mortgage it would basically take 50 to 55% of my pay every month and then there is the starta fee.

Renting it out is around $1400 to $1500 a month that will cover the mortgage but I still have to pay the starta. Then I run the risk of getting a horrible tenant and they are always a headache to get rip off.
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Old 05-09-2016, 01:20 AM   #6052
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We won't be bailing this particular couple out because they're public sector workers whose jobs are largely secure. Their main risk is not being sufficiently insured in case of death, cancer, or other long-term disability. A term life insurance policy on $1 million+ won't be cheap.

You're right in that we own all of this debt indirectly through our exposure to the banks via the CPP or our personal mutual funds and indexes. We can't opt out of the CPP and I imagine most amateur investors who are following a passive index strategy have at least 5-10% in Canadian equities.

It's almost a perverse way to justify getting in the market.
You mentioned that they're looking to have kids soon. Have they thought how they're going to pay the mortgage when one of them goes on maternity leave for a year? The max income is $537 or $30,000 a year.

I don't know, the numbers don't make sense to me. Earning $100k and buying a $1.5M house, there's something missing, like an inheritance of some sort.
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Old 05-09-2016, 06:33 AM   #6053
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The cost of the house is irrelevant. What matters is how much they have to mortgage. But even if the mortgage is 750k, 100k/yr isn't enough to cover it and still feel relatively safe.
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Old 05-09-2016, 06:48 AM   #6054
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The cost of the house is irrelevant. What matters is how much they have to mortgage. But even if the mortgage is 750k, 100k/yr isn't enough to cover it and still feel relatively safe.
hang on a minute. are you saying the amount of debt someone takes on is irrelevant?

In the very short term, you are correct, but mortgages are usually 25-30 year debts - that's a long time to suggest debt amount (akin to purchase price) is irrelevant
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Old 05-09-2016, 07:12 AM   #6055
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Was in Richmond on Saturday and drove by the house I grew up in as a child - it's out in the farming area (5 road/Blundell) and it's listed now for $2M. It's a 72'x302' lot (half acre) with a 3 bedroom rancher (1500sf) on it.

Back in 1989 my parents sold it for $189K so nearly a 11X increase in "value" in 27 years. Insane.
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Old 05-09-2016, 07:15 AM   #6056
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Well at least wages are keeping up with inflation!
Wait.......
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Old 05-09-2016, 07:49 AM   #6057
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Was in Richmond on Saturday and drove by the house I grew up in as a child - it's out in the farming area (5 road/Blundell) and it's listed now for $2M. It's a 72'x302' lot (half acre) with a 3 bedroom rancher (1500sf) on it.

Back in 1989 my parents sold it for $189K so nearly a 11X increase in "value" in 27 years. Insane.
That is not too outrageous is it?

$189K to $2M over 27 years is an annualized return of 9.13%. The annualized total S&P500 return from Jan 1987 - Jan 2016 is 9.47% (value of $2.4M)

(Used https://dqydj.com/sp-500-return-calculator/)
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Old 05-09-2016, 08:06 AM   #6058
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That is not too outrageous is it?

$189K to $2M over 27 years is an annualized return of 9.13%. The annualized total S&P500 return from Jan 1987 - Jan 2016 is 9.47% (value of $2.4M)

(Used https://dqydj.com/sp-500-return-calculator/)
Only difference is that, they could have leveraged that $189K. 20% down means $37,800 whereas to hit the S&P numbers, you'd need to have $189K at that time.

So 189K at Jan 1987 gets you $2M today, but $189K is the downpayment for 5 of those units, which would be worth $10M today, assuming they could afford the mortgage payments.
Of course, minus the taxes and interest, so it is less than $10M, but you get the point.
Of course, this is all hind sight and the numbers are no where near that great now for RE from an actual investment point of view.
And of course, we have no clue how much $$$ was spent on the upkeep of the house.
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Old 05-09-2016, 08:18 AM   #6059
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hang on a minute. are you saying the amount of debt someone takes on is irrelevant?

In the very short term, you are correct, but mortgages are usually 25-30 year debts - that's a long time to suggest debt amount (akin to purchase price) is irrelevant
No, he said what is relevant is how much mortgage debt they have, which is n-sync with what you said.

In reality, say they were given a $500K inheritance and came up with the other $250K from selling their condo, so the total mortgaged amount is $750K.
With these numbers, that is less than $3K a month for 30 years @ 2.5%.
And if they rent out the basement, that helps a quite a bit if they can get say $1K.

$100K annually, so roughly $67K take home, or $5583 net income per month.

A little extreme, but still manageable. Of course, if the interest jumps up to 5%, then it jumps to $6404 per month which is really bad.
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Old 05-09-2016, 09:20 AM   #6060
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You mentioned that they're looking to have kids soon. Have they thought how they're going to pay the mortgage when one of them goes on maternity leave for a year? The max income is $537 or $30,000 a year.

I don't know, the numbers don't make sense to me. Earning $100k and buying a $1.5M house, there's something missing, like an inheritance of some sort.
Most public sector workers get a top-up payment while on maternity/parental leave. In some cases, organizations will top up payments to 100% of their pre-leave salary.

After year 1, they will likely have child care from their parents which is a significant tax-free benefit.

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hang on a minute. are you saying the amount of debt someone takes on is irrelevant?

In the very short term, you are correct, but mortgages are usually 25-30 year debts - that's a long time to suggest debt amount (akin to purchase price) is irrelevant
One could argue that buying housing in this market is almost a hedge on security of tenure at this point. The rental market has changed since you've been in town - owner/landlords are selling because the returns are at historical highs. The investors who are buying in their place are simply forcing existing tenants out by flouting the regulations in the RTA. Reasonable, legal housing at reasonable prices in the rental market is increasingly difficult to find. Lots of people are thinking the same thing - sell, invest the difference, and rent.

The couple in question has relative security of employment and the security that their parents are likely going to downsize and help them out if shit really hits the fan.
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Old 05-09-2016, 09:33 AM   #6061
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Ever since I started having interest as a future first-time home buyer, it's getting pretty scary. With all the headlines and news about the housing market here... I don't even know anymore.

What a time to be alive..
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Old 05-09-2016, 10:05 AM   #6062
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Ever since I started having interest as a future first-time home buyer, it's getting pretty scary. With all the headlines and news about the housing market here... I don't even know anymore.

What a time to be alive..
Do you have to buy now?
Where are you in your life now?
Single, GF, long term relationship, married?
Are you currently renting or living with your parents?
Only child or siblings?

All these play a part of your decisions. Don't fall into the trap that you HAVE to buy now when you don't. Like what 4444 said, it's only stressful if you let it consume your life.
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Old 05-09-2016, 10:29 AM   #6063
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Let's say the market continues the way it's been going or even softens slightly over the next 1.5-2 years

I think the fear of being left behind is completely justified if you think the market will continue on as is. If a 1.2 mill house right now is 1.6 2 years from now, even with an unprecedented "correction" you'd still be ahead.
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Old 05-09-2016, 10:47 AM   #6064
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Only difference is that, they could have leveraged that $189K. 20% down means $37,800 whereas to hit the S&P numbers, you'd need to have $189K at that time.

So 189K at Jan 1987 gets you $2M today, but $189K is the downpayment for 5 of those units, which would be worth $10M today, assuming they could afford the mortgage payments.
Of course, minus the taxes and interest, so it is less than $10M, but you get the point.
Of course, this is all hind sight and the numbers are no where near that great now for RE from an actual investment point of view.
And of course, we have no clue how much $$$ was spent on the upkeep of the house.
I was referring to the overall increase in value of the asset is not outrageous not the ROI on the capital.
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Old 05-09-2016, 11:04 AM   #6065
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With these numbers, that is less than $3K a month for 30 years @ 2.5%.
.
here's the biggest risk in this analysis - you can't get a 30 year mortgage in canada (unlike the US at 3.x% - which is a fucking steal)

as i've banged on to hell and back, it's a massive leap of faith to expect an average 2.5% interest rate for the entirety of the mortgage amort. if it is, then there's bigger issues, most of which will be the continued fucked up economies of most of the western world = no jobs for a lot of ppl currently employed in vancouver.

you can't pay a cheap mortgage with no job.
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Old 05-09-2016, 11:22 AM   #6066
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here's the biggest risk in this analysis - you can't get a 30 year mortgage in canada (unlike the US at 3.x% - which is a fucking steal)

as i've banged on to hell and back, it's a massive leap of faith to expect an average 2.5% interest rate for the entirety of the mortgage amort. if it is, then there's bigger issues, most of which will be the continued fucked up economies of most of the western world = no jobs for a lot of ppl currently employed in vancouver.

you can't pay a cheap mortgage with no job.
You are incorrect about the 30 year mortgage.
But the rest I agree with.
Then again, everyone felt the same way about housing 30 years ago when all the people were leaving Hong Kong in preparation for the 97 take over.
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Old 05-09-2016, 11:25 AM   #6067
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You are in correct about the 30 year mortgage.
But the rest I agree with.
Then again, everyone felt the same way about housing 30 years ago when all the people were leaving Hong Kong in preparation for the 97 take over.
wait, it's 2027?

i think the global economy and a one time / one location event are slightly different.
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Old 05-09-2016, 11:30 AM   #6068
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wait, it's 2027?

i think the global economy and a one time / one location event are slightly different.
Smart ass.
30 years ago would make it 1986, when people started to leave Hong Kong in fear of the 97 take over.
Not sure how many HK people looked towards Europe, but there was a pretty big movement to Vancouver.

http://globalnews.ca/news/2444980/th...e-has-changed/

You may be correct about a one time one location event. At this point, only time will tell.
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Old 05-09-2016, 11:48 AM   #6069
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35 year amortizations are still out there. You'd need 20% down for sure though.
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Old 05-09-2016, 11:48 AM   #6070
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Do you have to buy now?
Where are you in your life now?
Single, GF, long term relationship, married?
Are you currently renting or living with your parents?
Only child or siblings?

All these play a part of your decisions. Don't fall into the trap that you HAVE to buy now when you don't. Like what 4444 said, it's only stressful if you let it consume your life.
Looking to buy next year (the thought of paying rent to pay off someone's mortgage is

In the process of finishing up paying off my student loan/New awesome job (probation over in 3 months)

Single

Renting with parents

Got a sibling
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Old 05-09-2016, 11:56 AM   #6071
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Looking to buy next year (the thought of paying rent to pay off someone's mortgage is

In the process of finishing up paying off my student loan/New awesome job (probation over in 3 months)

Single

Renting with parents

Got a sibling
Solves your problem.
You won't be able to qualify for a mortgage because lack of employment history to show how much income you make.
Depending how much debt you have, that will reduce how much you can borrow as well.

So for now, unless you can get help from parents, it looks like you may be stuck renting for the next 2-3 years.
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Old 05-09-2016, 11:57 AM   #6072
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How the fuck anyone could do that makes me actually ill. I can tell you that you can comfortably (and I mean very comfortably) hit the higher 300s, with a 100k+ household income and no kids, but the thought of 500k, never mind 1.5 mil you have basically ruined your life.
Personally I think any higher than the 3-400k though and you are going to start sacrificing the fun stuff. I'm much happier with money to blow on fun and a nice small place than a big place full of Mr. Noodles.
I'd compare the Vancouver housing market to some stupid 19 year old hostess spending all of her money on a coach purse and having nothing left to put in it.
The way bank sees it is that the suite would bring an additional 1k monthly. They did put about 30% down as parents of both sides chipped in... but still, it blows my mind for them considering such an expense when they bring about 6k home. Even with the mortgage-helper, it's going to be very tight for a family of 3 or 4 down the road.

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Where are friends' kids going to go to school? Southridge at $15K per year?
I think given the location they picked, Southridge was definitely part of equation. I mean, it's the closest school to their house. How the heck they are going to afford 15k/yr tuition... I don't know. Maybe grandparents would chip in again.
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Old 05-09-2016, 12:04 PM   #6073
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I think given the location they picked, Southridge was definitely part of equation. I mean, it's the closest school to their house. How the heck they are going to afford 15k/yr tuition... I don't know. Maybe grandparents would chip in again.
Good luck with southridge.
Not only do you need the ability to pay the tuition, but you also have to fit into their high standards for both students and family and go through a rigorous interview process.
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Old 05-09-2016, 12:05 PM   #6074
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Thoughts on leasehold property? Price doesn't seem to be as badly affected by these dramatic increases. Assessed value rises in the same linear progression as similarly aged properties but assessed doesn't mean anything in this market. Would be living in for 3-5 years.
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Old 05-09-2016, 12:26 PM   #6075
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^ First Nation's land or City of Vancouver land?

It's hard to say as it depends on the length of time remaining on the lease, the location (Champlain Heights, Fraserview, south False Creek, or Park Royal), and what the property is (strata vs leasehold detached). But, a potential red flag is your ability to secure financing for such a leasehold property.

In the appraisal community, 99-year prepaid leasehold is equivalent to an equivalent freehold property in value. If you're buying brand new leasehold, you might be able to find out buyer in 3-5 years time as the spread and desirability between the two properties is small.
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