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Old 07-13-2016, 11:41 AM   #7101
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^ I'm surprised that the Smith Maneuver doesn't get discussed more here. People always say that the market is only gains on paper, but for those who are risk-tolerant, the rising market has also increased the opportunities for investing. However, people will say that borrowing on the house is no different than borrowing on margin. The difference is that rising housing values, in particular rising detached values, have given people access to far more equity than borrowing on margin ever could.

Using HELOC for investing, whether it's in real estate or equities, is pretty par for the course for many baby boomers. Heck, it's how some first-timers are able to get into the market today - HELOC loans from baby boomer parents.
For non-speculators (like myself) that own property, and are going to stay in Vancouver for a long time, it's the only way to really take advantage of the property gains.

I wish I could have got a huge HELOC loan from my parents.....I would have bought a house 5 years ago instead of a townhouse!
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Old 07-13-2016, 12:03 PM   #7102
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^ I'm surprised that the Smith Maneuver doesn't get discussed more here. People always say that the market is only gains on paper, but for those who are risk-tolerant, the rising market has also increased the opportunities for investing. However, people will say that borrowing on the house is no different than borrowing on margin. The difference is that rising housing values, in particular rising detached values, have given people access to far more equity than borrowing on margin ever could.

Using HELOC for investing, whether it's in real estate or equities, is pretty par for the course for many baby boomers. Heck, it's how some first-timers are able to get into the market today - HELOC loans from baby boomer parents.
I'm not sure as to the exact wording of this, but my mom who is a lender/mortgage broker for coast capital has told me that they, and a few other banks (cant remember which ones) have greatly reduced, and in some cases stopped all together the short term re-mortgaging and pulling out of additional credit in your home through HELOC and other means basically because of the insecurity of the "equity" a lot of these people are borrowing from.

Short term she says they've really cracked down as smaller entities like coast capital cant be exposed to such risk. But she said in the past these types of situations have flowed with the market as well, and in 1-2 years, if things continue the way they are, or even level out, odds are you will be able to go back and re-mortgage/borrow upon this newly realized equity, simply because it's been "stable" for a year or more.

this may not sound like a "new" thing, but Coast Capital has only recently started this in the last 2 months or so, before that money had been flowing fairly freely.
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Old 07-13-2016, 01:34 PM   #7103
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Credit unions have their own set of rules as they're not federally regulated. They were still giving out 35-year amortization mortgages long after federally-regulated banks stopped offering them. All credit unions mortgages are collateral charge mortgages too, which means they were more likely to provide HELOC or re-advanceable mortgages on top of regular mortgage products.

Regardless, I don't blame them for dialing down the risk though. It might be hard to get a HELOC now, but if you've had one over the last 5 years, it would have been a gold mine considering the bull run on equities and housing prices up until last year.
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Old 07-14-2016, 05:27 AM   #7104
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CRA prepares to look into Vancouver real estate deals involving unreported foreign income: Hong Kong newspaper
by MARTIN MACMAHON
Posted Jul 13, 2016 5:18 pm PDT Last Updated Jul 13, 2016 at 5:20 pm PDT


CRA prepares to look into Vancouver real estate deals involving unreported foreign income: Hong Kong newspaper - NEWS 1130



VANCOUVER (NEWS 1130) – Those using unreported foreign income to buy property in Vancouver will soon be under more scrutiny, according to an exclusive report from the South China Morning Post.

Fifty Canada Revenue Agency (CRA) auditors are headed our way, according to documents leaked to Ian Young, the Vancouver correspondent for that newspaper.

“It’s a secret tax crackdown on real estate deals in Vancouver related to foreign money,” says Young, who notes the investigation will also look at property flipping.

According to Young’s source, these new resources will mean up to 600 audits over the next year locally.

“My source who provided this information says that they don’t think it’s enough to address the scale of the problem,” says Young. “But it’s certainly a big step up on what was being done because the same document shows that in the past year, there was only one audit on global unreported income in Vancouver, in BC That’s a shockingly low number.”

Census data from 2011 previously highlighted by Young have pointed out a disconnect between incomes and housing costs in some local neighbourhoods.

“It showed there were 25,000 households in Vancouver, where their housing costs actually exceeded their declared income,” says Young. “This is a related field. This gives a suggestion that this is unreported income that is fuelling home buying or at least home expenses here in Vancouver.”

In one slide from a secret CRA presentation shared within Young’s article, the owner of a home purchased for $5.8-million was actually claiming the “Working Income Tax Benefit,” intended to provide government support to those living on low incomes.
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Old 07-14-2016, 05:58 AM   #7105
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Yep.

I mean just look at all these people waiting around for prices to dip. As soon as prices go down even a little there will be a flood of people who have been waiting for a correction in the market starting to snap up property, and that will curb the drop to a minimum, or maybe even just level it off completely.

All these people waiting for a drop of 50% are insane, it's just not gonna happen.
don't try to catch a falling knife.

if prices start to drop, those people on the sideline may be too afraid to buy a devaluing asset.

also, if prices start to fall, this may result in an overweight effect on the economy given how much of the Cdn economy is in real estate (and ancillary industries)
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Old 07-14-2016, 06:07 AM   #7106
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Istanbul, Stockholm, Budapest and Gothenberg are probably all as a result of North African/middle eastern refugees.
Not even close. you think the north african refugees are buying up real estate? the numbers aren't very big relative to the size of Europe / big cities - you're taking the headlines and confusing them with reality.

also, they're refugees, the average refugee has very little in the way of wealth. they are usually put in social housing.

Stockholm is starting to turn negative now due to things just getting too hot there. The main reasons for housing in major cities in Western Europe going up are: 1) lack of building (city centres are full of 100+ yr old housing with next to no new builds) combined with large scale EU migration (not refugees but free movement of people from places like Spain, Portugal, Italy, Greece, etc.) and 2) fucking cheap money. Negative rates in Europe = stupid cheap mortgages (low 2.x% 5 year)
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Old 07-14-2016, 06:15 AM   #7107
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^ I'm surprised that the Smith Maneuver doesn't get discussed more here. People always say that the market is only gains on paper, but for those who are risk-tolerant, the rising market has also increased the opportunities for investing. However, people will say that borrowing on the house is no different than borrowing on margin. The difference is that rising housing values, in particular rising detached values, have given people access to far more equity than borrowing on margin ever could.

Using HELOC for investing, whether it's in real estate or equities, is pretty par for the course for many baby boomers. Heck, it's how some first-timers are able to get into the market today - HELOC loans from baby boomer parents.
you just need to be extremely disciplined and have sufficient income to cover any downside risk with taking on additional leverage. the good news is you can only go so far on the LTV with HELOC.

I've used them and it happened to work out well, but you need to be really sure of your downside risk. you wouldn't want to take a massive HELOC today and put it in the stock market all at once (especially at today's valuations), but as part of a longer term investment plan it's a great idea as rates are so low (as you pay off your mortgage, increase your HELOC every 3 months in the same amount and invest in a different asset (not another house in the same market!) - you get diversification obtaining higher returns (long run) than your cost of debt (which is tax deductible).

Win, fucking win! But be aware of your exposure to interest rate hikes (but if you're well diversified, it won't matter as your assets will always outperform long run than ur post tax cost of debt)
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Old 07-14-2016, 06:39 AM   #7108
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Not even close. you think the north african refugees are buying up real estate? the numbers aren't very big relative to the size of Europe / big cities - you're taking the headlines and confusing them with reality.

also, they're refugees, the average refugee has very little in the way of wealth. they are usually put in social housing.

Stockholm is starting to turn negative now due to things just getting too hot there. The main reasons for housing in major cities in Western Europe going up are: 1) lack of building (city centres are full of 100+ yr old housing with next to no new builds) combined with large scale EU migration (not refugees but free movement of people from places like Spain, Portugal, Italy, Greece, etc.) and 2) fucking cheap money. Negative rates in Europe = stupid cheap mortgages (low 2.x% 5 year)
Sorry, you're correct. I confused that knight report with a similar report I had seen regarding population change, that report gululu posted is aimed at residential pricing
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Old 07-14-2016, 09:02 AM   #7109
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I'm not sure as to the exact wording of this, but my mom who is a lender/mortgage broker for coast capital has told me that they, and a few other banks (cant remember which ones) have greatly reduced, and in some cases stopped all together the short term re-mortgaging and pulling out of additional credit in your home through HELOC and other means basically because of the insecurity of the "equity" a lot of these people are borrowing from.

Short term she says they've really cracked down as smaller entities like coast capital cant be exposed to such risk. But she said in the past these types of situations have flowed with the market as well, and in 1-2 years, if things continue the way they are, or even level out, odds are you will be able to go back and re-mortgage/borrow upon this newly realized equity, simply because it's been "stable" for a year or more.

this may not sound like a "new" thing, but Coast Capital has only recently started this in the last 2 months or so, before that money had been flowing fairly freely.

In 2013, they changed the rules slightly so that you can only borrow up to 65% of the value of your home for your HELOC (instead of 80%).

It won't affect me because my mortgage is still relatively big compared to my HELOC.
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Old 07-14-2016, 11:13 PM   #7110
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Canada Revenue Agency launches Vancouver housing probe
MARK HUME
VANCOUVER — The Globe and Mail

Published Thursday, Jul. 14, 2016 9:07PM EDT
Last updated Thursday, Jul. 14, 2016 11:12PM EDT

Canada Revenue Agency launches Vancouver housing probe - The Globe and Mail


A man walks past houses in east Vancouver, B.C., on Sunday September 20, 2015.
(DARRYL DYCK For The Globe and Mail)


The Canada Revenue Agency has launched an investigation into the red-hot housing market in Metro Vancouver, where rampant speculation, unscrupulous dealings and foreign investment are being blamed for driving up the cost of homes and helping to create an affordability crisis.

A sensitive government briefing document leaked to The Globe and Mail and some other media outlets states that 50 income-tax auditors, 20 GST auditors and 15 workload-development officers are now investigating real estate tax issues in the Pacific region.

The document states that the agency is conducting audits in an attempt to detect flipping, to identify builders who don’t comply with filing regulations or who under-report GST, and to measure compliance with non-resident filing requirements. It also indicates that the CRA is collaborating with FinTRAC on “lifestyle audits.”


FinTRAC, the Financial Transactions and Reports Analysis Centre, is an independent federal agency that works within the scope of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

The CRA appears to be focusing on some of the areas highlighted in a continuing series of reports by The Globe into Metro Vancouver’s soaring real estate market, where prices have climbed more than 30 per cent in the past year alone – raising concerns about the impact of foreign investment on housing affordability.

“I have repeatedly raised concerns that the rules governing our real estate market are out of date. With unregulated, speculative global capital flowing into Metro Vancouver, we are seeing housing prices completely disconnected from local incomes,” Mayor Gregor Robertson said in an e-mail.

“First and foremost, housing needs to be for homes, not a commodity to make money with,” he said. “Given the amount of money flowing into Metro Vancouver real estate, we need a much more robust system of oversight and I support enhanced resources for the CRA for more tracking, auditing and enforcement within their jurisdiction.”

The Globe’s investigation uncovered cases in which foreign-born owners declared low incomes, despite moving millions of dollars through relatives into Canada, as well as concerns that investors could use residency rules to avoid paying capital-gains taxes. The investigation also revealed concerns from within FinTRAC that poor reporting by real estate agents made the industry vulnerable to money laundering.

The leaked document, delivered as a webinar by the CRA on June 2, is labelled “Protected B,” a government security classification that means “unauthorized disclosure could reasonably be expected to cause … serious injury to an individual, organization or government.”

The CRA document also identifies as a topic of interest “individuals living in high-value areas in British Columbia who are reporting minimal income not supporting their lifestyle; individuals purchasing high-end homes with minimal income being reported [and] individuals who are not reporting all of their worldwide income.”

The document states that the “CRA compliance work will increase visibility and lead to more tax compliance, but will not address the major concerns about affordability of real estate.”

In an e-mail, CRA spokesman David Walters said the government routinely investigates when “new risks of tax non-compliance emerge,” such as the real estate market in Vancouver.

He said the auditors “are focused on detecting and addressing a number of different risk areas related to real estate transactions … [but] the source of funds for the real estate purchases are not the focus of tax non-compliance.”

B.C. Finance Minister Michael de Jong said in an e-mail he is pleased by the CRA’s action. “We support these efforts and share information to the extent possible under the information-sharing agreements we currently have in place with the federal government,” he said.

The provincial government recently announced plans for an emergency summer session of the House to pass legislation that would allow Vancouver to impose a tax on homes left empty by speculative buyers.

David Eby, the NDP’s housing critic, said it is about time the federal government got involved in the issue, but he was critical of the scope of the CRA’s investigation.

“My first reaction is, where the hell have they been? I am blown away that first of all they have been almost entirely absent from this issue, and secondly that they think 50 auditors is sufficient to deal with this problem,” he said.

At a recent news conference, Mr. Eby said a task force of auditors, Crown counsel, police and tax and corporate law experts should be appointed to “crack down” on real estate speculators.

Andrew Weaver, B.C.’s Green Party Leader, said the CRA investigation may not be enough, but it is a step in the right direction. “It’s good to see someone taking action,” said Mr. Weaver, who has attacked the provincial government for failing to act regarding foreign speculation in B.C. real estate.

Kin Lo, associate professor of accounting at the University of British Columbia’s Sauder School of Business, said the CRA could have considerable impact with 70 auditors on the job.

“It looks quite comprehensive,” he said of the agency’s plan. “They can actually go through a lot of files with that amount of people.”

But Joshua Gottlieb, of UBC’s Vancouver School of Economics, said it’s unclear how cost-effective the audits might be.

“Looking into whether or not someone is a tax resident in Canada is just really complicated,” he said. “Good for them for putting more effort into it and doing audits, but if it is inherently complicated, why not go the simple route and tax the property?”
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Old 07-14-2016, 11:21 PM   #7111
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'Secret Tax Crackdown' Coming To B.C. Real Estate: Report
The Huffington Post Canada | By Daniel Tencer

Posted: 07/14/2016 1:45 pm EDT Updated: 07/14/2016 1:59 pm EDT

'Secret Tax Crackdown' Coming To B.C. Real Estate: Report


A row of a new houses in the Vancouver suburb of Richmond, British Columbia. (Photo: Volodymyr Kyrylyuk/Getty Images)

The Canada Revenue Agency (CRA) is planning a crackdown on real estate-related tax cheating in Vancouver, according to a report in a Hong Kong newspaper.

The move could put a damper on the city's frenzied real estate market, where many have attributed double-digit house price growth to an influx of illicit foreign money.

The South China Morning Post says it has obtained leaked documents from the CRA showing it plans to deploy 50 auditors who will “review the top 500 highest risk files within our region."

“It’s a secret tax crackdown on real estate deals in Vancouver related to foreign money,” Ian Young, the reporter behind the story, told News1130 in Vancouver.

The documents reportedly state the crackdown was launched because of “significant media attention” given to potentially shady dealings involving foreign home buyers in Vancouver.

Media have noted some suspicious transactions in Vancouver amid the city’s real estate frenzy, such as a $31.1-million mansion owned by an individual whose career was listed as “student.”

"I’m pretty disgusted by what’s happening here [in the Vancouver real estate market], and a lack of enforcement has been a part of the problem."

The CRA documents mention a Vancouver home that was sold for $5.8 million and whose owner claims the Working Income Tax Benefit for low-income earners.

No allegations of wrongdoing have been made against these homeowners, but the CRA documents state the agency will scrutinize “individuals living in high-valued areas in B.C. who are reporting minimal income not supporting their lifestyle.”

The crackdown could cast a wide net, looking not only at foreign buyers but local ones as well. On top of unreported income from outside Canada, the auditors will look at income from property “flipping,” under-reporting of capital gains from home sales, and under-reporting of the GST on sales of new homes.


Condo towers in Vancouver's West End. (Photo: Chris Cheadle via Getty Images)

The move comes amid reports that China’s government is cracking down on the illicit outflow of cash from the country. Many observers of the Vancouver market say it’s become a haven for unreported cash from China.

Fund manager David LePoidevin told HuffPost Canada recently he believes that Chinese crackdown is responsible for a slowdown in Vancouver’s real estate market in the past few months.

Data shows sales have dropped by double digits over the past few months, relative to a year ago, while new listings have increased, suggesting at least a temporary slowdown.

The individual who leaked the CRA documents to the South China Morning Post said they did so because “like many people, I’m pretty disgusted by what’s happening here [in the Vancouver real estate market], and a lack of enforcement has been a part of the problem."
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Old 07-17-2016, 12:19 PM   #7112
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The year is 2040 and Vancouver?s houses are worth $80-million - The Globe and Mail
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Old 07-17-2016, 02:18 PM   #7113
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What's the probability of this becoming a reality though?

The market might crash and you might be able to buy a house at $100k, who knows..
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Old 07-18-2016, 05:55 PM   #7114
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What's the probability of this becoming a reality though?

The market might crash and you might be able to buy a house at $100k, who knows..
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Old 07-20-2016, 08:52 AM   #7115
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Edit nvm. Posted a survey about empty houses that was already conducted, my bad
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Old 07-20-2016, 09:36 AM   #7116
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'Secret Tax Crackdown' Coming To B.C. Real Estate: Report
The Huffington Post Canada | By Daniel Tencer

Posted: 07/14/2016 1:45 pm EDT Updated: 07/14/2016 1:59 pm EDT

'Secret Tax Crackdown' Coming To B.C. Real Estate: Report
The Canada Revenue Agency (CRA) is planning a crackdown on real estate-related tax cheating in Vancouver, according to a report in a Hong Kong newspaper.
They should've done that a long time ago.

Tho I wonder, how does CRA confirm if the immigrant are using money they had before they immigrated to Canada to buy the properties (100% not taxable), or they are continuing to earn foreign income yet not reporting it? (unless they severed all ties and are non-resident, 100% of their foreign income are still taxable)

I guess when they immigrate to Canada, they have to declare all the details of their assets and net worth?
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Old 07-20-2016, 09:49 AM   #7117
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They should've done that a long time ago.

Tho I wonder, how does CRA confirm if the immigrant are using money they had before they immigrated to Canada to buy the properties (100% not taxable), or they are continuing to earn foreign income yet not reporting it? (unless they severed all ties and are non-resident, 100% of their foreign income are still taxable)

I guess when they immigrate to Canada, they have to declare all the details of their assets and net worth?
nvm, read the articles...they are not auditing people with unreported foreign income.
they are just auditing people making profit house flipping
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Old 07-20-2016, 10:02 AM   #7118
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Jesus the number of fear mongering articles and media pieces is now reaching an epic peak.

This market isn't going to crash because the market can't bear it anymore. It's going to crash because the media is playing their fiddle and all the stupid people are dancing to their rhythm.

I'm so sick of sensationalist news stories and click bait articles.

I mean just look at this junk:

Get Out Of Vancouver Real Estate, Now$|$Garth Turner

It's one thing to present facts, and to probe the reader into making conclusions themselves, based on if they believe or don't believe the logic behind your methodology. It's another thing entirely to instruct and entire city to list their houses for sale, and to "GET OUT".

Far too many people in this day and age have just become a pawn in the media's little game. There's a whole big world out there, and you have almost unrestricted access to it through your mouse and keyboard. I won't claim to know what will happen in our RE market, but for the love of god, don't read a news article on Huff post and then proceed to sell your home because it instructs you to.

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Old 07-20-2016, 10:08 AM   #7119
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My girlfriend set up an appt with a mortgage broker for later this week. I keep trying to tell her how stupid the market is, and just how far we are away from even thinking of owning a place. She doesn't seem to understand and just assumes that we could own some 5000 sqft home in Langley, even though we have no downpayment and no savings.

From a young child I assumed I'd be a renter for ever
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Old 07-20-2016, 10:25 AM   #7120
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don't sign your name on shit

let her take the responsibility if she want's to be financially irresponsible
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My girlfriend set up an appt with a mortgage broker for later this week. I keep trying to tell her how stupid the market is, and just how far we are away from even thinking of owning a place. She doesn't seem to understand and just assumes that we could own some 5000 sqft home in Langley, even though we have no downpayment and no savings.

From a young child I assumed I'd be a renter for ever
Owning a place is one of the biggest decisions you will ever make - doesn't sound like your gf has thought this through...
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Old 07-20-2016, 10:50 AM   #7122
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My girlfriend set up an appt with a mortgage broker for later this week. I keep trying to tell her how stupid the market is, and just how far we are away from even thinking of owning a place. She doesn't seem to understand and just assumes that we could own some 5000 sqft home in Langley, even though we have no downpayment and no savings.

From a young child I assumed I'd be a renter for ever
Don't worry, once she gets out there an sees what she can actually afford she'll change her tune pretty quick.
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Old 07-20-2016, 11:02 AM   #7123
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If someone isn't in the position to buy, how can they possibly go through to do so? This is something I just couldn't understand.

When my income isn't anywhere close to being able to afford a $2M old timer bungalow; when I don't even have 1/4 of what I need as down payment, no amount of fudging the numbers can change that.

When I need to completely suck dry my parents retirement savings to afford a $900k townhouse, and confine myself to a 20 year daily ramen diet while pinching pennies like a hut yee, how can I possibly allow myself to go through with that?

Unless I am planning to stay single, 500 sq ft is totally inadequate for any practical living. Sure you can say you'll sell when the time comes to get married, but as soon as you factor in the misc fees (lawyer and RE agent fees) and run the numbers, you are going to realize that selling your 500 sq ft unit 2 years later is actually going to cost you money even though the unit's paper price might have gone up. Why would anyone want to do that?
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Old 07-20-2016, 11:18 AM   #7124
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People put themselves in shitty financial situations all the time. How many people want a car they can't afford but buy it anyways? This is just on a grander scale. Plus you have places handing out mortgages like candy assuming that you're willing to spend 80% of your paycheck just on the mortgage alone.
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Old 07-20-2016, 11:26 AM   #7125
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Quote:
Originally Posted by Gumby View Post
Owning a place is one of the biggest decisions you will ever make
It's also the most emotional

And whether you're considering a jacket, car or a house while already financially constrained, emotion takes over because people 'feel in their gut that it's a good decision and everything will be ok'.

And thus, they just broke the wall of security around their finances.

Then again, trying to keep emotions in check is like trying to wrangle a bull with dental floss.
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