Buying Apartment

[taylor192]

Originally Posted by Chuck Norris

Most buyers recently (2008/2009 data) statistically purchase with 5% down (this 5% in 45% of the cases is borrow from other lines of credit because the current value is so cheap). The average amortization of mortgage is 35 years (previously 25) and plenty over the last few years took 40 years while they were available). The average person's debt ratio is within 2% of their threshold. Their debt ratio in over 80% of the cases is based on dual income. Only one person needs to be laid off or have a wage decrease and the family is in trouble.

I was one of these in 2004: 5% down, right up against the 40% TDS.

Big difference: I went into it knowing I had 3 roommates to cover my costs. If anything went wrong, I was only paying 1/4 of the expenses. It also forced me to have a rainy day account, cause 1 of those roommates could leave at any time, and I might be stuck carrying additional expenses. So even if house prices flattened out or dropped a bit, I was fine cause my roommates were covering the majority of the expenses and paying down the equity.

My parents had boarders, so I was used to living with other people in the house, and will probably never live alone. I don't understand the obsession young people have with owning small 1-bdrms and taking on all the costs themselves.

Originally Posted by Chuck Norris

Real estate bubbles (especially in Vancouver) have happened again and again and will continue to happen again and again. The reasons are always different but there is always some kind of catalyst to make people feel smart.

That's the big evil of capitalism that people hate: the ups and downs of the market. They love the ups, yet won't except the downs.

I think they need to make basic economics a required high school course. Supply/demand, its an easy concept, eventually one overruns the other and the graph switches direction up/down trying to find a steady state.

Originally Posted by Chuck Norris

While Taylor mentions this, many people either just don't listen or think it can't happen to them. Well, it can. It will. Just wait.

It was only a few years ago that prime was at 6.25%, people forget that pretty quick. Besides, interest rates are irrelevant if someone doesn't even have a job to make the mortgage payments anyway. It's easier and feels nicer to pretend everything is okay. While these people live in fantasy land, I get to make money off their backs.

Does that make me an asshole? No, it makes me forward thinking and lemmings always drown.

Recessions make the rich richer and the poor poorer.

I've been on the fence about giving advice to others:
A: prevent them from making mistakes, crashing the market, increasing taxes, causing inflation or deflation... OR
B: encourage them, hope for a crash, buy up cheap assets after

This example makes me lean more towards B, cause sheep never learn, so I might as well profit from it rather than waste my breath.

I'll join you in being an opportunist asshole

Originally Posted by Chuck Norris

You do and you don't. I think you're the kind of person who'd rather do it themselves. You know how it is with hand outs. It's just like a baller version of the soup kitchen.

The bums are right back the next day waiting for the next bowl. Very few learn to make their own soup

I could write a book on this. I'm going to go far OT:

My family used to be worth millions, several businesses, the 90s recession caused them to all go belly-up and bankrupt. I went from driving mom's Jag to school, to taking the bus to university. Best financial lesson of my life. So I know both sides of being a baller and being broke, and it it much nicer being a baller. I'd gladly take $100K if my parents would lend it to me, yet I'd know what to do with it and it wouldn't include buying a house.

I just moved with my roommate and had to laugh at what a sorry state our generation is in. I handed him a socket wrench to put together an Ikea bookshelf, and he looked at me perplexed of how to use it. He didn't know how to crank it, make it switch directions to tighten/loosen, ... what the hell?

My family was worth millions, yet my father still insisted on doing most things ourselves. I learned welding, plumbing, electrical and electronics repair, drywall, painting, car maintenance and repair, ... from my father and learned accounting while in the office with my mother.

To learn all these things I'd have to go to school for a very long time. What happened to parents teaching their kids this?

[Chuck Norris]

^haha

Parents don't teach their kids anything because they are too busy working (both parents) and when they get home it's easier to plug into the tube and let their kids learn life from the computer.

When I get back from Boston we should grab some beers for sure haha

[AWDTurboLuvr]

I'm a bit late to get here but I'll add in my two cents anyways.

As a current and soon to be ex-property investor, I would agree that residential rentals are way too much hassle and now is one of the worst times to try to get into it (initial investment amount is too high). Me and the wife have sold off some of our condos in 2007/08 and are probably going to sell off our other remaining one and just wait for the housing correction.

I felt that the housing boom in the GVRD is mostly psychological...as in that everyone got caught up in buying a property because everyone else was doing it. I mean, I'm sure almost everyone had a friend or two that was or did buy a property...and then sold it for a profit. People didn't want to get left behind or they didn't want to seem stupid to others for not getting involved. Stupid shows like "Flip Me" on HGTV or TLC made it look easy to just sell homes for profit and people bought into the hype.

I had a chance to chat with my friend's real estate agent a few months ago and I asked her what she thought of the housing bubble. She proceeded to tell me that there is no bubble and that house prices will go up because interest rates are low and that there is no more real land to build on in Vancouver. I've never heard a bigger pile of BS than this. I asked her well, what happens when interest rates go up (because they will)? How will people afford still? She tells me, "That's what 35 year mortgages are for." Dear lord...

All I ask is for you to really sit down and write up a proper budget...and budget for some severe rainy days...because they do happen and those are the times that end up screwing someone over financially. Research and educate. Do not let your emotions get involved in your decision.

I personally find it ridiculous how people will not invest in the stock market with limited knowledge, yet do the exact opposite with real estate, sinking huge 6-figure sums into a 25+ year mortgage...hoping that values will go up.

[Ducdesmo]

Lots of good information on this thread. I am thinking on purchasing a pre-sale apartment to live in the Fraser Valley area where prices are not as high as the city of Vancouver. It would be strictly for me to live in and I would be putting 20% down. I have worked out my monthly mortage+strata+other housing costs and it would cost approx 30% of my gross monthly income.

On paper everything seems doable. My question I guess is whether I should hold off for another year or so or jump in this winter as I would very much like to move out ASAP. I know that the prices are very much inflated, but in the Fraser Vallery area, what is the likelyhood that it will dip a significant amount?

[Chuck Norris]

^ If you have to move then move.

I mean, sometimes you can't put a price on your sanity.

To say how much something is going to drop is difficult. I'd be bullshitting if I gave you an exact amount. It's really impossible to tell.

It all depends on where in the Valley and what you're buying.

Keep in mind that if prices of condos in Vancouver drop, there is no chance prices out here are going to stay flat.

Example, if a house in Vancouver is $500,000 an equal home in Surrey cannot sell for $500,000. If a condo in Vancouver is $300,000, Surrey condos at $280,000 aren't going to cut it.

The closer you are to the city, the larger the premium. The irony is that in most cities, people drive into the city to work. In Vancouver, there are lots of people who live downtown but actually work elsewhere. If you don't believe me, look at any other large city and the way people commute. The idea of living near work has been eclipsed by the dream to live in the city.

Dream to live in the city? WTF? The only reason anyone lives in the city is because it's close to work! If not, why the hell would you live in a box when you could live in a nice home with more space and some freedom?

I lived downtown for a while and yes, it was nice but once I decided I didn't want to party anymore, there was little point for me to be there. There sure as hell isn't any work for someone like me.

[taylor192]

Originally Posted by Chuck Norris

The closer you are to the city, the larger the premium. The irony is that in most cities, people drive into the city to work. In Vancouver, there are lots of people who live downtown but actually work elsewhere. If you don't believe me, look at any other large city and the way people commute. The idea of living near work has been eclipsed by the dream to live in the city.

Dream to live in the city? WTF? The only reason anyone lives in the city is because it's close to work! If not, why the hell would you live in a box when you could live in a nice home with more space and some freedom?

I lived downtown for a while and yes, it was nice but once I decided I didn't want to party anymore, there was little point for me to be there. There sure as hell isn't any work for someone like me.

That was one of the first things I noticed living here, that the downtown sky-scrapers are mostly residential, not commercial like most cities.

The way I see it is simple: ocean and mountains. Living in Surrey I'd be > 1hr away in traffic from both, living in Kits I can walk to the beach and be on Grouse in < 30mins.

There is a premium to live in metro Van, thus why industry has been driven out to the burbs. Plus this is a blue-collar port, not a while-collar financial metropolis. So it makes since to put the manufacturing/shipping/... at the edge of the city, not downtown.

[taylor192]

Originally Posted by itsallaboutgz

Lots of good information on this thread. I am thinking on purchasing a pre-sale apartment to live in the Fraser Valley area where prices are not as high as the city of Vancouver. It would be strictly for me to live in and I would be putting 20% down. I have worked out my monthly mortage+strata+other housing costs and it would cost approx 30% of my gross monthly income.

On paper everything seems doable. My question I guess is whether I should hold off for another year or so or jump in this winter as I would very much like to move out ASAP. I know that the prices are very much inflated, but in the Fraser Vallery area, what is the likelyhood that it will dip a significant amount?

Sounds like you're in a good spot.

If you're at 30% of income you've got some wiggle room, so that's a huge plus.

Prices are inflated everywhere, including the valley. Its just prices are less in the valley, so when it takes a 20% dive it won't seem like losing $200K on a $1M home, it'll be $60K on a $300K condo. Still hurts, yet doesn't seem as bad.

The thing to ask about the valley is what happens if the economy tanks. Do jobs dry up? Do people move away? If so, housing could actually suffer more than inflated metro Van.

Eventually we all want to own a house, and if you're staying 5-10 years at worst you'll probably break even, no housing slump, even in Vancouver, has lasted > 7 years.

[taylor192]

Originally Posted by Chuck Norris

^haha

Parents don't teach their kids anything because they are too busy working (both parents) and when they get home it's easier to plug into the tube and let their kids learn life from the computer.

When I get back from Boston we should grab some beers for sure haha

My generation is a product of the 80s, when both parents worked, money flowed freely, and it was easier to buy love with extravagant gifts.

Maybe we should start a business pub night, similar to the RS coffee nights.

[JLC]

Hey guys,

I just wanted to say that this has thus far been a very good thread to read...I dont usually read through each post, but this is one I pretty much read from beginning to end (well..end to this point..hopefully there is more discussino to come).

Just wanted to thank Chuck and Taylor for some very well thought out posts, and truly providing their knowledge to inform other less informed people (there are others that helped out too but its no secret that Chuck and Taylor probably participated the most).

Anyways, props to you guys..

[tool001]

BofC date to review the rates is coming up again. believe jan 20.? i know that economy is not doing so good still? but they are other factors at play here. ie Canadian dollar/exports etc etc.
any ideas as to if they would leave rates alone or up .25 points?

[taylor192]

Originally Posted by tool001

BofC date to review the rates is coming up again. believe jan 20.? i know that economy is not doing so good still? but they are other factors at play here. ie Canadian dollar/exports etc etc.
any ideas as to if they would leave rates alone or up .25 points?

At this point I think they'll ride it out till June to save face based on their promise to hold rates.

Flaherty has come in to Carney's rescue with threats of shorter amortizations and larger downpayments, so Carney is off the hook temporarily to take care of the housing bubble.

Besides, for us nay-sayers holding off on rate increases until June is a bonus. It means the perfect storm is brewing:
- HST
- rate raises
- Olympic hangover starts after spring surge

There will be a surging in the spring to beat HST, rates rising, and the new amortization/downpayment rules. This last gasp will be the best time to sell (my house is going on the market this month) as it will effectively eat into most future sales and collapse demand for years to come. Then the bubble pops.

[taylor192]

Originally Posted by JLC

hopefully there is more discussino to come

Anyways, props to you guys..

Thanks dude.

The discussion will continue as more questions are asked. The best way to learn is to seek out people with experience and pick their brain.

Lots has happened recently (see my post above) that Chuck, myself and others are taking into consideration that many might not know about or appreciate the ramifications.

[johny]

doesn't the HST only effect brand new places? or places over a large amount of money.

what are the new downpayment / amortation rules comming?

[tool001]

Originally Posted by johny

doesn't the HST only effect brand new places? or places over a large amount of money.

what are the new downpayment / amortation rules comming?

think approx. HST is for over 425K and over
and

downpayment will be going up from minimum 5%.. maybe 10%..
amortization will be lowerd from a maximum of 35 years.