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Old 04-02-2012, 10:08 PM   #1
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Khan Academy!!

Khan Academy from Finance to Science to Banking etc.. all written by the same person!


Rent or Buy.?

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Old 04-02-2012, 10:56 PM   #2
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is mortgage tax deductable in canada too?
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Old 04-03-2012, 12:48 AM   #3
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is mortgage tax deductable in canada too?
not for most people. if you run a business from home, then you can deduct the portion you use for business and pro rate it, but there are consequences when you sell the home. you got to pay cap gains on it i beleive
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Old 04-03-2012, 05:18 AM   #4
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Old 04-03-2012, 05:40 AM   #5
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Lol i'm still gonna buy a house.
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Old 04-03-2012, 06:22 AM   #6
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Old 04-03-2012, 06:39 AM   #7
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Thanks so much Bahhbeehhaaaa, past few days with my family has been hectic on whether we should continue to rent or buy. Doing the math now and this will help greatly in our decision!
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Old 04-03-2012, 06:43 AM   #8
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Rent is never a good idea.
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Old 04-03-2012, 07:23 AM   #9
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Vancouver now has become a lot like other major world cities like New York, where it makes more financial sense to rent than own. If you can get past the old mindset of you must own, which a lot of our parents have ingrained in our minds, you will be better off financially.

IMO there is still room for some rise in detached home values but I think the condo market is pretty much at its peak now, inventory figures have been getting uglier, especially if you're looking at owning or renting condos in the $500-600k+ range, personally I would rent.
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Old 04-03-2012, 07:43 AM   #10
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he's also asuming a million dollar house with a 6% interest rate,

whereas our houses in the suburbs are around the 600k area with 3% interest,

but yet renters are still charged 3k a month.

I could rent out my spare room to anyone if they want, for 1000 a month, Itd be nice if someone payed my mortage for me, then one day when im mortage free, my entire paycheck goes into my pocket.
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Old 04-03-2012, 07:45 AM   #11
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It's amazing how many different fields this guy actually have decent knowledge on. Even more amazing that he can explain it to people in a relatively understandable way.

As for the rent vs. buy, his calculation is what everyone should do. As for deeper calculation, it would be the appreciation of the property. Those who are trying to buy their own place now should take note... do your homework. Vancouver RE has appreciated for the last decade, but it's estimated by most sources (banks, RE boards.. etc) to lose its steam or at least stay relatively flat for the coming years.

So, factor that accordingly into your estimate.
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Old 04-03-2012, 07:57 AM   #12
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he's also asuming a million dollar house with a 6% interest rate,

whereas our houses in the suburbs are around the 600k area with 3% interest,

but yet renters are still charged 3k a month.

I could rent out my spare room to anyone if they want, for 1000 a month, Itd be nice if someone payed my mortage for me, then one day when im mortage free, my entire paycheck goes into my pocket.
6% is the going rate in US. And in SF, a million dollar home is everywhere.

Back to lower mainland, a quick look on CL, for 3K a month, you can rent some properties well over a million dollar. One won't get anywhere near 3k of rent on a 600k house in GVR or suburbs.

Also, we have record low rates for mortgage, at a $500k mortgage, for every 1% increase on mortgage, monthly payment is increased by about $300. (25yr) So, at 6% (3% more than current), the 1k you get from rent is gone. And for the course of next 5yrs, the interest rate has nowhere to go but up.
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Old 04-03-2012, 09:14 AM   #13
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Vancouver now has become a lot like other major world cities like New York, where it makes more financial sense to rent than own. If you can get past the old mindset of you must own, which a lot of our parents have ingrained in our minds, you will be better off financially.

IMO there is still room for some rise in detached home values but I think the condo market is pretty much at its peak now, inventory figures have been getting uglier, especially if you're looking at owning or renting condos in the $500-600k+ range, personally I would rent.
I agree with this statement, although in probably the outer suburbs of the Lower Mainland, I would say detached homes will come down 5-10%. However, your view on the condo market is spot on. The inventory level is disgusting right now and I got lucky when I sold my rental property in Richmond last week.

It would be cheaper for me right now to rent the 3BD condo I live in....which is something I plan to do.
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Old 04-03-2012, 09:36 AM   #14
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6% is the going rate in US. And in SF, a million dollar home is everywhere.

Back to lower mainland, a quick look on CL, for 3K a month, you can rent some properties well over a million dollar. One won't get anywhere near 3k of rent on a 600k house in GVR or suburbs.

Also, we have record low rates for mortgage, at a $500k mortgage, for every 1% increase on mortgage, monthly payment is increased by about $300. (25yr) So, at 6% (3% more than current), the 1k you get from rent is gone. And for the course of next 5yrs, the interest rate has nowhere to go but up.
Valid point, but everyone who says renting is cheaper, always fail to look in the future when your property is actually paid off, even the guy in the video. The way he explains it is you will be paying said monthly costs for the rest of your life, if you renting, you will be, if your buying, you will be finished by 40 ect.. then your entire income is your own, and you have 600k+ in equity.

I hope to have my mortage payed off by the time im 35, if I succeed, il be laughing, while people will still be paying 2k+ a month until the day they die
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Old 04-03-2012, 09:46 AM   #15
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When I bought my townhouse in 2008 (completion date was summer 2009), my initial interest rate was 6.3% from the bank. The broker told me that that was the initial rate, but that I would be a able to get the lowest rate within the 90 days before closing (completion). At first I was hoping just for a 1% drop, but ended up with an interest rate of 3.5% at the time everything was said and done.

That dropped my mortgage payments from $1800-ish to about $1250. Crazy drop. Right now I have it rented for $1550. I am glad the interest rates dropping as I would have been fucked if I needed to rent it at over $1800.

The down side to this, is that my property has barely appreciated in the 3 years of owning. My fear is now, when I go to renew in 2 years, the rates will be back up again and I'll be fucked.

On a side, I am not sure I would buy again. I, like many others, fell victim to the pressure to buy and did it...even thought I was mortgaged approved by myself, I was not prepared in any way to actually buy. I knew every little about the process and still don't to this day. Renting seems to carry this stigma of not being responsible, or not have enough money to buy. It really isn't true. I feel very tied-down owning a house here...as soon as the seller market picks up (if it ever does), I'll probably jump ship as soon as possible.
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Old 04-03-2012, 09:56 AM   #16
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Valid point, but everyone who says renting is cheaper, always fail to look in the future when your property is actually paid off, even the guy in the video. The way he explains it is you will be paying said monthly costs for the rest of your life, if you renting, you will be, if your buying, you will be finished by 40 ect.. then your entire income is your own, and you have 600k+ in equity.

I hope to have my mortage payed off by the time im 35, if I succeed, il be laughing, while people will still be paying 2k+ a month until the day they die
I would rather have $600K in cash than $600K in equity.

This scenario depends on how much of your total wealth went into your down payment into a mortgage and into your monthly payments. If the majority of your wealth is in other investment vehicles, then having a mortgage isn't affecting your financial picture as much as someone that has 75% of their cash stuck in their home.
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Old 04-03-2012, 10:11 AM   #17
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Thanks so much Bahhbeehhaaaa, past few days with my family has been hectic on whether we should continue to rent or buy. Doing the math now and this will help greatly in our decision!
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Old 04-03-2012, 11:03 AM   #18
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I guess I should've said, I'm still gonna own a house but it's gonna be out in the valley, Mission more specifically probably.

His 6% is pretty crazy and he's making a long term assumption that houses won't appreciate, which he has every right to do but personally I don't agree with it, just my opinion. Those two things drastically change things.
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Old 04-03-2012, 11:04 AM   #19
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Valid point, but everyone who says renting is cheaper, always fail to look in the future when your property is actually paid off, even the guy in the video. The way he explains it is you will be paying said monthly costs for the rest of your life, if you renting, you will be, if your buying, you will be finished by 40 ect.. then your entire income is your own, and you have 600k+ in equity.

I hope to have my mortage payed off by the time im 35, if I succeed, il be laughing, while people will still be paying 2k+ a month until the day they die
This is assuming they never buy. But if they do and they ended up buying the same thing cheaper or better house for the same money, you might be crying.

I have a JP friend who bought an apartment after a few years of consideration. The price he paid was roughly 60% of what his neighbor paid. And my friend has yet to seem them smiled once since he moved there.

Imagine if a renter friend of yours buy an identical unit next door for 30% less in 5 years. I am not sure I would be laughing if I were you.
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Old 04-03-2012, 11:11 AM   #20
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His 6% is pretty crazy and he's making a long term assumption that houses won't appreciate.
Canadian mortgage rate have averaged around 8% for the last 25yrs. If you think 6% is crazy... hold on tight.

And the thing about "appreciate" is the very thing that still make any sense to buy in GVR.

But the question is, how much more can it go? We have record low mortgage rate. No stable creation of jobs (FT at least) and negative immigration to BC and many ppl in lower mainland stretching to their limit on mortgages. If we were to increase the price further, who would buy?
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Old 04-03-2012, 01:04 PM   #21
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What he's saying is not true for all cases. His assumptions being 3k/month on a million dollar house. Along with all the other assumptions he made. Although you can use his math to help you in your future decisions.

He forgot that you can make money renting out your house as well.

edit: I like khans videos too btw, I watched them during my first year in engineering for help. just not this one.
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Old 04-03-2012, 01:26 PM   #22
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His example is for one very specific scenario ONLY.
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Old 04-03-2012, 02:14 PM   #23
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Valid point, but everyone who says renting is cheaper, always fail to look in the future when your property is actually paid off, even the guy in the video. The way he explains it is you will be paying said monthly costs for the rest of your life, if you renting, you will be, if your buying, you will be finished by 40 ect.. then your entire income is your own, and you have 600k+ in equity.

I hope to have my mortage payed off by the time im 35, if I succeed, il be laughing, while people will still be paying 2k+ a month until the day they die
Yes your mortgage payment will be gone, but other expenses remain such as property tax/maintenance, possible roof leak,plumbing problem as the house ages. However my opinion is that owning is better... provided that you bought at the right price.

Condos are terrible in Vancouver at the moment. $500-600K for a 1bed, plus $350-600 monthly HOA fees, and property tax....
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Old 04-03-2012, 02:23 PM   #24
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buying is not for me, especially since im a person that likes being very mobile, hence why I chose the career path that will get me a job in any major city. Eventually I do want to own when if I choose to have a family, but if I don't. Why own?

Even though it's a selfish mentality, my father spent the last 15 years saving for his retirement and is now off to australia next year to retire.
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Old 04-03-2012, 02:36 PM   #25
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I would rather have $600K in cash than $600K in equity.

This scenario depends on how much of your total wealth went into your down payment into a mortgage and into your monthly payments. If the majority of your wealth is in other investment vehicles, then having a mortgage isn't affecting your financial picture as much as someone that has 75% of their cash stuck in their home.
you would not have 600k in liquid cash vs equity because you would still be paying 3k a month rent, unless your living at home rent free or something, thats obviously the best option.

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This is assuming they never buy. But if they do and they ended up buying the same thing cheaper or better house for the same money, you might be crying.

I have a JP friend who bought an apartment after a few years of consideration. The price he paid was roughly 60% of what his neighbor paid. And my friend has yet to seem them smiled once since he moved there.

Imagine if a renter friend of yours buy an identical unit next door for 30% less in 5 years. I am not sure I would be laughing if I were you.

But now you are gambling on the waiting game, the sole purpose of the discussion was renting vs owning and the guy in the video measures it over a lifetime.

while its true that if a person waits it out and buys for 60% of the cost, he is laughing,

what if the reverse happens? and prices go up 40%? he would never be able to own anything, and thus will be paying rent for the rest of his life.

pick your poison, pay a high price now, or wait it out and possibly an even higher price later, or possibly a lower one, its like gambling on stocks.

Everyone keeps saying its going to crash eventually, still waiting... its not going to crash, not in the near nor distant future, not while they are allowing foreign purchases and sales, our housing market has become more about money making and investing, than it has about living.

It will only crash when there physically arent enough workers that can afford to live in the lower mainland anymore, and are all forced to move out east, then the economy wont be self sustainable like it is now.

Im gambling on my belief that the crash will happen in probably 10/15 years or so, when fuel prices are too high, all our highways will be tolled, all bridges tolled, and transit will be 20 dollars per ride, and the entire middle class leaves vancouver because its not affordable.

I agree that buying a house now, or in the next couple years, will be a huge mistake, but for those of us who bought 5-10 years ago at normal prices, hopefully the prices only crash back down to average pricing, so we dont all get screwed.
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