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Vancouver Off-Topic / Current EventsThe off-topic forum for Vancouver, funnies, non-auto centered discussions, WORK SAFE. While the rules are more relaxed here, there are still rules. Please refer to sticky thread in this forum.
I did some basic calculations a while back when rates where in the mid 2% range. Even at such a low rate, you'll end up paying about double what you borrowed over 25 years.
Borrow $600k for a condo, the place needs to be 1.2 million by the time you pay it off to break even. Even at 1.2 million, I haven't taken into account 25 years of inflation, upkeep costs, property taxes, etc.
I'd rather have higher rates and lower prices. It's a hell of a lot easier to pay back $300k at 8-10% than $600k at 3%.
2.44% on a 25 year amortization puts you on pace for total interest paid over 25 years to be 1/3rd of the borrowed amount only (ie: $450k mortgage, $150K in interest paid over 25 years).
Per your example $300k at 8% put you on pace to pay $386k in interest over 25 years AM, more than the principal borrowed.
$600k at 3% puts you on pace to pay $251k over 25 years AM. So double the loan amount and $135k LESS interest. The monthly payments on the $600k loan would only be about 25% higher than the $300k loan at higher rates.
If someone bought a place with a $600k mortgage 5 years ago in Vancouver it's very likely worth over $1.2 million now at just the end of their first 5 year term.
Like I said, it was very basic calculations I did back then. None of it really matters unless you're going to sell. And if you did sell, you're going to have to rent or move away to come out on top. Downsizing really isn't at the top of the list for most recent buyers.
If you want to make it complicated, throw inflation into the mix. We don't know what future inflation is going to look like but we have historical data. $100 worth of goods in 1993 costs a little more than $150 today. The money you get from selling your home after 25 years is worth about 2/3 of the value.
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Last edited by !LittleDragon; 08-05-2018 at 04:13 PM.
But do we really expect the prices to drop back down to 300k? What if the prices are at 500ish but with 10% rate
Not really, I was referring to the amount borrowed, not the cost... I don't expect a massive drop. However, I wouldn't put into the realm of impossible. Many places plunged 70% 10 years ago where the locals thought it would never happen. At least they recovered. Japan never recovered from their huge drop. Prices there went up 3x-4x in a few years and crashed. Property there costs the same there now as it did in the mid 90's. It does happen.
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Last edited by !LittleDragon; 08-05-2018 at 06:53 PM.
You know thats not how interest works right?
10% interest on a 500k loan is like 700k INTEREST over 25 years.
but you can hedge that it may go lower over the next 25 years versus going higher for sure
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Hopefully the people who made money flipping WCCP paid taxes because the CRA announced last week they're probing WCCP, Trump Tower and the Tempo project in Richmond. This is another reason the presale market will cool down.
CRA should mandate all developers to submit buy/sell/assignment records.
Kinda like how employer send your T4 records to government so you can't hide your T4 income. (Or T5018 for those familiar with construction industry)
I know a few people been flipping condos over the years without paying taxes.
1 guy actually got audited and ends up owing $50K+ in back tax.
CRA should mandate all developers to submit buy/sell/assignment records.
Kinda like how employer send your T4 records to government so you can't hide your T4 income. (Or T5018 for those familiar with construction industry)
I know a few people been flipping condos over the years without paying taxes.
1 guy actually got audited and ends up owing $50K+ in back tax.
Wouldn't those large deposits get flagged by the banking system?
How can you sell a house ie. for $500k, that money deposited into your account and then withdrawn to buy another place, then sell it, etc...
Wouldn't those deposit/withdrawals be flagged? Surely, they would get flagged.
Wouldn't those large deposits get flagged by the banking system?
How can you sell a house ie. for $500k, that money deposited into your account and then withdrawn to buy another place, then sell it, etc...
Wouldn't those deposit/withdrawals be flagged? Surely, they would get flagged.
I doubt it
There are thousands of housing transaction every day.
Vast majority of it are people buying & selling their principle residence so there is no tax implication.
i'd think most condo assignment would be considered investment, so you need to pay tax on gain like you do when buying & selling stocks
When I was at the bank, no one got flagged as far as I knew. Seemed like it's easy to get away with tax evasion. At worse you're charged with a 100% penalty. Which is probably a positive EV play for those avoiding payment. We also never hear any stories about people evading small amounts like <$100k.
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Quote:
Originally Posted by Ferra
I doubt it
There are thousands of housing transaction every day.
Vast majority of it are people buying & selling their principle residence so there is no tax implication.
i'd think most condo assignment would be considered investment, so you need to pay tax on gain like you do when buying & selling stocks
Or simply start a shell company and purchase the property under the company. Then sell the company. I wonder how the tax would work in that case.
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Originally Posted by G
Sad day, my buyer couldn't get financing so they couldn't remove subjects
Wouldn't the buyer get a preapproval mortgage first before actually starting making offer (serious buyer anyways). That way they know their price range?
Sad day, my buyer couldn't get financing so they couldn't remove subjects
You still get to keep their deposit, don't you? At least that's a consolation prize...
But really, I find it quite surprising that people don't get approved on financing when they put an offer in. Don't they already have financing lined up and pre-approved when the offer is made? The bank can of course still turn the financing request down, but that usually signals either:
1) the bank thinks the property isn't worth the transaction price / mortgaged amount
2) the buyers are using financing as their "excuse" to walk out on the deal
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Quote:
Originally Posted by Traum
You still get to keep their deposit, don't you? At least that's a consolation prize...
l
You don't keep the deposit because for the subject removal usually the buyer have 7 days to remove subject or doesn't want the place. If they don't want your place within that timeframe is fine. However if the subject is remove and they decided they don't want the place then you can keep their deposit and sue them for any revenue lost (say they offer 800k but didn't go through and you are only able to sell the place for 700k you can sue them for the 100k lose).
Damn... that kind of sucks for the seller... So basically I can just go around to make a high offer, subject to financing, to bait the seller into accepting my high bid. String him around for a week or 2, and then claim I can't secure financing and walk out unscathed?
In a regular market, I might as well team up with 1 or 2 partners and use this to block out other potential high bidders, ruin the seller's listing by making it stale, and then swoop in with a lowball offer to seal the deal myself! There is like no protection of any kind for the seller!
You can get approved for a mortgage based on the equity you have in your current place. Before this craziness, subject to sale was commonplace.
I just offered 5% over asking on a place and told the selling agent that we'd be pricing our current place immediately and aggressively, to give confidence that we'd close. In the end the seller took a cleaner offer at asking price.
I'm seriously considering selling and renting for a bit. Everything points to a slow fall/winter and I want to be liquid for a strong offer.
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Damn... that kind of sucks for the seller... So basically I can just go around to make a high offer, subject to financing, to bait the seller into accepting my high bid. String him around for a week or 2, and then claim I can't secure financing and walk out unscathed?
In a regular market, I might as well team up with 1 or 2 partners and use this to block out other potential high bidders, ruin the seller's listing by making it stale, and then swoop in with a lowball offer to seal the deal myself! There is like no protection of any kind for the seller!
You can do that but if the Seller thinks you're messing around they won't accept your offer if it has that subject. These things are usually done in good faith.
I used to see a lot of subject free deals but now more and more offers contain subjects.
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Quote:
Originally Posted by Traum
Damn... that kind of sucks for the seller... So basically I can just go around to make a high offer, subject to financing, to bait the seller into accepting my high bid. String him around for a week or 2, and then claim I can't secure financing and walk out unscathed?
In a regular market, I might as well team up with 1 or 2 partners and use this to block out other potential high bidders, ruin the seller's listing by making it stale, and then swoop in with a lowball offer to seal the deal myself! There is like no protection of any kind for the seller!
Well the seller can still show his place around and do open house he just can't accept any other offers for x days if he accepted yours. That's why there is this bank and forth negotiation. If the seller don't like your offer he can deny it and accept offers from others. That's why when the market is hot a lot of sellers would look for offers with no financial clause (don't need to get approve for mortgage) or some even have no subject at all.
Quote:
Originally Posted by fliptuner
You can get approved for a mortgage based on the equity you have in your current place. Before this craziness, subject to sale was commonplace.
I just offered 5% over asking on a place and told the selling agent that we'd be pricing our current place immediately and aggressively, to give confidence that we'd close. In the end the seller took a cleaner offer at asking price.
I'm seriously considering selling and renting for a bit. Everything points to a slow fall/winter and I want to be liquid for a strong offer.
Good idea! when I sold my place I already have plans to live with my parents and put my stuff in storage for a bit till I find a reasonable price place.
Quote:
Originally Posted by Energy
You can do that but if the Seller thinks you're messing around they won't accept your offer if it has that subject. These things are usually done in good faith.
I used to see a lot of subject free deals but now more and more offers contain subjects.
I think when I submit my first offer I have all kids of subjects (IE financial even though I don't need a mortgage). When negotiation started I remove most of the ones I don't really care/need so my offer seems better and it seems like I am interested in my place and want to negotiate for a better price I guess.
The person who purchase my place only need financial. But I guess given the place is only one year there isn't much need for a inspection or anything. I also have all my strata docs, minutes, new home owner warrantly etc etc so it was pretty easy to give the buyer all the info he needs.
Last edited by Mr.HappySilp; 08-08-2018 at 06:11 PM.
I just offered 5% over asking on a place and told the selling agent that we'd be pricing our current place immediately and aggressively, to give confidence that we'd close. In the end the seller took a cleaner offer at asking price.
I'm seriously considering selling and renting for a bit. Everything points to a slow fall/winter and I want to be liquid for a strong offer.
Having no subjects on the offer is in itself a major attraction. There is zero uncertainty -- when the seller accepts, the deal is done. He won't run into the situation that G has just found himself in. When there is market uncertainty -- and IMO, the current market is exactly that -- the seller won't have to worry about any of the what ifs. If I were selling right now, I'd take the no subjects offer over a 5% higher offer that is subject to financing as well.
Having no subjects on the offer is in itself a major attraction. There is zero uncertainty -- when the seller accepts, the deal is done. He won't run into the situation that G has just found himself in. When there is market uncertainty -- and IMO, the current market is exactly that -- the seller won't have to worry about any of the what ifs. If I were selling right now, I'd take the no subjects offer over a 5% higher offer that is subject to financing as well.
I wished I had a no subject offer. This was the only offer I got so we just tried it. We definitely thought they would be able to get financing so we are kinda surprised.
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List on Tuesday, sell on Monday, days are over. If things were the the same, I'd have no problem buying before listing or getting a bridge.
I'm in the same boat, I've been looking for a while and the market has softened for sure. Do I sell first and then hope I find something or do I offer with subject to sale? If I sell first I can make a much cleaner offer with only inspection subjects but then I risk being forced to settle for something if I can't find what I'm looking for.
Decisions, decisions.
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If you are already negotiating the sale of your home then in your offer for your new home it might make sense to put a subject to the sale of the current home but say that the subject must be satisfied or waived within a certain period of time (but make it a shorter period so the seller will accept like a week or so if that's how long you expect before you reach a deal for your current home).
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