Quote:
Originally Posted by ah123
Garth Turner putting his sights on the Calgary market now
http://www.greaterfool.ca/2012/05/01/death-by-condo/
I am not sure what to make of his articles, it's almost funny, but then I don't know if there that many people who are really that reckless with their money (i.e. looking at real estate as a way to quickly make money) |
I laugh at that advertisement he's got as the picture.
On the annual cash flow part:
- completely ignores how much it will cost to find tenants and to maintain the condo (Over the 10 year holding period I imagine that alone would probably eat up the positive monthly CFs).
- Ignored is the concept that you would have to re-fi your mortgage in 5 years at rates most likely well north of the 3.5% rate used to come up with the mortgage calc which will most likely offset any increases in rent earned.
On the Capital Gain part:
- Selling costs are completely ignored
- Overall return on equity is misleading because it's a 10-year return as opposed to an annual return. Once you realize that the CF is probably negative for 10 years, your illiquid investment is essentially depending on abnormal price appreciation to beat the returns on a well-diversified portfolio and even then might not compensate for the lack of liquidity