Quote:
Originally Posted by Bunk
I don't think condos or any type of housing that is rentable is a bad investment at all. If you can cover the carrying cost with rent, it's a great return over time. Someone else paying the mortgage.
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It's all a cost benefit/opportunity cost equation.
20% down, taxes, R&M, condo fees, insurance, time invested, lost rent (tenants flake out) less monthly rent.
Let's say you're spending $350k
You need $70k down
Condo fees of $250
Taxes of $150
Insurance $60
R&M $200 (yes, you do spend at least this much over time)
Mortgage $1,382
Total $2,042
So, according to CMHC's average 1 and 2 bedroom rents of $1,130 and $1,357 for downtown.... I'm thinking it's a bit of a waste of money. But, lets say your place is nicer and you get $1,500 per month. Great, you're still paying $500 per month over your mortgage or $6,000 per year. Sounds like an awful start. But let's say your place is really nice so it's $1,900 per month. Still, total headache and you've tied up $70k over the next 5 years to some ###### who likely doesn't give a crap about your place.
But, let's say you buy some shares of boardwalk and earn 3.4% over the next 12 months and not have to worry about managing a stupid apartment condo.
On top of returning a nice dividend boardwalk could also have some capital gains. $2,600 a year, or a permanent headache. That you're trapped in for 5 years. But wait, you're going to have to pay $10,000 to sell the place. vs. $9.99 for the boardwalk shares.
Boardwalk has also more than doubled over the last 5 years. I don't think buying a condo 5-years ago would have yielded anything close to that type of return.
Plenty of other options. The boardwalk one is just easy because I'd bet they're more competent property managers than the average person who decides to buy a condo. Also you get to enjoy the benefits of diversification, economies of scale, and experience.
Bunk did mention covering the carrying costs - which buying now, isn't easy. Nor does it account for and lack of capital growth in a time when many think housing prices are frothy, Canadian economy is looking weak and regardless that we're in a low rate environment with little risk of rates jumping just yet, we're still tied somewhat to the US bond market and whatever else the Government does to impact housing. I'd be a little reluctant jumping in hoping to have positive cash flow and capital gains.