Calgarypuck Forums - The Unofficial Calgary Flames Fan Community
Old 10-25-2017, 12:19 PM   #3221
Hes
Eye Guy
 
Hes's Avatar
 
Join Date: Oct 2002
Exp:
Default

^ Just like any other investment it is about smart decisions. Buying at lower market times in areas that retain value/increase value is a prudent investment.

My wife and I have two rental condos. We bought in 2006 and only now is their value back to what we paid for them. Bad investment. We bought them to live in originally however. Our house has increased in value quite substantially because we bought in 2008, during the downturn, in a desirable inner city neighborhood. So far it has been a great investment.
Hes is offline   Reply With Quote
Old 10-25-2017, 12:41 PM   #3222
Wormius
Franchise Player
 
Wormius's Avatar
 
Join Date: Feb 2011
Location: Somewhere down the crazy river.
Exp:
Default

Quote:
Originally Posted by OMG!WTF! View Post
People don't seem to realize the financial disaster they subject themselves to in real estate and it always comes down to the falsehoods inherent with real estate. Real estate always goes up over time is likely the most costly "truism" I've ever heard.

In 2007 the average house price in Calgary touched 500k. Now it's 475k. Not a big deal but the time factor is absolutely devastating. Your 500k would be worth 900k now if invested at a below market average return of 6%. Your average 2007 house is now approaching a half million dollar hit on your potential net worth. And those numbers will just get worse over time as compound interest really kicks in.

I'm also willing to concede $500 a month to rent in the rent vs own debate. So 6k a year in rent premium for ten years. 60k in ownership savings. Certainly enough to pay the realtor when you go to sell.

Rent now. Buy later.
Is this about buying a house with cash vs. investing the money then? I would tend to agree that if I had $500k sitting in the bank right now and had the option of buying a house or investing it and renting, I would rent. I could probably even pay the rent with the interest off of a basic savings account. I doubt I could rent a $500k house though.

edit: Are you sure about the average house price in Calgary being $500k in 2007?

Quote:
2012 21,207, $428,655
2011 18,496, $414,391
2010 17,218, $409,885
2009 20,669, $394,064
2008 19,084, $413,293
2007 26,611, $423,770
2006 27,426, $358,326
2005 26,833, $256,327
2004 22,842, $227,269
2003 21,062, $215,838
2002 21,544, $203,203
2001 19,535, $186,586
2000 17,211, $180,420

Source: Calgary Real Estate Board

Last edited by Wormius; 10-25-2017 at 01:00 PM. Reason: Other thought.
Wormius is offline   Reply With Quote
The Following User Says Thank You to Wormius For This Useful Post:
Old 10-25-2017, 12:48 PM   #3223
mrkajz44
First Line Centre
 
mrkajz44's Avatar
 
Join Date: Oct 2010
Location: Deep South
Exp:
Default

Quote:
Originally Posted by OMG!WTF! View Post
People don't seem to realize the financial disaster they subject themselves to in real estate and it always comes down to the falsehoods inherent with real estate. Real estate always goes up over time is likely the most costly "truism" I've ever heard.

In 2007 the average house price in Calgary touched 500k. Now it's 475k. Not a big deal but the time factor is absolutely devastating. Your 500k would be worth 900k now if invested at a below market average return of 6%. Your average 2007 house is now approaching a half million dollar hit on your potential net worth. And those numbers will just get worse over time as compound interest really kicks in.

I'm also willing to concede $500 a month to rent in the rent vs own debate. So 6k a year in rent premium for ten years. 60k in ownership savings. Certainly enough to pay the realtor when you go to sell.

Rent now. Buy later.
If you are going to attack the "truism" that real estate always goes up, then I would argue that "the market always goes up" is also a truism. The ability for the market to crash is just as possible as real estate crashing. Easy to look in hindsight and say the market went up 6% per year so you would have been better to invest in the market than real estate. Maybe over the next 10 years the market will remain flat and housing prices increase by 20% - then which one was the better investment?
__________________
Much like a sports ticker, you may feel obligated to read this
mrkajz44 is offline   Reply With Quote
Old 10-25-2017, 01:06 PM   #3224
Jason14h
First Line Centre
 
Join Date: Oct 2005
Exp:
Default

And why would anyone EVER pay anything over the minimum towards their mortgage right now, let alone a house in cash?

Interest rates are 3%. No one is lending you $500.000 at 3% to invest in the stock market!
Jason14h is offline   Reply With Quote
Old 10-25-2017, 02:18 PM   #3225
blankall
Ate 100 Treadmills
 
blankall's Avatar
 
Join Date: Mar 2006
Exp:
Default

Quote:
Originally Posted by Jason14h View Post
And why would anyone EVER pay anything over the minimum towards their mortgage right now, let alone a house in cash?

Interest rates are 3%. No one is lending you $500.000 at 3% to invest in the stock market!
This is exactly it when you buy a property the increase in value is based on the amount you borrow, not just what you put down. Although I would argue in many market conditions there is a benefit to paying cash. You get the increase in real estate value, plus the benefit of but paying b rent. That's more an issue of timing a market though. Different situation than the norm, which is carrying a mortgage for 20-30 years.
blankall is online now   Reply With Quote
Old 10-25-2017, 03:04 PM   #3226
OMG!WTF!
First Line Centre
 
Join Date: Oct 2014
Exp:
Default

Quote:
Originally Posted by mrkajz44 View Post
If you are going to attack the "truism" that real estate always goes up, then I would argue that "the market always goes up" is also a truism. The ability for the market to crash is just as possible as real estate crashing. Easy to look in hindsight and say the market went up 6% per year so you would have been better to invest in the market than real estate. Maybe over the next 10 years the market will remain flat and housing prices increase by 20% - then which one was the better investment?
Yes but the stock market crashing and the housing market crashing are entirely different things. I can plan my losses in the stock market. If I'm comfortable losing 5k I can exit with a loss of 5k and move along. When you buy a house does anyone think about how much they're comfortable losing? And does anyone have a realistic exit strategy when the market goes down? No they don't. You need to be willing to lose much much more in the real estate market than the stock market. Time/inflation can kill your investment as easy as save your investment. Liquidity is a valuable commodity.

Another difference is you can't short sell a house when the real estate market goes down. I guarantee you when the stock market does correct or hopefully crash, there will be some of the easiest money to be made you've ever seen.

The 6% return I suggested is much less than the actual return over the last ten years. If you say anything more than 6% though the money guys here get jumpy. If you bought the SPY before the crash in 2007 you've earned 100% without any maximizing strategy. If you bought in 2009 you've seen 200% return. But I'm trying to even out the average house price with an average return in the market, both likely being lower than the mean.

Ultimately you're correct. If you think the real estate market will go up, then you should buy houses. But I have no strategy to determine that other than hoping for a great return.

Quote:
Is this about buying a house with cash vs. investing the money then?
Yes I was working off the assumption that living rent free in a paid off house is a good idea.

Quote:
edit: Are you sure about the average house price in Calgary being $500k in 2007?
Yes. In 2007 the average house price touched 500k. As well the stock market touched 1300 so I was using the relative highs of each not the average. The average price for the year was less.
OMG!WTF! is offline   Reply With Quote
Old 10-25-2017, 03:58 PM   #3227
Jason14h
First Line Centre
 
Join Date: Oct 2005
Exp:
Default

Quote:
Originally Posted by OMG!WTF! View Post
Yes but the stock market crashing and the housing market crashing are entirely different things. I can plan my losses in the stock market. If I'm comfortable losing 5k I can exit with a loss of 5k and move along. When you buy a house does anyone think about how much they're comfortable losing? And does anyone have a realistic exit strategy when the market goes down? No they don't. You need to be willing to lose much much more in the real estate market than the stock market. Time/inflation can kill your investment as easy as save your investment. Liquidity is a valuable commodity.

Another difference is you can't short sell a house when the real estate market goes down. I guarantee you when the stock market does correct or hopefully crash, there will be some of the easiest money to be made you've ever seen.

The 6% return I suggested is much less than the actual return over the last ten years. If you say anything more than 6% though the money guys here get jumpy. If you bought the SPY before the crash in 2007 you've earned 100% without any maximizing strategy. If you bought in 2009 you've seen 200% return. But I'm trying to even out the average house price with an average return in the market, both likely being lower than the mean.

Ultimately you're correct. If you think the real estate market will go up, then you should buy houses. But I have no strategy to determine that other than hoping for a great return.



Yes I was working off the assumption that living rent free in a paid off house is a good idea.



Yes. In 2007 the average house price touched 500k. As well the stock market touched 1300 so I was using the relative highs of each not the average. The average price for the year was less.
But there is the other issue that I can borrow $500K for a mortgage, pay 3% interest, and then if my house appreciates at a rate >3% I am essentially getting free RoR on money I did not have.

I can't borrow $500K to invest in the stock market at 3%. I would agree 100% if my options were "What to do with $500K CASH", but for the majority of people this is not an option or the question that applies to them.
Jason14h is offline   Reply With Quote
Old 10-25-2017, 04:10 PM   #3228
Slava
Franchise Player
 
Join Date: Dec 2006
Location: Calgary, Alberta
Exp:
Default

Quote:
Originally Posted by Jason14h View Post
But there is the other issue that I can borrow $500K for a mortgage, pay 3% interest, and then if my house appreciates at a rate >3% I am essentially getting free RoR on money I did not have.

I can't borrow $500K to invest in the stock market at 3%. I would agree 100% if my options were "What to do with $500K CASH", but for the majority of people this is not an option or the question that applies to them.
You posted this a couple times now, so let me just say that you can borrow money to invest in the market. It's a super common strategy and lots of people do it. The rates usually float, but let's face it they're not at their highs these days either.

Anyway, sorry to interrupt the discussion on whether to rent/buy.
Slava is offline   Reply With Quote
Old 10-25-2017, 04:14 PM   #3229
Jason14h
First Line Centre
 
Join Date: Oct 2005
Exp:
Default

Quote:
Originally Posted by Slava View Post
You posted this a couple times now, so let me just say that you can borrow money to invest in the market. It's a super common strategy and lots of people do it. The rates usually float, but let's face it they're not at their highs these days either.

Anyway, sorry to interrupt the discussion on whether to rent/buy.
Thanks Slava,

I honestly had no idea, that I could get a $500 K loan to invest in the market, with no collateral, based solely on my income for around 3%. I have heard of small amounts for RRSP, etc.
Jason14h is offline   Reply With Quote
Old 10-25-2017, 04:19 PM   #3230
OMG!WTF!
First Line Centre
 
Join Date: Oct 2014
Exp:
Default

Quote:
Originally Posted by Jason14h View Post
Thanks Slava,

I honestly had no idea, that I could get a $500 K loan to invest in the market, with no collateral, based solely on my income for around 3%. I have heard of small amounts for RRSP, etc.
Yeah you can't borrow nearly as much as you can with real estate. I think you get two or three times your cash holdings in a margin account. But one advantage you get that home owners don't is that you can borrow us funds. So essentially you pay interest on USD instead of converting. This is a massive benefit to stock market investing.
OMG!WTF! is offline   Reply With Quote
Old 10-25-2017, 04:26 PM   #3231
snootchiebootchies
Scoring Winger
 
Join Date: Jun 2009
Exp:
Default

But if you have lots of equity in your home, you can borrow money through a HELOC to invest in the stock market with the advantage of writing off the interest payments on your tax returns. You are limited in the types of equities you are permitted to invest in, however, using this strategy.
snootchiebootchies is offline   Reply With Quote
The Following User Says Thank You to snootchiebootchies For This Useful Post:
Old 10-25-2017, 04:32 PM   #3232
OMG!WTF!
First Line Centre
 
Join Date: Oct 2014
Exp:
Default

Quote:
Originally Posted by snootchiebootchies View Post
But if you have lots of equity in your home, you can borrow money through a HELOC to invest in the stock market with the advantage of writing off the interest payments on your tax returns. You are limited in the types of equities you are permitted to invest in, however, using this strategy.
Yes. Similarly you can write off margin account costs too.
OMG!WTF! is offline   Reply With Quote
Old 10-25-2017, 05:11 PM   #3233
Jason14h
First Line Centre
 
Join Date: Oct 2005
Exp:
Default

Quote:
Originally Posted by OMG!WTF! View Post
Yes. Similarly you can write off margin account costs too.
Margin accounts carry a different type of risk as well though during a crash!
Jason14h is offline   Reply With Quote
Old 10-26-2017, 07:34 AM   #3234
OMG!WTF!
First Line Centre
 
Join Date: Oct 2014
Exp:
Default

Quote:
Originally Posted by Jason14h View Post
Margin accounts carry a different type of risk as well though during a crash!
They actually carry much less risk. You have to maintain enough equity to satisfy margin requirements. If you fall below a certain percentage your broker will sell your holdings to maintain that ratio. You can't even lose all your money in a margin account much less lose more than you have as is the case in housing. I guess if you're a bad investor and just want to hope and pray things start going up again, selling with some money left on the table could be considered a risk.
OMG!WTF! is offline   Reply With Quote
Old 10-26-2017, 08:56 AM   #3235
Jason14h
First Line Centre
 
Join Date: Oct 2005
Exp:
Default

Quote:
Originally Posted by OMG!WTF! View Post
They actually carry much less risk. You have to maintain enough equity to satisfy margin requirements. If you fall below a certain percentage your broker will sell your holdings to maintain that ratio. You can't even lose all your money in a margin account much less lose more than you have as is the case in housing. I guess if you're a bad investor and just want to hope and pray things start going up again, selling with some money left on the table could be considered a risk.
If the market crashes, they literally can/will sell your entire non margin positions as well to cover the margin losses.

You are correct, but in a crash instead of having stock that is depressed in value that you can wait on a recovery, you have nothing.

It would be akin to the bank immediately calling in a mortgage if your house price fell 1$ below the outstanding mortgage.
Jason14h is offline   Reply With Quote
Reply

Tags
housing , real estate

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -6. The time now is 11:23 PM.

Calgary Flames
2017-18




Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
Copyright Calgarypuck 2016