# $100k and no home. Looking to invest.



## kaswardy (Feb 18, 2016)

I recently sold my Toronto condo and saved up for a downpayment on a Mississauga home. However, I am having second thoughts as I feel the price of Mississauga homes and GTA in general are overvalued. Specially with the low interest rates, the 3BR semi-detached I am looking at are around $550+

I was wondering if it would be better to buy property in the markets that are down, i.e. Alberta. Rent it out through a management company and then rent out a place in Mississauga instead on a long-term lease. Given that the interest rates can shoot up if the economy balances, I would avoid being burnt on an overvalued property. With the home in Alberta, I'll at least have some equity build up and since the market is already down there, the 5-10 year should give me better yield.

I am also open to purchasing property in US, since it seems to be in the growth phase.

What do you guys think? Are you willing to purchase in an overvalued market even if it is your principal residence?


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## Newby1983 (Apr 9, 2015)

You only have enough for <20% downpayment on a $550k property. On your personal residence this is risky. The demise of Alberta may be near their end or still more may come (I think the latter). I don't know enough about US real estate but looked into it last year and didn't like withholding tax upon the sale. Since then a two bedroom condo in Florida has risen by $50k. Also property management down their is high 12-15%. 

If your stuck on buying in Mississauga with your 20% downpayment I'd seriously consider renting the basement or even better renting the main floor and living in the basement. 

This is the reason many people are looking outside the GTA where your downpayment is worth a lot more.


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## Just a Guy (Mar 27, 2012)

To get started in real estate, it's best to start locally, until you know what you are doing at least.

I see many "investors" who buy properties they've never seen, trusting a realtor to get them a good deal. Unfortunately, the realtor gets paid for selling you a property, not for getting you a good investment. 

Then they hire a property manager to take care of their investment, and make sure it's full. Unfortunately, the property manager gets paid only to keep the place full a lot of the time. If the place gets trashed, quick fixes from overpriced contractors who provide a kickback aren't unheard of in the industry.

A few years on, when the investment is still underwater, the property gets dumped and people talk about what a crappy investment real estate is.

No one will ever care about your investments as much as you do. If you don't pay attention to them, you're most likely going to be taken for a ride by those looking out for their income stream...this applies to all forms of investing.

Until you grow in portfolio size, and know what you are doing, stay local. When you want to expand into other areas, you need to learn about those other areas first. Do you know the good parts of Alberta vs. The bad? Do you know the average prices, so that you can recognize a good deal? There are many properties which probably look cheap compared to Vancouver or Toronto, but are they cheap for the area? What are the rents? What are the contractor prices?

There's a lot to learn. Also, with only one or two properties, you may find it difficult to get a property manager to even look at you. If they do, and they have a choice in a down market to fill a vacancy, are they going to fill your one place, or the guy who has dozens of places which they manage? Who's more important to them to keep happy?


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## peterk (May 16, 2010)

If you want to make a bet on Alberta then buy Alberta stocks. Attempting to buy and manage a property in Alberta while living in Toronto makes no sense unless that is your business. Not to mention, that housing prices in Alberta have only fallen moderately so far. They have much further down to go, to be sure.

Excellent call though on selling your condo, and being hesitant to upgrade in that crazy Toronto market.


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## gladaki (Feb 23, 2014)

peterk said:


> If you want to make a bet on Alberta then buy Alberta stocks. Attempting to buy and manage a property in Alberta while living in Toronto makes no sense unless that is your business. Not to mention, that housing prices in Alberta have only fallen moderately so far. They have much further down to go, to be sure.
> 
> Excellent call though on selling your condo, and being hesitant to upgrade in that crazy Toronto market.


Talking about it..
How much people spend on house every month ?
other than mortgage.


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## kaswardy (Feb 18, 2016)

Newby1983 said:


> You only have enough for <20% downpayment on a $550k property.
> If your stuck on buying in Mississauga with your 20% downpayment I'd seriously consider renting the basement or even better renting the main floor and living in the basement.


I will actually be making a 25% down payment. Should have added a $100k+ on the title. And I also plan to rent out the basement.



> To get started in real estate, it's best to start locally, until you know what you are doing at least.


You're right about that. Maybe not Alberta then look for a place which is within a 2 hour drive, so that I don't need a property manager to pay extra for. I guess in that case, I'll be better off doing that for my second property.


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## Willwemakeit (Feb 7, 2016)

FWIW Kaswardy, we spent the past 30+ years building our net worth buying, selling, being landlords, buying residential and acreage lots and building and selling them. Basically that is how we've built our net worth preparing to retire. Both myself and our daughter (since she was 18) are licensed realtors ourselves. We hear realtors on the radio promoting the market in Calgary areas as a great opportunity right now, but the question is are you willing to risk catching a falling knife? The reality is the majority of realtors are still feeling the market is desperately over valued when talking amongst themselves in offices! In fact right now, we are struggling (over 90 days on the market) to sell our own last condo revenue (bought in panic in a heated market = huge mistake), listed at $30K less than we paid for it when negotiated in 2006 and delivered upon build in July 2008 (after the wheels fell off the bus so to speak). Only for sale now due to a tenant breaking contracts back in November, and our softness of not selling it last May when they begged a renewal when their contract came up after a year prior, when if we'd sold we'd have at least broke even from 9 years prior purchase.

Single family homes in the older districts (1960's) under $500K especially if opportunity to rent out basement (income helper), provided they are listed competitively are still moving somewhat, as are single family two storeys around that 1200-1400q ft range in the newer edge communities if priced typically under $400K. However in Calgary area we really only saw the softening occurring in the fall last year of any significance. Over the $700K range I am hearing a ton of folks saying it's dire, exception generally being in the belt line area. We can tell from our front page system, the number of new listings versus pending sales and actual solds updated daily as well how many have expired/terminated = unsold.

Truly not trying to discourage you from doing as you see fit, just sharing what we are hands on, feet on the ground experiencing right now, unlike the reports you read that are weeks lagging typically. In addition hubby and I bought a water lot in Florida at a huge deep discount in the crash of 2009, and yes it is worth considerably more now than we paid to buy and build on, however ............ If we knew then what we know now as they say. Because we can't claim homesteaders being foreign ownership, we pay over 3 times what our neighbours do in property taxes and that cost alone has risen to almost 5 figures per annum. Last year the flood insurance body announced we would be paying a huge premium being non-resident owners on our flood insurance moving forwards to help them get back some of the claims they've paid out a few years ago. When we sell, there is the issue of with-holding tax, as well you are playing with the exchange rates in addition for timing your buy/sell times not just the market timing. We are actually in the process right now of trying to sell that also, and whilst we appreciate different states have different rules, it has put us totally off ever owning any real estate as a foreigner in the USA again.

Of course we are prepping at an age for soon to be retirement, and whilst we have no intention of personally owning real estate again in the future after all sells here, I still feel strongly that long term as long as you consider the market sentiment you are buying in, long term holding of real estate in a well researched economic centre can be a great part of your overall investment portfolio. Albeit we did feel drained dealing with tenants at times, but would concur with others here that it is for sure best to be hands on with your first revenue. 

To keep things in perspective, they are saying that in the USA only 1 in 100 folks are employed in the Oil/Gas industry, and on BNN today they were pointing out the positives in that regards to having low priced oil, but with Alberta being so energy dominant it's quite a different story we are on the ground evidencing. Moving companies are stating for every 13 moves back east/maritimes they are lucky to get 1 return trip back west and even then sometimes it's bypassing Alberta onwards to Vancouver. This oil situation is having a ripple effect on so many other businesses - hair dressers and chiropractors telling us their businesses are down exponentially, some mentioning 45% and more to us in every day travels. Every week I am speaking with IT professionals, executive secretaries/assistants and others that have been laid off, some since August last year, some having set up child care or driving student buses now unable to find alternative suitable employment. Overheard large home builders staff at a Christmas Party talking outside as we arrived saying their home starts were down over 50% last year versus 2014, and someone with a business next to one of their storage yards concurred at a house party that all their vans hardly moved compared to in the past the yard would be empty by 7.30am most mornings. 

I'm sorry this is a little long winded but you have done so well to build up good equity into your recent sale, I'd just hate to see anyone's efforts thus far be wiped out with a wrong move, at the wrong time. One thing about opinions is everybody has them and they are very different, and as much as I hate to admit it, I actually think for once Kevin O'Leary may be right about Canada overall being too much in a real estate bubble in large centres of Ontario and Vancouver. Also his take on Alberta may take many years to recover from the current oil situation stance, that definitely concerns me. Who really knows, but as the saying goes, there's little smoke without fire usually and crystal balls are the fuzziest I've ever known in over 20+ years living working and building in this province. I distinctly recall selling homes here in 1995 for less than folks had paid for them in 1993 also for what it's worth, as well being in 27 car line ups to present offers in 2006 and seeing one home selling for double it's list price. To then watch it taper off end of first quarter 2007, taking until end 2007 for the sellers to believe us that the market had turned, and kept going down for about the next 3 or 4 years before turning slowly back up again. For some that bought right at the peak of the market (especially condos), they were only just about breaking even in 2014, and now they are lagging again from that time frame a decade ago.

Another consideration is whether one should pay their landlord's mortgage or their own especially with current interest rate levels being so low? Of course if Miss' is in a bubble that's about to burst or could it push higher????? then it needs to be seriously considered how long a time frame one would be committing to. I recall back in 2004 at a realtor function a fellow realtor saying to another who had just bought in the new build London "don't you feel the market is too high priced right now?", she retorted back to him "darling in a couple of years this will seem like chump change". She was right, but after 4 years, he was right = go figure, there's never ever an easy answer when it comes to any form of investments, except when decades of time is on our side.

All in all Kaswardy, just remember whilst it doesn't give much return, sometimes when there's so much economic uncertainty at play in so many areas throughout not just a province, country, but the world of late, it pays to sit on our hands and sometimes stay on the side lines in cash equivalents, until we see the confirmed curl in the desired direction occurring. None of us ever consistently buy at the lowest and sell at the highest in anything we trade in, but if we can get the bulk of the range in-between we typically end up way ahead overall in the big picture.

Sincere good luck with whatever you decide to do, and be sure to let us know.


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## hboy43 (May 10, 2009)

Well if it investing is "buy low sell high", have you considered that maybe RE is highish and perhaps stocks are lowish, especially materials?

People in general are so afraid of stocks. My brother wants to retire soon, so recently started paying attention to his money. Figures family net worth including pensions is 3 million. I suggested that oil and gas is on sale now, maybe invest a bit there. So he comes back a few weeks later saying he put $10,000 into XEG. He is somewhat nervous but can kind of see how he might be buying lowish. So i say sure might drop in half yet, just buy another $10,000 if it does. Can't do that, too risky, play money ... Lol. If 10k on 3m isn't rounding error, I don't know what is.


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## JeanJean (Feb 12, 2016)

"buy low and sell high" is good in theory, but a tough call in practice. because low can go lower, and high can go higher. 
look at past 10 years. ask people around you (your friend, colleges ), how many of them have their asset increased by having bought /hold properties in toronto? how many of them gained in stock markets by practicing buy low and sell high?
forget about warren buffett. there is only one buffett. but there are many happy property owners in GTA.

if property drops its price half, will the stock market go sky rock ? or maybe drops more than half? look at 2008 crisis. when house value dropped big time, so did stock market. unless you are a stock picking guru.


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## peterk (May 16, 2010)

Wow. Amazing post will-we-make-it! It's good to hear about the real estate details from an insider. I agree it is a falling knife.

I know several people who bought houses in Calgary and Fort Mac in mid and late 2015 thinking they got a good deal compared to 2013/14...

The stock market reacts much faster than the housing market. If I still see myself in Alberta after an eventual recovery, I will hopefully sell my Alberta stocks at a significant profit, and then possibly move that money into a house and basement level prices. 

Even if oil goes to $100 next week, I still think that Alberta housing prices would continue downward for another year at least, before making a slow and timid recovery in 2017/2018.


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## JeanJean (Feb 12, 2016)

investment in real estate doesn't mean that one has to catch falling knife. alberta isn't the only choice. From perspective of economy growth and population growth, i would think that ontario, GTA to be exact, would be good for real estate investment. a house (detached, semi, or free hould townhouse) is good but it is too expensive for average investors' budget. 
I am not sure if a condo in downtown toronto is a good idea, but I am looking into it. it'll be great if we can do a discussion on it.


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## Berubeland (Sep 6, 2009)

This is your personal residence. It is not an investment it is a place to live. Depending on where you are in your life stages depends on whether you rent or not. Personally I think a lot of people who are buying shouldn't be and buying way too much house for what they need. 

If you have kids and a stable life by all means buy a house you will live in for 10+ years. If you are a young couple there's no way you should buy a 5-6 bedroom house. 

I would say that the idea that your house you live in is an investment is actually a sign of the bubble. It's job is to please you and your family for your everyday living. If you can sell it AFTER YOU ARE DONE USING IT for more than you paid, good. If not you got the use of it for years. It's been 20 years since the market went down in Toronto and the rising tide has raised all the boats. People are not working for this money or added any value to the house, they just assume it will be worth more in a year. 

If you rent, you will not be able to get a long term rental. Your landlord will not make money off the rent and so someday he will cash out his real estate ticket. If you have children in school, you can look forward to moving every few years and that's not easy to be in the same catchment area. You will get to deal with a bunch of ******* realtors for no profit of any kind. It may be very inconvenient timing. No one will care. 

If you are a single guy or couple, moving is not a big deal in fact you may have to move for work. In most cases landlords are subsidizing your rent for that house, so you can live in much nicer house than you could afford to buy. 

There is no easy answer but I can tell you that people who are used to living in their own house will not like being a renter.


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## Just a Guy (Mar 27, 2012)

JeanJean said:


> investment in real estate doesn't mean that one has to catch falling knife. alberta isn't the only choice. From perspective of economy growth and population growth, i would think that ontario, GTA to be exact, would be good for real estate investment. a house (detached, semi, or free hould townhouse) is good but it is too expensive for average investors' budget.
> I am not sure if a condo in downtown toronto is a good idea, but I am looking into it. it'll be great if we can do a discussion on it.


I think you are totally confused on what an investment is. 

It's not that GTA real estate is "too expensive for average investors", the fact is GTA real estate is too expensive to make money. 

Investment isn't "buy and pray it goes up in value", that's called gambling. Investing is buy at a rate where you can make money off of it. There are many ways you can do that in real estate, for example buying, renovating, selling for more (aka flipping). You add value, and sell for a profit. 

Another method is to buy and rent it for a positive cash flow. 

If the math doesn't work for these, or other methods, then it's not investing. Counting on the market to go up, because it always goes up, is stupid. It's pure gambling. Saying a correction will never happen is just lying to yourself. Don't believe me, go back to Alberta two years ago and see what was being said. 

If the prices are too high, they are too high. It happens all the time in every market. Think of the .com of the 90's. While the market may yet go up, you can't time the market in either direction, doesn't mean that prices aren't too high. 

Real investors know when the numbers are wrong. It's called math. Better to avoid some "profits" to protect yourself in he long run. 

That being said, if a property came onto the market at the right price, I'd buy it. Those are few and far between these days. Only a fool jumps in just to be in the market. Patience is very important in being successful. Doubly so in real estate.


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## Rusty O'Toole (Feb 1, 2012)

Jumping into real estate as an absentee landlord is a bad idea. Instead may I suggest you buy a house with a basement apartment or granny flat? They sell for only a little more than an ordinary house and can give you $700 a month or more. If you do this be VERY careful and choosy about who you rent to.


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## kaswardy (Feb 18, 2016)

Thank you Willwemakeit for such a detailed response. You and the other posters have talked me out of owning a property outside of my home town. I have gone back to the drawing board and evaluating a couple of options on how to best spend the savings. I am certain that I'll be out of the real estate market and potentially see other year long investment options.


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## spirit (May 9, 2009)

I have a son who just moved back to Edmonton after working in Calgary for 3 years.....he is in his early 30's and living in his brother's basement. He also would like to buy a home but his job is still temporary after 8 months......dependent on someone who is out on sick leave. He knows that he SHOULD not buy a house right now but he also has 100000 saved.......60 from an inheritance and 50 on his own.....he wants to keep 10000 aside for emergencies.

I am counselling him to keep on saving his money........his girlfriend is living with him now and going back to school for upgrading......

The only thing different from him and you....I think (; is that he would like to be in a home in a year or so if he job becomes permanent......but he too thinks home prices have more to fall.......otherwise I would suggest that he put his money into a GIC for a couple of years........until he definitely knows what he wants to do


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## kaswardy (Feb 18, 2016)

What about booking property under development? If due diligence is made on booking the right one, is there reasonable money to be made? I understand that I'll be needing to pay taxes on it, but I assume it is usually available cheaper. And since I won't be in the country it is a safer bet than having tenants in your home.

I am self-employed so I do have flexibility and can go all out in doing research and visiting locations.


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## Ottawa Realtor (Aug 16, 2015)

Just a Guy said:


> I think you are totally confused on what an investment is.
> 
> It's not that GTA real estate is "too expensive for average investors", the fact is GTA real estate is too expensive to make money.
> 
> ...


I have to say Just a Guy is probably one of the most knowledgeable persons on this and any other blog on real estate. I have regular meetings on real estate investing and I find many people that come to the meetings have the perception that somehow they can double their money overnight. The problem with 'newbies' is that they believe the sales pitches they hear in some of the seminars instead of educating themselves and understanding the numbers and the local real estate. I recall a previous blog with a Toronto owner claiming his property was 'recession proof'. This kind of unsupported belief is just wishful thinking that can get you into trouble. People should educate themselves and learn the basics like how to calculate cap rates (properly) ROI, NOI, TOI, etc. Also be realistic about the price of a particular property and the rental amount as those are probably the most important numbers to get right.


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