# Vancouver condo or Burnaby House?



## Y&T2010 (Dec 29, 2009)

I am starting to look around... it will be my first home.. so I want to make sure I make a good decision.

I'm not sure if everyone is familiar with Vancouver, but here are my general two options: I am partnering up with my boyfriend for a place that is around the $600,000 range (believe me, that doesn't get you much at all here)


1) buy a new (or 10-15 year old condo or townhouse in Vancouver (central to everything)
downsides are having to pay the monthly strata fees, not owning your own land, and not having as much appreciation as you could with a house, wont' be able to rent out a mortgage helper in the basement because. well, there IS no basement!

2) buy a 50 year old+ house with lots of land in Burnaby (a suburb of Vancouver). The downsides here is that it's really old (not sure if we have enough money to renovate and repair if anything goes wrong), no one will probably WANT to rent in that area because it's suburbia-ish, and I'm not sure if Burnaby will appreciate.

Any Vancouverites out there who who think Burnaby will appreciate in home value?

Our plan is investment+ first home. We want to have it appreciate in a few years.

What do you guys think? 1 or 2? I'm undecided... part of me really wants to stay in Vancouver... but it's so $$.


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## Potato (Apr 3, 2009)

What about option 3: rent the one that will bring you the most enjoyment (which from the sound of your post, would be a condo in the centre of everything)?

Examine your assumptions: what makes you think that either would appreciate at all? It's one of my personal hot-button issues, and I've written about it a number of times, but at this point in the game I think you can expect that there will be a decline in house prices over the next ~3-5 years. In many places, esp. Vancouver, it's cheaper to rent a place and save your money than to buy.

Here's a pair of examples from MLS:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8994041
http://www.realtor.ca/propertyDetails.aspx?propertyId=8948749

Right in the description they say that those units, at $350k and $400k, are rented at $1250 and $1350, for a rent multiple north of 250X. It's much better to be the renter than the owner of those units.

Some of my blog posts on the topic:
http://www.holypotato.net/?p=752
http://www.holypotato.net/?p=404
http://www.holypotato.net/?p=714
http://www.holypotato.net/?p=499
http://www.holypotato.net/?p=674

There are also some long threads on RFD and other places to read up on the potential for a downturn in Canadian housing. Given that it's the biggest financial move you'll make, it's worth spending a weekend or two catching up on the reading, making your own budgets/spreadsheets, and at least making an informed decision, even if in the end you disagree with me.

Finally, accounting aside, another reason to consider renting is the fact that you said "boyfriend" -- granted, all semi-permanent relationships start at the boyfriend stage, but are you sure you're ready to buy a place together? It can be quite difficult to split up afterwards... Also, you said you don't have a reserve for repairs if something goes wrong. Owning is riskier than renting, so at the very least rent for a few years until you build up that emergency fund.


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## Spidey (May 11, 2009)

All we can give are personal opinions, so it may or may not be appropriate for you. 

I used to live in the Vancouver area and have previously owned a condo in Surrey, a condo townhouse in Richmond, a condo in Harrison hot springs and a house in Richmond. 

In each case, the condo ownership drove me crazy. Unfortunately condo boards seem to be made up of a bunch of anal-retentive, busy-bodies who try to poke their nose where it doesn't belong. Some of the things I've put up with - condo boards dictating what kind of curtains we could have, threats to charge us $250 to clean up a very tiny oil mark in the parking (they could have just asked us before threatening), complaints about us sharing our townhouse with my brother-in-law and his girlfriend (we were childless at the time so it was a total of 4 people in a 3 bedroom unit), harassment of guests when we lent out the Harrison unit (it was a recreational property) . . . . you get the idea. The worst of all, IMO, was the voting in of excessive contingency funds. Every condo must put aside contingency funds for repairs but the condo board always tries to drastically increase this amount. People think of this as "saving for a rainy day" or "money in the bank" but it is much better to save for a rainy day in your own account than in the condo account. If you ever move those savings are gone. 

So as much as I very highly value living close to work, I would vote for buying the property in Burnaby.


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## leslie (May 25, 2009)

1) I would never buy realestate with anyone who only qualifies as "a boyfriend". The transaction costs preclude any presumption of profits on quick flips unless value are sky rocketing.

2) You state you want quick profits. No doubt before you split up and have to sell. The question is: for how long can prices keep going up? A strategy works until it doesn't. How on earth can we tell you if prices will go up?

3) The property listings above show that operating returns are only 3% (plus capital gains). 
Rent save $1250 * 12mo = 15,000
Fees $193.90 * 12 mo = <2,327>
Insurance, repairs etc = <1,000>
Ppty tax = <1,000>
-------------------------------------
Return = $10,673 as a percent of cost ($349,00) equals* 3%.*

Do you really think that 3% is adequate if there is NO capital gains? Consider also that you will probably be borrowing at a rate greater than that, giving you a negative operating return on the portion mortgaged.

4) Totally agree with the comments on owning Strata's above. But the reality is that the problem exists because the vast majority of owners don't give a hoot. So by definition, the problem does not exist for them. You have to decide which side you would be on.

5) Totally disagree with your statement that you cannot get anything under $600,00. I live downtown and know full well that $600,000 is what you pay when you want only 'new' and 'view'. Nothing but the best.
-------------------------------
This idea smack of pillow talk, probably started by the partner withOUT the savings for the downpayment.


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## Y&T2010 (Dec 29, 2009)

Thank you all for your great feedback and opinions!

I should clarify, I know I say my significant other is a boyfriend, but we have been dating for almost 5 years and are thinking of tying the knot in a few years. Perhaps I should have used the term "partner" 

I will think twice about condo ownership. Having your own piece of land to call yours must be nice... 

Thanks for the feedback re: strata council and meetings and the emergency funds. I didn't know about all that.

Leslie, I have thought about the idea of "splitting up" and the what-ifs, really, who knows if the market will go up any further? The idea of long term appreciation is long term, not in a few years. People who buy must be able to weather out the storm.

Thanks everyone for your feedback, your has really helped me put things in perspective. I really appreciate it.


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## seven3 (Apr 4, 2009)

I recommend waiting a bit and saving a bit more. 

As you mentioned, $600k doesn't buy you any "liveable" house in Vancouver / Burnaby. You would need to put some $ into renovations and also have a contingency fund for repairs since the home is likely to be 50+ years old in that price range.

Or, buy a newer place in New Westminster or Surrey, for $550 you can get a nice semi-new house...


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## Y&T2010 (Dec 29, 2009)

@seven3, thanks for the recommendation on holding out a bit.

I think I am going to hold out until the summer time at least to see what happens. I am kind of hoping for the interest rates to go up, so that the housing prices will go down.

I'm waiting for that possibly fictitious housing bubble to burst.


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## Potato (Apr 3, 2009)

Y&T2010 said:


> I think I am going to hold out until the summer time at least to see what happens. I am kind of hoping for the interest rates to go up, so that the housing prices will go down.



As much as I have high confidence in rates going up and housing prices coming down, I would be quite surprised if it happened this summer (at least the more important latter part -- I won't be too surprised if rates jump in late summer). If you are going to wait for sanity to return, you'll have to be prepared to wait several years. The housing market works on a slow cycle.


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## ssimps (Dec 8, 2009)

Potato said:


> As much as I have high confidence in rates going up and housing prices coming down, I would be quite surprised if it happened this summer (at least the more important latter part -- I won't be too surprised if rates jump in late summer). If you are going to wait for sanity to return, you'll have to be prepared to wait several years. The housing market works on a slow cycle.


And waiting for prices to drop may mean you are also waiting for interest rates to rise. There is always a catch I guess. So what makes sense for you depends on things like how much you have to put down on the house, how quickly you can pay the mortgage off, and if you really think that once you buy a house you will stay in it for a long time period (5-10+ years), or end up deciding to sell 2 years later.


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## Y&T2010 (Dec 29, 2009)

Yah, you're both right. The housing market cycle IS really slow-- matter of years rather than months, right Potato?

They announced that they're not planning to raise the interest rates anytime soon. Prices usually go up in the summer, too.

Guess I should get back to looking around!

Thanks guys!


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## Potato (Apr 3, 2009)

Y&T2010 said:


> Yah, you're both right. The housing market cycle IS really slow-- matter of years rather than months, right Potato?
> 
> Guess I should get back to looking around!


Well, that wasn't quite the take-home message, but if that's the way you want to go with things, hey, it's your money!

If you're looking at a $600k house/condo, and there's a correction of say 20% brewing, then by just delaying and renting for a few years, you could have an extra $120k to work with. Money is a means to an end, and less spent on housing means more for vacations, cars, early retirement, etc. So do whatever will make you happiest. For me, spending a few years not owning my home (which to me is every bit as much home sweet home as if I owned it) is well worth the potential payoff in a few years' time. Not to mention the added flexibility and reduced risk at this stage of my life. But if "pride of ownership" has a six-figure price tag for you, then go nuts.

In that case, you'll probably want an answer to the question you originally came to ask, rather than us looking through to the deeper question of whether to buy at all. Again, I'd say look for what will make you happy: do you really want to have to deal with a tenant in a "mortgage helper"? Do you loathe the idea of a commute? Or, do you need a yard and greenspace to call your own, and couldn't deal with the press of humanity in the city core? Only you can decide, but these are the sorts of issues for you to decide on and put values on.


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## Y&T2010 (Dec 29, 2009)

Potato said:


> Well, that wasn't quite the take-home message, but if that's the way you want to go with things, hey, it's your money!
> 
> If you're looking at a $600k house/condo, and there's a correction of say 20% brewing, then by just delaying and renting for a few years, you could have an extra $120k to work with. Money is a means to an end, and less spent on housing means more for vacations, cars, early retirement, etc. So do whatever will make you happiest. For me, spending a few years not owning my home (which to me is every bit as much home sweet home as if I owned it) is well worth the potential payoff in a few years' time. Not to mention the added flexibility and reduced risk at this stage of my life. But if "pride of ownership" has a six-figure price tag for you, then go nuts.
> 
> In that case, you'll probably want an answer to the question you originally came to ask, rather than us looking through to the deeper question of whether to buy at all. Again, I'd say look for what will make you happy: do you really want to have to deal with a tenant in a "mortgage helper"? Do you loathe the idea of a commute? Or, do you need a yard and greenspace to call your own, and couldn't deal with the press of humanity in the city core? Only you can decide, but these are the sorts of issues for you to decide on and put values on.


Awe thanks Potato. You guys have really helped me "look deeper". I think I do loathe the idea of a commute, I want a yard and greenspace... *sigh* I want it all. Don't we all, huh?

I'll keep you guys updated. Housing sales in Vancouver has gone up 127% since December of last year, and there's less real estate available to buy.


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