# Sell house for a loss?



## wondering (Aug 7, 2011)

Two years ago, I bought a house for $360k. But I am starting to realize that home ownership is not really for me. I can comfortably pay the mortgage (20 yr amortization but I'm currently paying it off as if it is 10 yr) but the fact that I have a mortgage sometimes stresses me out (it goes in phases). I am also getting tired of the yard and house maintenance, the inability to be away for long periods of time etc.

I have been thinking about whether I should sell the house and move back to a small rental apartment. If I did, I would lose quite a bit of money (maybe around $30-35k?) due to the falling house price and agent fees. But on the plus side, I would have the remaining 120k equity in the home that I could invest elsewhere and my monthly cost (i.e., rent vs. mortgage interest plus property tax plus utilities plus maintenance) would drop by about $350 per month.

What do you think I should do? Just accept that a bad decision was made, take the loss, and hope to recover the lost money over the next few years by having lower monthly costs and more investment money (instead of it being tied up in house equity)? The initial 30-35k loss would be about 10-15% of my net worth. Or not worry so much, try to hang in there for another 1-3 years and hope that the house price goes up a bit?

I would definitely sell if I knew that I could break even. I am leaning towards selling now but can't get over the thought of losing 30-35k. I also worry that by selling, I would be making a second bad/rushed decision (the first being buying the house in the first place).

Thanks for any advice.


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## peterk (May 16, 2010)

It's only a place to live. If you decided to rent a house two years ago and now were sick of it, would you want your 30k in rent back? It's no different - just a place to live. 

What is your other option anyways? You are unhappy with your current living arangement. Move out and move on.


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## kcowan (Jul 1, 2010)

Looking at history is always troubling when making a decision. It is why people are often reluctant to sell a losing stock and hang on during price swoons.

Just look at your alternatives going forward and decide what is the best alternative for you.


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## Lephturn (Aug 31, 2009)

wondering said:


> I have been thinking about whether I should sell the house and move back to a small rental apartment. If I did, I would lose quite a bit of money (maybe around $30-35k?) due to the falling house price and agent fees.


Save the agent fees - why not use something like Grapevine and save yourself several thousand dollars?

I've used it to both buy and sell this year - just have an RE lawyer and you can set your own price etc. You are not rushed, so this gives you a lot of flexibility.


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## Berubeland (Sep 6, 2009)

If you hold on you may lose more even. No one can really say.


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## Cal (Jun 17, 2009)

Out of curiosity what city do you live in?


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## wondering (Aug 7, 2011)

Thanks for the replies so far. I live in St. Catharines, ON. I've looked into selling on my own but I wasn't sure how successful it would be given the slow market. I think it would make sense if there are a lot of buyers and houses are easier to sell. But regardless, the consensus seems to be that I should try to put this behind me and move on so to speak. If I do, I'm sure I'll be able to post in the worst financial mistake thread...


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## sags (May 15, 2010)

Go wherever makes you happy.

People buy cars, furniture, electronics, take vacations, etc and they don't expect to get all their money back.......so why should a place to live be any different?

I belong to a Facebook page from where I retired from. Almost every day, I get a notification of another one of my co-workers and friends getting sick or biting the dust. Life is too short to worry about a buck here and a buck there.

Go wherever makes you happy...........and enjoy the lifestyle.


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## eggroup (Mar 29, 2011)

I personally agree with selling-and-not-looking-back strategy.

You know "it worth money" being unhappy and worried in your life, don't look at the 30-35K as loss, you will (buy) your happiness with it.

I also agree with what (sags) said.

Move on man, it's not the end of the world!!!


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## dogcom (May 23, 2009)

Buying your own house is a life decision and a money decision second. If it is not to much bother and this is where you are truly at, then sell and recover. 

The only thing I would say is you sound a little lazy and a bit of a quitter. Everything takes work or you pay someone else and make less doing so unless your time is more valuable.


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## Cal (Jun 17, 2009)

Would you trade the temporary stress of carrying the mortgage, and the inability to be away for long periods of time etc. for the 30-35K?

Have you considered hiringing someone to do the yardwork and housekeeping?


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## carverman (Nov 8, 2010)

sags said:


> People buy cars, furniture, electronics, take vacations, etc and they don't expect to get all their money back.......so why should a place to live be any different?


Cars and electronics are disposable/depreciating time constrained articles..
you don't expect to get your money back..only value for actual use and enjoyment.
Cars and electronics depreciate as soon as they leave the store in most cases. 

Vacations..well that's a personal thing..if you can afford it, take it and
spend money you would otherwise not spend but it only has short term enjoyment value..and maybe some longterm memories and videos or photgraphs. 

*Now real estate is another thing entirely.*

The *difference is equity *through paying that mortgage and in general, real estate prices go up with inflation and the local markets. Mind you in recessionary
times, there aren't as many buyers out there looking to buy, so real estate
prices stay flat.

But this is why it's called REAL estate. It is a physical item that you can 
buy and sell, and provides a real value to your physical person..SHELTER!

Unlike stocks and other investments that can make you a millionaire on paper
or vaporize into thin air if the market crashes..no matter what you lose on
paper, you still have a home to live in! 

However, if you stick to a plan, real estate prices will usually double every
10-15 years on average, barring any financial catastrophe due to recessions
or even a depression. But if that happens everyone with a mortgage loses
in POTENTIAL property value, unless you panic and sell low. 

Sooner or later things have to improve in the economy, so the markets
will reflect that as well in real estate prices. If you rent, you are also pinned
down with a lease. You *pay that monthly rent no matter what the economy
is doing *or your personal finances/job being affected by economic hard times,
unless you sublet the apt or house with the landlords permission. 

That is the way it is with renting and that is the way it is with mortgages.
The difference is with the first you just pay for use only. 

So I see owning real estate as a "true value in one's life" in several ways. 

1) You will ALWAYS have a roof over your head in constantly esculating rental markets.

2) You own the property, (provided you pay the property taxes), and you
can make any improvements or changes as you wish

3) Real estate values will increase over LONGER time periods, but if you
buy and sell within a shorter period..you could lose because the cost of selling with agents, legal fees, moving and other things.

While there are cheaper ways of selling your home, they can be a hassle
with "tire kickers" constantly interrupting you to see the place rather than
arranged scheduled "open houses" and viewing by real estate agents.

I bought my (after divorce) house in 1996,for $121K, 
(after my ex kicked me out of my own home and rented it out to make some income for herself at my expense! I'm still mad about that! ), 

Today,my house that I bought in 1996 IS MINE, *nobody can ever kick me out of my own home again, no lawyer, no judge as long as I pay my property taxes*. It is worth at least double what I initially paid for it. A similar place to mine down my street was listed for $315k recently and has been sold. I also have made some improvements to mine over the years as well as living mortage free for 
over 10 years now!

I sacrificed an RRSP,choosing to cash it in and pay off the mortgage. 
Paid a whopping income tax hit over the 2-3 years that I cashed it in, but
I have saved myself nearly $100K by doing it that way instead of paying
it off gradually, and having the greedy banks reap the profits from my after
tax income over the last 11 years! 

Prior to buying my own house, I lived in an apt for a 1yr (lease) and hated it. 
It was a lot more hassle with neighbors kids screaming/banging on the walls,
being locked out by the automatic doors, dealing with snow and ice
at an outdoor parking spot that they charged me $30 a month more back
then. I had to pay for electricity (electric heat), electric hot water tank
rental as well, so it was no bargain back in 1995 at $900 + $30 + $35 for
electricity. 

If I had to continue renting at well over $1000 a month today,
I would have spent: 16 yrs x 12 months x $1100 = at least $211K 
(and probably a lot more)by now.

Instead, I bought my place for $121K with $10K down, and paid off the
$635 monthly mortgage within 5 years, by cashing in my RRSP in 2000.
Over the last few years, I have saved at least $78K by not having a mortgage
and my place is worth probably around $280K today's real estate market in
my area of Ottawa.

So lets do the math here..

Initial cost: $121K
After tax mortgage savings paying it off early: $78K
Estimated value of my house today: *$280K*
Tax free money in my "pocket" (or realistically my net worth today) = 
(280K minus 121K + 78K mortgage savings = $237k PLUS a roof over
my head for 16 years! 

If I continued to pay rent over 16 years....$0 equity and $211k in the
landlords pocket!
Thus sayeth the old (battle weary & experienced some hard knocks in life) "Carver".


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## dagman1 (Mar 3, 2010)

Carverman: The adage "you can rent money or you can rent space" will always resonate with me.

If you think objectively about your home, it's only appreciated 5.45% over the years (plugging in Jan. 1, 1996 as the buy date). Now subtract interest on your mortgage, property taxes, and maintenance. I'm betting that your house has actually returned negative. Now that's not to undermine your decision to buy a house. But only to make the point that there isn't inherently anything better about buying from a financial standpoint, and that home owners often overestimate their returns from their property.


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## andrewf (Mar 1, 2010)

Carver's calculator only adds and doesn't subtract. He never deducts all the money he has spent on his property in improvements, maintenance, insurance, taxes, and utilities from his gain.


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## MoneyGal (Apr 24, 2009)

And opportunity costs on the downpayment and the monthly payments.


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## DanFo (Apr 9, 2011)

It sounds like you just don't like being a home owner, it could be better to cut your losses and move on if your home makes you feel restricted and it's a burden to you. I'd look into your future first before selling...wife/kids and if renting is fine in those situations for you since selling a house at a loss only to rebuy another house in the near future is going to generate more costs.

I'd had similiar feelings after I bought my house but I need a place to live and the difference between rent/mortgage isn't to big. Maintenance you just get used too and I've never worried about being away from the house for a lenghty period of time I just have a neighbour check in on it once a week while I am away. I also plan on being here for 25+ years. Eventually I'll have no mortgage and the balance will be tipped the other way (I pay $4.11 in interest to live in the house each day ..getting cheaper every other week  )...Sure I might have lost some investment oppertunities but the investments that I have made since i have had the house haven't really outperformed the increase in my property value with the markets swings these days (they did well before the bank colapse).


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## dogcom (May 23, 2009)

Danfo is right get used to getting your hands dirty and do a little maintenance. You will learn stuff as you go and will build up equity and so on as the time passes by. I also don't think anyone who has bought house in a decent location and city has done better from investments on this forum in the last 20 to 30 years. They all like to talk about the numbers and so on but it never is the way they say it is.

At this time however one does need to make good investments and save a lot to buy a house today. I do also believe this generation will have a much harder time affording a home then we did in the past and our fathers generation had it easier then us. We will need belguy to verify this because it sounds like he has lived before even cars were invented. I know no one has ever really had it easier it is just that inflation helped a lot to those who bought before. Also high interest rates were a big help keeping a lid on prices and being so high gave a lot of room for them to come down which can't happen now.


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## Oldroe (Sep 18, 2009)

Why not turn it in to a rental. Hire yard maintenance, handy man repairs ect.

And you will be the tenant.


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## larry81 (Nov 22, 2010)

Sound like a condo might be the best for you, no maintenance hassle


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## kcowan (Jul 1, 2010)

larry81 said:


> Sound like a condo might be the best for you, no maintenance hassle


Anyone who claims a condo is no hassle has been very lucky living in their condo. Restrictions that are capricious, high HOA fees and special assessments are the norm.

To me the only advantage to ownership is the exceptional financial leverage that you are forced to take on. Everything else is emotional. Not that emotions aren't important.


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## drip99 (Aug 27, 2009)

Get a student renter to help with mortgage


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## carverman (Nov 8, 2010)

dagman1 said:


> If you think objectively about your home, it's only appreciated 5.45% over the years (plugging in Jan. 1, 1996 as the buy date).


You strike an interesting argument.

Ok, if I had $121K in the first place, (rented my living space instead of buying
at say $1000 per month) and invested $121K (1996) in a safe interest bearing investment over 15 years, how much would I have today?...
considering:
1) the banks pay diddly squat compound interest
2) the government taxes you at your effective tax rate on that interest
3) The real rate of inflation is closer to 5% per year, not the propaganda
that Stat's Canada give you on a few staple items. 



> Now subtract interest on your mortgage, property taxes, and maintenance. I'm betting that your house has actually returned negative.


Mortgage payments, property taxes and maintenance are included as cost
of living somewhere. 

If you pay rent, the landlord's portion of property taxes and building maintenance are built into his rental price...you don't actually think that the
landlord pays that out of his own pocket do you? ..it all comes from the
renter..it's a business. 



> Now that's not to undermine your decision to buy a house. But only to make the point that there isn't inherently anything better about buying from a financial standpoint, and that home owners often overestimate their returns from their property.


Look at this way..unless you can live in your parents home for FREE..
...*your personal living space is going to cost you*one way or another.

If you rent your own personal living space at say..$1000 a month..
it's going cost you $12K per year..money that is paid out in exchange 
for living space.

If you can swing the downpayment (10%) to get a conventional mortgage
from the mortgage lenders, and the mortgage payment is $1000 per month,
it is going to cost you the about the same for a few years, until the interest payments on the $110K you borrowed starts to come down at the point
that you are finally starting to pay off the principal in greater amounts each
month..over a 20 year amortization period.

RENTING:
So over 20 years...(assuming here there isn't any renter's lease increases, which there always is), you have paid out $240K by renting..that money is no longer available to you as equity....or "money in the bank", but you got accomodation from paying it.

BUYING: Again using my amount of $121K with a 10% down payment leaving
about $108,900 left to pay at $775.58 a month for up to 20 years at 6% interest... you have paid $186,139.20 over 240 payments to the mortgage
company. Cost of borrowing that $108,900 = $77,136. 

Assuming no serious Canadian real estate market crash AND you have to sell
during the crash period, your home should appreciate modestly every year
in that 20 years. Let's keep the math simple...lets say it appreciates up 50%
in 10 years due to inflation and it is double the initial purchase price in 20 years.

So now after 20 years, I have paid off the mortgage and have at least 
$242K of equity in it. Ok, over 20 years, I have to invest some money in
repairs, (new roof, A/C and heating,etc), these are maintenance costs and
need to be added to the cost of owning,. (Lets say the roof costs $5K
and the heating/ A/C replacement cost $8k ..about $13k + paint
etc) for a total of $20k on maintenance over that period. 

And lets suppose the taxes on my property, (which go up every year ), are pegged at $3k per year over these 20 years...($60k). 
Utilities don't enter the picture as you have to pay those whether you rent or own.

So in simple terms: $242K equity minus $80k taxes and repairs, 
leave me with $162k of equity left. While that seems to be "negative" returns 
it is still tax free money.. if I chose to sell.

If I rented for 20 years, I would have paid out $240K. 

If I live in my own house for 20 years, (mortgage paid off even sooner)
it cost me $186K in mortgage payments over 20 years) + 80K in repairs/taxes
for a total cost of owning my own home at $266K. 

Chances are that in today's market, my house has appreciated that much
and is worth at least what I put into it (in the last 15 years) by my ACCELERATED MORTGAGE PAYMENTS + paying off the mortgage early
within 10 years of the 20 year amortization. 

So lets say I actually saved 50% of that $77,236 in interest payments
($38,618 by paying it off earlier)..so now I can subtract the
early mortgage payout savings onto the total cost of owning 
($266K minus $39K) ...giving me (roughly) a real cost of ownership $227K.

Lets say if I was going to list it at $266K. 
and I would get $260K for it minus $18K (5% comm+ legal+hst) = $242K

That $242K is tax free money in my pocket after living there for 20 years.

I didn't have $121K available to invest when I bought it, so that is really
a moot point, no matter how much that $121K would have brought me
in returned compound interest over 20 years MINUS the income tax I
would have to pay on the interest each year for 20 years.

Maybe the compound interest would have doubled at 6% compound interest
over 20 years, but we know the banks are not paying that kind of interest
so that is a useless argument, but assuming interest rates had stayed the
same over 20years.

Equity realized from owning and paying off mortgage earlier: $240K PLUS.

Renting: Invested $121K in secure savings but paid out $240K in rent?

Would I really be further off ahead in 20 years if I had rented instead? 
Is my decision on home ownership bringing me a negative return on investment?


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## carverman (Nov 8, 2010)

andrewf said:


> Carver's calculator only adds and doesn't subtract. He never deducts all the money he has spent on his property in improvements, maintenance, insurance, taxes, and utilities from his gain.


Andrew; Blame it on my Dollar Store calculator..that I had to pay $2 for.

Improvements are done for yourself in the process of living.

Repairs are done out of necessity.

Insurance is a necessary evil but without it if I had a total fire, I would be on
the street like a penniless bum, because I couldn't afford the rebuild costs
these days.

Taxes, what can I say about taxes, you pay taxes no matter what.
If you rent, you are indirectly paying the landlord's taxes in your monthly rent.

Utilities: What does that have to do with anything concerning investments
or equity? 
The fact is you pay utilities whether you own or rent. Perhaps not the water/sewer charges if you are renting, but the landlord would factor that into the rent equation in any case.


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## NotMe (Jan 10, 2011)

@ Carverman - given that you invested $121,000 in a fairly risky investment (real estate is risky, just ask anyone south of the 49th parallel) you should also compare how'd have done investing in something other than a gic.

In 2010, $121000 saved in 1996 would be worth:

•$191,000.00 if saved in a short-term asset.
•$288,000.00 if saved in a long-term asset at a term of 3 years.
•$281,419.86 if saved in a S&P portfolio with dividends reinvested.
•$383,000.00 if saved in a gold portfolio.
http://www.measuringworth.com/calculators/ussave/result.php

I think the point overall is simply that homeowners (of which I am one) tend to overstate the value of their homes and understate all the other expenses tied to it. Plus there's a hell of difference between buying a house in Toronto when you did (1996) or even when I did (2007) vs today.


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## dagman1 (Mar 3, 2010)

Okay, first of all, you are making a lot of assumptions to help your argument.

No one gets a 20 year mortgage, your assumptions on the interest paid should be on a 30 year mortgage. Especially no one gets a 20 year mortgage then accelerates down payments to pay it off in less than 20 years. But what's more, if someone did such a thing, you have to take the difference between market rent and cost of a mortgage payment plus accelerated payment, and assume that this money is invested. Another critical assumption of 100% appreciation over 20 years is very, very optimistic given the run up in real-estate in the past 10 years.

Even with your very optimistic assumptions, the cost to acquire that $242K asset (optimistic because of the recent run up in RE) was $77K interest (optimistic because it assumes a 20 year mortgage) + $60K taxes (fine) + 20K maintenance (optimistic as any homeowner knows this would be a dream), providing a $85K gain. Over 20 years that is $4,250 a year. It's not much of a stretch to think that if the money saved between the mortgage payment and market rent is invested someone could accumulate a $85K portfolio.

But most importantly what prices and market rent were 20 years ago is meaningless today. All that matters is what prices are relative to market rent TODAY and what you believe their respective appreciation the NEXT 20 YEARS will be. In fact, if you wanted we could go back and determine with absolute certainty whether your house was a good investment or not, all we'd be assuming is a portfolio rate of return. But that's not the question were trying to answer.

Please watch these videos, they explain better than I could:
http://youtu.be/YL10H_EcB-E
http://youtu.be/QA2TBiIsdT0
http://youtu.be/mtL_plJXv3c


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## carverman (Nov 8, 2010)

NotMe said:


> @ Carverman - given that you invested $121,000 in a fairly risky investment (real estate is risky, just ask anyone south of the 49th parallel) you should also compare how'd have done investing in something other than a gic.
> 
> In 2010, $121000 saved in 1996 would be worth:
> 
> ...


I'm not trying to overstate the value of my home. For most of us these
days, that is the only type of real estate that has some equity..well
short of our "final real estate" - 3ft x 6ft L x 8 ft D), that we
might own permanently after we are gone.

Those figures shown are not without tax consequences or some risk.

If I had that kind of money back in 1996,at age 50 after a bitter 4 year struggle/divorce that cost me over $200K in lost equity and HUGE legal fees..I certainly wouldn't be putting it into ANY investment with risk. 

Besides, if I happened to have had that kind of savings during before the divorce in 1998..50% of that $121K would have been gone! 

So the moral of the story is ..if you can't afford to lose it..don't invest in
any risky investments!... and secondly don't get married!

In my case, with my declining health and age, I was lucky that I was able
to pay off a $100K mortgage in less than 10 years..BUT it took some sacrifice..
I had to cash in what was left of my RRSP after divorce.


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## carverman (Nov 8, 2010)

dagman1 said:


> Okay, first of all, you are making a lot of assumptions to help your argument.
> 
> No one gets a 20 year mortgage, your assumptions on the interest paid should be on a 30 year mortgage.


I'm not denying the fact that most people will stretch out their mortgage
payments over a longer period of time..and if that is the case, then the
economics of the decisions change drastically. I'm not going into those
cases however, because I didn't have (possibly) 30 years to pay off a
mortgage when I bought my place in 1996.
I was already 50 then, and certainly had no intention of paying a mortgage
from a fixed retirement income to age 80!

What I wanted was a my OWN place! Something I can call my own and
nobody, no judge or lawyer could come after me and take my own home
away..because of divorce or any legal issues ever again!

To me at that point and now, my house is more important than any money
in the banks or paper investments. Real estate is something "real"..
a roof over my head. That gives me more comfort than having several
hundred thousand in the banks that the gov't could possibly tax me on 
each year, or tax my estate after I'm gone. This is my POV these days. 



> But what's more, if someone did such a thing, you have to take the difference between market rent and cost of a mortgage payment plus accelerated payment, and assume that this money is invested. Another critical assumption of 100% appreciation over 20 years is very, very optimistic given the run up in real-estate in the past 10 years.


Well the old saying goes.."different strokes for different folks"..at this
point in my life ( ie: the last 25% of my expected life, with my health 
on decline, I couldn't care less about having "hundreds of thousands"
in various investments.. rather what I have..MY house,
is more important to me at this point. 



> Over 20 years that is $4,250 a year. It's not much of a stretch to think that if the money saved between the mortgage payment and market rent is invested someone could accumulate a $85K portfolio.


That is true, if one still has the money from the difference to invest. 
I don't now, due to the economy and bad Nortel management going bankrupt
resulting in my DB pension benefits to be cut by $865 as of Jan 1, 2009. 
Now, I just have enought to live on and pay my taxes and living expenses.
I'm just glad I don't have a mortgage payment at this point!




> In fact, if you wanted we could go back and determine with absolute certainty whether your house was a good investment or not, all we'd be assuming is a portfolio rate of return. But that's not the question were trying to answer.


At this point in my life, I really don't care how good (or bad) an investment
my house is.

1. I am 65 and have a life expectancy to 80 (if I'm lucky to get there).

2. Short of selling in the next 15 years, because I have to rely on
a wheelchair due to my health decline, I am NOT planning on selling.
Once I'm gone, any remaining assets will be distributed according to my will 
and any of the gov'ts money in my bank accounts would not help me..
but only help the gov't because CCRA can still tax my estate holdings. 

3. Unlike any paper investments in the various financial institutions, 
my house , gives me comfort and shelter. You can count all the money you
have on paper..but unless you cash it in and use it..it's just a net worth
on paper..that's all it is..and CCRA will ensure that you pay your fair share
of taxes on it..unless it's deferred tax investment.


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## carverman (Nov 8, 2010)

dagman1 said:


> Please watch these videos, they explain better than I could:
> http://youtu.be/YL10H_EcB-E
> http://youtu.be/QA2TBiIsdT0
> http://youtu.be/mtL_plJXv3c


These videos are not realistic to my situation in any stretch of the imagination.

It's fine for someone in living in the US (in Silicon Valley CA) to determine 
whether it's a good investment of their after tax income to rent or buy at inflated real estate market prices, a $1million dollar house in economic boom years. 

As a Canadian high tech worker, working for much lower salaries and
also paying 50% of my salary as court ordered garnishment support payments
to my ex and daughter attending university, this would be totally unrealistic
in my case. 

I was lucky after being "taken to the cleaners" by the Ontario divorce courts to have enough of my salary after tax to muster up a small down payment.

Besides, unlike the US, mortgage payments are not tax deductible here in
Canada. The mortgage payments in Canada are after tax, and remain that
way. About the only saving consolation we have as home owners ( because
we can't claim the mortgage payments as a income tax reduction on our own
personal residence), is when you go to sell your own personal residence property you are not taxed again on the actual sale.
That allows the principle residence owner to acquire some equity over longer periods of time. The gov'ts can still tax us on the selling commission and legal costs of selling. 


However, this all changes though if you move out and rent out your personal residence as income property.


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## sags (May 15, 2010)

Most of the people in our complex are older and sold their homes and moved into rental units. They just don't want the hassle of home ownership anymore.

In this area, the big construction boom is upscale retirement homes, and upscale apartment buildings with all the amenities.

I think the transition from home ownership to rental properties is already well underway for baby boomers. 

One would think they would stay in their paid off homes, but they don't seem to be.

A lot of people are moving from rural towns and villages into the city. They want to be close to amenities and health care.

Health care will be the prime motivator for baby boomer movement in the future.


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## carverman (Nov 8, 2010)

sags said:


> Most of the people in our complex are older and sold their homes and moved into rental units. They just don't want the hassle of home ownership anymore.


Most people 65+ don't want to be bothered with upkeep and repairs.
Property taxes keep rising every year, along with heating costs etc. 



> In this area, the big construction boom is upscale retirement homes, and upscale apartment buildings with all the amenities.


Here in Ottawa as well, but it depends on how independent you are.
Most rents are $1000+ for a small 1 bedroom apt + parking and in my
area, you have to pay for use of a supplied window a/c on some of
these retirement units as well. 



> I think the transition from home ownership to rental properties is already well underway for baby boomers.
> One would think they would stay in their paid off homes, but they don't seem to be.


Yes, the trend seems to be going that way. But my next door neighbour is
in her 80s..still living in her house 8 years after her husband died even with
her getting very frail at this point. Another 80ish female senior lives alone
in her house across the street from me...so not everyone is jumping at
selling and getting into these senior residences..they aren't exactly cheap
to rent on just a gov't OAS/GIS pension. 



> A lot of people are moving from rural towns and villages into the city. They want to be close to amenities and health care.
> Health care will be the prime motivator for baby boomer movement in the future.


It is for me. I'm using Para-Transpo for my monthly hospital treatment.
My driving days are coming to a close with my leg disability. I can
still drive for now..but my reaction time (especially on icy roads) is very
limited now so I avoid driving now on those days where roads are slippery.

I was considering building in the country outside Ottawa about 12 years
ago, but sold the lot and abandoned that idea when my health started
to deterioate about 10 years ago..now I'm lucky so far not to be in a wheel chair..at least so far.


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## hboy43 (May 10, 2009)

Hi:

I sold an Ottawa house after owning 25 years, so reasonably long term, no? I figure I made 2.9% PA compounded annually, while inflation was something like 2% compounded annually, plus I got to live there.

From purely economic point of view, I have no doubt that renting and investing the capital in the stock market would have won hands down.

Having said that, a house is not a pure investment, and carverman's concerns about security and lifestyle are valid points too.

hboy43


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## blin10 (Jun 27, 2011)

hboy43 said:


> Hi:
> 
> I sold an Ottawa house after owning 25 years, so reasonably long term, no? I figure I made 2.9% PA compounded annually, while inflation was something like 2% compounded annually, plus I got to live there.
> 
> ...


true BUT at the time you didn't know what the market would do for the next 25 years, very small percentage of people would risk all their money, it's easy now to say that... it's the same thing right now, why don't everyone put all their money into stock market if it's such a sure thing? I love these arguments "if I invested 10-20 years ago I would be way better off, bla bla", well no ****, but at that time you would not know that, who knows there could of been some type of depression and your portfolio could of sank 50%


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## Charlie (May 20, 2011)

super long term a house *should* go up by inflation and no more. Unless the utility of that house goes up (area improves/house upgraded) it's doing the same thing it was back then....

the 'investment' side of it, for most homeowners, is whether the saved rent offsets the costs of maintaining the home and the cost of capital (to a degree). Plus the intangible stuff. It's a tough calculation. Especially if you factor in risk -- you need a place to live -- so securing one at fixed cost minimizes your risk down the road. And in periods of inflation, securing your price can have a huge financial benefit over rent increases over 20-30-40 yrs.

I don't think the math works in some of our higher priced areas. Especially for investment properties -- since they're strictly investment with no risk hedge over needing a place to live. But I would rather retire with a paid off house rather then a rent commitment.


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## Berubeland (Sep 6, 2009)

I want to know when a house stopped simply being a place to live and started being an investment with people expecting a big lottery win. 

Oh I know! When mortgages started being 40 year 0 down at emergency interest rates. The entire thing kind of reminds me of rent to own furniture ads. Buy this nice couch for less than a dollar per day for the next 5 years. 

People as a whole officially do not understand basic math. So when monthly payments went down...people could afford more and prices went up. Then when grandma sells the place she paid $30,000 for in 1947 for half a million bucks everyone thinks the old bird hit the jackpot when in reality she's just kept up with inflation. 

Inflation is a funny thing, I'm 38 and I remember when bags of chips had more chips than air and cost 25 cents.


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## sags (May 15, 2010)

Having owned homes for 30 years, I know there was always something that needed to be added, fixed, changed, or maintained. I spent a lot of time and money in hardware and home renovation stores and a lot of weekends and nights doing the work.

There always seemed to be something...........

Having sold and rented for the past 5 years, I no longer have worry about anything but simply paying the rent. The landlord has to look after everything else.

But, there still is always something.............just something else.

Comparitively speaking, prices here for apartment or townhome condos is low, as is the cost of monthly rent on rental units. 

We can roughly purchase a condo unit for about the same monthly cost as renting it, so a long term mortgage is here nor there really. You have to pay to live somewhere. If the government further shrinks the amortization schedule to 25 years, it may change the equation, as it would if interest rates were to rise significantly. I think though, rents would probably keep pace anyways. 

Our goal wouldn't be too make a lot of money on the condo.........or even ever pay it off, but to establish a "beach head" for our son that he can either live in, rent out, or sell in the future. He would have some choices.

We will keep our cash separate and easier to deal with in the event of our demise, as we don't want all our assets tied up in a probate process. We are currently involved in one estate and it has been almost 18 months with no end in sight.

The only true advantage I see from ownership is the freedom to decorate the inside of the home as you please. If you want purple shag carpetting and pink walls...........it is your perogative. Or, if you have extra cash and don't care about the cost, you can change a mediocre condo into a showpiece unit and live a more luxuriant lifestyle.

To me............that choice is meaningful, as I like to control my surroundings and the immediate area I live in. 

Also today, it is possible to buy an apartment condo that includes amenities that I would not have in a family home, such as a full gym and indoor pool, spa, and sauna. Underground parking is nice feature in our winters, and not having to clean the foyer five times a day would be a nice bonus.

So it is all dependant on your wants and needs. 

We have pretty much concluded our next step is towards an owned apartment condo in an upscale building with amenities.

But that is just us.


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## blin10 (Jun 27, 2011)

you also need to compare same sq ft area... you can't compare 3000 sq ft mortgage with 1000 sq ft condo rent...


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## kcowan (Jul 1, 2010)

sags said:


> Also today, it is possible to buy an apartment condo that includes amenities that I would not have in a family home, such as a full gym and indoor pool, spa, and sauna. Underground parking is nice feature in our winters, and not having to clean the foyer five times a day would be a nice bonus....


Our rental apartment has most of that. The pool is outdoors though but we also have 2 tennis courts...


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## Square Root (Jan 30, 2010)

To the OP you have lost the money whether you sell or not. Do what makes you happy. Agree with Berubeland. Personal use real estate is a place to live and enjoy not an investment. This is coming from a guy with plenty of real estate too. I have made way more on my bank stocks than I have on my real estate over the past 15 years. But real estate is fun! Skiing in the mountains, boating at the cottage, warm weather in Arizona. As long as you don't think you can sell quickly for a good price. Just ask the guys in Arizona who bought at any time since 2000!


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## dogcom (May 23, 2009)

Stocks we all know will generally not beat buying real estate when following certain things.

1. You try to buy stocks and you also try to buy real estate at some kind of bargain price.

2. You pick up solid stocks or a solid house in a great location.

3. You make sure your company has limited competition or your home is in an area like Vancouver where you can't build a lot of competition easily. Calgary has almost unlimited land to develop so competition comes easy at this time. So buying closer to the city core where commuting time is low and land is limited would be better.

4. Companies biggest detractor is they can easily lie, cheat, steal fudge numbers and install horrible management but that good piece of land is always there unless something truly extraordinary was to occur to devalue the land. Companies can and do pay dividends however so this part is good and your dividend is not paying rent as your home gains equity and prices rise you save more and more for not paying rent.

Home detractors are lack of liquidity and stocks can be sold quickly. Problem here is you can easily dump good stocks for whatever reason but will tend to hold real estate because it is much more difficult to sell on a whim. 

Overall unless you are very experienced and patient probably 95 percent of the people will lose with stocks over real estate no matter what the past numbers say. Most will only lose badly in real estate if they pay far to much and can't afford to hold it mostly because the banks being to loose with their lending policies creating distorted prices that can't hold up. This happens with stocks also when investors borrow to much in the good times and then get squeezed later on.


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## OK-bachelor (May 24, 2011)

How old are you? I just turned 40, and looking way ahead to retirement , the thought of paying some ******* $1500 rent , instead of $500 for taxes/ maintenance , when I'm old sick n' tired really sounds unappealing .


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## kcowan (Jul 1, 2010)

OK-bachelor said:


> How old are you? I just turned 40, and looking way ahead to retirement , the thought of paying some ******* $1500 rent , instead of $500 for taxes/ maintenance , when I'm old sick n' tired really sounds unappealing .


Don't forget to include the $1200 you have to pay some ******* at the bank for the mortgage!


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## Karen (Jul 24, 2010)

I've just read through this thread for the first time, and I'm amazed at how few people put much value on the positive emotional aspects of owning your own home. I've never stopped to consider the financial benefits of owning vs renting because that question is completely irrelevant to me. Carverman has expressed my views on the subject perfectly; there's nothing that could ever replace the feeling of security and satisfaction I get from knowing that this house is mine.

I'm neither competent nor physically able to do any heavy maintenance myself, but I gladly pay to have it done for me. The biggest one-time expense by far was replacing the roof a few years ago, and the cost of having the yard work done for nine months of the year adds up to a substantial amount, but family members help with smaller jobs, and I really hope to be able to stay here for the rest of my life.

The OP in this thread has said that he has no trouble making his mortgage payments; in fact, he suggested that he's making extra payments and would probably be mortgage-free in half that time if he remains in his house. That being the case, he could obviously afford to have his maintenance work done, and that seems to be a good solution to his problem.

One of the happiest days of my life was the day I paid off my mortgage. I admit that I'm more security-oriented than most of you here, but even taking that into account, I still feel that owning one's home is an incredibly good feeling.


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## uptoolate (Oct 9, 2011)

No doubt about it Karen. It is wonderful to have a house that is paid for. I wonder if the OP has updated us on what the final decision is/was. I didn't come across it as I read the thread.


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## kcowan (Jul 1, 2010)

We were happy renters for 13 years but when we bought our condo in PV, I was amazed at DWs attitude. She said she now has a place to stay IF times get tough. Definitely an emotional buy for her.

Somehow people don't ascribe earnings power to their portfolio. They feel it can go away at any time.


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