# My public appeal to property investors



## james4beach (Nov 15, 2012)

Real estate "investors" (those who buy up multiple properties and rent them out) are -- in my personal opinion -- engaging in an activity that is harmful to the country, and which has been directly harming fellow Canadians. Here I am talking about people who own more than 2 properties when it's not used by their own family.

Yes I know that all of you have become filthy rich off this practice in the last ~ 30 years. It's been a great time for property investors. Extreme leverage into a never ending bull market, in a declining rate environment, will produce riches.

But I ask you to consider the harm you're causing Canadians. All those mortgages you've been getting end up putting artificial buying demand into the market. You are bidding against people like me (and all my friends) *who actually need houses to live in*.

~ ~ My suggestion ~ ~

You've gotten rich enough. Cash out and walk away.

Sell your properties now. Liquidate them. Even if you've built up a long term portfolio. You have an opportunity here to sell at record high prices. In case you haven't heard, the Bank of Canada is in a rate hiking cycle. It really hasn't even started yet, so you still have an opportunity to sell your properties now. And how many years do you think a RE bull market is going to last? It's already been 30 years. Or do you think it's going to last 50 years?

If you're leveraged in several properties, and if this whole thing goes tits-up, nobody will shed any tears for you. There is VERY little sympathy in this country for property investors who have driven prices sky high.

Again: sell your properties now and walk away. You have a great exit opportunity here, before interest rates really get crazy.


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## cainvest (May 1, 2013)

james4beach said:


> ~ ~ My suggestion ~ ~
> 
> You've gotten rich enough. Cash out and walk away.


Seriously ... you're asking people to walk away from making money?


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## james4beach (Nov 15, 2012)

And if that appeal doesn't work for you, here's a more numerical argument:

Starting from today's market value of your properties (important... *today's* prices) what do you think your net rental yield will be? How much will you make, net of all the maintenance costs, hassles, unoccupied periods?

Do you realize that if you put that same $ value into risk-free GICs, that you can make close to 4% yield today? That's with no risk, no troublesome tenants, no manual labour.

I'm not talking stocks which fluctuate. I mean a rock solid, guaranteed 3.5% to 4% yield. That's what's available today. Using a discount brokerage, you can spread among enough CDIC issuers to easily cover $1.5 to $2.0 million of these.


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## james4beach (Nov 15, 2012)

cainvest said:


> Seriously ... you're asking people to walk away from making money?


No, I'm asking them to lock in their riches before it blows up in their faces. Both interest rates and public sentiment is against them.

But if they want to roll the dice, and take their chances being highly leveraged in a real estate bubble, *as interest rates rise*... go for it!


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## Ponderling (Mar 1, 2013)

So am I on the bad boy list for owning residential rental REIT's? 
On the other hand I know of a couple of south asian pals who along with their extended families who each collectively own 5-6 residential properties. Now, they live in parts of two or three of the properties.

Their parents, first gen imms have zero trust in the stock market.
In India their experience with that stock market has found a rather corrupt stock investment environment in the past.

Plus they have met realtors marketing through their mosque/ temple locally to put together buying syndicates.


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## cainvest (May 1, 2013)

james4beach said:


> No, I'm asking them to lock in their money before it blows up in their faces.


That's just like asking people to cash out of the stock market because you think it's going to crash. 

Their money, their risk but I'm sure they are aware of the numbers change due to interest rates.


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## james4beach (Nov 15, 2012)

cainvest said:


> That's just like asking people to cash out of the stock market because you think it's going to crash.
> 
> Their money, their risk but I'm sure they are aware of the numbers change due to interest rates.


But owning stocks doesn't deprive other people of owning a home. There's an ethical side to this as well.

I also think many property investors haven't thought about this yet. People tend to become complacent when things go very well for them, for a long time. We've had 40 years of declining interest rates. People have trouble wrapping their heads around a rising interest rate environment.

Nobody has seen a rising interest rate environment for 40 years!

@Ponderling I have no problem with families who use properties for their own extended family use.


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## doctrine (Sep 30, 2011)

Not that I own 3 homes, but say I do and live in one of them, and rent out the other 2, who is being deprived of a home to live in?


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## cainvest (May 1, 2013)

james4beach said:


> There's an ethical side to this as well.


I don't see an ethical issue here unless they are doing something illegal to obtain the homes.


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## james4beach (Nov 15, 2012)

doctrine said:


> Not that I own 3 homes, but say I do and live in one of them, and rent out the other 2, who is being deprived of a home to live in?


I'm talking about owning. I want to own a home, and I'm not alone.

In this scenario, you're 1 person owning 3 homes. Yes I realize you consider yourself a humanitarian and will generously allow me to rent from you, but if you own 3 homes and I own 0 homes, clearly there's an imbalance.

You have deprived 2 other people of being able to own a home.

The property investors buy up and hoard these homes. In the market, they compete against others who own zero homes.


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## off.by.10 (Mar 16, 2014)

james4beach said:


> But owning stocks doesn't deprive other people of owning a home. There's an ethical side to this as well.


What about all the people who will be deprived of renting a home, under your plan? Are you saying only owners deserve a roof over their head?


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## MK7GTI (Mar 4, 2019)

I tend to agree with James to extent. I have a friend who owns a property management business in town. He’s done very well for himself. Owns a couple properties in Edmonton and rents them out through AirBnB. I’ve given him the same speech as James just did. Went in one ear and out the other. However, this guy doesn’t even know what a TFSA is. Saves his money in HISA’s and just buys more property. 

The problem with the point we try and make is your literally asking them to stop making money and walk away. Potentially to something they know little or nothing about. It’s just never going to happen. 

Cost of housing is the single biggest issue(imho) in this country. No one wants to be the reason the first toothpick breaks and the house of cards falls.


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## Beaver101 (Nov 14, 2011)

J4B, I'm afraid such investors got too much shot up in their veins that they can't quit. The low interest rates, use of OPM and dream of riches at the end of the rainbow are far too lucrative. Ethics (and what's that when it comes down to making money) not counting.


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## james4beach (Nov 15, 2012)

The people doing this who are leveraged, are just asking for it.

I'm just trying to be helpful and communicating the warning. Mr. Market can educate them better than I can.

Property investors: at least do yourselves a favour and deleverage before higher interest rates arrive.


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## Money172375 (Jun 29, 2018)

Can I get everyone to sell their blue chip stocks? Hopefully the price will fall 20% and I can buy more.


james4beach said:


> The people doing this who are leveraged, are just asking for it.
> 
> I'm just trying to be helpful and communicating the warning. Mr. Market can educate them better than I can.


I would suspect most rental properties are leveraged to 65%. Plenty of equity to withstand a market drop. when rates rise, so will rents.


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## james4beach (Nov 15, 2012)

Money172375 said:


> Can I get everyone to sell their blue chip stocks? Hopefully the price will fall 20% and I can buy more.


Nobody is deprived of home ownership when you buy stocks.

Nobody has to push off their plans of building a family when you buy stocks.

Nobody suffers from housing instability (lack of permanent living arrangements) when you buy stocks.

I want property investors to understand that your RE investment portfolio actually causes some harm to society. No question you are making money... but you ARE harming others.


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## off.by.10 (Mar 16, 2014)

james4beach said:


> Nobody has to push off their plans of building a family when you buy stocks.
> 
> Nobody suffers from housing instability (lack of permanent living arrangements) when you buy stocks.


I know families who rent. You don't *have* to push off your plans because you don't own. Female hormones might say otherwise but that does not make it fact.

I also know some who have been renting the same place for over a decade. What instability do you speak of? A house is hardly permanent anyway. People change jobs, divorce, etc and still need to move even if they own their place. Then they have the extra trouble of selling the place.


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## cainvest (May 1, 2013)

james4beach said:


> You have deprived 2 other people of being able to own a home.


Why couldn't you have bought one of those homes when they did?


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## james4beach (Nov 15, 2012)

cainvest said:


> Why couldn't you have bought one of those homes when they did?


That's really a side argument about timing so this is a red herring.

I don't have to buy a home today. So I'm not bidding on any, but that doesn't change anything. When I do want to own a home, I want to have that as an option.


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## doctrine (Sep 30, 2011)

james4beach said:


> I'm talking about owning. I want to own a home, and I'm not alone.
> 
> In this scenario, you're 1 person owning 3 homes. Yes I realize you consider yourself a humanitarian and will generously allow me to rent from you, but if you own 3 homes and I own 0 homes, clearly there's an imbalance.
> 
> ...


I haven't deprived anyone of anything. They are free to purchase those theoretical homes from me at market value. They are expensive, and much more so than in the past. But it doesn't mean you can't buy one today. Or three, if you choose. 

I don't own any homes in reality, but what you are worried about comes to pass, then I am likely going to be in a position to buy properties from those who are underwater on their mortgage. And maybe 3 of them.


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## cainvest (May 1, 2013)

james4beach said:


> That's really a side argument about timing so this is a red herring.
> 
> I don't have to buy a home today. So I'm not bidding on any, but that doesn't change anything. When I do want to own a home, I want to have that as an option.


Well if some are still buying homes for investment when you're ready buy then you are bidding against them ... just like before. Of course if you are right about them being in financial trouble soon then they will have to sell off the homes (no longer profitable/affordable) and that should lower prices right?


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## Mortgage u/w (Feb 6, 2014)

This has got to be the most ridiculous thread I’ve seen in a while.

So what’s your theory? Everyone should own a home?? What about the people that want to rent? Who should own those properties?
Is it envy? What’s preventing you to own multiple properties? And why are you shaming property investors?


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## bigmoneytalks (Oct 3, 2014)

This thread is too juicy to ignore. Keep them crazy posts coming!


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## Italicum (Feb 10, 2017)

james4beach said:


> Real estate "investors" (those who buy up multiple properties and rent them out) are -- in my personal opinion -- engaging in an activity that is harmful to the country, and which has been directly harming fellow Canadians. Here I am talking about people who own more than 2 properties when it's not used by their own family.
> 
> Yes I know that all of you have become filthy rich off this practice in the last ~ 30 years. It's been a great time for property investors. Extreme leverage into a never ending bull market, in a declining rate environment, will produce riches.
> 
> ...


you got me thinking James when you talk about “harming fellow Canadians”, as I try (though not always succeed) to uphold the concept of non-harming in what i do and say. First, a note that i read some of your CMF posts and appreciate both the depth of the research you often provide in support of the points you make (though i don’t always agree with the conclusions) and more importantly what i perceive to be your intellectual honesty. Kudos for that.

i actually do own three properties, with zero debt, which i bought well before the frenzy of the last several years. In fact, i dislike debt (and not just when the mortgage rate is 19.5%, which i experienced) and endeavoured to burn it down as quickly as i could, though i could have instead held back on that and leverage into buying even more properties. I could easily do that today still. Others have provided above several valid counterpoints to yours and i will not repeat them. Rather, i will mention that your post triggered a familiar self-questioning as to the motivations behind my RE (and other investment) purchases. i am hoping that sharing it adds to the conversation here. I believe that Normally, what drives most investing behaviour (indeed most human behavior) be in RE, stocks, bonds, GIC, etc. is either greed or fear. I bump up against these as well when i think about my situation and whether i should buy more. Awareness and wisdom are necessary to intercept and mitigate these energies. This is no generalized judgement call toward anyone that owns three or more properties or three or more millions in the stock market. It all depends on what motivates those investments, what it the purpose, how is the capital obtained and used. I have a feeling that you do not intend to cast a wide and generic net.


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## Ponderling (Mar 1, 2013)

Once you own your own home you realize its costs as well. 

I do a lot of my own reno work on our 1967 built house. I estimate that in addition to the about 6K of property tax in a year , plus cost of power, nat gas, water and sewer to about 4K, maintenance is at least 8K a year when you average it out.

All that on a fully paid up property.

So since moved in 19 years ago: 
Contracted: New roof. New windows. New insulation underlay and siding on second storey, and new eaves-troughs. New furnace ( 2x) partial new central air and recent repair. Hot tub. 

On own: New back yard fence. Re- lay interlocking pavers after proper subgrade granular layer installed. Insulate and finish basement. New basement windows and exterior door replacement. Build basement wall unit furniture. Improve attic insulation. External vented kitchen exhaust hood. Upgraded bath fan. Install HRV after tighter windows, doors and insulation upgrades. Install central vac. Move laundry room in basement. Upgrade 100A to 200A main electrical service. Install dedicated power lines to fridge, microwave, dishwasher, exterior shed circuit and its power sub panel,.garage door opener. Build insulated 4 season back yard shed. Mix and pour concrete sidewalk to the shed and adjacent hot tub foundation pad. Build storage mezzanine layer in garage above garage door layer. Pick up and install 50' worth of cedar hedge into prepared beds. Replace about 3 fence posts every year. Consolidated front and back rooms on main floor including structural rework needed to remove load bearing interior wall. Install 20 pot lights. Replace varied flooring with hardwood. Just one bedroom left to do. Paint every room in house except kitchen so far.


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## TomB16 (Jun 8, 2014)

james4beach said:


> No, I'm asking them to lock in their riches before it blows up in their faces.


I've owned investment RE for 30 years. People have been telling me I will lose my shirt for three decades.

To be fair, not every landlord makes money, to say the least. Money can definitely be made. We've done well. The last House I sold had a bidding war. We have not gotten rich quick, though. We have earned what we have gained.

It's just amusing to read this post when CMF has been explaining to people how lousy RE is as an investment for as long as I have been reading. Lol

As for me making an investment move to help someone else out.... Lol!!!!


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## james4beach (Nov 15, 2012)

bigmoneytalks said:


> This thread is too juicy to ignore. Keep them crazy posts coming!


Yeah no kidding eh! lol can you imagine boomer property hoarders actually apologizing?



TomB16 said:


> I've owned investment RE for 30 years. People have been telling me I will lose my shirt for three decades.


Teach us a lesson! Buy MORE! That will show the nay sayers.


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## james4beach (Nov 15, 2012)

Mortgage u/w said:


> This has got to be the most ridiculous thread I’ve seen in a while.


Says the career mortgage underwriter, who doesn't even understand that lenders should actually incur risk for lending. Based on your other post(s), you actually think it's normal that the government should be offloading all the mortgage risk from banks.

Can you believe this guy?

Wow big surprise, the boomer who made a fortune in the mortgage business sees nothing wrong with a mortgage mania.


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## KaeJS (Sep 28, 2010)

Not quite sure I understand this thread. I feel like it belongs in r/canadahousing.

I don't think your thread is really about warning leveraged property investors, nor do I think they would even care. Most importantly, I think you are wrong on a few levels. Namely;

1) Individual RE investors hardly contribute in any way to the insane rise of house prices we have experienced.

2) I highly doubt you will see the crash or pain you are expecting. I own two properties and I'm not worried at all. I'm aware prices may come down a little, but it won't be catastrophic. It also won't affect me and lots of others because I'm not planning to sell right now or any time soon and most likely neither are they.

3) Owning a home is not a right, it is a privilege.


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## james4beach (Nov 15, 2012)

KaeJS said:


> 1) Individual RE investors hardly contribute in any way to the insane rise of house prices we have experienced.


That's incorrect. They do contribute. Of course they aren't the only reason (low interest rates and easy availability of credit are right up there) but people who buy up more properties than they personally need absolutely are contributing to the national problem.


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## james4beach (Nov 15, 2012)

MK7GTI said:


> I tend to agree with James to extent. I have a friend who owns a property management business in town. He’s done very well for himself. Owns a couple properties in Edmonton and rents them out through AirBnB. I’ve given him the same speech as James just did. Went in one ear and out the other.
> . . .


Thanks for sharing this kind of concern, I appreciate it @MK7GTI




Italicum said:


> you got me thinking James when you talk about “harming fellow Canadians”, as I try (though not always succeed) to uphold the concept of non-harming in what i do and say. First, a note that i read some of your CMF posts and appreciate both the depth of the research you often provide in support of the points you make (though i don’t always agree with the conclusions) and more importantly what i perceive to be your intellectual honesty. Kudos for that.
> 
> i actually do own three properties, with zero debt, which i bought well before the frenzy of the last several years. In fact, i dislike debt (and not just when the mortgage rate is 19.5%, which i experienced) and endeavoured to burn it down as quickly as i could, though i could have instead held back on that and leverage into buying even more properties. I could easily do that today still. Others have provided above several valid counterpoints to yours and i will not repeat them. Rather, i will mention that your post triggered a familiar self-questioning as to the motivations behind my RE (and other investment) purchases. i am hoping that sharing it adds to the conversation here. I believe that Normally, what drives most investing behaviour (indeed most human behavior) be in RE, stocks, bonds, GIC, etc. is either greed or fear. I bump up against these as well when i think about my situation and whether i should buy more. Awareness and wisdom are necessary to intercept and mitigate these energies. This is no generalized judgement call toward anyone that owns three or more properties or three or more millions in the stock market. It all depends on what motivates those investments, what it the purpose, how is the capital obtained and used. I have a feeling that you do not intend to cast a wide and generic net.


Thanks for the thoughtful reply @Italicum and I appreciate that you held back from leveraging into more properties. It's great to hear you have zero debt on them.

I think you make a good point about the other factors, for example how the capital is obtained and used. Whether someone is exploiting easy credit, whether they are chaining together loans in a highly dubious way. Clearly, you are being very prudent and had the self control to not greedily pursue a whole bunch of debt-financed properties.

I don't think you're part of the problem and I applaud you for fully paying for your properties.

Yes I may have cast an overly wide net, but there clearly are a lot of heavily leveraged property investors in this country. The latest stats from Statistics Canada show that about 30% of the housing in Ontario & BC is held by multiple-property owners (real estate investors). We also know that some people have multiple mortgages, and are even making downpayments using HELOCs... talk about greed!

These are astounding numbers. I'm sorry for casting a wide net, but I absolutely do think property investors deserve some blame for the shortage of affordable housing, when 30% of the homes in these provinces are owned by multiple-property investors!


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Do you realize that if you put that same $ value into risk-free GICs, that you can make close to 4% yield today? That's with no risk, no troublesome tenants, no manual labour.


Do you realize that I've put only $50k on a property in 2019, a property which has increased by $50k-$100k in value each year, plus I get near $20k/year from my tenants?

In the last 3 years, I've had to spend about 10h of my time for maintenance at my tenants apartment.

Meanwhile, because of all the deductions on interests, taxes and other, it's as if I was making losses, so even though I make a 6-figures income at my job, I get a few thousands in tax returns every year because of my "rental losses". Not only I don't have to pay taxes on my rental revenue, but I'm getting tax returns.

So I'm pretty happy my little $50k didn't go in a GIC at 4%. Even if my property drops -30% in value this year, I'll have made much, much more than a GIC at 4%.

And obviously I won't sell it because I live in one unit and rent the other.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> I'm talking about owning. I want to own a home, and I'm not alone.
> 
> In this scenario, you're 1 person owning 3 homes. Yes I realize you consider yourself a humanitarian and will generously allow me to rent from you, but if you own 3 homes and I own 0 homes, clearly there's an imbalance.
> 
> You have deprived 2 other people of being able to own a home ...


Sounds like you are being unrealistic. 

In this scenario, say the owner is convinced then sells. What's to prevent what happened to my neighbour?
He took less money to sell his bungalow to a person instead of a numbered company as he wanted to avoid it becoming a rental. That buyer then flipped it over to a different numbered company where it's now an AirBnB rental.


BTW ... aren't the AirBnB places a bigger issue?


Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> But owning stocks doesn't deprive other people of owning a home ...


Really ... a REIT that is offering 30% more than individuals does not do the same thing?
They typically own a lot more places than an individual typically does.




james4beach said:


> ... There's an ethical side to this as well.


Are you going to avoid residential REITs as well?




james4beach said:


> ... We've had 40 years of declining interest rates. People have trouble wrapping their heads around a rising interest rate environment.
> 
> Nobody has seen a rising interest rate environment for 40 years!


A bit of an exaggeration ... there are ups and downs with those forty years. Those I recall discussing what they were paying were talking about recent rates and whether what they could find was higher or lower than that.

If it's a steady decline for forty years, my second mortgage should have been cheaper than the first instead of pretty much the same price.


Cheers


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## Eclectic21 (Jun 25, 2021)

MK7GTI said:


> I tend to agree with James to extent. I have a friend who owns a property management business in town. He’s done very well for himself. Owns a couple properties in Edmonton and rents them out through AirBnB. I’ve given him the same speech as James just did. Went in one ear and out the other ...
> 
> The problem with the point we try and make is your literally asking them to stop making money and walk away ...


IMO there's a bigger problem ... should he leave the market, others including REITs will happily buy him out to make the money he used to make. 

IOW, cashing out is likely to help only a few indviduals and more likely to help those with even deeper pockets like numbered companies and REITs.


Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> Nobody is deprived of home ownership when you buy stocks.
> 
> *Nobody has to push off their plans of building a family when you buy stocks.*


I know people who have kids while in rentals, including in '70's so I'm not convinced home ownership is as critical as you say.

Wasn't you who in another thread that Canadians are dazzled by McMansions where apartments sufficed for families? I have friends who seem to have no problem with raising two sons with zero home ownership and what sounds like the same space you describe living in.




james4beach said:


> I want property investors to understand that your RE investment portfolio actually causes some harm to society. No question you are making money... but you ARE harming others.


Does this mean you are switching to some form of ethical investing instead of indexes?
The list of money making companies that are causing harm is long from AFAICT. 


Cheerrs


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## Italicum (Feb 10, 2017)

james4beach said:


> I absolutely do think property investors deserve some blame for the shortage of affordable housing, when 30% of the homes in these provinces are owned by multiple-property investors!


"I absolutely do think property investors deserve some blame for the shortage of affordable housing, when 30% of the homes in these provinces are owned by multiple-property investors!" I fully agree with this statement James (emphasis on 'some'. You correctly mention some other factors feeding the RE insanity of the last many years). More than anything else, the intent of my comments was to draw some attention to the fact that there is plenty of delusion in not realizing that greed and fear never lead to true happiness, and not only when they are the forces behind RE investments. We would be much happier if we, individually and collectively, would work to diminish continuous grasping/chasing/wanting (greed) and aversion (not liking some condition, leading to insecurity, anxiety, fear).


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## kcowan2000 (Mar 24, 2020)

james4beach said:


> Says the career mortgage underwriter, who doesn't even understand that lenders should actually incur risk for lending. Based on your other post(s), you actually think it's normal that the government should be offloading all the mortgage risk from banks.


They are just an intermediary, James. The debt ends up in the hands of investors.

Your next rant should be about speculators in commodities because they increase the price of everything!


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> KaeJS said:
> 
> 
> > 1) Individual RE investors hardly contribute in any way to the insane rise of house prices we have experienced.
> ...


Hmmm ... so at my friend's workplace, a LTC she says there's about ten of her co-workers who couldn't qualify for a mortgage. Some relatives and friends provided the downpayment so that some moved from a one bedroom apartment to having part ownership plus use of more than half the house.

Yet it sounds like you blame these people for helping relatives and friends start down the path of home ownership?

BTW, some are not only sharing the ownership/expenses but also the rental income from renting out say the basement suite.




KaeJS said:


> 3) Owning a home is not a right, it is a privilege.


Yes ... lots of people in the world would happily rent to have a place that withstands the weather.


Cheers


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## sags (May 15, 2010)

Let's give it a year of increasing interest rates and see how it all develops.

Most people have no idea how effectively higher interest rates can crush real estate prices.

They have never experienced interest rates on mortgages of 8% or more.....which was the lowest rate we ever experienced owning 6 homes over decades.

It takes time to filter down to when people hit their mortgage renewal dates, but it affects everyone sooner or later.

I remember when 8% mortgage rates were considered "low". Heaven help people if they go into double digits again.

How would people like to be paying 10% interest on an $700,000 mortgage debt, while their home is dropping in value........yikes.


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## birdman (Feb 12, 2013)

sags said:


> Let's give it a year of increasing interest rates and see how it all develops.
> 
> Most people have no idea how effectively higher interest rates can crush real estate prices.
> 
> ...


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## birdman (Feb 12, 2013)

Yes, if I recall correctly home values dropped about 25% in the few years after the lowest mortgage rate was 17% and the prime rate was 22.75%. When this happened and from my experience it was mainly the speculators, (including those who upgraded their homes as they planned on selling their current home fore money 6 mos down the road), who got hammered and some went bankrupt. High rates can definitely have a negative effect on property values but somehow, someway, I believe most homeowners managed to make their payments. I expect many took on extra work, cut out things like vacations, costly sports & hobbies, entertainment, major purchases, etc. in order to keep their home. While I think these extraordinary rates are unlikely it is my view that rates will keep increasing until inflation slows.


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## HappilyRetired (Nov 14, 2021)

james4beach said:


> That's really a side argument about timing so this is a red herring.
> 
> I don't have to buy a home today. So I'm not bidding on any, but that doesn't change anything. When I do want to own a home, I want to have that as an option.


Well, that makes sense. Everyone should sell their rental properties now so that James "might" be able to buy one of them in the future. If he decides to buy.

Your arrogance is astounding.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> Says the career mortgage underwriter, who doesn't even understand that lenders should actually incur risk for lending. Based on your other post(s), you actually think it's normal that the government should be offloading all the mortgage risk from banks.
> 
> Can you believe this guy?
> 
> Wow big surprise, the boomer who made a fortune in the mortgage business sees nothing wrong with a mortgage mania.


Well, you sure are full of assumptions - which explains the nonsense you are spewing in this thread.

How exactly did you understand that the government offloads mortgage risk from the banks?

And what makes you assume that I'm a boomer who made a fortune? Its anectodical, actually, that you resort to stereotyping.

If you're upset you can't afford a home, you can only blame yourself. Or should I assume you're a genZ where you cry for anything that doesn't go your way?


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## Italicum (Feb 10, 2017)

birdman said:


> Yes, if I recall correctly home values dropped about 25% in the few years after the lowest mortgage rate was 17% and the prime rate was 22.75%. When this happened and from my experience it was mainly the speculators, (including those who upgraded their homes as they planned on selling their current home fore money 6 mos down the road), who got hammered and some went bankrupt. High rates can definitely have a negative effect on property values but somehow, someway, I believe most homeowners managed to make their payments. I expect many took on extra work, cut out things like vacations, costly sports & hobbies, entertainment, major purchases, etc. in order to keep their home. While I think these extraordinary rates are unlikely it is my view that rates will keep increasing until inflation slows.


yes, I bought my apt as a new graduate in 1980 from someone, whom unfortunately for him, went belly up when facing a 19.5% mortgage rate.


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## Covariance (Oct 20, 2020)

I wonder what it would be like if we lived in a society that required people to immediately upon completion of their studies to purchase a home, and in so doing allocate the majority of their after tax income to pay for a mortgage for the next 20 years. No choice. Sign-up with the bank or emigrate. Or live in your parents basement.


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## sags (May 15, 2010)

The current generation doesn't realize that baby boomers struggled to buy their homes.

Back then, life was also cheaper to manage. There was only basic cable, no cellphones, no internet, no streaming services, and many fewer dining out options.

If you didn't own a vehicle......you took the bus, not call a Uber. You didn't get food delivered to your house and you cooked your own meals.

Our entertainment was wandering down to the local ball park and watching recreational ball games, or driving to the beach and then driving back and getting ice cream.

People today spend way too much money on "non living" expenses, especially given their low earnings.

That is the other part.......back then employers were happy to make a profit and share with employees. You actually got regular wage increases.

It is a different world today, and I don't think the current generation is ready for what may be coming.


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## Italicum (Feb 10, 2017)

sags said:


> The current generation doesn't realize that baby boomers struggled to buy their homes.
> 
> Back then, life was also cheaper to manage. There was only basic cable, no cellphones, no internet, no streaming services, and many fewer dining out options.
> 
> ...


yes, you point out additional reasons for concern. I don't know how many thousand times I trekked back and forth to university on foot and on busses to buy grocery. Mind you, in the old country I came from I grew up sharing my bed with one of my brothers, so those treks were 'walks in the park'. Our collective, misguided 'needs' to reach contentment somewhere got off the rails.


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## cainvest (May 1, 2013)

sags said:


> There was only basic cable


You mean a TV antenna right?


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## birdman (Feb 12, 2013)

cainvest said:


> You mean a TV antenna right?


Never had the luxury of an antenna, only rabbit ears.


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## cainvest (May 1, 2013)

birdman said:


> Never had the luxury of an antenna, only rabbit ears.


ummmm ... rabbit ears are a type of antenna


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## Flugzeug (Aug 15, 2018)

Certainly every generation struggles to enter housing in a general sense. (Location and Family Money Are Variables here).

I had this conversation with my father recently.

He’s in his 70s now, and it wasn’t easy for him back then. But it was easier for him than it was for me when I first bought in 2009. And it was easier for me than it is for a 22 year old in the same job today.

I think we are seeing the start of a slow decline or flattening out in real estate, who know how long this lasts but the 25% per year increases are over I think. The driver of this was interest rates dropping in 2020 which created the demand through ultra cheap borrowing costs. Rising rates doesn’t necessarily dry up demand but it lowers the amount people can and will spend = lower prices.

I do think investors and house flippers contribute to the supply problem, but it’s a free market so they can do as they please. My parents had 2 rental properties for a while but sold them as they found it to be a hassle.

I have a friend who is a real estate agent and several rental properties. He has zero clue about stocks, so RE is his only avenue of investment.


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## james4beach (Nov 15, 2012)

Well well well... look at all the smug property investors excusing themselves and refusing to acknowledge how they are part of the country's problem.

"Young families can't even afford a single home, but I own three! Screw them!"

All of you should teach me a lesson. Show me how smart you are! Go get another mortgage and buy *another* property. Have you hoarded enough properties yet? @MrBlackhill think of how some of your coworkers have more rental properties and are getting richer than you. You're going to look poor compared to them. Buy another property or two before others do.

@Letran is your property empire complete yet? I'm sure you have some friends who own more properties than you. Don't let them win... you can do it. Quick, get 3 more mortgages!


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## HappilyRetired (Nov 14, 2021)

My wife and I own 2 properties, one of them is seasonal so it's only used part of the year. We split our time between them.

We also share a cottage rental with a couple family members. So, we own 2 properties outright and part of a 3rd.

And we don't feel guilty in the slightest.


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## james4beach (Nov 15, 2012)

HappilyRetired said:


> My wife and I own 2 properties, one of them is seasonal so it's only used part of the year. We split our time between them.
> 
> We also share a cottage rental with a couple family members. So, we own 2 properties outright and part of a 3rd.
> 
> And we don't feel guilty in the slightest.


I never blamed you. Look at my first post. I wrote: "Here I am talking about people who own more than 2 properties when it's not used by their own family."


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## cainvest (May 1, 2013)

james4beach said:


> All of you should teach me a lesson. Show me how smart you are! Go get another mortgage and buy *another* property.


Guess they'd be doing people a service ... those that can't afford to buy a home with these rising rates can at least rent one.


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## HappilyRetired (Nov 14, 2021)

james4beach said:


> I never blamed you. Look at my first post. I wrote: "Here I am talking about people who own more than 2 properties when it's not used by their own family."


Read my post again. We own a rental.


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## sags (May 15, 2010)

People can invest in anything they want, but I quibble with the government giving tax incentives exclusively to home owners.

How about....to match the tax free capital gains from a principal residence, the government even things up and let renters deduct their rent from their income ?

It may dissipate some of the FOMO of losing out in the tax free riches from home ownership, and tilt the ownership versus renting debate towards renting.

The home ownership pumpers can forget the self serving argument that home ownership creates a better society and all that mystical crap to justify the copious tax break given to home owners. If that were truly the case the government should make sure everyone owns a home.....for a better society.


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## sags (May 15, 2010)

While they are at it.........how about they eliminate the $2000 a person pension deduction and pension splitting for people like us earning over $100,000.

It is a joke. The income cutoffs are way too high and benefit seniors with more income than many working people. Same with GIS to house rich seniors.

Get on it Pierre P.....and I will think of voting for you. Forget all that bitcoin crap and "gatekeeper" BS......and propose something useful for a change.


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## Gator13 (Jan 5, 2020)

A few random thoughts in no specific order:

There is a shortage of homes for rent and our government says we need more rentals. Someone has to fill this demand and it shouldn't be the government (taxpayer)
Single family homes have continuously increased in size over the years. It has nearly tripled since the 1950's. I think all would agree that this trend has contributed to homes being more expensive.
Everyone has the choice to own rental property(s). It takes some courage to take on the mortgages and work to maintain the property, find tenants, deal with tenants, etc.
Stocks, vacant land, cash, bitcoin, valuables, rental home, collectibles, business......everyone is free to choose.
Some people choose working part-time, some choose travel, some choose expensive cars, some choose home ownership.....everyone is free to choose.
Some are willing to move to more affordable towns and cities to achieve home ownership.
Full disclosure. We have a principle residence, but have never owned a vacation property or rental property.


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## andrewf (Mar 1, 2010)

Money172375 said:


> Can I get everyone to sell their blue chip stocks? Hopefully the price will fall 20% and I can buy more.
> 
> I would suspect most rental properties are leveraged to 65%. Plenty of equity to withstand a market drop. when rates rise, so will rents.


Rates don't drive rents, rent and rates drive property values.


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## Gumball (Dec 22, 2011)

James I do not doubt housing affordability is a large issue in Canada, but your post is short sighted, as many landlords do value-add projects to the houses they buy for rent.. add bedrooms, convert basements into additonal units, build additional units on the property, etc, etc

I beleive property investory actually help the housing market - adding rental stock in effect puts downward pressure on rent. Give these investors a break, theyre up against a brutal ontario landlord tribunal that is heavily slanted towards the tenants and work hard to make things work.

if you feel so inclined to increase housing supply perhaps reach out to your township and see how long they sit on building permits before theyre actually approved, your local conservation authority that makes it hard for people to build, or perhaps find out why our federal government is turning a blind eye to the money laundering going on in canadian real estate.... dont get distracted by the small landlords... the items listed here are the real issue we are facing for housing affordability

full disclosure i dont own any rentals


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## scorpion_ca (Nov 3, 2014)

Gumball said:


> I beleive property investory actually help the housing market - adding rental stock in effect puts downward pressure on rent. Give these investors a break, theyre up against a brutal ontario landlord tribunal that is heavily slanted towards the tenants and work hard to make things work.


When an investor buy a rental property, the main goal is to make money, which increases the rents every year. It doesn't help the tenant whereas if the house price was lower, tenant may afford to buy a house. Canada should stop allowing people to buy more than 2 houses in the next 10 years or until they increase the supply. 

I know many people voted for liberal in the last couple of elections but not anymore.


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## TomB16 (Jun 8, 2014)

Over the years, I have noticed that renters seem to think that if they give me $2000 per month, I make $2000 per month. When the housing market goes up 15%, they assume I just tripled my money. When the market goes down 5%, they are convinced I am about to go bankrupt. I get this all the time at family gatherings and when we spend time with friends. They know all about it; probably from watching HGTV.

Everything you see on HGTV is balognie with cheese.

Being a landlord is a business and it's a difficult one, at that.

When I size up a property, the rent has to break even with a mortgage, amortized over 22 years, plus tax and insurance. I will not buy a property with the idea of subsidizing it. Even at break even, I am exposed to damage and vacancy. Don't get me started about damage deposits and renter responsibility.

I don't buy a house or multi-family thinking I am going to get rich quick. I don't buy a house because I think the market value is going to go up. I don't sell a house because it is worth more than I paid and I think I can extract equity. I keep it because it is a good business operation or I sell it because I think it is not a good business situation.

Over the years and decades, I fix every little thing that goes wrong with it. That includes replacing the shingles, waterproofing basements, etc. I do that stuff. I don't remember the last time I called a contractor. If I sub-contracted out all the work, I would lose money. I'm not big on that.

It will be essentially a break-even for the first few years. I count on rent going up at roughly 5% annually, so houses do start to cashflow nicely 5 years into the project.

Project houses add another layer. If I buy a lousy house, I need to be able to put it into good condition and the rent needs to work out as per my 22 year amortization guideline, or better. When I calculate the cost to put a house right, I need to make double the material cost on labour. So, a $450K house might require $50K in material to renovate and it needs to be worth $600K *minimum* to make it worthwhile. I'd like to make triple on labour but our market isn't that good. From there, I use that $600K value, make sure the $600K is below market value, and then run it through my 22 year amortization plus tax and insurance calculation. If it pencils out, I might buy. If it does not, I do not.

The point being, it is business; I am not flipping a commodity.

We make our houses nice. The finishes are not high end, even in our most expensive places, but they are nice and we keep the houses fresh. This is how we attract older people who plan to stay for years and decades. The other thing we do is take care of the houses and the people in them. The reason our tenants love us is because 1) we generally pick good people 2) we take care of them.

When I interview potential tenants, I look for people who are adversarial in their approach to life and eliminate them from the competition. I do not want someone who thinks they have to yell to get things done. Those folks are eliminated from the pool.

Over the years, I have taken people to hospital, fed cats while people are away, blown snow after major storns, stop by to check in on people here and there, etc. Being a *good* landlord is hard work. Finding good tenants is also hard work but it is the trick to having a good life as a landlord. Bad tenants will ruin your life.

So, Mr. James. If you want to discuss the parasitic nature of being a landlord, I suggest you operate some houses for a decade or two and get back to us. A good landlord is not easy work. We provide one hell of a lot of value to the community.


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## james4beach (Nov 15, 2012)

TomB16 said:


> So, Mr. James. If you want to discuss the parasitic nature of being a landlord, I suggest you operate some houses for a decade or two and get back to us. A good landlord is easy work. We provide one hell of a lot of value to the community.


I did not complain about landlords or say they aren't useful. I really like professional property managers who do this for a living who are conscientious and play by the rules.

My issue is that when so many average Joes buy multiple properties, using tons of leverage, they distort the Canadian real estate market. There are a lot of people in Canada who've bought up multiple properties on leverage and are using them for AirBnBs, VRBOs, and other amateur rentals. That might not be you, but many people in cities do this.

I understand that rental owners think they're humanitarians or something, but I've got news for you: if property investors didn't hoard properties, *bid up prices using borrowed money*, then others would be able to buy those homes for themselves. Many of us... in fact most of my friends... are forced to rent because we've been priced out. And IMO, greedy property investors are a significant force in pricing out others.

But how lucky we are, that people like you allow us to rent from you. One million thank-yous, Tom!

Well-run rentals are one thing, but the crappy rentals are not providing a valuable service to anyone. The landlords don't play by the rules, skirt the laws, sometimes force people out of rentals, violate condo regulations that ban AirBnBs, or run amateur hotel operations. I've seen buildings where tourists and undesirables come into perfectly nice condos, because some a*hole is running an amateur hotel.

In Toronto and Vancouver, AirBnB operators sometimes send instructions to the tourist on keeping quiet and not mentioning the AirBnB as they enter a building.

My parents live in a condo, and have suffered for YEARS because some a*hole in their building has bought up 2 units and is renting them out like hotels and for short term rentals. With endless side effects for neighbours. This is the kind of crap that has come from greedy, amateur property investors. We've got way too many amateur landlords and AirBnB operators in this country.

Cut off their mortgages and that insanity would stop.


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## TomB16 (Jun 8, 2014)

james4beach said:


> I did not complain about landlords or say they aren't useful. I really like professional property managers who do this for a living who are conscientious and play by the rules.


I suspect you have mistakenly used the word "investor" in the thread title when you really mean "flipper". I don't understand why people think buying and selling things is investing but they do. It's almost universal.

Owning a house for a decade or more does not drive up the price of houses. If someone is living in the house, the house is doing what it was intended to do.

How the rental is run has an impact on the profitability of the investment but is none of anyone's business but the owner and tenant.

Speaking of who I rent to, I do meet plenty of people who explain to me that I have to rent to them. They get quite aggressive and display the attitude you just did. I've been threatened suit on many occasions. Take a guess on how many of these people end up renting one of our houses.


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## TomB16 (Jun 8, 2014)

sags said:


> While they are at it.........how about they eliminate the $2000 a person pension deduction and pension splitting for people like us earning over $100,000.


Are you under the impression that it's possible for a couple to have a good life with $100K of income, or something?

15 years ago, $100K was a strong family income but times have changed.


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## james4beach (Nov 15, 2012)

Gumball said:


> if you feel so inclined to increase housing supply perhaps reach out to your township and see how long they sit on building permits before theyre actually approved


I think you have the wrong idea about this. It's not a supply issue, though that's of course what the property development and RE lobbyists will tell you.

Beware, that line you're saying is really just the messaging of the developer lobbyists who are trying to influence the public to approve their new constructions. It won't solve our problem.

Property hoarders just buy any new properties that come online. It's really unlimited demand because it's artificially stimulated thanks to the CMHC & generous mortgage lending.

This is the danger of so much leverage in the system. There's a very low bar to someone buying _yet another property. _The mortgages are handed out like candy. If you build new buildings, current property hoarders will just add to their portfolios (using existing property as collateral).


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## TomB16 (Jun 8, 2014)

james4beach said:


> I think you have the wrong idea about this. It's not a supply issue, though that's of course what the property development and RE lobbyists will tell you.


Incorrect.

When there is a dearth of houses, rent goes up *fast*. When there are a lot of vacancies, landlords have to lower rent to attract people. It is market driven.

RE is the same. We had a glut of houses for four years and selling a house at all was difficult.

When governments step in and regulate, it drives out people like me who have unlimited liability coupled to an up side that is limited by government. It is definitely moving in the direction of government controls.


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## james4beach (Nov 15, 2012)

TomB16 said:


> It is market driven, at the moment. When governments step in and regulate


Hilarious. You're the beneficiary of 20 years of incredible government stimulus and support of real estate, via the CMHC & relaxed mortgage lending. This was amped up further during the pandemic.

You've been riding a wave of government stimulus and support. All property owners have been.

Freeloading off the back of taxpayers like me, by the way. You're welcome! I think it's a bit insulting when I (the public) provide you CMHC stimulus, and then get priced out of home ownership myself.


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## TomB16 (Jun 8, 2014)

james4beach said:


> Freeloading off the back of taxpayers like me, by the way. You're welcome! I think it's a bit insulting when I (the public) provide you CMHC stimulus, and then get priced out of home ownership myself.


Freeloading would be more if I were to go onto a public forum and implore people to sell their properties so I can get one at a better price.


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## KaeJS (Sep 28, 2010)

James,

What is the issue?

The real estate market is like any other market. Play in it, or watch on the sidelines. Landlords take risk. Homeowners take risk. Sitting on the sideline is a risk.

People have taken risks and done well. Now you're upset about it? 

You're not the only taxpayer, either. We all contribute.

Should the renters of NYC be upset and frustrated that they can't buy an apartment in Manhattan?

Should I be upset that the car I want is $200,000?

We all know and we all agree that house prices have gone up considerably. But, frankly, the writing was on the wall for this over a decade ago.

Low rates. High immigration. Not very much land or infrastructure in most of Canada. 3 main cities people want to live. A country that is safe, accepting, has good healthcare and education...

All the signs were leading to higher home prices. People capitalized on it. You really can't be upset about it - it's just business.

Unfortunately, Canada is a dead country and there really is no place for younger generations like us here. I will agree with you on that. It is definitely much, much more difficult for us and I have said that before on this forum. I will always stick up for that point of view. But the solution to your problem is to find more money, not to ask others to change in order to fit your situation.


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## james4beach (Nov 15, 2012)

TomB16 said:


> Freeloading would be more if I were to go onto a public forum and implore people to sell their properties so I can get one at a better price.


Freeloading is when you benefit handsomely from government stimulus (funded by the taxpayer), also boosted by historically low interest rates.

Lots and lots of government support for you. Aren't you lucky!

@KaeJS @Letran @Mortgage u/w and several others around here have benefited tremendously from the freebies and stimulus generously handed to them by the Government of Canada. Our government has been _very generous to you_.

You're welcome guys! Could you have done it "on your own" though? We'll never know.


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## james4beach (Nov 15, 2012)

Let's try an exercise. I think this will be healthy for you property investors out there. Let's take turns acknowledging and thanking the government for the ways it's helped us with subsidies and handouts.

*My turn first*. "Thanks, government, for subsidizing schools and universities, and handing out extra money for educational pursuits, so that I had an opportunity to get a good education and improve my life. I really appreciate it, and I couldn't have done it without the government's help."


Any of you property investors want to try it? I think you should thank the government for back-stopping mortgages and providing stimulus to banks and lenders, making it possible for you to get a mortgage. You should thank the federal government and Bank of Canada for (repeatedly) assisting the mortgage and credit markets, to support the prices of your real estate even through turbulent markets like 2008 and the pandemic. You should thank the government and central bank for engineering a liquid and functional mortgage market, so that credit in Canada kept functioning smoothly even when market forces (free market capitalism) would have caused severe disruptions.

... you should thank the central bank for providing rock bottom interest rates, well below the rate of inflation, effectively providing you _free money_ to borrow and buy properties. You should also thank the government for allowing you to use absolutely insane levels of leverage (borrow against collateral) which are not permitted for ANY other assets. These are the loosest lending rules imaginable, given exclusively to you --- property buyers and investors!

*And you appreciate it, right?* At least tell me that you appreciate everything we (and I as a taxpayer) have done for you.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> @MrBlackhill think of how some of your coworkers have more rental properties and are getting richer than you. You're going to look poor compared to them. Buy another property or two before others do.


I just need a home. But half of my home can be rented. Which is definitely helpful, because I can leverage more and deduce some expenses. I don't want more RE than this because I want to diversify with stocks.

Housing and equities are the best performing asset classes in history.



sags said:


> There was only basic cable, no cellphones, no internet, no streaming services, and many fewer dining out options.
> 
> If you didn't own a vehicle......you took the bus, not call a Uber. You didn't get food delivered to your house and you cooked your own meals.
> 
> ...


Well, maybe people who are materialistic life the majority. But not only don't I have cable or antenna, I don't even own a TV!

I could also not own a vehicle and do everything by foot, bicycle and bus, but with a kid and family living at 200 km we decided to keep our vehicle which is worth $5k.

We cook every single meal, and I'm happy we went vegan at home so we don't have to buy luxury food called meat.

Recreational time? We both work and have a kid, that time is non-existent. We just go for a walk in the park.

Even though we make above $200k as a household, all the money goes into the mortgage, stocks, reserves for maintenance and renovations, kids basic expenses, and we have a debt because we did huge renovations after we bought because the place was non-livable even though it was worth 2/3 of a million.

I have no clue how people making median income will be able to live their lives while saving for retirement.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> But half of my home can be rented. Which is definitely helpful, because I can *leverage* more


...thanks to the government's generous stimulus programs (CMHC), you are offered a kind of leverage that cannot be found with any other asset class.

You can buy a home for as little as 5% down, borrowing 95% of the value! The leverage is extraordinary.



MrBlackhill said:


> Even though we make above $200k as a household, *all the money goes into the mortgage*, stocks,


... and that's with a heavily subsidized mortgage, where the government assumes risk to provide much lower borrowing rates. It's additional subsidized (tremendously) by the Bank of Canada, which engineers the cost of money so that you don't have to pay the rates of a free market.

Isn't it amazing what Canada does for the real estate market? Wow I sure wish the country was as generous with my small business. If I had half the freebies and subsidies showered on me as property owners and investors do, I'd be... rich like a property investor!


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> the government assumes risk to provide much lower borrowing rates. It's additional subsidized (tremendously) by the Bank of Canada, which engineers the cost of money so that you don't have to pay the rates of a free market.
> 
> Isn't it amazing what Canada does for the real estate market?


I thought you were on the left-leaning and liked how the government helps people. Turns out you only like it when the government helps you, especially? That's actually right-leaning.

If you think our mortgage rates are so low due to the government, I'm currently in France and you should see the mortgage rates... Much lower. Yet, the news talk about the same topic: how people can't afford a home.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> generous stimulus programs (CMHC)


Sure, but I'm paying a premium of a few tens thousands dollar (4% of property price) to be allowed to use a downpayment of almost 5%.



james4beach said:


> You can buy a home for as little as 5% down, borrowing 95% of the value!


Yes, but that's also because I have the income so that the bank stress-tested me and allowed the mortgage at less than 20% downpayment. So that's thanks to my income, and the government has nothing to do with my high income. And the 5% works only on the first $500k, then it's 10% of the remaining amount. And it's minimum 20% for a property of $1M.


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## Italicum (Feb 10, 2017)

Gumball said:


> James I do not doubt housing affordability is a large issue in Canada, but your post is short sighted, as many landlords do value-add projects to the houses they buy for rent.. add bedrooms, convert basements into additonal units, build additional units on the property, etc, etc
> 
> I beleive property investory actually help the housing market - adding rental stock in effect puts downward pressure on rent. Give these investors a break, theyre up against a brutal ontario landlord tribunal that is heavily slanted towards the tenants and work hard to make things work.
> 
> ...


Complex issue: the factors you mention, while real in my view, pertain to the supply side. There are many others that relate to the demand side (ultra-low, if raising, interest rates, high immigration rates into the country, influx of overseas capital into Canada's real estate, among others).


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## Italicum (Feb 10, 2017)

james4beach said:


> I think you have the wrong idea about this. It's not a supply issue, though that's of course what the property development and RE lobbyists will tell you.
> 
> Beware, that line you're saying is really just the messaging of the developer lobbyists who are trying to influence the public to approve their new constructions. It won't solve our problem.
> 
> ...


yes, although I do believe that there is BOTH a supply and demand issue, your comment here finds me smiling in agreement. The generous mortgage lending is a deep rooted one: many years ago, when the insanity we witness currently was in its embryonic stage, I requested a 200k mortgage from the bank. In return, they literally pushed 800k at me, "just in case I want to invest in something else". I turned down the overly generous offer in disbelief.


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## Juggernaut92 (Aug 9, 2020)

I feel like the thread is well intentioned but will fall on deaf ears.

Owning RE in North America = $$$
Owning RE in Canada =$$$$$
Owning RE in around Toronto and Vancouver = $$$$$$$$$$$$$$

Some people stick to what they know and what is working well for them. If you are interested owning I would suggest find a way to hop in. Who knows maybe there may be a crash this year or something like that but 5 years from now home prices in Canada will be higher than what they are right now. 

Capitalism is a lucrative but unfair system. It will create winners and losers. 

If you feel strongly about this then you can always lobby your government to do more about this such as putting more rules in place of owning multiple properties and stuff like that.

However, someone else posted a link in another thread regarding how a chunk of the current federal government members all have secondary rental properties for income.

I am not happy at all with this situation either but am accepting it for what it is. If I have kids then they will most likely need to have really good jobs or help from me (or both) in order to break into the RE market.


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## Italicum (Feb 10, 2017)

james4beach said:


> ...thanks to the government's generous stimulus programs (CMHC), you are offered a kind of leverage that cannot be found with any other asset class.
> 
> You can buy a home for as little as 5% down, borrowing 95% of the value! The leverage is extraordinary.
> 
> ...


"Wow I sure wish the country was as generous with my small business", on this one, James, I have to say that the government is generous with small business as well. Whether it is "as generous" could be a matter for debate .....in another thread  I happen to have a small business in the same field as yours (IT consulting), if I read your posts elsewhere correctly.


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## HappilyRetired (Nov 14, 2021)

TomB16 said:


> Are you under the impression that it's possible for a couple to have a good life with $100K of income, or something?
> 
> 15 years ago, $100K was a strong family income but times have changed.


Yes. Most people can live very comfortably on $100k a year. Our annual expenses are less than half of that. But we don't live in Toronto.


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## Beaver101 (Nov 14, 2011)

Priced out of Ontario, homebuyers turn their eyes to the Calgary real estate market

So now Calgary are where all the jobs are. Hopefully there'll be an exodus of RE investors out of Toronto (at least) as it's getting really crowded plus a matter of time before all those glasses from the condos pop.


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## Mortgage u/w (Feb 6, 2014)

Beaver101 said:


> Priced out of Ontario, homebuyers turn their eyes to the Calgary real estate market
> 
> So now Calgary are where all the jobs are. Hopefully there'll be an exodus of RE investors out of Toronto (at least) as it's getting really crowded plus a matter of time before all those glasses from the condos pop.


.....until oil prices drop again.


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## Plugging Along (Jan 3, 2011)

james4beach said:


> Any of you property investors want to try it? I think you should thank the government for back-stopping mortgages and providing stimulus to banks and lenders, making it possible for you to get a mortgage. You should thank the federal government and Bank of Canada for (repeatedly) assisting the mortgage and credit markets, to support the prices of your real estate even through turbulent markets like 2008 and the pandemic. You should thank the government and central bank for engineering a liquid and functional mortgage market, so that credit in Canada kept functioning smoothly even when market forces (free market capitalism) would have caused severe disruptions.
> 
> ... you should thank the central bank for providing rock bottom interest rates, well below the rate of inflation, effectively providing you _free money_ to borrow and buy properties. You should also thank the government for allowing you to use absolutely insane levels of leverage (borrow against collateral) which are not permitted for ANY other assets. These are the loosest lending rules imaginable, given exclusively to you --- property buyers and investors!
> 
> *And you appreciate it, right?* At least tell me that you appreciate everything we (and I as a taxpayer) have done for you.


Is it just property investors that should be thankful? aka as you say those who have more than 2 properties for non personal use.
Shouldn't it be anyone who has a CMHC mortgage which is home owners in general be your target? I know more people that have lost their homes because they are over extended than investors. 



james4beach said:


> ...thanks to the government's generous stimulus programs (CMHC), you are offered a kind of leverage that cannot be found with any other asset class.
> You can buy a home for as little as 5% down, borrowing 95% of the value! The leverage is extraordinary.
> ... and that's with a heavily subsidized mortgage, where the government assumes risk to provide much lower borrowing rates. It's additional subsidized (tremendously) by the Bank of Canada, which engineers the cost of money so that you don't have to pay the rates of a free market.
> 
> Isn't it amazing what Canada does for the real estate market? Wow I sure wish the country was as generous with my small business. If I had half the freebies and subsidies showered on me as property owners and investors do, I'd be... rich like a property investor!


These 5% downs are more like people who are buying homes for themselves for personal use. When was I purchasing my additional properties (yes, I am one of those unethical people), I had to put 20% (it may have been more) to be approved because it wasn't my first property. 
Ironically, I had to pay CMHC despite the fact that I had 50% down because my place was in the middle of no where and they felt it was a higher risk. This was my recreation property for personal use which could have been turned into an air bnb. Maybe other home owners who have mortgages should have thanked me.

I am actually still quite confused on what the issue you have is. I have honestly never been this unclear to your posts. This thread has been by far one of the strangest ones. To single out investment property owners as unethical is just not logical. You should be annoyed a easy lending for those who are in no shape to have a home. Owning a home is NOT a right, nor is it for everyone. Just like driving a car, not everyone should do it. There are also people who have multiple cars while some don't. Does this bother you too?

You are upset because you cannot afford a home. Well, from you previous posts, you CAN afford to buy a home. You have CHOOSEN not to. Using even the strictest lending rules, I am going to guess you could purchase a home somewhere in Canada. Your choice to not buy a home earlier, should not impact my choice to be in real estate.

Full disclosure I have been involved in real estate since grade school helping my immigrant parents manage their rentals. Every member of my extended family has multiple properties. Not one ever had to get CMHC insurance, except me on my rec property which I had 50%+ down on. This started in the late 70's/80's when people were walking away from their mortgages and no wanted to buy places. Yes, my parents had the opportunity to buy really cheap homes, but the mortgage rates were insane. They held on when tenants could be really lousy and would rather leave something vacant (once up to a year) than have a bad tenant. One of our tenants has now been there for 29 years. They are paying well below market rents. They kids grew up there. We ALLOWED them to stay when the economy took a hit and he was laid off for 9 months once, and another time 3 months. We worked out a deal for him to fix up the place (we supplied materials), he supplied the labour instead of rent. When his wife had cancer, and he was having a rough time, we gave him a month rent free. I have done the same for one of my tenants. He drops off a coffee to my dad when he drops of the rent checks for the year. 

If my boomer (he might be the gen before the boomer), parents sell the place so James can maybe buy a place later, where will our tenant go. His rent for the 4 bdroom house is less than what most would pay for a 1 bdrm apartment. Where do renters go? Will James give a room to this senior couple when he decides to buy a place?


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## Eclectic21 (Jun 25, 2021)

cainvest said:


> birdman said:
> 
> 
> > cainvest said:
> ...


I guess that a fancy antenna is what is meant. 

Cheers


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## Eclectic21 (Jun 25, 2021)

scorpion_ca said:


> Gumball said:
> 
> 
> > ... I beleive property investory actually help the housing market - adding rental stock in effect puts downward pressure on rent. Give these investors a break, theyre up against a brutal ontario landlord tribunal that is heavily slanted towards the tenants and work hard to make things work ...
> ...


Which is more likely to be raising rents every year though ... the REITs and professionals or the small guys who have a couple of properties?

The small ones I know seem to value stable tenants who will take care of the place versus getting top dollar with increases every year. 


IAC ... I don't see how the call to sell is going to change anything while the big players and those who are big time into short rentals (i.e. Air BnB) are in the queue with people like James.


Cheers


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## kcowan2000 (Mar 24, 2020)

Well I have been covinced by the posters on this thread that RE has been pretty fairly handled by the banks and the government. Sorry James but I think you have a lost cause on your hands!


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## Letran (Apr 7, 2014)

james4beach said:


> Real estate "investors" (those who buy up multiple properties and rent them out) are -- in my personal opinion -- engaging in an activity that is harmful to the country, and which has been directly harming fellow Canadians. Here I am talking about people who own more than 2 properties when it's not used by their own family.


I don't even know where to begin. There are more holes in this argument than a Swiss cheese.

First, I cannot imagine anyone sensible to give any sort of credence to this self-serving, fear-mongering post.

Two, if owning more than what you personally use is greedy? Does that argument only apply to houses?

*How about owning more than two cars?😣*
Jargument - _I'm guessing this is also harmful to Canadians that need/wants to buy cars are facing inflated prices. Damn used cars today are selling more than MSRP when they were new. This is definitely caused by greedy people owning more than two cars. Not only they are harming Canadians that now cannot afford to buy at these prices, they are harming the environment?_
Jolution_ - Sell your cars now while the prices are still high. Listen to me it is a friendly warning_

*How about holding more than two jobs?😖*
Jargument - _This is also harmful to Canadians that is trying to find employment. Spread it around, please just one job person. Just live within the means of one income._
Jolution_ - Put in your resignation immediately. Listen to me it is a friendly warning_

*How about having more than two kids?😫*
Jargument - _This is also harmful to Canadians these type of people propagate to solely to siphon government grants. Having more than two kids are too much. Occupying valuable daycare services. Waitlist for daycare are too long and prices are inflated. Then to make it worse now the government is subsidizing these services. Now we are all paying for it._
Jolution_ - Get a vasectomy or put your kids for adoption now while they are still cute and cuddly. Listen to me it is a friendly warning_

*How about having more than two million in the bank?😩*
Jargument - _This is also harmful to Canadians. What greed is this? More two million is definitely more than enough for your own family to survive and live anything more and you are depriving other Canadians from having their own nest egg. _
Jolution_ - Give the rest to charity now. Listen to me it is a friendly warning._

How about having more than...

Well you get the point. Which is more than what this OP has.


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## KaeJS (Sep 28, 2010)

james4beach said:


> @KaeJS @Letran @Mortgage u/w and several others around here have benefited tremendously from the freebies and stimulus generously handed to them by the Government of Canada. Our government has been _very generous to you_.
> 
> You're welcome guys! Could you have done it "on your own" though? We'll never know.


Myself and others worked hard and took risks when we saw opportunity.

I'm not really sure what you mean by "could you have done it on your own". I am younger than you are and I received no family help, no inheritance, no co-sign or any sort of that nature and I was able to put 20% down on both my properties.

So, yes, I did do it on my own. Lots of other people did, too.

I'm not sure what type of "edge" or advantage you think others received that you somehow did not.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... Isn't it amazing what Canada does for the real estate market? Wow I sure wish the country was as generous with my small business. If I had half the freebies and subsidies showered on me as property owners and investors do, I'd be... rich like a property investor!


If you want to play the envy card ... I wish as an employee I had the deductions you as a small business person have. I'd be much richer then. 


So other than trying to get people to sell what's making them money, which AFAICT won't change anything - what's your plan?

Do you want lending firms to go back to a 50% down payment?

Or maybe it would help to go back to the pre-WW2 setup where miners, chocolate makers, canners , pulp/paper workers etc. didn't own their home - their employer did. The employer owned the home plus the stores, the church, the police force etc. Prior to WW2, most did not own their home.


I suspect you are letting your observations get in the way of seeing larger issues. You say there is no supply problem yet around here, most developments approved are high density with few homes. With covid taking away the attractions for this setup (i.e. clubs, bars, theaters etc. closed) - for some strange reason, a fair number of people want out of their glass tower to have some land and space. (Never mind those approved for WFH permanently moving out of cities to their retirement country place.)

There's also the influx of foreign money. It seems the Chinese are running out spots in their usual locations of Vancouver and the GTA so now they are buying up other locations like Montreal.
Why rich Chinese are starting to buy more Montreal real estate

"The Canadian real estate market became particularly appealing to foreign investors from China because it offered more affordable investments compared to other countries. Earlier this year Colliers International stated that the majority of the inbound investments in Canada came from Chinese and Americans."








Chinese Investment in Canadian Real Estate: Is It Dwindling? (2019)


There is a lot of speculation that CHINESE REAL ESTATE in CANADA will decline due to the current conditions in the Canadian market. We have found out that it will...




precondo.ca





"Like many newcomers from large, densely populated Asian cities, one of the most striking things about Canada was how empty it seemed to be ... *While it used to be only high-net-worth Chinese buyers who invested in real estate overseas, in recent years more upper-middle-class buyers* are looking to do the same, the report said. Investing in real estate in safe countries like Canada is seen as a prestigious way to protect and build wealth while also providing opportunities for their children."








Chinese investors are getting a lot more than property, Montreal broker says


“Here, they can send kids for a better education, and their money is guaranteed — kind of,” says Chia-Yi Tung, who turned her own culture shock into a career.




montrealgazette.com






Cheers


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## sags (May 15, 2010)

TomB16 said:


> Are you under the impression that it's possible for a couple to have a good life with $100K of income, or something?
> 
> 15 years ago, $100K was a strong family income but times have changed.


It is a very healthy income for seniors when you are paying no tax on half of it.

With all the credits for seniors, we earn the first $50K tax free.

Personal exemptions, pension deduction, age deductions, pension income splitting, a disability deduction......plus no CPP, EI, union dues or DB pension contributions, daycare or child expenses........it all adds up.

In July, my wife gets a 10% increase in her OAS because she is 75. What does her age have to do with anything ?

Any senior couples earning $100K a year who say they are struggling are doing something wrong.


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## birdman (Feb 12, 2013)

As several of you are aware I spent my working days in the financial service industry. As such I was often quizzed by individuals and couples on financial matters including purchasing a home. My usual answer was well, "It all depends on how you want to live your life"? Do you want 2 incomes? a house? children? travel? material goods? fancy cars? dinners out? and on and on it goes. Our plan was simple: married young, saved both incomes for a couple of years, bought a house, had 3 children, wife was a stay at home mom and fortunately I enjoyed a successful career. That was the life we chose and it worked well for us. Our children did somewhat the same as they bought condos at a young age (early 20's) but married later in life (mid 30's) but now have houses and children.
Others have chosen different paths to fulfill their goals and from what I believe about yourself is you chose a different path and moved around with your employment, remained single, never purchased a home, invested prudently, etc. Certainly nothing wrong this and from your posts you seem happy with your choices. However, the one point you seemed to have missed or excluded in your life's journey so far is the purchase of a home which it seems you now desire. I'm not so sure that you should be blaming the F/I's, the speculators, the multiple property owners but perhaps look back in time on your decision on "how you wished to live your life"? Also, I respectively suggest that now may not be too late for you o purchase a home but that may involve moving out of Vancouver, working more, etc. Your choice.
Please don't take my comments as being derogatory as from reading your posts you have been successful, are knowledgeable, and and I enjoy reading your posts and contribution to this forum. Take care.


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## Flugzeug (Aug 15, 2018)

Italicum said:


> yes, although I do believe that there is BOTH a supply and demand issue, your comment here finds me smiling in agreement. The generous mortgage lending is a deep rooted one: many years ago, when the insanity we witness currently was in its embryonic stage, I requested a 200k mortgage from the bank. In return, they literally pushed 800k at me, "just in case I want to invest in something else". I turned down the overly generous offer in disbelief.


It’s crazy. We were given a $1,200,000 mortgage approval a few weeks ago and “wiggle room is there if more is needed”.

We might stress test at that amount but It’s not realistic.


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## TomB16 (Jun 8, 2014)

james4beach said:


> @Letran is your property empire complete yet? I'm sure you have some friends who own more properties than you. Don't let them win... you can do it. Quick, get 3 more mortgages!


You seem to think RE is going to collapse (hence daring people like Letran to buy property) and yet you also seem upset that some people own a lot of property.

You also seem to be under the impression that you being a tax payer is somehow relevant or gives you the moral high ground. Perhaps if you understood that home ownership requires an annual municipal tax payment, you would better understand how owning property works. A landlord that owns a dozen houses pays more than the national average income in property tax, each year, in my town.

Perhaps this thread is more just lashing out at people with success? Don't blame other people for your life choices.

There is no moral reason why you are entitled to an easier path to home ownership than the rest of us had. Buying a first home is difficult for anyone. Nobody just walked into it.

People who own a lot of houses probably have the following trajectory:


are big earners or were at one time
stretched real far to purchase their first home
are addicted to saving money and allergic to spending
hate any debt that is not mortgage debt
are able to operate with zero regard for consensus opinion which has been predicting an RE crash for the last 35 years.
saved money like their lives depended on it for the first few down payments

Why would successful people make it easy for you? If you didn't make the team, perhaps you should work on your skills until you do, instead of complaining to the coach of unfairness.

I believe I could be just as successful in RE today as I was in the last 30 years. Have you considered studying people who achieved success instead of criticizing them?


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> I thought you were on the left-leaning and liked how the government helps people. Turns out you only like it when the government helps you, especially? That's actually right-leaning.


I am left leaning. But notice in this case of RE stimulus it actually feeds the wealth gap.

The wealthy people who have big, expensive properties to leverage go on to hoard more properties. Additionally because CMHC stimulus isn't limited only to primary residences (which I'd totally support by the way) you get these semi-professional property investors, and wealthy people who already have millions, freeloading off the government with insanely high leverage -- that's subsidized.

Government support and benefits are supposed to be for people who need the help, not for rich property owners greedily trying to become even more rich.

I do like government stimulus and assistance, but it's way too generously applied in RE. In particular, for "property investors" -- those who own multiple properties. That's unfair to society as a whole and it distorts the whole RE market.

As someone who cares about social equality and wealth gap MrBlackhill I'm sure you can see the problem with the CMHC stimulus. The rich don't need these kinds of freebies. The housing stimulus should be limited to primary residences only, or first time home buyers, but should absolutely not benefit owners of multiple properties.


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## cainvest (May 1, 2013)

james4beach said:


> Government support and benefits are supposed to be for people who need the help, not for rich property owners greedily trying to become even more rich.


So what you are really saying is *it's the governments fault*.


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## james4beach (Nov 15, 2012)

cainvest said:


> So what you are really saying is *it's the governments fault*.


Somewhat. They added fuel to the fire. Primarily it's the fault of greedy property investors and speculators, when they're being greedy. But one thing we know about people is that they will generally choose to be greedy and reckless when you allow them to.

The guy taking out a HELOC to fund the downpayment on his next rental property is the problem. But the government allows him to do that, when they shouldn't.

Careless and stupid government (CMHC) and Bank of Canada policies really made things worse. It was their responsibility to curtail all this kind of activity, but they failed to do that.

So yeah, in this case, partially the government's fault. Definitely very bad CMHC policy and very bad Bank of Canada policy.


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## Italicum (Feb 10, 2017)

Letran said:


> I don't even know where to begin. There are more holes in this argument than a Swiss cheese.
> 
> First, I cannot imagine anyone sensible to give any sort of credence to this self-serving, fear-mongering post.
> 
> ...


If I may, almost all examples you gave (I am leaving out the two kids example out. That would require a whole different discussion), could denote greed...but they don't have to be result of greed. Again, it depends on the motivation, purpose, use, methods. needs, etc. I.e. the examples are neutral by themselves and do not demonstrate/deny the presence of greed. To establish greed we need to look deeper. However, I think you will agree that there is plenty of greed in some (careful, not saying all) RE investing, as there is in stock market investing...and a lot of human behavior.. My slant in this thread is that too many are oblivious that greed-fueled RE investing is not healthy...for themselves. If we are not aware and careful, we may gain $$ but we lose in happiness. P.S. feel free to not go into this rabbit hole I am going. I am taking only one, albeit seriously important, aspect (greed) in James' posts.


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## Covariance (Oct 20, 2020)

birdman said:


> As several of you are aware I spent my working days in the financial service industry. As such I was often quizzed by individuals and couples on financial matters including purchasing a home. My usual answer was well, "It all depends on how you want to live your life"? Do you want 2 incomes? a house? children? travel? material goods? fancy cars? dinners out? and on and on it goes. Our plan was simple: married young, saved both incomes for a couple of years, bought a house, had 3 children, wife was a stay at home mom and fortunately I enjoyed a successful career. That was the life we chose and it worked well for us. Our children did somewhat the same as they bought condos at a young age (early 20's) but married later in life (mid 30's) but now have houses and children.
> Others have chosen different paths to fulfill their goals and from what I believe about yourself is you chose a different path and moved around with your employment, remained single, never purchased a home, invested prudently, etc. Certainly nothing wrong this and from your posts you seem happy with your choices. However, the one point you seemed to have missed or excluded in your life's journey so far is the purchase of a home which it seems you now desire. I'm not so sure that you should be blaming the F/I's, the speculators, the multiple property owners but perhaps look back in time on your decision on "how you wished to live your life"? Also, I respectively suggest that now may not be too late for you o purchase a home but that may involve moving out of Vancouver, working more, etc. Your choice.
> Please don't take my comments as being derogatory as from reading your posts you have been successful, are knowledgeable, and and I enjoy reading your posts and contribution to this forum. Take care.


Question to @birdman or potentially others with facts - what is the difference in the mortgage available to these two types of people: 1. an individual that plans to live in the house, and 2. an investor that plans to rent the property?


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## cainvest (May 1, 2013)

james4beach said:


> Primarily it's the fault of greedy property investors and speculators, when they're being greedy. But one thing we know about people is that they will generally choose to be greedy and reckless when you allow them to.


Totally the government's fault then ... they are the ones that allow it and they are enabling everyone to take advantage of it. CMHC is a crown corp right. Is CMHC's mandate to help multi-property owners? If not, how come they don't control their own creation?

BTW, isn't capitalism itself based on greed. Do you see capitalism as a bad thing now?



james4beach said:


> So yeah, in this case, partially the government's fault. Definitely very bad CMHC policy and very bad Bank of Canada policy.


So you should be trying to get the government to correct those issues first and foremost.


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## TomB16 (Jun 8, 2014)

Covariance said:


> Question to @birdman or potentially others with facts - what is the difference in the mortgage available to these two types of people: 1. an individual that plans to live in the house, and 2. an investor that plans to rent the property?


Usually none.

In the decades I owned property, I've never had a rental house mortgage. Mortgages were always simple, personal, ownership.

Banks will consider rental income as personal income, at half of contract value. So, if you make $100K and have a $25K lease on a rental house, they consider you to earn $112.5K annually but they still do not tie the house purchase to the rental contract as a rental mortgage.

It's been some years but every time I reached out to a new lender, the first thing they blurt out is "Nobody is doing rental mortgages, right now."

RE investors have to be tenacious and make lenders do their jobs.

We bought property during good times and bad. I expect anyone who buys property because they think it will go up is likely to do poorly, long term. I have only purchased property because it was a good business decision. After all expenses are considered, can I earn 15% on my money? Not the project; my money. That was the question. If so, I went ahead with it.

I've always considered the equity markets good for about 10% average annual return. Perhaps I got that number from Warren Buffett many decades ago. Whatever the case, I'm sure I didn't come up with it. RE is work so I have always considered any project as needing to earn 15% to make it worthwhile over equities.


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## Covariance (Oct 20, 2020)

TomB16 said:


> Usually none.
> 
> In the decades I owned property, I've never had a rental house mortgage. Mortgages were always simple, personal, ownership.
> 
> ...


thank you. This is very helpful in understanding the issue.


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## Mortgage u/w (Feb 6, 2014)

Covariance said:


> Question to @birdman or potentially others with facts - what is the difference in the mortgage available to these two types of people: 1. an individual that plans to live in the house, and 2. an investor that plans to rent the property?


The main difference is how the borrower will be qualified and the fact that a higher down payment is required for a rental property.

A single dwelling that will be owner-occupied can be purchased with as little as 5% down. A rental property will require minimum 20%.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> I am left leaning. But notice in this case of RE stimulus it actually feeds the wealth gap.
> 
> The wealthy people who have big, expensive properties to leverage go on to hoard more properties. Additionally because CMHC stimulus isn't limited only to primary residences (which I'd totally support by the way) you get these semi-professional property investors, and wealthy people who already have millions, freeloading off the government with insanely high leverage -- that's subsidized.
> 
> ...


CHMC is not helping individuals that are 'hoarding more properties'. They are helping first time home buyers acquire a property. CMHC (nor any other provider) will not insure rental properties. 

Individuals leveraging their primary residences are also not benefitting from government support.


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## cainvest (May 1, 2013)

Mortgage u/w said:


> CMHC (nor any other provider) will not insure rental properties.


Shouldn't that read "will not insure _single unit_ rental properties" ?


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## TomB16 (Jun 8, 2014)

Mortgage u/w said:


> CMHC (nor any other provider) will not insure rental properties.


For sure.

This was always the case and why we had to put 20% down on all acquisitions in the last 20 years. On the other hand, investment property does not require mortgage insurance unless it is a non-arm's length registered self-mortgage (in which case 100% of the mortgage needs to be insured... usually with GE Capital).


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## Mortgage u/w (Feb 6, 2014)

cainvest said:


> Shouldn't that read "will not insure _single unit_ rental properties" ?


Yes. I should have pointed out that CMHC will not insure single units only.


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## MrMatt (Dec 21, 2011)

cainvest said:


> BTW, isn't capitalism itself based on greed. Do you see capitalism as a bad thing now?


No it isn't, it's about engaging in mutually beneficial transactions.


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## Gator13 (Jan 5, 2020)

MrMatt said:


> No it isn't, it's about engaging in mutually beneficial transactions.


I would think it is more about supply and demand as opposed to a mutually beneficial transaction.

Added:

Most would agree that the essential component behind capitalism is to make a profit.


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## MrMatt (Dec 21, 2011)

Gator13 said:


> I would think it is more about supply and demand as opposed to a mutually beneficial transaction.
> 
> Added:
> 
> Most would agree that the essential component behind capitalism is to make a profit.


Sure, but my view of Capitalism is free market capitalismm.
This necessitates a mutually beneficial transaction. Otherwise you don't have customers, and you don't make a profit anyway.


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## Gator13 (Jan 5, 2020)

MrMatt said:


> Sure, but my view of Capitalism is free market capitalismm.
> This necessitates a mutually beneficial transaction. Otherwise you don't have customers, and you don't make a profit anyway.


I am specifically talking about a free market. Demand can also be driven by necessity.


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## nathan79 (Feb 21, 2011)

I'm not even sure what the CMHC is supposed to be anymore. It was started to help WWII veterans find housing, but then it morphed into helping people with modest incomes get into the housing market. Now that people with modest incomes are almost completely priced out, it's basically only helping 6-figure income earners take out huge mortgages. It seems utterly bizarre that we're helping high income earners buy homes when most working class people can't even dream of owning a home.


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## cainvest (May 1, 2013)

nathan79 said:


> Now that people with modest incomes are almost completely priced out, it's basically only helping 6-figure income earners take out huge mortgages.


I know people with less than 6 figure incomes buying homes so I'm not sure who you are thinking is "priced out". Also note the CMHC down payment is scaled based on the house price and only applies below $1M.


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## nathan79 (Feb 21, 2011)

cainvest said:


> I know people with less than 6 figure incomes buying homes so I'm not sure who you are thinking is "priced out". Also note the CMHC down payment is scaled based on the house price and only applies below $1M.


Someone making 70K will qualify for perhaps a 300K mortgage. Your options will be extremely limited depending on whether your job is location dependent. In many cities that won't buy you anything at all.


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## Letran (Apr 7, 2014)

nathan79 said:


> I'm not even sure what the CMHC is supposed to be anymore. It was started to help WWII veterans find housing, but then it morphed into helping people with modest incomes get into the housing market. Now that people with modest incomes are almost completely priced out, it's basically only helping 6-figure income earners take out huge mortgages. It seems utterly bizarre that we're helping high income earners buy homes when most working class people can't even dream of owning a home.


I'm not going to pretend that I know much about CMHC, maybe things have change since then. I do not know about calling CMHC "help" or "advantage". Don't they charge like 1-2% of the selling price? And isn't that for first time buyers only? Either way it is just an option. a limited option as that but more importantly for me it is an expensive option. I do not know about you about you I do not feel you are getting anything for free with CMHC.

I still think it is a good option for first time home buyers that does not have the 20% down which is exactly what it is designed to help.

As far as I know property investors will not qualify, rental properties do not qualify. I do not even think second personal homes qualify.


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## Retired Peasant (Apr 22, 2013)

Whatever happened to member just a guy


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## james4beach (Nov 15, 2012)

cainvest said:


> So you should be trying to get the government to correct those issues first and foremost.


And I am trying to do that.

This is why I am generously telling property investors, as per my first post, that public sentiment is changing. If you're a leveraged property guy, do yourself a favour and realize that (1) you rode a wave of government stimulus and (2) market conditions are turning against you and (3) public sentiment is turning against you.

Because I'm so generous and considerate of others, I am helping clue-in property people that these government stimulated conditions you've enjoyed are at risk. International bodies, the IMF etc are all warning about the insanity in the Canadian housing and mortgage markets.

If you're going to stubbornly ignore what I'm writing here (I am generously contributing my time to help you out), then beware: *the party might end.*

As the CMHC and Bank of Canada stop providing you with free money, and as the public turns against multiple-property investors, over-extended property investors could be in a lot of trouble.

I will repeat my generous advice as I try -- yet again -- to help out property people:

LIQUIDATE NOW and get out, while you can still exit at all time highs. This party isn't going to last forever. At the very least, deleverage... that is absolutely the smart thing to do. Both policy makers and the general public are turning against you. Read the writing on the wall.

Or you can be stubborn and find out what happens, I guess.


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## KaeJS (Sep 28, 2010)

Retired Peasant said:


> Whatever happened to member just a guy


Weren't there 2 of them?


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## james4beach (Nov 15, 2012)

Letran said:


> I'm not going to pretend that I know much about CMHC


They, and the Bank of Canada, support the entire mortgage market in Canada. You own properties here too, so you're also freeloading off government stimulus from the federal govt (CMHC) plus Bank of Canada support.

So it seems that you don't even understand that you've been riding a credit boom fuelled by government and central bank stimulus. Just imagine how much your wealth has grown through your leveraged properties, *and you don't even understand that you have the government to thank!*

Lucky for you, I've been generously contributing my time here to help educate you about what's going on. I'll warn you again: credit is tightening. These generous government stimulus measures aren't going to last forever.

When government tightens all this, you could be screwed.


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## KaeJS (Sep 28, 2010)

james4beach said:


> And I am trying to do that.
> 
> This is why I am generously telling property investors, as per my first post, that public sentiment is changing. If you're a leveraged property guy, do yourself a favour and realize that (1) you rode a wave of government stimulus and (2) market conditions are turning against you and (3) public sentiment is turning against you.
> 
> ...


Disagree.

If the party ends, Canada is doomed. I think the government and policy makers rather inflate us to the moon and devalue us over a housing crash.

A housing crash would be too painful for everyone. Not just the investors.

But as someone who "rode the stimulus wave", I appreciate your concern.

I assume housing will drop 15% and that's about it. There is still demand. There are still more immigrants. There are lots of millenials like yourself waiting on the sidelines for an opportunity to get into the market, and they will help keep the sinking ship afloat so that it doesn't sink.

Plus, you need to think like an investor. I made a thread maybe 2 months ago about selling my investment property. But the biggest deterrent for me was "What do I do with the funds?".

If someone hands you 200k, you have to do something with it. So what is the prudent thing to do? Sell, take my 200k and put it into stocks at all time highs when a recession is around the corner? Put it into GICs and lose to inflation?

Or...

Keep collecting rent because house prices may or may not go down and I already have x amount invested in stocks...

There are also huge tax implications to consider when you sell.

You need to think like an investor. Not as someone on the outside.


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## Plugging Along (Jan 3, 2011)

Letran said:


> I'm not going to pretend that I know much about CMHC, maybe things have change since then. I do not know about calling CMHC "help" or "advantage". Don't they charge like 1-2% of the selling price? And isn't that for first time buyers only? Either way it is just an option. a limited option as that but more importantly for me it is an expensive option. I do not know about you about you I do not feel you are getting anything for free with CMHC.
> 
> I still think it is a good option for first time home buyers that does not have the 20% down which is exactly what it is designed to help.
> 
> As far as I know property investors will now qualify, rental properties do not qualify. I do not even think second personal homes qualify.


CMHC does charge, I think it's somewhere closer to 2-3%. I am not sure if that's for everyone or fixed. You can get it for additional properties. I was charged it for my recreation property even though I had over 50% down payment. I believe you could also get it if you already have a home and are buying another one as a new PR, then kept your first home. 

I don't have all the details, there definitely is a cost to the buyer. It was always generally 'cheaper' for me just have a higher down payment, so I never really paid attention except the one I was forced to take it.


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## james4beach (Nov 15, 2012)

KaeJS said:


> If the party ends, Canada is doomed. I think the government and policy makers rather inflate us to the moon and devalue us over a housing crash.
> 
> A housing crash would be too painful for everyone. Not just the investors.


Oh we're not doomed. It will just be painful for people with leveraged exposure, or people who had a large % of wealth in RE.

That's usually what happens in down cycles. It certainly doesn't wipe out everyone. Just like in stocks, it's the people who've been using leverage who tend to get destroyed.

An investor who doesn't use leverage, and who is well diversified across stocks, bonds, and RE should be fine.

Every other developed country (US, UK, France, Germany, Spain etc) have all gone through housing slowdowns and crashes over the last 20 years. It's going to happen here too, eventually. It certainly won't be the end of the RE market but it will be the end of some leveraged idiots.


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## Plugging Along (Jan 3, 2011)

james4beach said:


> It seems you didn't understand my other thread, so I'll correct your misunderstanding.
> 
> Property investors are freeloaders who were riding a wave of free money (credit) thanks to the Government of Canada. They are government-subsidized. The government has bent over backwards to make sure that *leveraged* property buyers/investors/speculators get to have very cheap mortgages. The government subsidizes lenders to make sure they hand out mortgages like candy. The Bank of Canada additionally subsidizes property investors with free money (extremely low interest rates).
> 
> ...


I took this from your other lottery thread. I am legitimately trying to understand your point or issue and don't follow. I really tried to flow out some of your arguments, and am struggling. Could you please answer the follow questions?
Question 1: Leverage or how the property is purchased: Which one are you upset over? (select one)
1. Properties that are purchased that are over leveraged. Over-leveraged being defined as requiring CMHC
2. Properties that are purchase with leverage, but NOT requiring CMHC
3. Properties that are purchased with ANY leverage (doesn't matter if you require CMHC or not)

Question 1B: Are properties that are purchased in cash upsetting? (Y/N)

Question 2: Financial status of the purchasers.
A. Does the buyers financial stablity/state factor into your argument? (Y/N). If yes, explain.
B. The percentage of an individuals wealth in R/E matters? Y/N

Question 3: Number of properties: Which one are you upset over? (Y/N) for each
A. More one property but all for personal use?
B. One property but used as a rental (no personal use)
C. One personal use property and one or more rental?

To make it easy for you answer, here's the fastest way to respond: Just select your answer
Q1. (1,2 or 3)
Q1B. Y/N

Q2. Y/N If Y, please provide some context
B. Y/N

Q3A. Y/N
B. Y/N
C. Y/N

Please do not take this in another way other than to try and understand what the issue is and I say that as I have always appreciated your thoughts. Of course you dont have to answer, but these are pretty straight forward questions, and if you don't then, that tells me there are no real points to trying to understand or discuss.


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## james4beach (Nov 15, 2012)

Plugging Along said:


> CMHC does charge, I think it's somewhere closer to 2-3%. I am not sure if that's for everyone or fixed. You can get it for additional properties. I was charged it for my recreation property even though I had over 50% down payment. I believe you could also get it if you already have a home and are buying another one as a new PR, then kept your first home.


I want to emphasize again that CMHC's involvement is not just on mortgage insurance. They still add liquidity support to the entire mortgage security market, whether or not you as a consumer see it as a CMHC charge.

In other words, the government is involved with ALL of these mortgages. Taxpayers like me are supporting property investors and speculators.

You'd think they'd be more grateful about it, but what I'm seeing in these threads are a lot of very ungrateful property owners/investors who somehow think they are "doing this on their own".


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## Plugging Along (Jan 3, 2011)

james4beach said:


> I want to emphasize again that CMHC's involvement is not just on mortgage insurance. They still add liquidity support to the entire mortgage security market, whether or not you as a consumer see it as a CMHC charge.
> 
> In other words, the government is involved with ALL of these mortgages. Taxpayers like me are supporting property investors and speculators.
> 
> ...


The government is involved in many aspects of my life not just housing. I could argue that my family pays much more in tax that the average person or family in Canada. (With the exception of health care, in which my mother and child have had to use a lot for. That's another thread). 

I am grateful that my parents choose to immigrate to Canada overall. That includes my education, healthcare, political stability, and quality of life and opportunities. that includes that they and all of my family had the ability to purchase real estate. I do look at the tax payer subsidizing my real estate the same way as they may have subsidized that I have an education or the roads I drives. It's part of the Canada over quality of life. Everyone has the opportunity to purchase real estate her, whether choose to or not is up to you. When my parents came here, they said they came because they try and take risks for a better life without worrying about being left destitute in old age. I am grateful for that. As a result my family (the beneficiaries my parents choice to come to Canada: my parents, siblings, me, our kids ) has paid much more in taxes than most people. I assure we have paid more taxes in Canada than all of the benefits received included our gains in real estate.

Sure the rules could be different in Canada, but you will still find success real investors.


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## james4beach (Nov 15, 2012)

Juggernaut92 said:


> I feel like the thread is well intentioned but will fall on deaf ears.
> 
> Owning RE in North America = $$$
> Owning RE in Canada =$$$$$
> ...


Falling on deaf ears... yup! Thanks for your post though.




Juggernaut92 said:


> *Capitalism is a lucrative but unfair system. It will create winners and losers.*


Ah interesting that you bring this up. The Canadian RE market is not "capitalism". The government and central bank is very heavily involved in it. The BoC sets artificially low rates and has provided free money for borrowers for 13 years now. The government and BoC intervene and support the mortgage market whenever it has problems.

That's not really capitalism, is it?

In capitalism and traditional banking, a lender is supposed to take risk. But in Canada, a lot of that risk is offloaded to the government. Some of the rest of it is securitized, and that's also assisted by the government and central bank.

I like capitalism just fine, but let's not lie to ourselves and call this capitalism. This is a government-subsidized real estate mania.

But arrogant and ignorant real estate people do tend to think they are 'success stories of capitalism'.


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## cainvest (May 1, 2013)

james4beach said:


> I want to emphasize again that CMHC's involvement is not just on mortgage insurance. They still add liquidity support to the entire mortgage security market, whether or not you as a consumer see it as a CMHC charge.
> 
> In other words, the government is involved with ALL of these mortgages. Taxpayers like me are supporting property investors and speculators.


CMHC pulled in $8 billion in 2020 ... I don't think they need your tax money. 

And not to worry CMHC has you covered if you choose to buy a home in the future ...

_“Now, more than ever, we see that the home is not just a place to live — it is also a sanctuary, a place to feel safe. Everyone deserves that,” said Romy Bowers, President and Chief Executive Officer. We will continue to be there when Canadians need us most. Our aspiration is clear: that by 2030 everyone in Canada has a home that they can afford and that meets their needs. Everything we do — is focused on achieving this aspiration.”_


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## Gator13 (Jan 5, 2020)

@james4beach, perhaps the solution to the perceived problem lies with renters. If renters stop renting from the individuals who own multiple properties the demand would drop. Food for thought.


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## Gumball (Dec 22, 2011)

james4beach said:


> And I am trying to do that.
> 
> This is why I am generously telling property investors, as per my first post, that public sentiment is changing. If you're a leveraged property guy, do yourself a favour and realize that (1) you rode a wave of government stimulus and (2) market conditions are turning against you and (3) public sentiment is turning against you.
> 
> ...


So James, let me get this straight, you are warning the rich landlords to get out of the housing market, so those poor sap first time home buyers that youre encouraging to purchase end up buying just before this so called crash you say is coming? thats not very nice to do to these poor first time home buyers, you should just not tip off these rich, greedy landlords


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> I want to emphasize again that CMHC's involvement is not just on mortgage insurance. They still add liquidity support to the entire mortgage security market, whether or not you as a consumer see it as a CMHC charge.
> 
> In other words, the government is involved with ALL of these mortgages. Taxpayers like me are supporting property investors and speculators.
> 
> You'd think they'd be more grateful about it, but what I'm seeing in these threads are a lot of very ungrateful property owners/investors who somehow think they are "doing this on their own".


again, this is incorrect. There are 3 mortgage insurers in Canada and only one is government backed. So your tax dollars are not at risk. CMHC generates enough money to sustain default.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> And I am trying to do that.
> 
> This is why I am generously telling property investors, as per my first post, that public sentiment is changing. If you're a leveraged property guy, do yourself a favour and realize that (1) you rode a wave of government stimulus and (2) market conditions are turning against you and (3) public sentiment is turning against you.
> 
> ...


who are you pleading to exactly? The over-leveraged and inexperienced individual losing money by renting out a small condo? The seasoned investor managing a multi-unit property? Or the large corp managing thousands of doors?


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## Money172375 (Jun 29, 2018)

not a supply issue?









Canada’s Oldest Bank Begs, “Could we PLEASE Stop With This Supply Myth?” - Better Dwelling


One of Canada’s most prominent economists really wants you to stop blaming high home prices on supply. BMO chief economist Douglas Porter explained Canada is promoting an incorrect supply narrative. In a piece literally called, Could We PLEASE Stop With This Supply Myth?, he breaks down a chart...




betterdwelling.com


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## MrBlackhill (Jun 10, 2020)

Money172375 said:


> not a supply issue?
> 
> 
> 
> ...


I think some stats aren't precise enough. There is a supply issue at places where there is too much demand because it's places where people want to live and where people can find great jobs.

I can find in Quebec a $200,000 house with 5 bedrooms, 3 bathrooms, 17 rooms, double garage, 9000 sq.ft land. But no one wants to live there or do business there.


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## Mortgage u/w (Feb 6, 2014)

MrBlackhill said:


> I think some stats aren't precise enough. There is a supply issue at places where there is demand because it's places where people want to live and where people can find jobs.
> 
> I can find in Quebec a $200,000 house with 5 bedrooms, 3 bathrooms, 17 rooms, double garage, 9000 sq.ft land. But no one wants to live there or do business there.


Where can you find such a home in Quebec??? Surely not anywhere near the greater Montreal area.

You should know that Quebec is has a thriving economy and the housing market is currently stronger than anywhere else.


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## off.by.10 (Mar 16, 2014)

Mortgage u/w said:


> Where can you find such a home in Quebec??? Surely not anywhere near the greater Montreal area.


And that was precisely his point. A relative recently bought a house not very different from the one described. It's over an hour's drive from what anyone here would call a city. But there's plenty of work around and you can live a happy life there. Also, "traffic" is when 3 cars meet at the same intersection. Or when you're stuck behind some weirdo driving at half the speed limit.


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## MrBlackhill (Jun 10, 2020)

Deleted


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... The guy taking out a HELOC to fund the downpayment on his next rental property is the problem. But the government allows him to do that, when they shouldn't.


Except that someone can rent that property. I'd think the empty houses with maybe one foreign "student" would be more of an issue. 

Huge amounts of foreign buyers as well as money laundering probably also doesn't help either.


Cheers


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## Money172375 (Jun 29, 2018)

Keep in mind the person using a HESLOC for a down payment is:
1. Borrowing against a other property, not the subject property
2. is qualified using the qualifying rate. 5.25%? Now?
3. the payments required on the HELOC are factored into the debt servicing ratio on the new subject property.
4. likely (most commonly) capped at 65% LTV on the HELOC property


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## Eclectic21 (Jun 25, 2021)

nathan79 said:


> I'm not even sure what the CMHC is supposed to be anymore. It was started to help WWII veterans find housing, but then it morphed into helping people with modest incomes get into the housing market. Now that people with modest incomes are almost completely priced out, it's * basically only helping 6-figure income earners take out huge mortgages*.


Odd ... the guy I was talking to yesterday who bought in Jan said that with two incomes, they are in the middle five digits.

Then too, I didn't know a baker and restaurant bar tender made six figures (they bought in 2020). 

Then there's the LTC worker helping out her sister who just trained as a PSW (i.e. is part time). Between the two, they might be middle to upper five digits. Though from what they said, the bank pre-approved their mortgage, said nothing for months but then balked on the closing date. The mortgage broker had to point out that it was late in the game to be balking and that the underwriter should keep in mind that if these two were turned down, he'd be directing future clients to other firms as he found this unprofessional.

(FWIW ... they are now on almost two years without missing a payment or bill.)


Cheers


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## james4beach (Nov 15, 2012)

Eclectic21 said:


> Except that someone can rent that property. I'd think the empty houses with maybe one foreign "student" would be more of an issue.
> 
> Huge amounts of foreign buyers as well as money laundering probably also doesn't help either.


It's not as much of a 'public service' to renters as many of you make it sound like.

If these property hoarders weren't buying up all these properties, other people would be able to buy the properties themselves. The issue is that the prices have been pushed up to absolutely insane levels. Existing property owners who buy more, with credit, are throwing their inflated RE buying power around.

But interesting to hear how property investors justify this, saying they're humanitarians, by generously renting these units to others. LOL!

Foreign buyers, crime syndicates and money launderers are also a problem of course.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> It's not as much of a 'public service' to renters as many of you make it sound like.
> 
> If these property hoarders weren't buying up all these properties, other people would be able to buy the properties themselves. The issue is that the prices have been pushed up to absolutely insane levels. Existing property owners who buy more, with credit, are throwing their inflated RE buying power around.
> 
> ...


seems like everyone is able to buy a property except you?


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## nathan79 (Feb 21, 2011)

Mortgage u/w said:


> seems like everyone is able to buy a property except you?


The majority of people who own property entered the market years ago. Many used their existing equity and took advantage of low interest rates to upgrade their primary residence or purchase investment properties during the pandemic. Others cashed out of high priced markets and moved to smaller towns to stretch their buying power.

Yes, there was a wave of first time buyers during the pandemic, but they make up a very small percentage of total owners. Of those who did buy, many are high income earners who also accessed the bank of mom & dad to fund their down payments.

The average home price in Canada is $816,720. There are not very many people of modest income buying at these price levels (at least not legally), except in small towns where prices are generally more affordable but jobs are limited. Ironically, it's mainly high income people who are able to work from home that can move to small towns. Most working class people have location dependent jobs that don't allow them this flexibility.


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## londoncalling (Sep 17, 2011)

james4beach said:


> If these property hoarders weren't buying up all these properties, other people would be able to buy the properties themselves. The issue is that the prices have been pushed up to absolutely insane levels. Existing property owners who buy more, with credit, are throwing their inflated RE buying power around.


RE is an investment for some and a home for others. We created the belief that everyone one in NA is entitled to a home with a yard in a nice area. Most of the world doesn't have the same view. I am not saying that the system isn't broken but most of what this thread is discussing has been long known to many. Is there anything in this thread that is new information for you? At some point the market will correct. I would say we are closer to a correction than we have ever been.

Do you have the same opinion as the revised statement below? 

"If these stock hoarders weren't buying up all this SHOP/AMZN/BRK.A, other people would be able to buy the stocks themselves. The issue is that the prices have been pushed up to absolutely insane levels. Existing share holders who buy more, with leverage, are throwing their inflated portfolio power around."

Berkshire Hathaway Inc. (BRK.A:US) | NYSE Stock Price | TMX Money
Amazon.com Inc. (AMZN:US) | NGS Stock Price | TMX Money
Shopify Inc. Class A Subordinate Voting Shares (SHOP) | TSX Stock Price | TMX Money

I used 2 stocks that saw a recent correction and a legacy behemoth stock.


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## sags (May 15, 2010)

Allow renters to deduct their rent from their income taxes, making renting more attractive than it is today as homeowners enjoy a huge tax break.

The landlord pays taxes on the rent......or is supposed to, so an equivalent tax deduction for the renter should be revenue neutral for the government.

Renters claiming a tax deduction would also alert the CRA to individual landlords who aren't claiming the rent they collect as income.


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## The_Fallen (12 mo ago)

Just to add my 2 cents here. I am within the top 5 percent of incomes in Canada. I have no debt, no wife, and no kids. I have been saving/investing aggressively for almost the last 10 years. I could not afford a house in GTA with a 20 percent down payment. A 1 million dollar home, with an 800000 mortgage, would cost me $3,349 over 25 years with a variable 1.90 percent mortgage. A fixed-rate of 3 percent would cost me 3,786 a month. The total housing cost would be over $5000 a month if you were to factor in property tax, insurance, utilities, maintenance and upkeep. An individual would need to earn over 8k a month to have a take-home income of 5k. I am not even factoring in other living cost such as food or transport. The only way I could make a go at it now as a first-time homebuyer, I would need a tenant, a working wife, or possibly both. Just let the reality of that sink in.


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## The_Fallen (12 mo ago)

sags said:


> Allow renters to deduct their rent from their income taxes, making renting more attractive than it is today as homeowners enjoy a huge tax break.
> 
> The landlord pays taxes on the rent......or is supposed to, so an equivalent tax deduction for the renter should be revenue neutral for the government.
> 
> Renters claiming a tax deduction would also alert the CRA to individual landlords who aren't claiming the rent they collect as income.


That isn't a horrible idea, but taxes are paid on the profit of a rental unit (if there is any), not the gross amount of rent.


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## HappilyRetired (Nov 14, 2021)

The_Fallen said:


> Just to add my 2 cents here. I am within the top 5 percent of incomes in Canada. I have no debt, no wife, and no kids. I have been saving/investing aggressively for almost the last 10 years. I could not afford a house in GTA with a 20 percent down payment. A 1 million dollar home, with an 800000 mortgage, would cost me $3,349 over 25 years with a variable 1.90 percent mortgage. A fixed-rate of 3 percent would cost me 3,786 a month. The total housing cost would be over $5000 a month if you were to factor in property tax, insurance, utilities, maintenance and upkeep. An individual would need to earn over 8k a month to have a take-home income of 5k. I am not even factoring in other living cost such as food or transport. The only way I could make a go at it now as a first-time homebuyer, I would need a tenant, a working wife, or possibly both. Just let the reality of that sink in.


You don't have to live in Toronto.


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## The_Fallen (12 mo ago)

HappilyRetired said:


> You don't have to live in Toronto.


I don't.


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## scorpion_ca (Nov 3, 2014)

Toronto Star - 
*The Great Canadian Snow Job: With sky-high real estate and soaring inflation, is Canada selling immigrants on an opportunity that no longer exists?*



Welcome to nginx!


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## Gator13 (Jan 5, 2020)

@james4beach , you are single and decided to semi-retire in your early 30's. Surely you can not expect the same outcome as those (with similar education and earning potential) working 50 or 60 hours per week.

Please know that I am not judging your decision. You might be the wise one choosing the path of renting and working part-time.


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## ian (Jun 18, 2016)

Perhaps you should try directing that message at Pierre P!


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## Mortgage u/w (Feb 6, 2014)

The_Fallen said:


> Just to add my 2 cents here. I am within the top 5 percent of incomes in Canada. I have no debt, no wife, and no kids. I have been saving/investing aggressively for almost the last 10 years. I could not afford a house in GTA with a 20 percent down payment. A 1 million dollar home, with an 800000 mortgage, would cost me $3,349 over 25 years with a variable 1.90 percent mortgage. A fixed-rate of 3 percent would cost me 3,786 a month. The total housing cost would be over $5000 a month if you were to factor in property tax, insurance, utilities, maintenance and upkeep. An individual would need to earn over 8k a month to have a take-home income of 5k. I am not even factoring in other living cost such as food or transport. The only way I could make a go at it now as a first-time homebuyer, I would need a tenant, a working wife, or possibly both. Just let the reality of that sink in.


Why would you need a $1M property?

With all due respect, I have a hard time believing you can’t afford something much more modest given your current situation.


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## The_Fallen (12 mo ago)

Mortgage u/w said:


> Why would you need a $1M property?
> 
> With all due respect, I have a hard time believing you can’t afford something much more modest given your current situation.


A 1 million dollar home in the GTA is not a luxury mansion. The house that I grew up in would go for easily over 1 million dollars today in the current market environment. My parent's income like the home I grew up in was modest. The criticism that I received regarding my post seems to be about my personal choices rather than the current state of affairs. I was merely trying to envoke a thought experiment regarding the current housing situation. I am statically better off than 95 percent of other Canadians and I would be stretched and need assistance (renter, two incomes) to afford a home in GTA, Vancouver, Ottawa, and even other metropolitan areas like Kitchener/Waterloo. I am not sure how the next generation is supposed to affordable housing in this environment. I hope we haven't gotten to a point where we don't care about our children's or grandchildren's futures. Do we want to create a system where only the very most wealthy can afford to own housing (as in the top 1 or 2 percent)? I hope this is an issue that regardless of where any of us sit on the political spectrum we can all agree is a serious problem. I think the frustration James was expressing in his original post is a reflection of the current state of things. I would ask you to disregard James or my personal choices and greivances and focus on the issue of affordable housing. How would you address the issue? Or do you even think it is an issue?


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## Mortgage u/w (Feb 6, 2014)

The_Fallen said:


> A 1 million dollar home in the GTA is not a luxury mansion. The house that I grew up in would go for easily over 1 million dollars today in the current market environment. My parent's income like the home I grew up in was modest. The criticism that I received regarding my post seems to be about my personal choices rather than the current state of affairs. I was merely trying to envoke a thought experiment regarding the current housing situation. I am statically better off than 95 percent of other Canadians and I would be stretched and need assistance (renter, two incomes) to afford a home in GTA, Vancouver, Ottawa, and even other metropolitan areas like Kitchener/Waterloo. I am not sure how the next generation is supposed to affordable housing in this environment. I hope we haven't gotten to a point where we don't care about our children's or grandchildren's futures. Do we want to create a system where only the very most wealthy can afford to own housing (as in the top 1 or 2 percent)? I hope this is an issue that regardless of where any of us sit on the political spectrum we can all agree is a serious problem. I think the frustration James was expressing in his original post is a reflection of the current state of things. I would ask you to disregard James or my personal choices and greivances and focus on the issue of affordable housing. How would you address the issue? Or do you even think it is an issue?


I am not criticizing your choices. I am just making a point that we need to be realistic given ones situation. We can all agree that the choice of home size should be relevant to their living needs. A three bedroom, 2500sqft home is much better suited for a family with 2 incomes, helping the affordability.

Just as homes are being built on smaller parcels of land, home size is also a factor. Your money today buys you less home. I am not saying this is good or how it should be - just stipulating the reality of things.

This has always been an issue, It has just been amplified given the sharp increase but will once again normalize. What 'normal' looks like is anyone's guess.


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## sags (May 15, 2010)

The solution is obvious, but no level of government is even talking about it.

Buy land, service land, put one floor 1000 square foot bungalows with finished basements on the land and sell them through a sales office.

Cut the land speculators, land developers, builders, and real estate right out of the equation. They all take their cut and it adds up to a lot of money.

I have provided examples of where it was done to accommodate the birth of the baby boomer generation and there is no reason it can't be done again.

My mom and dad raised 5 kids and our grandfather lived with us......in one of those 1,000 square foot bungalows.


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## sags (May 15, 2010)

Here is the bottom line on real estate prices.

There is no competition to builders who build massive new homes for the highest profit possible, so why should they change ?

I know some builders and they think a lot about how much profit they will make on a house build. If it isn't high enough......they don't build it.

I also know a couple of guys who own construction companies that develop land for servicing. They are all very wealthy.

Real estate agents......depends. Every city has their superstar realtors who make a lot of money and there is all the other ones who can't make a living at it.

Land speculators don't do anything of any value. They buy land, hold it for a period of time, and then sell it for a profit.

When a person buys a new home and mortgages all that money, they are borrowing it to pay the profits for all those people.


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## sags (May 15, 2010)

On the subject of immigration driving the increase in home prices.......how many immigrants are coming to Canada with enough money to buy a home ?

Are the refugees from Ukraine coming with all their worldly possessions stuffed into a suitcase going to buy a home when they arrive ?

I think that theory is completely out of whack with reality.


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## Mortgage u/w (Feb 6, 2014)

Canada is a free market. Every large business involves borrowing money to generate a profit. Heck, we can say the government does the same thing - they borrow our tax dollars to provide services. 

We could try communism - the government dictates where and how we live and ensure no one has more than the other. But I'm sure we'd find something else to complain about.


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## Emjay85 (Nov 9, 2014)

sags said:


> On the subject of immigration driving the increase in home prices.......how many immigrants are coming to Canada with enough money to buy a home ?
> 
> Are the refugees from Ukraine coming with all their worldly possessions stuffed into a suitcase going to buy a home when they arrive ?
> 
> I think that theory is completely out of whack with reality.


But they would need somewhere to live right? I guess they would have to rent. Would that drive up the demand for rental units and in turn drive up rental prices?


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## Plugging Along (Jan 3, 2011)

The_Fallen said:


> Just to add my 2 cents here. I am within the top 5 percent of incomes in Canada. I have no debt, no wife, and no kids. I have been saving/investing aggressively for almost the last 10 years. I could not afford a house in GTA with a 20 percent down payment. A 1 million dollar home, with an 800000 mortgage, would cost me $3,349 over 25 years with a variable 1.90 percent mortgage. A fixed-rate of 3 percent would cost me 3,786 a month. The total housing cost would be over $5000 a month if you were to factor in property tax, insurance, utilities, maintenance and upkeep. An individual would need to earn over 8k a month to have a take-home income of 5k. I am not even factoring in other living cost such as food or transport. The only way I could make a go at it now as a first-time homebuyer, I would need a tenant, a working wife, or possibly both. Just let the reality of that sink in.


Does some one without a partner or kids need a house in the GTA? Per kids a 2 bdrm apartment was enough for my spouse and I. We also had a roommate. That's how we saved for a down payment for our house.


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## Beaver101 (Nov 14, 2011)

^ I think someone without a wife or kid(s) on this forum has "2" houses already. One to live in and the other to rent. And that someone didn't even need his parents to co-sign. I'm guessing the bank(s) [or the loan compan(ies)] are this person's friend(s).

Personally, I know 2 friends of friends who have multiple condos (preference as less "house" work) as rentals. Life is good as long as they can keep up those mortgage payments and have good-paying jobs.


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## OptsyEagle (Nov 29, 2009)

Plugging Along said:


> Does some one without a partner or kids need a house in the GTA?


These are all good questions. A question that would probably poll indicating that people with kids andor a partner might answer no and people without kids or a partner might lean towards an overwhelming yes.

As this thread questioned, do investors need to buy a house? Our government has already answered the question about whether foreign residents should be buying Canadian houses. Soon, I suspect the back slap on that decision should start to show up on our shores. Counter questions like "Do Canadians need to buy a house in Florida or Mexico or wherever for the winter months". Tit for tat, should soon be our future on that decision. Canada usually loses those types of international fairness fights.

My view is that once we start down the slope of saying this person is more deserving then that person we will start sliding a long long way, probably further then what is good for the country. I say let the market do what the market does. House goes to the highest bidder...but I have a house. So perhaps that is easy for me to say.


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## Flugzeug (Aug 15, 2018)

Wherever one stands on the housing debate there is a definite change in buyer sentiment over the past month. In my area of Vancouver Island there are houses above $1M that sit a lot longer and sell around asking price than just a month or 2 ago. Sub $1M seems to have multiple offers, and $1.2M+ some get no offers at all. It’s very property dependent now as opposed to the last couple of years. Rising borrowing costs and more inventory seem to be the causes. I suspect the trend continues until rates stop increasing. 

There is currently a house listed at $1.45M. They dropped the price by 50k and it’s been sitting for 40+ days. Built in 2021. 

Like @The_Fallen, I make in the top % range for Canadians, statistically. We have a large downpayment from our previous sale. If we don’t close on a property by the time our fixed rate hold expires then we simply drop our budget to meet our monthly payment target, like everyone else. This is how rates cause houses to drop. 

On the notes about single people vs families needing single family homes. You don’t NEED it either way. Since moving last year we rented a small basement suite. If the past year taught us anything it’s that you don’t need monster houses with kids…and we saved a crap load of money vs renting a Single Family home while we figure our where we want to settle. 

We lost a bidding war for a house 5-6 months ago. A bit of a blessing as comparable houses are selling for less that our offer on that place. 

Interesting times.


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## cainvest (May 1, 2013)

Flugzeug said:


> If the past year taught us anything it’s that you don’t need monster houses with kids…


That's one thing that surprises me about many current home buyers, does one or two kid family need a 2000+ sq ft home?


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## Flugzeug (Aug 15, 2018)

cainvest said:


> That's one thing that surprises me about many current home buyers, does one or two kid family need a 2000+ sq ft home?


I don’t think so. We’ve got 2 young kids, and I recently found out another is on the way. Our previous house was a little smaller than 2000 sq ft, I think that would be fine. A good chunk of the world doesn’t raise kids in large homes. 

I know a family of 5 who lives in a 1300 sqft house. They chose that because it’s on the waterfront, which is more important to them than having a large home.


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## HappilyRetired (Nov 14, 2021)

cainvest said:


> That's one thing that surprises me about many current home buyers, does one or two kid family need a 2000+ sq ft home?


Probably not. Also, in Canada most homes have a basement. A small 1000 sq ft upstairs but you can usually get 700 - 800 usable sq ft in the basement. Insulate, drywall, LVP flooring is cheaper than buying a 1700 sq ft house.


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## nathan79 (Feb 21, 2011)

I wish there was more choice out there in terms of house size/price. Most smaller houses around here are being sold as "Investment opportunity! Subdivide or build your dream home!". These have been selling for around 1.4M just for the lot value. Most of these are older homes on slightly larger lots and are being replaced with two large houses that are a minimum 2500 sqft that nearly touch each other.

If you do manage to find a smaller house on a non-sub dividable lot, they still want 1.1M for it, while a 2500 sqft house only goes for an extra 150K over that. No wonder so few people opt for the smaller house -- it's such poor value.


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## off.by.10 (Mar 16, 2014)

nathan79 said:


> I wish there was more choice out there in terms of house size/price.


What you describe is simply the land being expensive. If you broaden your definition of "out there" to places where the land value is a smaller fraction of total cost, you'll find those smaller houses.


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## james4beach (Nov 15, 2012)

About 30 minutes after landing in Toronto, the taxi driver was eagerly telling me about his rental properties. And why wouldn't he? There are WAY too many people involved in rental properties.

At the hotel, I turned on the TV and saw two different channels with round-the-clock shows on home renovation and house flipping.

I will repeat my suggestion to you property investors: *it's time to deleverage*. Don't get greedy. Deleverage and protect yourselves from what is clearly a real estate bubble.

Those of you with fully paid-for properties... nothing to worry about.


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## KaeJS (Sep 28, 2010)

james4beach said:


> Those of you with fully paid-for properties... nothing to worry about.


And what about those with tenants that pay on time and in full every month?


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> I will repeat my suggestion to you property investors: *it's time to deleverage*. Don't get greedy. Deleverage and protect yourselves from what is clearly a real estate bubble.


not all property investors are over-leveraged. Even if they are, they should have the capacity to maintain the property. If they don’t, then it’s a poor investment choice regardless how the market performs. Sadly, inexperienced investors bank on property appreciation only and ignore everything else. Fortunately, there aren’t that many inexperienced investors that last.


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## Flugzeug (Aug 15, 2018)

Looks like new data shows large drops in GTA home prices. 

Some prices down 29% since February. Overall GTA prices for detached homes down 12% from February to April. 









GTA Home Prices Finally Cooling After a Red-Hot Run


New findings from real estate tech platform HouseSigma highlight this clear drop in GTA home prices, after a record-breaking winter.




storeys.com


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## Beaver101 (Nov 14, 2011)

james4beach said:


> About 30 minutes after landing in Toronto, *the taxi driver was eagerly telling me about his rental properties. And why wouldn't he?* There are WAY too many people involved in rental properties.
> 
> At the hotel, I turned on the TV and saw two different channels with round-the-clock shows on home renovation and house flipping.
> 
> I will repeat my suggestion to you property investors: *it's time to deleverage*. Don't get greedy. Deleverage and protect yourselves from what is clearly a real estate bubble.


 ...are you serious? But then why am I surprised despite I live in TO? But if a cab driver is huffing about his "rentals", it sounds like a scene off from the US subprime debacle ... LOL. You should have asked him if he does food deliveries on the side if those rentals are so profitable.



> Those of you with fully paid-for properties... nothing to worry about.


 ... sure ... property taxes, "property" insurance, utilities' fees, garbage disposal, plugged up toilets plus up-keeping/renos charges, etc. are "free".

For these flippy folks, the pasture is always greener on the other side with pots of gold magically appearing at the end of their rainbows.


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## Mortgage u/w (Feb 6, 2014)

Flugzeug said:


> Looks like new data shows large drops in GTA home prices.
> 
> Some prices down 29% since February. Overall GTA prices for detached homes down 12% from February to April.
> 
> ...


Yes, the market is finally leveling off. This is consistent across the country.


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## Flugzeug (Aug 15, 2018)

Mortgage u/w said:


> Yes, the market is finally leveling off. This is consistent across the country.


Level off? This is a drop. 

That’s realtor talk - a 12% drop is a level off. 
A 3% increase is a surge. 

We’ll see what happens as estimates from RE folks are all over the map.


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## Mortgage u/w (Feb 6, 2014)

Flugzeug said:


> Level off? This is a drop.
> 
> That’s realtor talk - a 12% drop is a level off.
> A 3% increase is a surge.
> ...


The article is not clear but my assumption is they are just basing themselves on listing prices and not actual sales.

In any case, 'level-off' means prices are settling back to a normal trend. Values increase constantly and at a steady pace. We saw a bump the last 2 years. Prices are now starting to level-off back to a normal level. There is no real decrease if we compare to pre-pandemic prices.


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## Flugzeug (Aug 15, 2018)

Mortgage u/w said:


> The article is not clear but my assumption is they are just basing themselves on listing prices and not actual sales.
> 
> In any case, 'level-off' means prices are settling back to a normal trend. Values increase constantly and at a steady pace. We saw a bump the last 2 years. Prices are now starting to level-off back to a normal level. There is no real decrease if we compare to pre-pandemic prices.


Agreed. The article isn’t clear in that regard. 

I get what you are saying now, that the trend/growth of price increases is levelling off. I agree with that. 

I look at it from a price point of view. If prices drop 10%, that’s a drop not a level-off. But it is a reversion to the long term trend line, as you say.


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## nathan79 (Feb 21, 2011)

Comparable sold prices are already off by 5-10% in the Fraser Valley.



Mortgage u/w said:


> There is no real decrease if we compare to pre-pandemic prices.


I don't think anyone was suggesting that, lol. It's going to take more than a couple months to get back to near pre-pandemic prices. Prices are up 50%, so you'd need a 33% drop to erase that. I don't know if that will happen, but I think it could happen.


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## Mortgage u/w (Feb 6, 2014)

nathan79 said:


> It's going to take more than a couple months to get back to near pre-pandemic prices. Prices are up 50%, so you'd need a 33% drop to erase that. I don't know if that will happen, but I think it could happen.


I don't think we will get to pre-pandemic prices nor does anyone want to. If we do, that signals being in a recession. 

We will just get back on pace. That is what we are seeing and anticipate when following the trajectory line. 

2020 and 2021 was similar to 2015-2017 when prices soared to record highs particularly in Vancouver. The headlines back then were the same as today where some were speculating a 30% drop. It didn't drop - it simply "leveled-off".


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## marina628 (Dec 14, 2010)

james4beach said:


> Nobody is deprived of home ownership when you buy stocks.
> 
> Nobody has to push off their plans of building a family when you buy stocks.
> 
> ...


James
I was a investor with multiple units for 30 years , bought 3 detached in Oshawa in 2009 plus owned a place in Brampton and condo in Toronto. When we sold 3 of them our tenants faced increases of $600 plus a month for less than they had. We never raised the rent once and after taxes we netted around $4400 a year on single detached homes with garages on your typical 35 x 120 ft lots. If you look at landlord and tenant forums tenants are begging landlords not to sell as they know what they are facing with new landlords .I have $340,000 in a joint acct with my son for a down payment on a house. My son who is 29 years old ,he earns around $71000 a year and I know how difficult it is to buy something .He moved to Kingston from Toronto 2 years ago because when he buys he wants to buy a 3 bedroom 2 bathroom bungalow as his forever home ,part of that being his mom (me) is in a wheelchair and he wants me to be able to visit the house we help pay for lol .I also have a 19 year old daughter who likely will always live with us unless we give her the same amount if not more. Anyway I sold my last house a year ago in Courtice not Toronto and it has increase 40% in a year , the new house I bought in Trenton also went up 40% or more .We 'investors ' do what we do maybe because we have no pensions like my husband and I or maybe we want to leave something our kids or eventually help them buy .We are not going to cause a drop in price for you selling but I suspect multiple people will be displaced as many are cashing out and moving to cheaper areas. The good new though is in past 30 days we have seen a few homes $100,000 less than they were in February ,My son is going to wait til the fall as I believe fall /winter 2022 they will be cheaper but Feb 2023 they will go insane again ,it is like 2017 right now.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... I will repeat my suggestion to you property investors: *it's time to deleverage*. Don't get greedy. Deleverage and protect yourselves from what is clearly a real estate bubble.
> 
> Those of you with fully paid-for properties... nothing to worry about.


As someone looking to buy a home more cheaply - isn't full paid up properties the opposite of what you want?
If it's paid up and generating income - why's the owner going to want to sell to you for a lower price?

Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... It's not as much of a 'public service' to renters as many of you make it sound like ...


Depends on specific cases as I know that for some, it is. In other cases, it's helping family out.

IAC, houses that are essentially empty seems more of an issue versus one that is rented out.




james4beach said:


> ... If these property hoarders weren't buying up all these properties, other people would be able to buy the properties themselves. The issue is that the prices have been pushed up to absolutely insane levels. Existing property owners who buy more, with credit, are throwing their inflated RE buying power around.


As I say, many at the LTC are only starting ownership because of the combination of friends/relatives already owning putting up the bulk of the down payment plus rentals. They are going to show up in the stats you are quoting but bear no similarity to the REITs, over leveraged amateurs and professionals.

I suspect the local gov't obsession with high density housing which covid has made less attractive is a bigger factor. 
Last I checked, it was something like 11% of the homes that were rentals in my local area. The rest are families.




james4beach said:


> ... But interesting to hear how property investors justify this, saying they're humanitarians, by generously renting these units to others. LOL!


I know several who are not charging market rates. It's usually years for a tenant to leave and a highly recommended new tenant to move in.

Regardless, I'm not sure why you prefer to focus on this instead of the "Foreign buyers, crime syndicates and money launderers " problem that I think is a bigger factor. 

Is the little guy all that important when in the '90's or so, one woman was buying twenty three homes in Vancouver as she had the practice $600 million family fortune to play with? Or the more recent fellow with $154 million of foreign money invested in homes before this latest jump in prices?


BTW, I can recall a friend when I was staying the weekend at his parents house in the '80's commenting how the two ways to buy in their Toronto neighbourhood was to inherit or be in an executive position early in one's career with everyone else priced out.


Cheers

*PS*
At the end of the day - my key question remains. Say the hoarders sell - what makes you think the buyers are going mostly be those like yourself instead of the pros? 

I don't see how swapping an amateur for a pro is going to drop prices and increase your ability to buy. Especially as you are probably in a lot better situation to buy than those starting out.


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## Mortgage u/w (Feb 6, 2014)

Eclectic21 said:


> Regardless, I'm not sure why you prefer to focus on this instead of the "Foreign buyers, crime syndicates and money launderers " problem that I think is a bigger factor.


1000%!


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## scorpion_ca (Nov 3, 2014)

Mortgage u/w said:


> I don't think we will get to pre-pandemic prices nor does anyone want to. If we do, that signals being in a recession.
> 
> We will just get back on pace. That is what we are seeing and anticipate when following the trajectory line.
> 
> 2020 and 2021 was similar to 2015-2017 when prices soared to record highs particularly in Vancouver. The headlines back then were the same as today where some were speculating a 30% drop. It didn't drop - it simply "leveled-off".


We didn't have higher inflation in the last decade. But this time is different with higher inflation. Many favorite stocks dropped 50% to 80% in the six months. Why can't the house price drops 30%?





__





Tiff Macklem acknowledges misjudging inflation, pledges to act 'forcefully' to bring it down






www.msn.com


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## james4beach (Nov 15, 2012)

Well with mortgage rates heading towards 7% and properties becoming illiquid, and prices likely falling in the coming year... I am warming up to the idea that landlords are actually "humanitarians" who generously provide a public service.


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## marina628 (Dec 14, 2010)

james4beach said:


> Well with mortgage rates heading towards 7% and properties becoming illiquid, and prices likely falling in the coming year... I am warming up to the idea that landlords are actually "humanitarians" who generously provide a public service.


James , I purchased a home feb 6 ,2021 in Trenton Ontario and I paid the builder $609,000 and we closed it November 2021.We got a credit line in December and CIBC appraised it at $907,000 ,so the rates can drop 40% and people like myself who bought 1 year ago still will not lose.I would love to see a 20-30% correction and if interest rates went up another 2% maybe the 5 year GIC will be worth looking at again


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## Mortgage u/w (Feb 6, 2014)

scorpion_ca said:


> We didn't have higher inflation in the last decade. But this time is different with higher inflation. Many favorite stocks dropped 50% to 80% in the six months. Why can't the house price drops 30%?


Anything is possible. But know that not all stocks are related to housing. And inflation is not only about housing prices.



james4beach said:


> Well with mortgage rates heading towards 7% and properties becoming illiquid, and prices likely falling in the coming year... I am warming up to the idea that landlords are actually "humanitarians" who generously provide a public service.


Rule number 1: Don't panic.

I hope you don't offer financial advise as a career.....


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## sags (May 15, 2010)

As per Marina.......that is what is most likely to happen.

People with a lot of "paper equity" in their homes will lose a big chunk of it as home prices fall, but they will not be forced to sell due to the drop.

People who bought in the last couple of years, grossly overpaid, and owe huge mortgages, are the ones who will suffer the most.

The premise that "everyone" suffers to the same degree with inflation or house prices is pure bunk. Everyone's financial situation is unique to them.

I also think the government will re-install 40 years mortgages or longer to lower payments, before they will let the whole housing market collapse.

We may even have inter-generational mortgages and instead of selling a home and giving your kids the money, they get the home and remaining mortgage.

Homes passing down from generation to generation is how it has been in major US cities like NYC or Boston since the 1950s or before.

Archie Bunker style........Archie, Edith, daughter and husband all living together in a small home in the blue collar Queens borough of NYC.

The show was popular because so many viewers could identify with it. Small house with generations of family, factory work, television as main entertainment.

That scenario was deeply ingrained in a lot of us baby boomers, like Kraft Dinner and weiners, Campbell soup, and Heintz beans on toast.

I am concerned that many young adults lack the financial survival skills to survive a deep recession though.

They lack the experienced based core knowledge to fall back on in the event of "hard times".


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## Mortgage u/w (Feb 6, 2014)

sags said:


> As per Marina.......that is what is most likely to happen.
> 
> People with a lot of "paper equity" in their homes will lose a big chunk of it as home prices fall, but they will not be forced to sell due to the drop.
> 
> ...


Agree. The scenario will be different for everyone. Just like when the stock market tanks, some panic and sell. Others tough it out and hang on.....or buy more. Some will make money and some will lose.

I think the government will have to increase their $1million cap for insurable mortgages before re-installing 40 year mortgages. They almost have no choice.

As for passing down homes, its essentially already happening - lots of parents are mortgaging their properties to provide down payments for their kids. Once that idea is capped, I could definitely see houses being passed down, debt and all.


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## james4beach (Nov 15, 2012)

Mortgage u/w said:


> Rule number 1: Don't panic.
> 
> I hope you don't offer financial advise as a career.....


My advice has been pretty solid. I suggested that leveraged real estate investors should deleverage... that's the smart thing to do, so that one is not over exposed in a risky situation.

What's that old saying? Bulls make money, bears make money, pigs get slaughtered.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> My advice has been pretty solid. I suggested that leveraged real estate investors should deleverage... that's the smart thing to do, so that one is not over exposed in a risky situation.
> 
> What's that old saying? Bulls make money, bears make money, pigs get slaughtered.


Your advice so far has been harassing property investors to sell their properties so you could afford a home instead. 

Being leveraged is not a bad thing so why is deleveraging the 'smart thing to do'?


The right advice should be that those who are over-leveraged or not generating any cash-flow should think about their outcome given the current economy: rising interest rates, increased costs, slow down in appreciation, etc.


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## james4beach (Nov 15, 2012)

Mortgage u/w said:


> Your advice so far has been harassing property investors to sell their properties so you could afford a home instead.
> 
> Being leveraged is not a bad thing so why is deleveraging the 'smart thing to do'?


I'm not shopping for a property and don't even intend to get one in the near future.

I'm a humanitarian who's here to help others. Here's my public service message: it's a bad idea to be highly leveraged into a market downturn / tightening cycle where liquidity is being pulled out of markets.

The reason I keep repeating this is that it's clear that real estate guys (people like you) have absolutely no concern about leverage.

It's a dangerous situation to put yourself into. We have a real estate market with rampant greed and rampant leverage. Deleveraging is a smart idea, this applies not just to real estate but to every asset class! Stocks, bonds, commodities.

But real estate is trickier because properties are illiquid. It requires a bit of a head start, as you know, it's harder to deleverage when dealing with RE.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> I'm not shopping for a property and don't even intend to get one in the near future.
> 
> I'm a humanitarian who's here to help others. Here's my public service message: it's a bad idea to be highly leveraged into a market downturn / tightening cycle where liquidity is being pulled out of markets.
> 
> ...


Now there's advice I can agree with! As you mentioned, deleveraging (for those over-leveraged) applies to every asset class. I would include owner-occupied property owners and not just investors.

And you are right, people like me have no concern about leverage........because those like myself understand it well, very well. 

You cannot put everyone in the same basket. Your advice is logical and should resonate for those who don't understand RE. But for those who do understand it, we can't be blamed for not being concerned.


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## james4beach (Nov 15, 2012)

Mortgage u/w said:


> You cannot put everyone in the same basket. Your advice is logical and should resonate for those who don't understand RE. But for those who do understand it, we can't be blamed for not being concerned.


Ah ok, I see the difference. So you're saying people with the expertise to leverage their properties shouldn't be concerned. Rising rates can be managed.

But more general homeowners and perhaps amateur real estate investors, you would agree, should be concerned and cautious here?


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## KaeJS (Sep 28, 2010)

james4beach said:


> Ah ok, I see the difference. So you're saying people with the expertise to leverage their properties shouldn't be concerned. Rising rates can be managed.
> 
> But more general homeowners and perhaps amateur real estate investors, you would agree, should be concerned and cautious here?


It is funny to me that someone who has never owned a home or rental property and doesn't plan to do so is continuously giving advice to those who have and do.

Please educate me more.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> Ah ok, I see the difference. So you're saying people with the expertise to leverage their properties shouldn't be concerned. Rising rates can be managed.
> 
> But more general homeowners and perhaps amateur real estate investors, you would agree, should be concerned and cautious here?


Absolutely. There is always a risk associated to debt - any debt. 

Aside from the obvious mortgage debt, people get in trouble all the time with simpler debts like credit cards, retail credit and even bank overdrafts.

Debt is very useful when used properly


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## james4beach (Nov 15, 2012)

Mortgage u/w said:


> Debt is very useful when used properly


How many leveraged property investors successfully navigated the RE bear markets in the US, UK, Spain, etc and came out unscathed?

Even publicly listed property companies (REITs) had an awful time, and some collapsed. Were they not professionals too?


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## scorpion_ca (Nov 3, 2014)

There could be many more companies in this situation. Time will tell....









Greater Toronto Real Estate Development Files Insolvency After Inflation Squeeze - Better Dwelling


Canadian real estate developers are being squeezed by inflation, and it’s turning ugly. The Hazleton Development Corporation obtained Companies’ Creditor Arrangement Act (CCAA) protection on April 20, 2022. The developer cited rising costs as one of the primary issues putting a 265-home project...




betterdwelling.com


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## londoncalling (Sep 17, 2011)

Mortgage u/w said:


> Debt is very useful when used properly


This is such an important message for this thread. Even credit cards can be used to save money or generate income. I have a debit card but can barely remember my pin because it never gets used. If I pay the balance off before interest occurs I'd be foolish not to use someone else's money. Businesses use other peoples money all the time to reduce overhead, create cashflow and fund investment in their business. Many of the wealthiest people use leverage for their investments. If one can use others money to safely build wealth. The danger comes when one doesn't understand or chooses to ignore the risks. Some will do well in a correction of an asset, some will get lucky in spite of their poor choices and some will lose. Good or bad it is the nature of capitalism which is likely a topic for its own thread.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> How many leveraged property investors successfully navigated the RE bear markets in the US, UK, Spain, etc and came out unscathed?
> 
> Even publicly listed property companies (REITs) had an awful time, and some collapsed. Were they not professionals too?


Who says they were all professionals or made wise choices? I know just as many smart, professional investors and business owners as dumb ones. The key to their success is making wise decisions.

Its not only housing prices that can affect a property manager or REIT in a negative manner. There are operating costs involved, vacancies to manage and shareholder obligations (if public) to maintain. Screw-up on any of these and you risk insolvency.

Like I mentioned, not all debt is bad. Use it wisely and you can be rewarded. In times of uncertainty, get informed and protect yourself accordingly.


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## marina628 (Dec 14, 2010)

James you have been in this forum for 10 years and since day one you have claimed to have decent income and some savings , if you bought in 2012 you would have around $600,000 more in net worth now .Do you regret not purchasing? My Dad always told me a mortgage is forced savings ,he seen rent as a waste of money ,we got our first house making $44000 a year and bought it with a basement apartment plus rented a room for $500 a month .I am not sure of your age now but for somebody like my son ,buying now and taking 30 years to pay off a house is his dream , being mortgage free at 59 .You have to start somewhere and not sit on the sidelines , I have seen year round mobile homes selling for less than $200,000 in Kingston and same in Belleville .Not exactly 'living the dream' but it is a great start over paying high rents.


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## james4beach (Nov 15, 2012)

marina628 said:


> James you have been in this forum for 10 years and since day one you have claimed to have decent income and some savings , if you bought in 2012 you would have around $600,000 more in net worth now .Do you regret not purchasing?


This has nothing to do with my point. What I don't like are the distortions to the housing market, and the unhealthy (and dangerous) economic situation that has resulted from many years of a real estate mania, assisted by bad government policies + rampant investor greed.

I also don't like how greedy property investors keep making a bad situation worse.

Those problems have nothing to do with whether I personally own a house or not. Say that I bought a house 20 years ago. Would that solve the distortions to the housing market? Of course not.

Maybe you don't realize how bizarre and out of control our housing market is. This isn't normal.


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## KaeJS (Sep 28, 2010)

james4beach said:


> I also don't like how greedy property investors keep making a bad situation worse.


Greedy investors?

James, if it wasn't RE, it would be something else. Have you seen crypto or stocks? How about PS5's or Graphics Cards?


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## james4beach (Nov 15, 2012)

KaeJS said:


> Greedy investors?
> 
> James, if it wasn't RE, it would be something else. Have you seen crypto or stocks? How about PS5's or Graphics Cards?


Ah yes, but those don't impact a basic life necessity: a house.

That's why I've been saying for years that I wish these property investors would buy dividend stocks instead. They will still get the yield they want, but without contributing to runaway house prices, which price people out of home ownership.

*I'm asking property investors to consider that hoarding properties as a financial asset causes harm to society*. There are other things you can buy instead, that won't cause as much harm. Buy stocks, dividend stocks, bonds, or for all I care, buy graphics cards or iPhones.

That's one thing I'm raising, is asking you to consider the harm to society. The other thing I'm raising is that we're now in a tightening liquidity environment where interest rates are shooting up. The "punch bowl" is being pulled away, and real estate people aren't used to that. I think it's _in their own best interest_ to deleverage because this is going to become dangerous for them. If interest rates really keep rising, property investors are going to have lots of problems.


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> That's why I've been saying for years that I wish these property investors would buy dividend stocks instead. They will still get the yield they want, but without contributing to runaway house prices, which price people out of home ownership.


The risk is the same though. 
Buying stocks creates a debt for someone else. Now you become dependant on someone else to preserve your capital. Inflation and rising rates are problematic for everyone, not only RE investors.


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## KaeJS (Sep 28, 2010)

james4beach said:


> Ah yes, but those don't impact a basic life necessity: a house.


Owning a home is not a necessity.
Having a roof over your head is.

That is why there are rentals and the rent increases are capped.


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## londoncalling (Sep 17, 2011)

I agree with @KaeJS 

A place to live is a necessity. Owning that place is not. There is a lot of things that can be done to "fix" the RE industry. I am not sure if there is a win win solution. Not every province has rent caps and there are mixed opinions on how effective it is. I am not a renter nor am I a landlord. I believe there are as many good landlords as good renters. There are probably just as many bad renters as bad landlords.


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## m3s (Apr 3, 2010)

james4beach said:


> *I'm asking property investors to consider that hoarding properties as a financial asset causes harm to society*. There are other things you can buy instead, that won't cause as much harm. Buy stocks, dividend stocks, bonds, or for all I care, buy graphics cards or iPhones.


Everything is driven by free market incentives

RE is a good investment because you can leverage up so much. The banks love it, the mortgage brokers love it, the RE agents love it, the home inspectors love it, the home improvement stores love it, the contractors love it etc

The root cause is the artificially low rates thanks to an artificially easy monetary policy. Only Pierre can save us. Look at Germany for an example


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## marina628 (Dec 14, 2010)

james4beach said:


> Ah yes, but those don't impact a basic life necessity: a house.
> 
> That's why I've been saying for years that I wish these property investors would buy dividend stocks instead. They will still get the yield they want, but without contributing to runaway house prices, which price people out of home ownership.
> 
> ...


James I think selling them did more harm than holding them ,you are obviously hoping to buy but even if house prices drop 50% that still makes them unaffordable to most. Also 40-50% gets things back to 2020/2021 prices. The mortgage brokers and Real Estate agents can probably tell you there are some uncertain things right now with the interest rates and June 1 will likely have another .50% raise in rates but it only affects people who were shopping at their max price .There will never be more sellers than buyers with the immigration targets increasing every year.


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## FI40 (Apr 6, 2015)

marina628 said:


> The mortgage brokers and Real Estate agents can probably tell you there are some uncertain things right now with the interest rates and June 1 will likely have another .50% raise in rates but it only affects people who were shopping at their max price .


I find this hard to believe. I'd wager most people shop very near their max price - and usually, people buy before they sell, counting on getting a pretty good transaction (i.e. quick sale for the price they want).
It's hard to argue that rising interest rates will not bring down prices. It's a forcing function. Lenders are quite simply approving people for less. If there are 2-3 more 50bp hikes this might have a material impact on the market.


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## Gator13 (Jan 5, 2020)

This article is regarding the CMHC is very interesting......

CMHC warns it may not regain market share on mortgage insurance - The Globe and Mail


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## banjopete (Feb 4, 2014)

I mean I guess I understand the sentiment but it's pissing in the wind. The idea of home ownership for the masses is dwindling, maybe the sooner many realize this the better for their finances. Money's always going to make more money, thinking otherwise is not realistic. Real money will always enshrine its ability to make even more through influence at the highest levels. I don't expect that to change any time soon regardless of the colours flying in the capitals. Should the average household be even trying to afford a 700k house just because you can get financing for it?


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## KaeJS (Sep 28, 2010)

banjopete said:


> I mean I guess I understand the sentiment but it's pissing in the wind. The idea of home ownership for the masses is dwindling, maybe the sooner many realize this the better for their finances. Money's always going to make more money, thinking otherwise is not realistic. Real money will always enshrine its ability to make even more through influence at the highest levels. I don't expect that to change any time soon regardless of the colours flying in the capitals. Should the average household be even trying to afford a 700k house just because you can get financing for it?


I love this post.


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## KaeJS (Sep 28, 2010)

James,

Why not short HCG or something?


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## Eclectic21 (Jun 25, 2021)

scorpion_ca said:


> We didn't have higher inflation in the last decade. But this time is different with higher inflation. Many favorite stocks dropped 50% to 80% in the six months.


Can you give me some examples of favourites that dropped this much?
Spot checking a few I remember ... they are flat or up for six months. If I use the peak then they are down about 10% or less.

If you mean "favourite tech stocks" then I can think of many examples. 




scorpion_ca said:


> ... Why can't the house price drops 30%?


I'd guess lack of supply, foreign investors, crime groups money laundering and local gov't focusing on out of favour types of housing. 

Nothing makes it a rule but I don't seem enough changing for that big a drop, the GTA and GVA potentially being exceptions.


Cheers


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## Eclectic21 (Jun 25, 2021)

Mortgage u/w said:


> ... As for passing down homes, its essentially already happening - lots of parents are mortgaging their properties to provide down payments for their kids. Once that idea is capped, I could definitely see houses being passed down, debt and all.


My co-workers parents moved into a retirement or LTC home. They sold their house to my co-worker for less than FMV. After moving in, he has sold his former house that was smaller.

I also have co-workers living at home with their parents where the will says they receive the house when the parents die.


It's a complex market with lots of moving parts. 

Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> Ah ok, I see the difference. So you're saying people with the expertise to leverage their properties shouldn't be concerned. Rising rates can be managed ...


No different than when I used my HELOC to buy an investment portfolio in late 2008 and early 2009. I planned for what I would do if rates rose significantly.

Turns out they stayed lower and the investments rose faster than I expected some would say I was a fool for not buying a lot more. However, it let me sleep at night plus I did will so to me, it didn't matter.




james4beach said:


> But more general homeowners and perhaps amateur real estate investors, you would agree, should be concerned and cautious here?


Depends on how stretched they are, what is happening with the income overall and when the rising interest rates will hit them (I know people who took out a ten year mortgage knowing that rates were low).

The stats can be misleading as well. OOH, I'm counted as someone who has significant money on their HELOC. OTOH, interest rates have to go up by 4x to equal the cash paid. More than a 40% drop would be needed to bring the trading value into the neighbourhood of the HELOC value.


Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> How many leveraged property investors successfully navigated the RE bear markets in the US, UK, Spain, etc and came out unscathed?


It would take a study. I know that the three I worked with in Maryland in 2000 were talking about how their properties were up so much and they were concerned about a crash so they sold and moved further away to lock in the gain. Others stood pat but had been reducing their leverage for years so it didn't affect them much, the last I talked to them.

Others were at the wire and walked away from their property.




james4beach said:


> ... Even publicly listed property companies (REITs) had an awful time, and some collapsed. Were they not professionals too?


Sure ... but they have restrictions that the amateur does not have. Money flows in and it has to be invested or paid back to the investor. Similar to the individual could sell all their Nortel stock before the crash but the indexers could not as it was part of the index for so long.


Cheers


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... That's one thing I'm raising, is asking you to consider the harm to society. The other thing I'm raising is that we're now in a tightening liquidity environment where interest rates are shooting up. The "punch bowl" is being pulled away, and real estate people aren't used to that. I think it's _in their own best interest_ to deleverage because this is going to become dangerous for them. If interest rates really keep rising, property investors are going to have lots of problems.


As I have said before, shouldn't you want problems to drive prices down?

I've also said before that I suspect that if the amateurs you are concerned about did follow your recommendation and sold, the bigger players with deep pockets will snap up the properties for little change to affordability.


Cheers


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## james4beach (Nov 15, 2012)

Eclectic21 said:


> I've also said before that I suspect that if the amateurs you are concerned about did follow your recommendation and sold, the bigger players with deep pockets will snap up the properties for little change to affordability.


I don't think that's how a marketplace works. When many buyers are tripping over each other and in a buying frenzy, there's buying pressure to push the prices up.

Without a huge number of enthusiastic buyers, of course there still will be some professional buyers but I don't think prices would increase quite the same way. Certainly not the 25% single year increase in Canadian home prices.

Easy availability of credit, and super low interest rates, creates more buyers. Take away the stimulus (those low rates and easy mortgages) and buyers disappear.


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## scorpion_ca (Nov 3, 2014)

james4beach said:


> I don't think that's how a marketplace works. When many buyers are tripping over each other and in a buying frenzy, there's buying pressure to push the prices up.
> 
> Without a huge number of enthusiastic buyers, of course there still will be some professional buyers but I don't think prices would increase quite the same way. Certainly not the 25% single year increase in Canadian home prices.
> 
> Easy availability of credit, and super low interest rates, creates more buyers. Take away the stimulus (those low rates and easy mortgages) and buyers disappear.


Totally agreed with you.









Posthaste: The way the housing market is stalling, the Bank of Canada may have to hit the brakes sooner than expected


For the first time since 2010, five-year fixed mortgage rates are all above 4%




financialpost.com


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Totally agreed with you.


Yup, economists and the BoC knows all this too. It's quite well known that low interest rates push up housing prices.


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## nathan79 (Feb 21, 2011)

scorpion_ca said:


> Totally agreed with you.
> 
> 
> 
> ...


The title of that article is ridiculous. Although activity is down it's still technically a seller's market. Price drops are minimal so far. The BoC needs to stay the course and tame inflation regardless of the housing market, at least if they want to restore their credibility.


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## marina628 (Dec 14, 2010)

FI40 said:


> I find this hard to believe. I'd wager most people shop very near their max price - and usually, people buy before they sell, counting on getting a pretty good transaction (i.e. quick sale for the price they want).
> It's hard to argue that rising interest rates will not bring down prices. It's a forcing function. Lenders are quite simply approving people for less. If there are 2-3 more 50bp hikes this might have a material impact on the market.


Even though I have high tolerance for Risk I sold my $1,500,000 before buying another new construction for half the price because I did not want to be suck with two homes. Maybe my friend are low risk but most have bought much lower than their max including my niece who bought her first home and had $200,000 down.


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## off.by.10 (Mar 16, 2014)

Eclectic21 said:


> I've also said before that I suspect that if the amateurs you are concerned about did follow your recommendation and sold, the bigger players with deep pockets will snap up the properties for little change to affordability.


Funny you should post that now, I had a flyer in the mail yesterday saying "we're experienced investors looking to buy houses and multiplex in your area". And not some random crap printed on a home printer, it was a very professional job which likely involved a graphic designer and high end printing.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> I don't think that's how a marketplace works. When many buyers are tripping over each other and in a buying frenzy, there's buying pressure to push the prices up.
> 
> Without a huge number of enthusiastic buyers, of course there still will be some professional buyers but I don't think prices would increase quite the same way. Certainly not the 25% single year increase in Canadian home prices ...


It's anecdotal ... but for the six houses that sold last year in my neighbourhood, viewings were about twelve people with two to four offers per house. At least four of the offers were from pros. For one house, it turned out of that one offer was officially a pro and the second who looked like a family was a stand in for the pro that lost out on the big.




james4beach said:


> ... Easy availability of credit, and super low interest rates, creates more buyers. Take away the stimulus (those low rates and easy mortgages) and buyers disappear.


In general ... sure. Whether it's as straight line and as direct an impact as you think is what I doubt.


Cheers


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## Eclectic21 (Jun 25, 2021)

off.by.10 said:


> Funny you should post that now, I had a flyer in the mail yesterday saying "we're experienced investors looking to buy houses and multiplex in your area". And not some random crap printed on a home printer, it was a very professional job which likely involved a graphic designer and high end printing.


Out of curiosity - this is the first flyer?

For me it's been around six years or more. What's recent is instead of one or two a year, it's more like ten flyers a year.


Cheers


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## off.by.10 (Mar 16, 2014)

Eclectic21 said:


> Out of curiosity - this is the first flyer?


Not the first, but the first that looks so nice. It's usually 2-3 ever year but often little more a black & white printed piece of paper. I think those are the people who rebuild on old, larger lots. This seemed like someone looking for investment properties. I also noticed that a house on my street which recently had a for sale sign now has a for rent sign.


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## scorpion_ca (Nov 3, 2014)

Deleted


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## FI40 (Apr 6, 2015)

What do you all think about the likelihood of the government implementing an expanded version of the "shared equity mortgage" if prices do start to decline, and it becomes politically expedient to do so?

I think this is a terrible idea btw, but what do I know. It has the potential to push prices up despite whatever happens to interest rates.

I see government intervention as one of the very few ways prices could avoid declining. Another way would be inflation and rates dropping very soon, which seems unlikely.


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## nathan79 (Feb 21, 2011)

FI40 said:


> What do you all think about the likelihood of the government implementing an expanded version of the "shared equity mortgage" if prices do start to decline, and it becomes politically expedient to do so?
> 
> I think this is a terrible idea btw, but what do I know. It has the potential to push prices up despite whatever happens to interest rates.
> 
> I see government intervention as one of the very few ways prices could avoid declining. Another way would be inflation and rates dropping very soon, which seems unlikely.


The shared equity mortgages have been a failure by most accounts. I'd be surprised if they doubled down on them. I think we're more likely to see 30-year insured mortgages for first time buyers.


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## james4beach (Nov 15, 2012)

nathan79 said:


> The BoC needs to stay the course and tame inflation regardless of the housing market, at least if they want to restore their credibility.


Unfortunately the Bank of Canada is biased towards supporting home prices.

Several years ago, I met a BoC member at a university talk, and he enthusiastically explained to me how important it is that home prices stay strong. He said several times something along the lines of "the economy will be OK as long as home prices don't fall".

Sadly I think the BoC has some kind of ideological commitment to inflate home prices. It's a rigged market with a heavy player... certainly not capitalism, not a free market.


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## sinfullivingsolution (Jun 1, 2015)

interesting thread, which I do have some experience in the rental industry and opinions.

I believe that having a place to live is not a right. its not my responsibility, the governments or a landlords responsibility to provide affordable housing. it is the individual renters responsibility to obtain housing. the problem is that people want to live in highly populated areas that are extremely desirable by all. here lies the problem.

like any other service or product cost is dictated by supply and demand. 

for example living in southern ontario is way more expensive than living in new brunswick for housing. people dont want to move out there, which is their choice. our choices define our lives.

if supply if increased for rentals or home for sale the cost would go down. problem is that laws enacted by government strangle free enterprise. the green belt conservation, ridiculous zoning bylaws, bad tenant, bad landlords, rent control, a dysfunctional landlord tenant board and many other issues.

I dont see people who are real estate investors as unethical. they are providing a service to people at fair market value. if a whack of housing was built for rent and sale this would change the market and more than likely real estate investors would have to revalue their rents or house prices to reflect the decline in demand.

as far as a gic providing a similar return as a rental property. not even close. depending on several factors its not unheard of to easily be getting a return in the teens. asset appreciation, a taxational favorable business and good cash flow make real estate such a hot way of making money. even with headaches(which mostly can be screen out by due diligence and buying in up and coming areas) its a no brainer. 

if people want affordable housing they can move somewhere where its affordable. otherwise they need pay market value for living accommodations in a high demand area.

personally, I go were I get the most bang for my buck and where I can find work. Ill be moving to new brunswick in a year and buying property up there. more than likely a fixer upper cottage for under 100k.


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## nathan79 (Feb 21, 2011)

james4beach said:


> Unfortunately the Bank of Canada is biased towards supporting home prices.
> 
> Several years ago, I met a BoC member at a university talk, and he enthusiastically explained to me how important it is that home prices stay strong. He said several times something along the lines of "the economy will be OK as long as home prices don't fall".
> 
> Sadly I think the BoC has some kind of ideological commitment to inflate home prices. It's a rigged market with a heavy player... certainly not capitalism, not a free market.


Lol... not long after you say that I come across this article...









Interest rate trajectory will depend heavily on housing market, Bank of Canada deputy governor says


Bank officials have said they intend to get the benchmark rate into a ‘neutral’ range of between 2 per cent and 3 per cent relatively quickly




www.theglobeandmail.com





Can we fire these f**king clowns?


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## james4beach (Nov 15, 2012)

nathan79 said:


> Can we fire these f**king clowns?


Amazing article. They don't even hide it. Real estate must be propped up at all costs, they say!

And people wonder why home prices are inflated. It's 30 years of central bank (and other government) stimulus.


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## Emjay85 (Nov 9, 2014)

james4beach said:


> Unfortunately the Bank of Canada is biased towards supporting home prices.
> 
> Several years ago, I met a BoC member at a university talk, and he enthusiastically explained to me how important it is that home prices stay strong. He said several times something along the lines of "the economy will be OK as long as home prices don't fall".
> 
> Sadly I think the BoC has some kind of ideological commitment to inflate home prices. It's a rigged market with a heavy player... certainly not capitalism, not a free market.


Sounds like you missed a huge buy signal that day! if you can't beat em....


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## MrBlackhill (Jun 10, 2020)

For first time on record, more Ontarians moved to Quebec than the reverse in 2021










For the first time in over 50 years of data, there's more people moving from Ontario to Quebec than the other way around.

The free market will regulate itself. Some people are selling their unaffordable house in Ontario to buy a more affordable house in Quebec.

At some point, when people truly won't be able to buy a house in a specific city, they'll buy elsewhere. Obviously, the whole Canadian population can't live in Toronto just because they want to. No matter what are the interest rates, no matter how high or how low are the prices, everybody can't live in the same city, so prices will necessarily go up as long as demand is greater than supply. And supply isn't unlimited.

People must be forced to buy elsewhere if they can't afford it, that's how new great cities emerge.


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## scorpion_ca (Nov 3, 2014)

nathan79 said:


> Can we fire these f**king clowns?


Yes, vote for Pierre Poilievre even though I voted for Liberals last two times but not anymore.

*Trudeau’s Tory Rival Says He’d Fire Bank of Canada Governor*









Trudeau’s Tory Rival Says He’d Fire Bank of Canada Governor


The leading candidate to challenge Justin Trudeau in Canada’s next election said he would fire the governor of the country’s central bank if he was elected prime minister.




www.bloomberg.com


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## james4beach (Nov 15, 2012)

Emjay85 said:


> Sounds like you missed a huge buy signal that day! *if you can't beat em....*


And there is the logic that underpins the entire Canadian housing market. It works until it doesn't.

(And it's not capitalism)


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> Yes, vote for Pierre Poilievre


The problem with PP is that he's a populist, and it's pretty clear he's engineering his "outrage" just to win votes. He's disingenuous and doesn't really believe the things he says.

A guy like PP would just as easily turn around and serve the real estate & mortgage industry lobbyists. That's what happens with politicians who have no core values. They'll say anything, strategically for election purposes.

Beware: PP is tricking you.


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## scorpion_ca (Nov 3, 2014)

james4beach said:


> Beware: PP is tricking you.


Yes, I know but I want him to win the CP leadership election that he can make a challenging life for Liberal and NDP. All other CP candidate seems to me a pu$$y. Otherwise, Liberal and NDP would destroy the middle class more in the name of helping the middle class.


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## nathan79 (Feb 21, 2011)

scorpion_ca said:


> Otherwise, Liberal and NDP would destroy the middle class more in the name of helping the middle class.


They know exactly who they're helping; they're just being totally disingenuous with their terminology. They don't mean middle income, except for the highest end of that category, aka "upper middle class" or borderline wealthy. That's why they call middle class whatever someone "feels like" rather than a strict definition. If they were actually honest they'd have to admit the middle class in this country is being hollowed out at an alarming rate.


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## james4beach (Nov 15, 2012)

I just want to make sure I'm on the record with my clear warning here:

Leveraged property investors may face catastrophic losses -- and personal ruin -- if they remain too leveraged during a property downturn. With home prices weakening and interest rates spiking higher, this may be your best opportunity to sell now, before conditions turn very bad.

*It's probably best to sell now, or at least deleverage, for your own good.*

The bank prime rate today is 3.2%. With about 200 basis points of increases expected, the prime rate at the end of this year will be over 5%. Into next year, the bank prime rate could get up to 6%.

If you think I'm out to lunch on this one, then please by all means, take on additional mortgages and buy another property. It worked for you before, maybe it will work for you again? Good luck!


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## Money172375 (Jun 29, 2018)

james4beach said:


> I just want to make sure I'm on the record with my clear warning here:
> 
> Leveraged property investors may face catastrophic losses -- and personal ruin -- if they remain too leveraged during a property downturn. With home prices weakening and interest rates spiking higher, this may be your best opportunity to sell now, before conditions turn very bad.
> 
> ...


Remember that many recent borrowers (last few years at least) were qualified at rates around 5.5%. To me, the bigger risk is job loss and recession, rather than higher rates.


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## james4beach (Nov 15, 2012)

Money172375 said:


> Remember that many recent borrowers (last few years at least) were qualified at rates around 5.5%. To me, the bigger risk is job loss and recession, rather than higher rates.


I don't quite understand. Don't most people have variable mortgages, and immediately pay higher rates as the prime rates go up?

Or are you referring to the projections made by lenders that people have sufficient income to pay at 5.5%?


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## Money172375 (Jun 29, 2018)

during The last bit of lending I did in and around 2018/19, variable borrowers were approved and adjudicated at 5.34%. Even though they were paying much less, the application and the applicable lending ratios were calculated on A 5.34% rate. I believe (but could be wrong), anyone taking a 3 year or longer fixed rate was adjudicated on the their negotiated rate. Could be wrong on this last aspect…cant remember for sure.

as for how payments are treated on a variable rate mortgage where rates are rising. At TD, a “trigger” rate was detailed in the mortgage agreement. only when that trigger rate is reached, do payments start to go up. Before that trigger rate is reached and during rising rates, the payment remains the same, but more of it goes to interest instead of principal. From what I recall, the trigger rate was quite a bit higher than the customers rate at the the time of signing. Perhaps 2-3% higher. 

either way, I do believe variable rates would need to go up at least 2.5%, and probably more, before we start hearing about missed payments. I suspect many people are/will be switching their variable rare mortgages to fixed rate.

im sure mortgage u/w can provide some more current info….specifically do the trigger rate clause and if all lenders function the same way.


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## Money172375 (Jun 29, 2018)

From TD below…so it appears the payment remains the same until the payment no longer covers the interest portion. So you could theoretically be paying interest only if rates rise sharply.

****

With a *variable interest rate*, the interest rate can fluctuate. At TD, your principal and interest payments will stay the same for the term, but if the TD Mortgage Prime Rate goes down, more of your payment will go towards the principal. If the TD Mortgage Prime Rate goes up, more will go towards interest.
When interest rates increase, the principal and interest amount may no longer cover the interest charged on the mortgage. The interest rate this occurs at is called the Trigger Rate.
Variable interest rate mortgages can exceed their trigger rate until they reach what is known as a balance called the Trigger Point. When this happens, you will be required to adjust your payments, make a prepayment, or pay off the balance of the mortgage.


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## Money172375 (Jun 29, 2018)

Recent example as quoted in the globe and mail last last week.









Have fixed payments on a variable-rate mortgage? Here’s when you’ll really start to feel the pain of rising rates


Despite a surging prime rate, variable-rate mortgage payments are generally fixed




www.theglobeandmail.com






At Canada’s largest mortgage lender, Royal Bank of Canada, the “approximate trigger rate” would be in a range between 5.51 per cent and 5.65 per cent for someone in the first year of a variable, says Arjun Lombardi-Singh, RBC’s senior manager of communications.

That assumes a $500,000 mortgage at prime minus 0.50 per cent (2.70 per cent) with monthly payments and a 25-year amortization. It also assumes prime rate doesn’t drop along the way.
Using this example above, it would likely take another 275-plus basis points of Bank of Canada rate hikes before we saw a trigger rate over 5.51 per cent. As of Wednesday, the market was only pricing in about 225 bps of additional rate increases in the next five years. (There are 100 basis points, or bps, in a percent)


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## londoncalling (Sep 17, 2011)

james4beach said:


> I just want to make sure I'm on the record with my clear warning here:
> 
> Leveraged property investors may face catastrophic losses -- and personal ruin -- if they remain too leveraged during a property downturn. With home prices weakening and interest rates spiking higher, this may be your best opportunity to sell now, before conditions turn very bad.
> 
> ...


Those that purchased prior to 2022 took on the risk of interest rate increases and a RE bubble burst but for those that did have likely seen further price appreciation. It will vary by market. Buying Real Estate today comes at a higher interest rate cost but it is my understanding that price appreciation is starting to stall. When a price drop comes some markets may see greater declines than others. 

Are you so certain that everyone should be selling? If that is true than who would be buying? More to the point are there any circumstances in your view where it is acceptable to be a buyer at this moment in time? How about a 10 year mortgage with 50% down? Does one have to wait until bank prime gets back to below 2%? What if I plan to hold for the next 25-30 years? I am really trying to understand under what conditions buying real estate would again be a good decision.


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## james4beach (Nov 15, 2012)

londoncalling said:


> Are you so certain that everyone should be selling? If that is true than who would be buying? More to the point are there any circumstances in your view where it is acceptable to be a buyer at this moment in time? How about a 10 year mortgage with 50% down? Does one have to wait until bank prime gets back to below 2%? What if I plan to hold for the next 25-30 years? I am really trying to understand under what conditions buying real estate would again be a good decision.


I'm just suggesting the generic advice that applies to any leveraged investor: one should beware of how much leverage they're using. If someone has mortgages they can easily afford even at higher rates, then there's no problem. If someone has minimal debts, no problem there either.

But from what I've seen/read, some property investors are very aggressive with leverage and those people should probably be careful. Stock investors for example can't use anywhere close to the amount of leverage that real estate investors are using.

"Deleveraging" doesn't necessarily mean selling the properties. It can also mean paying down the debts to make sure one isn't leveraged so much.


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## londoncalling (Sep 17, 2011)

Thanks for the clarification. Deleveraging is likely the best course of action for many if you believe we are going to see more hikes beyond this summer. I agree generally speaking real estate is not expected to provide the same return it has recently. However, people will try to explain how they are the exception to the general rule. Just to play devil's advocate. If I were to put out a post about deploying 6 digits into the market at all time highs most of the advice would be to do it right away or in chunks over the next few quarters.

Does this caution apply only to additional properties and not to those that do not currently own? If I had the cash(which I don't but this is just a fun mental exercise) to purchase in full without any financing should I be concerned buying right now? The only fundamental difference I see is the leverage portion(which you have pointed out). How much leverage would be acceptable? If I own my home outright, is it acceptable to take 20% of home equity out for another property or any investment for that matter? Was it ok when lending rates were less than 2%?


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## off.by.10 (Mar 16, 2014)

Money172375 said:


> im sure mortgage u/w can provide some more current info….specifically do the trigger rate clause and if all lenders function the same way.


Certainly not all, at least not a few years ago. I had an MCAP variable and the payments changed with every rate change, both ways.


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## james4beach (Nov 15, 2012)

londoncalling said:


> Does this caution apply only to additional properties and not to those that do not currently own? If I had the cash(which I don't but this is just a fun mental exercise) to purchase in full without any financing should I be concerned buying right now? The only fundamental difference I see is the leverage portion(which you have pointed out). How much leverage would be acceptable?


These are good questions and I don't know the answers. If someone needs a primary residence (needs a place to live) I don't see any problem with buying a house, either in full or with a moderately sized mortgage.


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## londoncalling (Sep 17, 2011)

In all honesty neither do I. I do not consider RE an investment for me personally, but in reality it is. I have a primary residence and am considering a recreational property. These decisions have a financial component but investment dain/loss is secondary. I have no desire to be a landlord even though I can do most of the maintenance on my property. Thanks for participating in my mental exercise thus far.


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## james4beach (Nov 15, 2012)

londoncalling said:


> I have a primary residence and am considering a recreational property.


Seems harmless enough as long as you can handle the mortgage debt. The kind of thing that makes my skin crawl as these property investors who start with one property, take out a HELOC on it and then use that as a downpayment on the next property. Repeat it multiple times and end up with $3 million in real estate with maybe only $100K net equity. Lying or bending the truth on loan applications to make it all happen.

That seems like a common game among these young hot-shot property investors in the GTA. I've even seen similar things in Winnipeg, for example in a condo building where I watched a man in his 20s with a moderately paying job own 2 or 3 condo units. First thing you ask yourself is where he's finding the money. Next moment, you realize it's all borrowed. It's a national credit mania.


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## Money172375 (Jun 29, 2018)

james4beach said:


> Seems harmless enough as long as you can handle the mortgage debt. The kind of thing that makes my skin crawl as these property investors who start with one property, take out a HELOC on it and then use that as a downpayment on the next property. Repeat it multiple times and end up with $3 million in real estate with maybe only $100K net equity. Lying or bending the truth on loan applications to make it all happen.
> 
> That seems like a common game among these young hot-shot property investors in the GTA. I've even seen similar things in Winnipeg, for example in a condo building where I watched a man in his 20s with a moderately paying job own 2 or 3 condo units. First thing you ask yourself is where he's finding the money. Next moment, you realize it's all borrowed. It's a national credit mania.


Keep in mind, i would suspect the vast majority of investment properties are leveraged only to 65%. A secondary tranche would be leveraged up to 75%. Anything beyond that, and you’re most likely into private borrowing, and yes anybody on that path, is at increased/moderate risk.


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## KaeJS (Sep 28, 2010)

I think people have quite a bit of an equity cushion. I think most investors are not on the very edge. I could be wrong, and I'm sure some of them are, but I believe the vast majority of the investors have deeper pockets and higher incomes than you think.

My second property is leveraged at 40%.
Even if house prices were to drop 50% from current values, I would still be able to sell and not take any loss.

Time will tell, though.


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## londoncalling (Sep 17, 2011)

I don't have any plans to establish a leveraged RE portfolio of individual properties. Even the addition of a second property in the current environment gives me pause. I likely would have had the some hesitation if rates had stayed low and prices kept rising. Also the purchase will cause a significant shift in my overall diversification of assets. I will also need to pull back the amount going to equities and RRSP, TFSA until the property is paid in full. In an effort not to derail the thread I will post additional thoughts updates in a different thread. Sale of Principal Residence | Canadian Money Forum 

@KaeJS I am not sure how big a correction we could see but I also think most people would find ways to prevent foreclosure.

I am not sure how much leverage is being used in RE but I thought there were rules in place to limit bad practices. Anybody taking advantage of loopholes that go beyond the intent of the lending rules does so at their own peril. Obviously, those that build a house of cards and are way overextended take the chance of losing it all. Simple Risk-Reward.


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## nathan79 (Feb 21, 2011)

I think RE investors have become too accustomed to relying on capital appreciation instead of income. How will they navigate the new reality of higher rates, while in many cases collecting rent that is less than the mortgage payment? Not only is your property decreasing in value, but you're shovelling money into it every month. Then what happens in a recession when jobs are lost and rents drop?

We should not assume that Canada is somehow special and immune to a RE crash. I think a small percentage of over-leveraged borrowers would be enough to trigger a cascade effect of falling prices... and the more prices drop, the more people would become underwater. People like KaeJS would probably be fine... even if he did get underwater he could wait it out, but there's no guarantee that those who are levered by 65-75% would be unscathed.


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## Money172375 (Jun 29, 2018)

World Latest News, Videos, Photos, Breaking News, & World News Headlines - World News


For all of you people, I have tried to share information about all WorldNews types of news and all this news which is being conveyed by me to you people or




worldnews.upexampaper.com


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## Money172375 (Jun 29, 2018)

Banks tighten home equity line of credit guidelines


Rob McLister, founder at RateSpy.com, talks about big banks tightening lending criteria around home equity lines of credit, and what it means for Canadians with HELOCs.




www.bnnbloomberg.ca


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## sags (May 15, 2010)

Home sales have almost stopped as the prices drop and interest rates rise. Real estate lawyers are swamped with people seeking to get out of deals. Pre construction is a disaster as development is cancelled and deposits are gone with no recourse.

More taxes on speculation and pre construction assignments are in the works.

There is a growing chorus of economists calling for a bigger interest rate hike to “stun the markets” and stop inflation before it is out of control.

I think we can conclude bubblemania is over.


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## Flugzeug (Aug 15, 2018)

We viewed a house last week. On “offer day” they got zero offers. We said we thought it was overpriced so won’t be making an offer. Then the realtor calls the day after “offer day” asking if we are still interested because it’s a gem “priced to sell”, I told them it’s priced to sell 3 months ago, not today, hence the zero offers.

Depends on price point, but where we are and at our price point, sellers are dropping prices and even delisting and list much lower a short time later. If they do get any offers usually it’s with multiple conditions and under asking price. I hear condos and some townhouses are still getting multiple offers but much closer to asking price or under. 

I get the sense sale prices will continue to trend downward from the peak, at least in the coming months.


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## kcowan (Jul 1, 2010)

Reminds me of Alberta from 1981 until 1985. Our house sold for $230k in 81 and resold in 85 for $150k. Not a housing crisis but a cost of money crisis. BTW we bought it in 73 for $67k.


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## scorpion_ca (Nov 3, 2014)

The house prices in Calgary NE has started to drop since the BoC raised the interest rates. The houses were sold for 320k to 380k in 2018 and 2019. The similar house prices went to 450k, 550k and even 600k in late 2021 and early 2022 (Thanks to ON and BC buyers). Now it's in 400k to 500k range. A couple of more 50 basis points would fix this problem.

In our area, a house was sold for 380k in late 2020. They didn't do any upgrade and now asking $600k on Kijiji. The greedy seller didn't even post it on www.realtor.ca in order to save the realtor fees...


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## Gator13 (Jan 5, 2020)

There could be some fantastic RE buying opportunities in the months ahead.


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## Johnny199r (May 20, 2014)

My apartment lease expires in December.

I am in the market for a house. 

I hope things accelerate.


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## scorpion_ca (Nov 3, 2014)

Today sellers are dropping the asking house prices 20k to 40k in Calgary NE area. 50 basis point is working like a magic pill.


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## bigmoneytalks (Oct 3, 2014)

scorpion_ca said:


> Today sellers are dropping the asking house prices 20k to 40k in Calgary NE area. 50 basis point is working like a magic pill.


Yup I remember someone here in CMF posted that real estate is going up because of "immigration" and "supply and demand" and this population boost would keep prices going up. I said it then and I say it now. It's rates. It's that simple. Rates go up prices come down.


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## m3s (Apr 3, 2010)

nathan79 said:


> I think RE investors have become too accustomed to relying on capital appreciation instead of income. How will they navigate the new reality of higher rates, while in many cases collecting rent that is less than the mortgage payment? Not only is your property decreasing in value, but you're shovelling money into it every month. Then what happens in a recession when jobs are lost and rents drop?


I'm moving back to Canadia and doing the math

I can rent a brand new build for $2k. I can buy the exact same build in the exact same location for $800k lol

According to rate hub a 5 year variable would be $3.5k but the property taxes are another $5k not to mention owners insurance, closing costs and maintenance (or initial setup on a new build) Plus I much prefer my downpayment to me more liquid in this volatile market. Oh and I'd have to buy sight unseen and waive all conditions and probably bid above asking too.

The rent seems to be around $2k no matter what so it lets me get a better place at the same cost too..

Am I the moron missing something or is everyone else?


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## KaeJS (Sep 28, 2010)

m3s said:


> I'm moving back to Canadia
> 
> Am I the moron?


Yep.


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## m3s (Apr 3, 2010)

KaeJS said:


> Yep.


Don't worry I think I still have an ice scraper, snow shovel and toque in storage somewhere

As long as Trudeau keeps printing free money we should be good


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## KaeJS (Sep 28, 2010)

m3s said:


> Don't worry I think I still have an ice scraper, snow shovel and toque in storage somewhere
> 
> As long as Trudeau keeps printing free money we should be good


I don't know why anyone would voluntarily move here.

To each their own. But I guess you're already rich so it doesn't matter too much.


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## m3s (Apr 3, 2010)

It's not voluntary. My work visa is done

No sense throwing a unicorn pension away for a few months when there's things to sort out anyways

Then off to warmer climes


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## KaeJS (Sep 28, 2010)

m3s said:


> It's not voluntary. My work visa is done
> 
> No sense throwing a unicorn pension away for a few months when there's things to sort out anyways
> 
> Then off to warmer climes


Should have spent your time finding a woman for a green card. 😂


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## off.by.10 (Mar 16, 2014)

bigmoneytalks said:


> Yup I remember someone here in CMF posted that real estate is going up because of "immigration" and "supply and demand" and this population boost would keep prices going up. I said it then and I say it now. It's rates. It's that simple. Rates go up prices come down.


You need both really. Population and somewhat limited supply so people are willing to bid up. And low rates so people can afford to bid up. Take away either one and prices come down.


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## MrBlackhill (Jun 10, 2020)

KaeJS said:


> I don't know why anyone would voluntarily move here.


Why don't you move out if it's so bad here? Honest question.


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## londoncalling (Sep 17, 2011)

m3s said:


> It's not voluntary. My work visa is done
> 
> No sense throwing a unicorn pension away for a few months when there's things to sort out anyways
> 
> Then off to warmer climes


If you will only be in Canada for a few months you are not serious about buying nor does it makes sense.


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## KaeJS (Sep 28, 2010)

MrBlackhill said:


> Why don't you move out if it's so bad here? Honest question.


Because I only want to go to America and they won't let Canadians just go there.

If they did, I would have gone. But they still don't. And now I have a girlfriend that I might actually want to stay with so that makes it more complicated.


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## m3s (Apr 3, 2010)

londoncalling said:


> If you will only be in Canada for a few months you are not serious about buying nor does it makes sense.


It makes sense if I was speculating like most other Canadian RE buyers and work pays all the closing fees

It doesn't make sense if I don't think RE can continue to go up forever like most Canadians. Depends entirely if we keep a numerically challenged PM who doesn't think about monetary policy

So ultimately depends how smart I think the average Canadian RE speculator and voter is


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## scorpion_ca (Nov 3, 2014)

What would you do in this situation?

I heard last night that a guy bought a house in Toronto 3.5 years ago with fake income documents and 20% down payment. He has been paying mortgage every month without any problem. A couple of months ago he got a registered mail from the bank about the fraudulent way of obtaining his mortgage. He spoke with two lawyers and his chance of winning the case is not good. He is given two options.

1 - Hand over the house, bank will sell it, he will have to pay the difference if it doesn't cover the mortgage, and pay additional 30k to cover the bank lawyers' fee. No criminal record in his name.
2 - Go to trial for criminal offence and he may serve 2 to 5 years behind the bar.


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## KaeJS (Sep 28, 2010)

Option 1, of course.


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## scorpion_ca (Nov 3, 2014)

KaeJS said:


> Option 1, of course.


Yup. sadly most of the people want to be home owners in North America by hook or by crook.


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## Mukhang pera (Feb 26, 2016)

I would have to think that a large number of Canadians would be behind bars if there was much truth to this.

For starters, I doubt he received a registered letter at all. Not after years of faithful payment of the mortgage debt. I do not think banks are in the business of conducting forensic analyses of loan applications _ex post facto._ Why would they? They are in the business of lending money, not seeking out and prosecuting crime. If payments are always current, who cares?

Moreover, I doubt this guy (if he exists apart from in fiction) was given the stark choice "hand over the house" or "go to jail". Does the mortgage contract give the bank the right to a handover if the falsity of the initial application is discovered long after the event? Unlikely.

The bank's remedy, if any, lies in the conventional remedy of foreclosure. But to invoke that machinery, there would have to a breach of a mortgage covenant and the mortgage would have to provide that any falsity or misrepresentation in the application is an ongoing breach, giving rise to the right to call the loan and to foreclose if repayment is not forthcoming. 

If the bank says hand over or we call the cops, the bank is facing jail for extortion. 

Finally, the notion that a Canadian court would imprison someone for lying on a loan application, especially where the lender suffered no loss, is just plain silly. 

But still, an entertaining story at first blush.


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## Mukhang pera (Feb 26, 2016)

I should add that I recognize that fake documents used to support a loan application comes within the concept of "false pretences" under the Criminal Code, s. 362(1). But would any Crown counsel approve charges in such a case? I would not count on it. Under s. 362(4), writing an NSF cheque is also a crime. Are all writers of NSF cheques residing in Her Majesty's Guesthouse?


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## sags (May 15, 2010)

The lender could simply refuse to renew the mortgage at the renewal date.


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## Mukhang pera (Feb 26, 2016)

sags said:


> The lender could simply refuse to renew the mortgage at the renewal date.


Well sure, but that would not make much of a story, would it?

As well, as I suggested earlier, if the mortgage has been paid faithfully for a period of years, and assuming some principal has been paid off, and the mortgage amount remaining is significantly less that the value of the property, I would think most lenders would prefer to renew. Why not, unless there is some reason to believe that the security has been impaired or despite some years of stalwart performance, things are about to change. I would not expect the lender to dig in its heels and refuse to renew simply to punish the borrower, to reflect righteous indignation or to mark disapproval of opprobrious conduct. 

I would guess that dishonesty in mortgage applications is a time-honoured ritual. Almost to be expected.


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## Mortgage u/w (Feb 6, 2014)

scorpion_ca said:


> What would you do in this situation?
> 
> I heard last night that a guy bought a house in Toronto 3.5 years ago with fake income documents and 20% down payment. He has been paying mortgage every month without any problem. A couple of months ago he got a registered mail from the bank about the fraudulent way of obtaining his mortgage. He spoke with two lawyers and his chance of winning the case is not good. He is given two options.
> 
> ...


You must have heard half the story with some interpreted twists to make for some juicy gossip.

No bank will go after a client years after the loan was provided - especially if the loan is not in arrears. If that were truly the case, the bank is exposing itself and revealing that they have poor underwriting and fraud prevention policies. 

So as it stands, I would choose Option 3 - Expose the bank by asking what steps they took to validate the income.


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## Mukhang pera (Feb 26, 2016)

Mortgage u/w said:


> ...
> No bank will go after a client years after the loan was provided - especially if the loan is not in arrears. If that were truly the case, the bank is exposing itself and revealing that they have poor underwriting and fraud prevention policies.
> ...


Good point. The bank would be casting itself in a bad light for no good reason.


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## MrBlackhill (Jun 10, 2020)

Nearly 1 in 4 homeowners would have to sell their home if interest rates rise more: survey


As per a survey from Manulife Bank of Canada, 18% homeowners polled are already at a stage where they can’t afford their homes




www.theglobeandmail.com







> *Nearly 1 in 4 homeowners would have to sell their home if interest rates rise more: survey*
> 
> Nearly one in four homeowners say they will have to sell their home if interest rates go up further, according to a new debt survey from Manulife Bank of Canada.
> 
> ...


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## HappilyRetired (Nov 14, 2021)

18% isn't nearly 1 in 4, it's not even 1 in 5.

Frankly, I don't care all that much about people that bought houses they can't afford. I'm sure many of those people also made some other bad financial choices too.


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## off.by.10 (Mar 16, 2014)

I don't put much value in that kind of survey. Lots of people are always complaining about being tight on money. But when push comes to shove, they'll make the payments and other stuff will be dropped.


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## scorpion_ca (Nov 3, 2014)

This type of BS news is nothing but a scare tactic that BoC doesn't increase the rates. Enough is enough. Keep increasing the rates until inflation is 2%.


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## marina628 (Dec 14, 2010)

scorpion_ca said:


> What would you do in this situation?
> 
> I heard last night that a guy bought a house in Toronto 3.5 years ago with fake income documents and 20% down payment. He has been paying mortgage every month without any problem. A couple of months ago he got a registered mail from the bank about the fraudulent way of obtaining his mortgage. He spoke with two lawyers and his chance of winning the case is not good. He is given two options.
> 
> ...


He likely made $500,000 on that house so far , making payments the bank cannot have a leg to stand on. They can however call in the mortgage. Even mortgage defaults they give you lots of opportunities to fix it. I worked with BMO in mortgage department for 6 years and this seems like a stretch to me as generally they only investigate if things are not being paid.


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## james4beach (Nov 15, 2012)

scorpion_ca said:


> This type of BS news is nothing but a scare tactic that BoC doesn't increase the rates. Enough is enough. Keep increasing the rates until inflation is 2%.


Agree completely. And the real estate industry (mortgage brokers, property developers, real estate investors, home builders, real estate agents) are all going to start screaming about interest rates now.

They're going to lobby the government and central bank to pump up housing again. I'm worried because they have a lot of power in this country, the land of mortgages and real estate investors.


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## MrBlackhill (Jun 10, 2020)

off.by.10 said:


> I don't put much value in that kind of survey. Lots of people are always complaining about being tight on money. But when push comes to shove, they'll make the payments and other stuff will be dropped.





scorpion_ca said:


> This type of BS news is nothing but a scare tactic that BoC doesn't increase the rates. Enough is enough. Keep increasing the rates until inflation is 2%.


Even though I posted that article, I also agree. People say that their mortgage would be "unaffordable", yet when you look at their lifestyles they spend so much elsewhere... When they face the big decisions, they'll simply be forced to travel less, eat out less, fewer expensive activities, fewer toys, cheaper food, cheaper vehicles, etc. Unless they want to keep that lifestyle and sell to downgrade their house, maybe.


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## Beaver101 (Nov 14, 2011)

^ That. And that would be considered SACRIFICES! 

Alternatives are to drive Uber and deliver for Door Dash, if not AirBnB the place(s).


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## off.by.10 (Mar 16, 2014)

MrBlackhill said:


> When they face the big decisions, they'll simply be forced to travel less, eat out less, fewer expensive activities, fewer toys, cheaper food, cheaper vehicles, etc. Unless they want to keep that lifestyle and sell to downgrade their house, maybe.


Exactly. And that is how higher rates bring inflation under control.


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## MrBlackhill (Jun 10, 2020)

Yet I guess _at some point_, higher rates hurt more the poor than the rich. Because, anyways, the poor are always on the losing side.

High inflation hurt the poor, because their wage don't keep up and have no extra money.
High rates hurt the poor, because they are the most indebted and have no extra money.

Who has the highest debt-to-income? The poor.
Who has the lowest debt-to-income? The rich.

Actually, COVID helped decrease the debt level of the poor.
















Debt-to-income ratio by disposable income quintile


none




www150.statcan.gc.ca


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Yet I guess _at some point_, higher rates hurt more the poor than the rich. Because, anyways, the poor are always on the losing side.


I've thought about this too but I think it's hard to generalize. Not every rich and poor person has the same financial traits. For example some people are poor because they don't have much income, but may not have any debt problem and may not be too sensitive to higher interest rates.

And some rich people have insanely high leverage and debt levels. For example, these investors in multiple properties (who've been using one house as collateral for the next mortgage), or rich people who aggressively use leverage for business. People like this can get absolutely destroyed by higher interest rates! There are many rich people who don't have great liquidity and really push their luck, for cashflow.

Though, it's true that the poor are more likely to be on the losing side and have less financial resiliency to survive stresses.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> I've thought about this too but I think it's hard to generalize. Not every rich and poor person has the same financial traits. For example some people are poor because they don't have much income, but may not have any debt problem and may not be too sensitive to higher interest rates.
> 
> And some rich people have insanely high leverage and debt levels. For example, these investors in multiple properties (who've been using one house as collateral for the next mortgage), or rich people who aggressively use leverage for business. People like this can get absolutely destroyed by higher interest rates! There are many rich people who don't have great liquidity and really push their luck, for cashflow.
> 
> Though, it's true that the poor are more likely to be on the losing side and have less financial resiliency to survive stresses.


I think we're a lot of people on forums who are self-claimed "experts", but no one truly knows the complexity of those truly doing the job at the central bank.

My math may be wrong or over simplified, but let's say we have a responsible poor who managed to buy a cheap house. His first term was at 3%. Now he has $200,000 left on the mortgage and he's looking to renew at... 5%. His mortgage payments jumps +$200/month, or +$2,400/year because of the rising rates. Meanwhile, he looks at his $30,000/year expenses on basic needs that grew +7% due to inflation, or +$2,100/year. He's getting destroyed on both sides. Now economists must find the right balance so that how much people pay more due to rising rates plus how much people pay more due to inflation is optimized to its minimum value.


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## MrMatt (Dec 21, 2011)

MrBlackhill said:


> I think we're a lot of people on forums who are self-claimed "experts", but no one truly knows the complexity of those truly doing the job at the central bank.


Sure, but my critique is much simpler.

The economy is a big complicated system with many inputs.
Many of our problems are being caused by a number of different factors.

Attempting to "correct" all those problems and tune the economy by turning one dial (or set of dials) ie interest rates, is bound to be at best a poor solution with many side effects.

To adequately address the issues, we need a multifaceted approach, that STARTS with not continuing bad policy, or at least scaling it back.

Pretending tweaking interest rates will solve inflation alone is idiotic, and expecting these actions not to have many far reaching impacts throughout the economy is absurd.


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## james4beach (Nov 15, 2012)

I still really think that property investors should SELL their properties now, or DELEVERAGE, before conditions get worse for them.

There are now 4.65% GICs which will exceed the return that an investor can get in their "rental property". Why would you deal with tenants, repairs and headaches, when you can get a *guaranteed 4.65%* in a safe instrument?

Additionally, the Bank of Canada stimulated the mortgage market and bought a huge amount of Canada Mortgage Bonds (CMBs), suppressing mortgage rates. The BoC is now in quantitative tightening and is actually selling mortgage bonds! Mortgages will get more expensive and lending conditions will tighten at banks. And the BoC still has $9 billion of mortgage bonds on their balance sheet, still lots to sell.

The BoC is unwinding their stimulus of CMHC bonds. Meanwhile, the Federal Reserve is unwinding their stimulus of other mortgage bonds. The combined actions of both central banks _will reduce investor appetite for all varieties of mortgage bonds_, meaning that conditions will tighten for both insured/uninsured and alternative mortgages. American investors are buyers of Canadian private and alternative bonds, and American demand for mortgage securities is rapidly drying up.

Better for property investors and property hoarders to sell now, while they still can. Or alternatively, just deleverage (repay loans) so that you aren't left exposed to the tightening mortgage conditions.

Property investors were huge beneficiaries of government handouts and stimulus. That party is coming to an end.

It's time to be a capitalist again. The government can't pump your assets up forever.


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## scorpion_ca (Nov 3, 2014)

This is interesting news. Are they sacred that there will be many defaults in the coming questers? 









Canadian non-bank lender Magenta’s ‘pause’ on mortgages may signal a slowing down in private lending


Rising interest rates and falling house prices in Canada may lead to more skittish private lenders to tap the brakes on mortgage lending




www.thestar.com


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## Mortgage u/w (Feb 6, 2014)

james4beach said:


> I still really think that property investors should SELL their properties now, or DELEVERAGE, before conditions get worse for them.
> ...
> Better for property investors and property hoarders to sell now, while they still can. Or alternatively, just deleverage (repay loans) so that you aren't left exposed to the tightening mortgage conditions.


Who should they sell too? Won't the new buyer be in the same predicament? If not worse?


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## scorpion_ca (Nov 3, 2014)

Mortgage u/w said:


> Who should they sell too? Won't the new buyer be in the same predicament? If not worse?


As a first time home buyer, I want to buy a house but don't want to pay 25% more than the price of March, 2020. Housing should be a place of living not the place of speculators paradise.


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## Gator13 (Jan 5, 2020)

james4beach said:


> I still really think that property investors should SELL their properties now, or DELEVERAGE, before conditions get worse for them.
> 
> There are now 4.65% GICs which will exceed the return that an investor can get in their "rental property". Why would you deal with tenants, repairs and headaches, when you can get a *guaranteed 4.65%* in a safe instrument?
> 
> ...


Some great points.

There are some folks who just happened to buy their homes in an over priced market. The economy is in a very fragile position and I hope a bumpy landing can be achieved. I sure don't want to see working class families lose their homes or their jobs. I also have no issue with owners of rental properties who are providing fairly priced rentals and have a solid and sustainable business plan (positive cash flow rentals).

On the opposite side of the spectrum, I won't mind if the greedy speculators and flippers get a good beat down


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## nathan79 (Feb 21, 2011)

Mortgage u/w said:


> Who should they sell too? Won't the new buyer be in the same predicament? If not worse?


There's always a buyer for the right price, but there's a dwindling supply of buyers at current prices. If someone needs to sell, or even thinks they _might_ need to, they should be aggressive at courting buyers right now. They don't want to be selling for a discount six months from now.


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## Flugzeug (Aug 15, 2018)

Distressed deals pile up in Canada's once-booming housing market - BNN Bloomberg


Much of the distress playing out in the market today is down to buyers and sellers caught by the rapid turn in prices.




www.bnnbloomberg.ca


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## MrBlackhill (Jun 10, 2020)

Oh @james4beach one of our neighbours is taking your advice seriously, he's selling!

We checked the listing... 3x the price that we've paid 3 years ago! Haha, what a joke! That's actually at least 2x its market value.

But, you know, they did renovations... Lol


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