# Anyone else think they should buy a house before investing to heavily?



## emperor (Jul 24, 2011)

So I've been looking around for investments and keep running into the same mental block. I don't own a house, I rent. For some reason I keep hearing this voice in my head saying that before I take risks with my money I should secure a home and buy a quarter section of land.

Home ownership doesn't look that great, it's a lot of money to purchase and maintain, land is also expensive and you don't make much from it.

But for some reason I can't get these ideas out of my head. Has anyone else had this problem?


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## Barwelle (Feb 23, 2011)

I'm the opposite... I like my flexibility, not being tied down to one place and forcing myself into long-term big-time monthly payments, so renting would suit my preferences.

Though I know I will be making a big purchase some day, so I'm saving money for a down payment now.

But thing is... some people still make a go of it with renting. Renting isn't necessarily a bad thing, it doesn't mean you're poor. I don't have stats, but I remember reading somewhere that Europeans are far more likely to rent than to own as compared to North Americans. Are they worse off because of it?

It annoys me a little bit when people justify their home purchase by saying that renting is throwing money away, whereas by having a mortgage, they are building capital. Well... yea... but don't forget that the vast majority of your first fews years' payments go towards interest and not principal. Long term it might makes sense, but it doesn't if you're not going to stay in one place for many years. If you only stay short term (or medium term), you're throwing money away for interest instead of rent, then you've got all the costs that come with buying and selling and maintaining a house on top of that. 

From this young guy's perspective, what you have to think about is, are you willing to be tied down to one home for a long time? Is your job secure? Is your company secure? Are you a nomad or are you ready to settle down?

Edit: As an aside... buying a house is still taking a risk with your money. Sure, your investments could go to zero. But then, your house could drop in value. You could lose your job or become injured and unable to work while being on the hook for a mortgage. Neither are risk-free.


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## Barwelle (Feb 23, 2011)

Another question, out of curiosity... you say you are deciding between buying a house, or investing. What would you be investing for?


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## peterk (May 16, 2010)

You should buy a house based on the price:rent ratio in your city, and your 5 year career/job security outlook. Any other factors involving emotions should be left out of this financial decision.


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## Cal (Jun 17, 2009)

It really does depend on what you pay in rent, what Re costs in that area, etc... You could invest in a dividend payer to the point that it pays your rent, that may solve both issues. lol.


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## arrow1963 (Nov 22, 2011)

A 'quarter section', as in 160 acres/65 hectares of farmland?

If that's what you mean, I'm guessing that most members of this board won't have a lot of experience speaking to that question. I'm also not sure whether you want your first major investment to be illiquid, highly leveraged, and undiversified, unless you want to get into farming.

One of my uncles recently sold some of his land in central alberta for a price well above what anyone was expecting, which appeared to be driven by low interest rates and an air of speculation. Personally, I wouldn't be entering the market in our area at this point.

But then again, maybe you weren't referencing farmland.


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## dogcom (May 23, 2009)

I think Hboy43 would be the closest to knowing what an acreage is like.

In general people who buy a home and raise a family always end up ahead of those who rent long term. Raising a family traditionally has made the parents worry about money and pay the bills which include the mortgage. If you look around to the majority of people who have net worth the renters are generally the worst off or have the the lowest net worth. 

Of course jumping in at any price is not a good idea and one should look for a buyers market and be able to afford the home they buy at a reasonable interest rate. This means you should be able to pay the mortgage if if rates go well above 5 percent.


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## Eclectic12 (Oct 20, 2010)

Barwelle said:


> ...But thing is... some people still make a go of it with renting. Renting isn't necessarily a bad thing, it doesn't mean you're poor. I don't have stats, but I remember reading somewhere that Europeans are far more likely to rent than to own as compared to North Americans. Are they worse off because of it?...


You make some good points.

Europe, however is a different kettle of fish. 

A friend of my parents flew back to Spain (it was Spain or Portugal) to help his mother move out of where she was renting. As long as she or her kids lived in the apartment, the rent was fixed, with no increases. As a result, the landlord was paying her to move out as a new tenant would mean a big rent hike. The flight costs were described as a drop in the bucket compared to the total amont the landlord was paying.

If I could get that deal here ... I'd certainly be going for that! *grin*


Cheers


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## emperor (Jul 24, 2011)

Thanks for the replies I guess I should explain my mind set a little better.

To me if you own a house you have the security of knowing you have a place to stay the rest of your life unless you can't make the property Tax. But the logical side of me says that I won't make money off it like I would investing in a dividend stock.

It's the same mentality with land, it will never go down in price and there is a security in knowing you have a place to go if you need to, a place to grow food and maybe get water. But the returns will be low.

I guess long story short I seem to have issues with taking risks, I feel like I need a very sound foundation before taking risks. 

I was trying to figure out if anyone else had the same issue, it would be helpful to know what they ended up doing and if they regretted it.


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## DanFo (Apr 9, 2011)

I was renting....but moved into my house in 04 and my mortgage will be done in Feb. The house definately costs me more than renting was..but I also am more free to do whatever i want inside it and i have the space to have "stuff". At the time i bought my investing knowledge wasn't too great and the investments I had bought back then i might of made money off 3 in 10 of them. I have no regrets in buying. It is more house than i currently need but i bought with the future in mind. Prices were better when i bought compared to now and I had the means to pay it off quickly. I'm looking forward to the new year...since after feb I'll have an extra 1600 a month to invest ..save or spend as i need. there is alot of little extra costs with owning...odd repairs and upgrades..even just paint... but hey it's my place and i want it to be maintained... i hink the main thing is hw long you see yourself living in a given area and the cost of homes in that area


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## hboy43 (May 10, 2009)

emperor said:


> I guess long story short I seem to have issues with taking risks, I feel like I need a very sound foundation before taking risks.


I wouldn't necessarily assume that buying one house in one market is lower risk than buying 20 stocks in x sectors, y countries. Especially now when the consensus seems to be that RE is peaky, stocks maybe not so much.

hboy43


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## emperor (Jul 24, 2011)

Lower risk in the sense that you have shelter as long as you can afford property Tax. Houses might drop in value but you still have a place to live, stocks drop and you lose everything you might end up not having a place.


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## Four Pillars (Apr 5, 2009)

If you own a house/condo - the rent you don't have to pay can be considered income, so yes there is some income created from owning.

I'm not sure about your comments about 'only having to pay property tax'. Do you have enough money to buy a property outright? If not, then that property isn't really any more secure than a rental, if you can't make the payments.

What exactly is the difference between someone who owns a house and no investments and someone with no house, but who owns enough investments that generate enough income to pay their rent?


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## the-royal-mail (Dec 11, 2009)

It sounds to me like you are the victim of the RE industry's rhetoric. Their concept has been to keep repeating the same message over and over, for generations, to the point where people start to believe it's true because it has been said so often.

But ultimately the concept is not proven and does not apply to every person in every market. There are many factors that lead to whether a person will be successful with this. The RE pumping is nothing more than buzz marketing and we've all heard the same rhetoric about "throwing money away in rent". Learn to ignore that. RE wants you to buy houses so they can get their commission and the govt wants your property taxes etc etc. That's throwing money away too, is it not?

I am concerned with your insistence that you will "always" have a place of your own no matter what. Uh no, that is incorrect. If you lose your job or end up with other financial problems you must still make the payments, whether you are renting or whether you own the property. People can and do lose their homes all the time, just look at what happened in the US. It can easily happen to any one of us. You do not own the property until it is paid in full.

In your case, I would suggest looking at the local rental and purchase conditions. Are there nice quality apts or houses available for you to rent in your target area? How much are they renting for? Is the rent comparable to the mortage/tax/fees/upkeep expenses of a house? I generally don't advise young, single people to tie themselves down to housing. It really limits your options. Apartments are much easier to get out of.

Also, in your market how long will it take to SELL the type of property you want? I've lived in rural areas and in some cases it could take years and you need to drop the price. Find out how long it typically takes to SELL what you want to buy. Remember while you have an unsold house and need to move elsewhere, you must still pay all expenses. Could you handle paying for two "homes" at the same time? Answer honestly.

Do you have 20% saved for a down pmt? Do you have rainy day money saved NOW? What is your debt situation?


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## Four Pillars (Apr 5, 2009)

Four Pillars said:


> What exactly is the difference between someone who owns a house and no investments and someone with no house, but who owns enough investments that generate enough income to pay their rent?


I forgot to include the obligatory link. 

I discussed my theory that there is no difference between buying or renting a house

http://www.moneysmartsblog.com/renting-vs-buying-is-there-any-difference/

It's just theoretical - in reality a renter can't borrow money as cheaply as a home owner and probably can't borrow anywhere near as much (which isn't a bad thing).


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## kcowan (Jul 1, 2010)

Four Pillars said:


> What exactly is the difference between someone who owns a house and no investments and someone with no house, but who owns enough investments that generate enough income to pay their rent?


Mostly it is the income tax that the latter must pay each year. Or the clawbacks that the renter suffers in social programs.


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## Spidey (May 11, 2009)

I think as a general rule one should be a home owner before investing heavily, provided that one anticipates living in the area for at least 10 years and preferably more. Home ownership in Canada has almost always been a sound investment for periods longer than 10 years. And I've found banks tend to look much more favorably on home-owners which often results in better financial deals in other areas. For me, it is the corner-stone of a financial foundation. That being said, there are always exceptions to "rules of thumbs".


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## dogcom (May 23, 2009)

If you bought at a good price and it is your principal residence any price gains are tax free. Also you don't pay rent anymore and when you get ahead of rent rates as compared to owning you are sort of getting a tax free monthly dividend.

On the risk side of thinking if you don't buy and house prices take off you miss the boat. If you instead buy dividend stocks and they drop in value as the price of homes increase then you start kicking yourself and you are still paying rent. I know lots of people where I live who are kicking themselves. As long as you aren't paying a huge price for the home in your market as has been and still is the case in Vancouver and Toronto then investing in my opinion is far more riskier.


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## sags (May 15, 2010)

I think we would all agree that IF a person can comfortably buy a home, and the cost is somewhat in the ballpark of the costs to rent, then it is a good idea.......given the tax free equity that can be built, and the historical increase in value of homes.

But there is that big IF in the statement, that might also be a big question mark these days.

In the past, home prices were relative to income. A person could expect a steady increase in their income year over year, and the monthly cost of the home 10 years down the road would require a lower % of income.

Is that the case today............with average salaries stuck around the 47,000 level and home prices in the 350,000 level?

The % of "pre-tax" income required to pay for a home is at dangerous levels. 

I believe I read it now takes 53% of pre-tax income to pay the mortgage, plus the cost of municipal taxes, insurance, maintenance etc.

Let's face it............many people could not afford to buy their own homes at today's prices.

How can others.........especially those just starting out afford them?

If the numbers work.............then it should work out all right..........but if they don't, home owners are walking a fine line between the happiness of home ownership or a drudgery of payments for decades into the future.

House prices, in my opinion, have nowhere to go but down.

Maybe they could level off..........but they certainly can't keep climbing the way they have.

In some places.............home ownership requires over 80% of income. 

7 out of 10 people own a home............and 7 out of 10 people live pay to pay. Most people have no retirement savings and a lot of people have a pile of debt to pay off.

And...............all this debt is "affordable" only because interest rates are at historic lows.

We really haven't been as prudent as we like to think..........and paying too much for shelter may be one part of that.


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## emperor (Jul 24, 2011)

Should be able to afford a house. I went on a spending spree this year and pretty much bought new everything. So most my stuff is under warranty for the next 2-7 years. Don't need to worry about broken down car costs or nothing. I have 145K (1.2% interest rate) in the Bank, 10 K locked into investments.


Four Pillars thats what makes sense to me also, I just can't seem to get past this own a house mentality.


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## lonewolf (Jun 12, 2012)

Hi, emperor

because of commision costs, HST (not sure if HST in all provinces) & a large portion of the mortgage payment each month goes to pay interest & not principal when the mortgage is young. If your not going to be living in the home long enough it will be hard to absorb enough money saved from paying rent to pay the costs of commision, HST & interest. The HST has changed the game a little & I think it now takes longer to absorb the added cost.

Then there is the leveraged gamble one has to sleep with, that could go either way the price of the home could up or down.

If a provence has no HST & or cash is paid for home then there would be less money waisted on interest & taxes making it easier for the home owner to beat the renter.

Shelter is almost always a liability meaning it costs money weather one pays rent or buys a house. My goal is always limit my liabilities (reduce my costs) & expand my assets (that which makes me money) If you can somehow turn shelter into an asset your well ahead of the game. I have totally failed @ it.


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## kcowan (Jul 1, 2010)

There is also the need to downsize. Had we purchased in Vancouver in 1997, we would be rich on paper. But where would we live?

Renting enabled us to retire in 2002 and still go on living in our rental apartment. Also made it easier to purchase in Mexico in 2007.

My brother should have sold his house in Toronto and move into a seniors residence in 2005. But he ran the numbers and said it was cheaper to stay living in his house. The house had a serious black mold problem. When he died in 2009 (of COPD), I did get the benefit of his superior financial decision. However I cannot help thinking that he might be alive today if he had gotten out of that house.

So there are many life impacts to the decision to buy versus rent. That is fine as long as they are consciously made!


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## Eclectic12 (Oct 20, 2010)

Four Pillars said:


> ...It's just theoretical - in reality a renter can't borrow money as cheaply as a home owner and probably can't borrow anywhere near as much (which isn't a bad thing).


Another factor is the individual's discipline. 

Some have no problem paying a mortgage as in their mind, it is an expense that has to be met. If they rented with the idea of investing space cash - in reality, they spend the spare cash on a nicer car, a better stereo, going out drinking/eating more often etc. So for some, buying a house forces them to re-direct into something of a longer term value, even if it's just shelter.


Cheers


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## Eclectic12 (Oct 20, 2010)

lonewolf said:


> ... because of commision costs, HST (not sure if HST in all provinces) & a large portion of the mortgage payment each month goes to pay interest & not principal when the mortgage is young. If your not going to be living in the home long enough it will be hard to absorb enough money saved from paying rent to pay the costs of commision, HST & interest. The HST has changed the game a little & I think it now takes longer to absorb the added cost.
> 
> Then there is the leveraged gamble one has to sleep with, that could go either way the price of the home could up or down.
> 
> If a provence has no HST & or cash is paid for home then there would be less money waisted on interest & taxes making it easier for the home owner to beat the renter.


It all depends ... yes, there are commissions etc. and it's a good point about the HST. However, what one chooses and where one is plays into this as well. When I bought my first house, two bi-weekly mortgage payments were less than I was paying for rent. Then too - since I was being given a 0.5% discount on the mortgage that was being applied directly to the capital, the interest portion of each was 55% from the start.

I'm well aware there are areas like the GTA where unless one has saved a pile of cash, a lot more of the payment will be interest - but one can evaluate this going in.

As for the leveraged gamble - since the mortgage plus insurance, property taxes, maintenance etc. weren't that much higher than my rent used to be, I wasn't really concerned. It turned out when I sold, the price had gone up so it meant a much smaller mortgage for a reasonably larger house in a RE market that was 30 to 40% higher than where I left.

+1 on shelter being a liability. But there again being open to opportunites helps. Two co-worker had the same discount and used it as cash. They complained about how much of their payments were going to interest yet did not re-direct the discount.


Cheers


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## Barwelle (Feb 23, 2011)

emperor, check out this rent-vs-buy calculator. See what you come up with (and please share what it spits out).

Note the 'Advanced Settings' button on the top right corner where you can change more detailed items (such as the expected rate of return on money that you would have invested if you were renting, instead of paying towards the mortgage.)

http://www.nytimes.com/interactive/business/buy-rent-calculator.html


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## MoneyGal (Apr 24, 2009)

Note that the NYTimes calculator assumes your mortgage costs are tax-deductible at your marginal rate. Which they are in the U.S., but are not in Canada. I assume that setting your MTR to 0% might back out the tax calculation, but I do not know. 

Industry Canada used to have an appropriate Canadian calculator but it has been gone from their site for a few years now.


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

As a long time home owner and real estate investor, I say it depends on you. Either way will work out. Years ago I saw calculations that proved renting was better than owning, financially. This depended on the fact that renting is cheaper, and if you took the money you saved and invested it, you wound up ahead.

I don't know anyone who has actually done this. I do know lots of people who bought houses twenty years ago or more, and now own a fully paid for house that is worth several times what they paid for it. In most cases, this is their largest financial asset.

Especially in Ontario, if you can rent a house or apartment and stay there forever the rent gets cheaper and cheaper over time. This is because rent control keeps your rent artificially low. I know of one case where a woman occupied the same apartment for 42 years. In the end she was paying $240 a month including heat and hydro. Similar apartments were renting at that time for $800. The taxes, insurance, heat and hydro cost her landlord more than she was paying in rent.

So, with good management you wind up ahead either way. I am firmly in the home ownership camp but understand that it is not for everybody.


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## Potato (Apr 3, 2009)

MoneyGal said:


> ...an appropriate Canadian calculator...


Here I come to save the day! It's spreadsheet-based and up on Google Docs (I guess now renamed to something else), you can download it to Excel or make a copy in your own google space to change the numbers.


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## 44545 (Feb 14, 2012)

Owning versus renting may not be a financially sound decision, especially during a period when housing prices are inflated, as they are now.

Khan Academy has a series of videos on the topic:
http://www.khanacademy.org/finance-economics/core-finance/v/renting-vs--buying-a-home

***

Here's a little example:

*Rent*, including utilities & parking: $1,100. ($13,200/year)
Additional expenses: none.

*Buying *the condo across the street:
$400/mo in condo fees = $4,800/year
$5,000/year in taxes (1%)
$300/mo in utilities = $3,600/year
TOTAL: $13,400/year

That doesn't include the $500,000 mortgage.
Even if you had $500,000 sitting in the bank and paid cash for the condo, that's money that's no longer earning money for you.

Those numbers are more typical than not, based on scenarios I've run. If you want to pay less, you end up living an hour's bus ride from work or you spend a fortune in gas and wear and tear driving your car, versus being a close 10 minute walk from work renting downtown.



Rusty O'Toole said:


> ...This depended on the fact that renting is cheaper, and if you took the money you saved and invested it, you wound up ahead.
> 
> I don't know anyone who has actually done this...


Hi. I'm CJ.

There. Now you know someone who does that. (40% of my net income goes to savings - money I wouldn't have if I were servicing a mortgage)


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## blin10 (Jun 27, 2011)

i did some math and while i own house, it would be cheaper to invest house money and rent same house in the same area... I would also be making about $700/month while renting same house.... I might do that but only if stock market will take a huge dive


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## KaeJS (Sep 28, 2010)

It really depends on how you do it.

Before I bought my house, I was scared to buy property. I had never done it before and I liked the flexibility/predictability of the stock markets.

I was able to make on average ~$500/month in gains from the market.

However, now that I bought the house, I make $1550/month in rental income, which more than makes up for the lost funds in the market.

This, though, does not always work out this way. You've really got to have a plan in place before you purchase land/property. If you don't do your research, you will be up sht creek.

For instance, I posted ads on kijiji in the area I was buying to see how many renters were available, how fast I would be able to sell rooms in that area, etc. etc.
You must do all of your research first.

With that being said, both the market and/or property can be more profitable than the other. It just depends on your circumstances (and of course, how well you trade!)


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## Spudd (Oct 11, 2011)

Have you got renters now? If so, congrats!


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## the-royal-mail (Dec 11, 2009)

I agree with CJOttawa. Specuvestors take note.


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## Hawkdog (Oct 26, 2012)

Where do you live? I wouldn't want to buy a house in Vancouver say.

Buy a house and treat it like an investment - location, location, location. Research trends on the location, is it an up and coming neighborhood. Fix it up - the kitchen and bathrooms.

Talk to anyone who bought a house 20 years ago and ask them what they paid for it and what it is worth now. I bet its worth double if its not in some resource town that was build to service the resource.

I have bought and sold 4 places since university. made money on all of them. I sold the condo I lived in while at university - where i had 2 roomates pay for my mortgage - for a 30% premium. 

Buy a house with a basement suite that pays a portion of you mortgage.

Buy a house and pay it off - then you don't pay anything but upkeep.


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## KaeJS (Sep 28, 2010)

Spudd said:


> Have you got renters now? If so, congrats!


Yes, I do.

Thank you! :biggrin:


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## 44545 (Feb 14, 2012)

Hawkdog said:


> ...Buy a house and pay it off - then you don't pay anything but upkeep.


Hawkdog: buying a place that has a rentable basement suite is smart.

I question the idea that real-estate is a good "investment" - it's a speculative play that's played well for the past five or ten years.

I'd like to add to your last point which I've quoted above.

Property tax around here for a typical home (say, $360,000 SFH) is about $3,600/year ($300/mo).
Utilities are about another $300/mo.
I've read that it's wise to set aside about 1% of house value for maintenance so 1% of $360,000 is $3,600/year or $300/mo.

That's $900 per month to own a "paid for" house.

Add to that: the $360,000 that could be earning 6%+ in the market. (historical returns for the last 112 years are about 8.5% so I'm being conservative) The house is cash-flow negative (unless you have a renter) compared to renting.

Check out the New York Times rent-vs-own calculator:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Play with the assumptions. Note as well: in the USA, you can use mortgage interest as a tax deduction. That skews the calculator more in favor of buying when the picture is more bleak here in Canada.


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## lonewolf (Jun 12, 2012)

A change in technology which results in the way houses are built is a major risk for buying a home for the long term.

If technology makes it so houses can be built for 75% less money, are tornado proof, more energy efficient or whatever will todays homes be viewed as dinosaurs & worth pennies on the dollar ?


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## Hawkdog (Oct 26, 2012)

CJOttawa said:


> I question the idea that real-estate is a good "investment" - it's a speculative play that's played well for the past five or ten years.


well, i bought my 3 bedroom condo for University in 1991- Kamloops BC, so what's that 20 years ago? i bought it for 62,000 and sold it after 4 years for 97,000. Worth about 175,000 now.
I also have an uncle who bought his house in Richmond BC for 20,000 in 1960, he sold it for 900,000 5 years ago.

your 5-10 year argument only applies if you plan to flip, the population in Canada will grow and housing demand will rise.
If you live in a city like Vancouver - buy near a sky train station - transit hub - the price will rise.

What does a $360,000 dollar house cost to rent? I live in a small town in Northern BC - a house worth that will cost you 1500 plus to rent - on par with Ottawa
so that "paid for house" will cost you $600 less.

and the 1% is a very general statement, if you are willing to be handy and have an internet connection you can do 99% of the maintenance yourself reducing the cost.
the property taxes on my 400,000 house and 20 acres is 2200 and I don't spend anywhere near 300/month on maintenance. My only must have utilities are hydro - 30 bucks a month in the summer - 100-200/month in the winter with the hot tub going - and water at $500/year. And my wife and I each put a $1000 into the market each month.

Most houses you rent in my experience you still pay utilities - plus phone, internet, tv if you choose to hook those up. At least in my experience, and when i rented i moved a lot so you had to pay hook up fees every time. I used to work with a guy that lived in an apartment - he would keep his door open a crack to let in warm air from the hallway to keep his N. gas bill down.

IF you want pets - your rental options are severely limited
If you want a garden - do you have the space? are you going to put in a lot of work for someone else's house?
If your hobby is restoring a vehicle - what is the extra rental cost on renting a place with a garage? or do you have to rent space elsewhere?
Is your landlord a dick? do you have to wait a week to get something fixed? "absentee landlord"
If you hunt do you have a place to hang and process your game? 

Yes renting works, but there are pitfalls.


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## kcowan (Jul 1, 2010)

We are looking at buying a 3BR/3 Bath condo in Dreams Villa Magna as an income property. Still awaiting the income proforma, but the decline in real estate values seem to make it viable.


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## Hawkdog (Oct 26, 2012)

lonewolf said:


> A change in technology which results in the way houses are built is a major risk for buying a home for the long term.
> 
> If technology makes it so houses can be built for 75% less money, are tornado proof, more energy efficient or whatever will todays homes be viewed as dinosaurs & worth pennies on the dollar ?


Do you have any insight as to what that technology would be? It definitely could reduce the price of current houses.

There are cheap methods for building houses out there, people build them out of tires, cord wood, straw bales, shipping containers. Currently though all houses are built from a resource that is extracted which is labour intensive. And to build a house a large portion of the cost is labour. So unless you can reduce the manpower and find a building material that is not an extracted resource its hard to reduce the price.

Countries like China have only recently switched to building houses out of wood which is driving the price of lumber up - see canfor stock. 
From what I see the cost of building a house is going up, you can buy an existing house that is a little older cheaper than you can build one.


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## Eclectic12 (Oct 20, 2010)

KaeJS said:


> It really depends on how you do it....


+1 ... Well said and covers areas that people tend to overlook or ignore.


Cheers


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## Eclectic12 (Oct 20, 2010)

CJOttawa said:


> Hawkdog: buying a place that has a rentable basement suite is smart.
> 
> I question the idea that real-estate is a good "investment" - it's a speculative play that's played well for the past five or ten years..


It all depends ... I'm pretty sure my parents made money on at least two houses where the first was owned for over ten years and the second for thirty-four over years. They also made money on at least one rental property before running out of time/energy. They decided to sell but were ripped off by a combination of bad buyer and the courts judging that the as the house on paper belonged to the buyer - other judgements against the buyer took precedence over my parent's claim.




CJOttawa said:


> Property tax around here for a typical home (say, $360,000 SFH) is about $3,600/year ($300/mo).
> Utilities are about another $300/mo. I've read that it's wise to set aside about 1% of house value for maintenance so 1% of $360,000 is $3,600/year or $300/mo.
> 
> That's $900 per month to own a "paid for" house...


The 1% seems high to me for a yearly amount - though a lot depends on what shape the house is in and whether there are big ticket items for several years in a row.

Out of sixteen years of home ownership - only the first house where I was replacing electric base board heating with a new gas furnace and running new duct work, for that one year - the maintenance was something like 1.2% of the purchase price. On my current house, based on what my neighbour paid to re-shingle the roof, the one year big ticket item plus regular maintenance would work out to be 0.6% for that one year.


As for the "$900 per month to own a "paid for" house - that is likely the case for when there are no tenants (it is an investment property, right?). When there are tenants - if it is a good investment, the tenants should be paying for some or all of the costs mentioned.

Then too - for an investment property, these costs plus the mortgage interest will be costs that can be deducted from the income. My primary residence allows at best, only a portion or none of these costs to be written off.


Cheers


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## Four Pillars (Apr 5, 2009)

Eclectic12 said:


> The 1% seems high to me for a yearly amount - though a lot depends on what shape the house is in and whether there are big ticket items for several years in a row.
> 
> Out of sixteen years of home ownership - only the first house where I was replacing electric base board heating with a new gas furnace and running new duct work, for that one year - the maintenance was something like 1.2% of the purchase price. On my current house, based on what my neighbour paid to re-shingle the roof, the one year big ticket item plus regular maintenance would work out to be 0.6% for that one year.


Agreed - house maintenance estimates using percentages are terrible.

Here is my method - guaranteed to be no less accurate than any percentage guess. 

http://www.moneysmartsblog.com/estimate-budget-home-maintenance-costs/


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## Hawkdog (Oct 26, 2012)

Four Pillars said:


> Agreed - house maintenance estimates using percentages are terrible.
> 
> Here is my method - guaranteed to be no less accurate than any percentage guess.
> 
> http://www.moneysmartsblog.com/estimate-budget-home-maintenance-costs/


Thanks for the link!
i guess 300/month would be accurate if that number includes the monthly strata fee if the condo has one.


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