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VanLord
Real Estate Talker
Posts: 259
Joined: Fri Aug 24, 2007 3:52 pm

Re: Current Buy vs Rent Scenarios

Thu Feb 02, 2017 10:48 pm

HomelessinSD wrote:
Vanlord,
 
Most of your assumptions are dead on: We are renting from a long time holder – 30+ years who used to live in the house and moved about 5 blocks away about 10 years ago into a bigger house with their elderly parents. They have no intention of cashing in for the foreseeable future. Last time we spoke, I asked very directly why they wouldn’t sell now. They said they don’t need the money and that we “could stay as long as we want”.
 
I guess they like tenants who have called them a total of one time in 4 years about an issue with the house (small roof leak). If something is broken, I fix it and just let them know it was done. Don’t even ask for them to pay for the parts.
 
Regarding buying 4 years ago: Simply put, didn’t have the same financial resources 4 years ago that we do today. Back then, would have been a difficult and stressful stretch to buy a $2m home. Now we could buy something twice that value with relatively comfortably and may do that if we find the right opportunity.
 
Regarding taxes… while we take advantage of strategies to reduce tax burden, we must be some of the rare people who consider paying taxes a good problem to have.
 
WCF: Thanks for the suggestion on REIT’s. I’m going to do some additional research.

that makes perfect sense, at this stage why would you want to leave your current home, which is in a great location, great situation and essentially subsidized housing, wouldn't be prudent to move up to a 4mil dollar house, or like you say moving out to the valley isn't really an option.
As for taxes that is indeed a good problem to have and definitely something I need to figure out the best way to reduce my tax burden...so far its to keep holding on to what I have, but at some point I will want to retire early and cash out some chips.  One thing I'd love to do is work with my neighbours to assemble our lots and roll it over into a rental building, thus having a steady stream of income and ideally maximizing the return on my land, but that's probably a different topic for a different day!
 
tdma800
Real Estate Talker
Posts: 2659
Joined: Wed Jan 23, 2008 9:12 am

Re: Current Buy vs Rent Scenarios

Thu Feb 02, 2017 10:55 pm

The other guy is spending thousands per month that will never be seen again. The right thing to do is to get a home of 3 to 4m, as that is stated as being affordable. Even if a property manager is hired for a rental property which takes care of the hassle, that still doesn't take care of the taxes that will need to be paid.  The aforementioned large(or even a smaller one) home is the only way in Canada to make a tax free income of that magnitude
 
VanLord
Real Estate Talker
Posts: 259
Joined: Fri Aug 24, 2007 3:52 pm

Re: Current Buy vs Rent Scenarios

Fri Feb 03, 2017 9:32 am

tdma800 wrote:
The other guy is spending thousands per month that will never be seen again. The right thing to do is to get a home of 3 to 4m, as that is stated as being affordable. Even if a property manager is hired for a rental property which takes care of the hassle, that still doesn't take care of the taxes that will need to be paid.  The aforementioned large(or even a smaller one) home is the only way in Canada to make a tax free income of that magnitude

Except the landlord in this case held on to his primary residence instead of selling it, which was a great strategy for him, he has the PR exemption up until he moved out (or as long as 4 yrs after), now lives else where enjoying the same tax-free status, plus his rental has doubled in value, so yes he maybe liable for a capital gain, of which half is tax-free.  Lets say he made 2 million, so even if he had to be $300-400k in taxes he still walks with 1.6-7m
In my case I held on to my PR when I moved to a nicer place, better location, etc, and rent it out, It has paid for it self and also pays from my current mortgage...But your comment is that I should have sold it and bought a bigger place e.g. a 5 million dollar mansion to enjoy the potential tax-free windfall at some point in the future, that may or may not happen. 
In other cases you are saying take on as much house as you possibly can borrowing to the max and then more, even borrow the down payment.  that is pretty dangerous advice to be giving to people.  Although we all know you are full of crap and probably live in your parent's basement
 
tdma800
Real Estate Talker
Posts: 2659
Joined: Wed Jan 23, 2008 9:12 am

Re: Current Buy vs Rent Scenarios

Fri Feb 03, 2017 9:35 am

If you're concerned about your job then buy mortgage insurance(not life) for that.
 
VanLord
Real Estate Talker
Posts: 259
Joined: Fri Aug 24, 2007 3:52 pm

Re: Current Buy vs Rent Scenarios

Fri Feb 03, 2017 10:01 am

tdma800 wrote:
If you're concerned about your job then buy mortgage insurance(not life) for that.

What does that have to with anything, you still shouldn't be spending more than 30% of your income on a mortgage, but what you are suggesting is to push that much higher in an effort to have a PR exemption later in life.
 
eyesthebye2
Real Estate Talker
Posts: 1063
Joined: Sun Jul 27, 2014 6:41 am

Re: Current Buy vs Rent Scenarios

Fri Feb 03, 2017 12:03 pm

If you own your home then lose your job, your income is 0% of your mortage. Tdma is giving good advice here
 
HomelessinSD
Real Estate Talker
Topic Author
Posts: 599
Joined: Tue Jun 15, 2004 2:12 pm

Re: Current Buy vs Rent Scenarios

Mon Feb 06, 2017 8:35 am

eyesthebye2 wrote:
If you own your home then lose your job, your income is 0% of your mortage. Tdma is giving good advice here

Not sure how sound that advice is for this example.
Mortgage job loss insurance typically has maximum coverage amounts and is also typically limited to a specific duration. You can't just lose your job and live in your house without making payments for the rest of eternity.


Duration is typically 6 months. If you can't make mortgage payments for 6 months due to a job loss, you should reconsider if you can afford to buy that home.
A more likely example is long term disability insurance... that is going to be a prerequisite to get the job loss mortgage insurance in most cases anyway.

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