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Johnny Horton

Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 7:54 pm

Thanks for the illustration.
However, I think it's unrealistic for 3 reasons.

1) It implies a net return of only 2.6% on the condo, which is low. Therefore, the true rent should be higher.
2) Yes the tax rate on $40,000 might taxed at a 35% personal rate but in reality, that $40,000 income will probably push the Tenant into a 50%+ rate. Therefore, the actual return should be less.
3) The mortgage fund gives a return of 8%....don't you think that fund may be a little on the risky side??? I think it overstates return while understating the risk involved.


Sorry, I'm not at all convinced. Not in the least. :mrgreen:
 
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freako
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 8:13 pm

Rentah, where do you infer that???


Because Mohican has stated it directly.

If the rent that Mohican pays doesn't cover the LandLords costs , why would the payments be double if he bought?


That is just what the numbers are, according to Mohican.

I'll tell you why, because Mohican doesn't have a big enough downpayment.


1. Monster downpayments are no free pass. If you lower your payments that way, you need to take opportunity cost (yet again) of DP into account.
2. Mohican sold his previous residence (townhome I believe) sometime around last fall. Unless he spent the proceeds on crack and hookers, he could easily make a decent DP.

The mortgage fund gives a return of 8%....don't you think that fund may be a little on the risky side??? I think it overstates return while understating the risk involved.


Free lunches are rare, so yes, that would indeed carry risk.
 
Bukowski
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 8:42 pm

Johnny Horton wrote:
[size=200]Thanks for the illustration.
However, I think it's unrealistic for 3 reasons.

1) It implies a net return of only 2.6% on the condo, which is low. Therefore, the true rent should be higher.


JOhnny... have you been paying attention? You don't get to set the return on your condo, the rent you can charge is determined by the market.

The REASON why real estate is such a bad investment is because rents aren't high enough to justify the ridiculous prices we have. Right now, in Vancouver, $500,000 condos are renting for $1,500. That's why bears are renting.
 
Johnny Horton

Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 9:05 pm

The REASON why real estate is such a bad investment is because rents aren't high enough to justify the ridiculous prices we have. Right now, in Vancouver, $500,000 condos are renting for $1,500. That's why bears are renting.


As I have said many times in the past, I would not categorize condos as representing all real estate. It is one segment of the market. In that regard, and for other reasons, those aren't very attractive investments. :mrgreen:
 
hiandre
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 9:39 pm

If the bears spent as much time focused on their "sky is falling" posts as they did on goal setting and
taking action in their lives, these guys could do quite well in business and other endeavors, and maybe a few of them do,
but I think many of them will just be spectators, wishing they could be a player on the field of life, how sad :cry:

I get the feeling a lot of them are bitter about missing the market upswing and bailing out early or
WORSE, never even being in the market ! There are those who "do" and those who teach... oh and those
who post WAY too much :P

Some of you guys need to get a life :shock:

Peace
 
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freako
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 9:42 pm

byeandre
 
stuck in a trailer
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 9:56 pm

Hey Johnny
Are you drunk all of the time or just most of the time!!!!!!!!

Cause for me its most of the time!!!!!!!!

I think that us bears can see this is a last ditch attempt by the Sun to get the last few suckers in to buy THERE real estate.


HIANDRE

I'm so sorry that you have just figured out that in a few months your mortgage will be bigger than your little place is worth. If you like I will buy your place for 80 cents on the dollar now. Oh never mind I'll wait a year or 2 and buy it for 50 cents on the dollar then.
 
Greenhorn

Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:21 pm

Johnny Horton wrote:
Thanks for the illustration.
However, I think it's unrealistic for 3 reasons.

1) It implies a net return of only 2.6% on the condo, which is low. Therefore, the true rent should be higher.
2) Yes the tax rate on $40,000 might taxed at a 35% personal rate but in reality, that $40,000 income will probably push the Tenant into a 50%+ rate. Therefore, the actual return should be less.
3) The mortgage fund gives a return of 8%....don't you think that fund may be a little on the risky side??? I think it overstates return while understating the risk involved.


Sorry, I'm not at all convinced. Not in the least. :mrgreen:


1) It implies a net return of only 2.6% on the condo, which is low. Therefore, the true rent should be higher.


Exactly! The math does not make sense, but these are typical yields when you buy a condo and rent it out. The market sets the rent not the landlord. $1,500 for a 550 sq.ft. condo is at the upper range.

2) Yes the tax rate on $40,000 might taxed at a 35% personal rate but in reality, that $40,000 income will probably push the Tenant into a 50%+ rate. Therefore, the actual return should be less.


The top marginal tax rate in B.C. is 44%. If you made an income of $250,000, your average tax rate would be only 35%. My estimate is reasonable. There is no such thing as a 50% marginal tax rate in B.C.

3) The mortgage fund gives a return of 8%....don't you think that fund may be a little on the risky side??? I think it overstates return while understating the risk involved.


You are a bull and love real estate. If it is safe to buy real estate, how could the mortgage at 75% of value be riskier? You can buy many income trusts that generate a wide range of investment yields. Take your pick. Encana has a 15% dividend right now!
Last edited by Greenhorn on Sun Apr 27, 2008 11:30 pm, edited 1 time in total.
 
Greenhorn

Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:26 pm

hiandre wrote:
If the bears spent as much time focused on their "sky is falling" posts as they did on goal setting and
taking action in their lives, these guys could do quite well in business and other endeavors, and maybe a few of them do,
but I think many of them will just be spectators, wishing they could be a player on the field of life, how sad :cry:

I get the feeling a lot of them are bitter about missing the market upswing and bailing out early or
WORSE, never even being in the market ! There are those who "do" and those who teach... oh and those
who post WAY too much :P

Some of you guys need to get a life :shock:

Peace


How was the Anthony Robbins course? Andre the giant has awakened inside!
Last edited by Greenhorn on Sun Apr 27, 2008 11:41 pm, edited 1 time in total.
 
Greenhorn

Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:29 pm

Johnny Horton wrote:
Opportunity cost?
Elaborate. :mrgreen:


If you calculate the cost of your purchase at 100% financing, you can avoid the opportunity cost dilemma and compare the mortgage cost of 100% financing, to the market rent of the property.
Last edited by Greenhorn on Sun Apr 27, 2008 11:40 pm, edited 1 time in total.
 
condohype
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:33 pm

The Top 15 Myths & Realities story is getting hammered in the comments over on the Sun's website. Even I couldn't help myself and made the coverage a subject for analysis on my blog. Sometimes, there is no distinction between news and advertising. Where are all the bulls?
 
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silverman
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Location: Beautiful BC

Re: Top 15 Real Estate Myths

Mon Apr 28, 2008 12:21 am

It is getting hammered by probably the same know-it-alls that predict crap like... prices will drop by 50%
 
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rentah
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Re: Top 15 Real Estate Myths

Mon Apr 28, 2008 6:46 am

So, silverman - What did YOU think of the article?
 
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silverman
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Joined: Sun Jun 13, 2004 11:50 pm
Location: Beautiful BC

Re: Top 15 Real Estate Myths

Mon Apr 28, 2008 9:43 am

Some of it is MYTH and some of it is REALITY
 
Johnny Horton

Re: Top 15 Real Estate Myths

Mon Apr 28, 2008 2:08 pm

hiandre wrote:
If the bears spent as much time focused on their "sky is falling" posts as they did on goal setting and
taking action in their lives, these guys could do quite well in business and other endeavors, and maybe a few of them do,
but I think many of them will just be spectators, wishing they could be a player on the field of life, how sad :cry:

I get the feeling a lot of them are bitter about missing the market upswing and bailing out early or
WORSE, never even being in the market ! There are those who "do" and those who teach... oh and those
who post WAY too much :P

Some of you guys need to get a life :shock:

Peace

Hiandre, my sentiments exactly. :mrgreen:
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