This is a friendly, interactive exchange of information on all Real Estate related subjects. Follow on Twitter: @RETALKS


Moderator: admin

  • 1
  • 2
  • 3
  • 4
  • 5
  • 9
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

why condos aren't good investments

Thu Dec 11, 2014 10:27 am

article is a couple of years old but sums up basically how I feel about condos - and why I never wanted to own one.
I feel condos are in line for a 60% drop when the investor component disappears
http://www.biggerpockets.com/renewsblog ... vestments/

As a result of the real estate crash in 2007, local markets in many cities have been flooded with a glut of distressed, bank owned, and unsold developer-owned condos, many of which are being offered at ridiculously reduced prices. This may lead you, the real estate investor, to wonder, “are condos good real estate investments?”. Ever since I lost $40,000 gambling on appreciation on a condo investment I’ve always felt like the answer was a resounding NO! Obviously we all know that all real estate is LOCAL and there are no hard and fast rules for every market but with that being said . . .

Here are the reasons I’ve stayed away from condos as investment properties.

Condo Fees

Every unit in a condominium pays condominium fees to cover the costs of the common elements and services in the building. Condo association fees range from hundreds to thousands per month depending on the type of building, the buildings requirements, and the amenities offered. Typically monthly condo fees are allocated towards the property’s master insurance policy, doorman/doormen, snow removal, trash removal, reserves, professional services like lawyers/accountants and possibly some utilities. In luxury buildings condo fees may go towards other amenities like fitness rooms, pools, valet parking, 24 hour concierge and chauffer driven vehicles. These condo fees, while beneficial to the owner occupant, are problematic for the real estate investor.

Monthly condo fees make it virtually impossible for an investor to put down the minimum amount required to purchase an investment property and still end up sufficiently cash flow positive. In order to “make the condo work” as a cash flow positive investment, a higher down payment is required which means less money is available for future or concurrent opportunities and the leverage opportunity is diminished. Apples to apples the ROI and cash flow on a condo are less than what they would be on a single family or multifamily investment at the same price. It’s true that condo association budgets are created annually and they can fluctuate up or down, but most owners of condominiums will tell you that they usually go up and rarely or never go down – so there’s no end in sight.

Increased Risk Alert: Special Assessments

Condo owners always face the risk of the dreaded SPECIAL ASSESSMENT. Over time the condo association will need money to make capital improvements like new windows or a new roof and will require each unit over to pay his or her pro rata share of the expenses. Special assessments do improve the property, but can cost anywhere from a few thousand to tens of thousands PER UNIT. Obviously this is catastrophic for the investor who isn’t living at the property and will likely see no increase in income as a result of the new roof or windows. It’s not difficult to envision a scenario where a special assessment therefore negates positive cash flow or turns an investment cash flow negative for a year or several years.

Other Investment Concerns With Condos

Landlord Control - Owners of single family and multifamily are free to make decisions as they see fit. Condo owners are subject to condo bylaws and must follow rules that others set for them.
Rental Restrictions – Too high of a ratio of non-owner occupants is bad for the financability of a condo. To combat this recent trend, condo associations have started limiting the number of units in a building that can be used as rentals. I’ve seen a few situations where the waiting list for permission to use a condo as rental, required a wait of 1-2 years. If you purchased a condo as an owner occupant with the intentions of renting it out as an investment down the road, consider the effect a 12-24 month vacancy would have on your return.
Volatility – There’s plenty of data out there that shows condo values drop more quickly that single family homes and that condos don’t appreciate as well as single family homes. This volatility exposes the condo investor to increased risk as real estate prices fluctuate between cycles.
Supply and Demand – Another concern with condos as investments in the possibility that a developer can come in and build a 100-200 unit condo building in the same space that say 20 or so homes would fit. Right or wrong I’ve always felt that this possibility makes condos less scarce and thus less valuable.
Buying a condo as a quasi-investment might work for someone who has a full time profession, like a doctor or lawyer, if that person is willing to sacrifice ROI for the maintenance and management conveniences condos offer. Alternatively, a condo could work as a quasi-investment for a buyer who will eventually occupy the condo but is only looking for equity build up and tax breaks in the short term. For a real estate investor focused on ROI and cash flow, I simply can’t think of a reason that justifies buying a condo over single family or multifamily homes.
 
westcoastfella
Real Estate Talker
Posts: 1583
Joined: Fri Mar 23, 2007 8:11 am
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 11:53 am

article is a couple of years old but sums up basically how I feel about condos - and why I never wanted to own one.
I feel condos are in line for a 60% drop when the investor component disappears
http://www.biggerpockets.com/renewsblog ... vestments/

As a result of the real estate crash in 2007, local markets in many cities have been flooded with a glut of distressed, bank owned, and unsold developer-owned condos, many of which are being offered at ridiculously reduced prices. This may lead you, the real estate investor, to wonder, “are condos good real estate investments?”. Ever since I lost $40,000 gambling on appreciation on a condo investment I’ve always felt like the answer was a resounding NO! Obviously we all know that all real estate is LOCAL and there are no hard and fast rules for every market but with that being said . . .

Here are the reasons I’ve stayed away from condos as investment properties.

Condo Fees

Every unit in a condominium pays condominium fees to cover the costs of the common elements and services in the building. Condo association fees range from hundreds to thousands per month depending on the type of building, the buildings requirements, and the amenities offered. Typically monthly condo fees are allocated towards the property’s master insurance policy, doorman/doormen, snow removal, trash removal, reserves, professional services like lawyers/accountants and possibly some utilities. In luxury buildings condo fees may go towards other amenities like fitness rooms, pools, valet parking, 24 hour concierge and chauffer driven vehicles. These condo fees, while beneficial to the owner occupant, are problematic for the real estate investor.

Monthly condo fees make it virtually impossible for an investor to put down the minimum amount required to purchase an investment property and still end up sufficiently cash flow positive. In order to “make the condo work” as a cash flow positive investment, a higher down payment is required which means less money is available for future or concurrent opportunities and the leverage opportunity is diminished. Apples to apples the ROI and cash flow on a condo are less than what they would be on a single family or multifamily investment at the same price. It’s true that condo association budgets are created annually and they can fluctuate up or down, but most owners of condominiums will tell you that they usually go up and rarely or never go down – so there’s no end in sight.

Increased Risk Alert: Special Assessments

Condo owners always face the risk of the dreaded SPECIAL ASSESSMENT. Over time the condo association will need money to make capital improvements like new windows or a new roof and will require each unit over to pay his or her pro rata share of the expenses. Special assessments do improve the property, but can cost anywhere from a few thousand to tens of thousands PER UNIT. Obviously this is catastrophic for the investor who isn’t living at the property and will likely see no increase in income as a result of the new roof or windows. It’s not difficult to envision a scenario where a special assessment therefore negates positive cash flow or turns an investment cash flow negative for a year or several years.

Other Investment Concerns With Condos

Landlord Control - Owners of single family and multifamily are free to make decisions as they see fit. Condo owners are subject to condo bylaws and must follow rules that others set for them.
Rental Restrictions – Too high of a ratio of non-owner occupants is bad for the financability of a condo. To combat this recent trend, condo associations have started limiting the number of units in a building that can be used as rentals. I’ve seen a few situations where the waiting list for permission to use a condo as rental, required a wait of 1-2 years. If you purchased a condo as an owner occupant with the intentions of renting it out as an investment down the road, consider the effect a 12-24 month vacancy would have on your return.
Volatility – There’s plenty of data out there that shows condo values drop more quickly that single family homes and that condos don’t appreciate as well as single family homes. This volatility exposes the condo investor to increased risk as real estate prices fluctuate between cycles.
Supply and Demand – Another concern with condos as investments in the possibility that a developer can come in and build a 100-200 unit condo building in the same space that say 20 or so homes would fit. Right or wrong I’ve always felt that this possibility makes condos less scarce and thus less valuable.
Buying a condo as a quasi-investment might work for someone who has a full time profession, like a doctor or lawyer, if that person is willing to sacrifice ROI for the maintenance and management conveniences condos offer. Alternatively, a condo could work as a quasi-investment for a buyer who will eventually occupy the condo but is only looking for equity build up and tax breaks in the short term. For a real estate investor focused on ROI and cash flow, I simply can’t think of a reason that justifies buying a condo over single family or multifamily homes.
Having owned and lived in both condos and houses, I don't really agree with a lot of the above.

- Condo fees vs montly utilities and insurance on a house - I'd have to do some math, but its probably pretty close to the same for both. You just pay it differently

- Special assessments vs regular maintenance - there is not much difference between getting a special assessment to fix your roof, and having to fix the roof of your house - both cost money that you have to come up with. Maintenance has to be done on both, envelope issues and leaks happen in both, its just part of ownership.

The advantages for condos are: less maintenance work for you, more security
The advantages of houses: more autonomy over what you do and how you do it, usually more space, more privacy, land ownership

In terms of value, as with everything in the LM it depends what, where, and when you bought. When I sold my condo I made a roughly 250% gain over my original purchase price. Had I owned a house over the same period of time (2001 thru 2013) in the same location, I probably would have gained the same.

The one thing that I do agree with is the depreciation aspect, and supply/demand for each asset class. Houses will probably win over the long term, at least in the LM.
I feel condos are in line for a 60% drop when the investor component disappears
Why do you fee the investor component is going to disappear?
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 1:32 pm

- Condo fees vs monthly utilities and insurance on a house - I'd have to do some math, but its probably pretty close to the same for both.

the insurance on my house is $82/month. I think strata fees are somewhere in the $350-600 range. Granted, strata fees usually include heat.

I did a calculation quite a few years ago on the cost/sqft condo vs. detached. Not only was condo/cost sqft substantially higher than detached, but calculation only included the cost of the structure...the land cost isn't included in the comparison. That's a big oversight. That would bring the cost/sqft of a detached property at about 15-20% of a condo. Crazy huh?
So either detached is fantastically undervalued, or the cost of a condo is fantastically overvalued. Since the value of a detached property is over $1M now I think the latter is more likely.
I agree with pretty much everything mentioned in the article provided. And the piece was written by a former condo owner!
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 2:22 pm

article is a couple of years old but sums up basically how I feel about condos - and why I never wanted to own one.
I feel condos are in line for a 60% drop when the investor component disappears
http://www.biggerpockets.com/renewsblog ... vestments/

As a result of the real estate crash in 2007, local markets in many cities have been flooded with a glut of distressed, bank owned, and unsold developer-owned condos, many of which are being offered at ridiculously reduced prices. This may lead you, the real estate investor, to wonder, “are condos good real estate investments?”. Ever since I lost $40,000 gambling on appreciation on a condo investment I’ve always felt like the answer was a resounding NO!

Ah ha! So now we know why you hate condos, you read about a guy who lost $40K. I'm guessing you've never read an article by somebody who bought a SFH just before the local 50% price collapse in 1982. At today's stretched valuations a $40K loss would only be a couple of percentage points, no wonder you're so touchy about the inevitable correction.

Obviously we all know that all real estate is LOCAL and there are no hard and fast rules for every market but with that being said . . .

Here are the reasons I’ve stayed away from condos as investment properties.

Condo Fees

Every unit in a condominium pays condominium fees to cover the costs of the common elements and services in the building. Condo association fees range from hundreds to thousands per month depending on the type of building, the buildings requirements, and the amenities offered. Typically monthly condo fees are allocated towards the property’s master insurance policy, doorman/doormen, snow removal, trash removal, reserves, professional services like lawyers/accountants and possibly some utilities. In luxury buildings condo fees may go towards other amenities like fitness rooms, pools, valet parking, 24 hour concierge and chauffer driven vehicles. These condo fees, while beneficial to the owner occupant, are problematic for the real estate investor.

Whereas roof repairs, grow ops, flooding, gangbangers next door, house fires, broken furnaces, lack of on-site management, security when vacant, squatters, etc., etc., are of no concern to an SFH investor.

Monthly condo fees make it virtually impossible for an investor to put down the minimum amount required to purchase an investment property and still end up sufficiently cash flow positive.

Whereas an old, run-down million dollar house in a tatty neighbourhood is an instant cash machine?

In order to “make the condo work” as a cash flow positive investment, a higher down payment is required which means less money is available for future or concurrent opportunities and the leverage opportunity is diminished. Apples to apples the ROI and cash flow on a condo are less than what they would be on a single family or multifamily investment at the same price.

At todays prices in Vancouver you will have great difficulty in generating positive cash flow with a highly leveraged condo or a house, and recent events make it clear that leveraging into an overvalued property of any kind is very risky. Based on the BoC statement, it's "off the charts" risky! In the past investors tolerated subsidizing their tenants because they anticipated capital gains. Those days are almost certainly behind us for a decade or so.

It’s true that condo association budgets are created annually and they can fluctuate up or down, but most owners of condominiums will tell you that they usually go up and rarely or never go down – so there’s no end in sight.

Whereas with a SFH everybody knows that the older they are, the less things go wrong and the cheaper they are to maintain. :lol:

Increased Risk Alert: Special Assessments

Condo owners always face the risk of the dreaded SPECIAL ASSESSMENT. Over time the condo association will need money to make capital improvements like new windows or a new roof and will require each unit over to pay his or her pro rata share of the expenses. Special assessments do improve the property, but can cost anywhere from a few thousand to tens of thousands PER UNIT. Obviously this is catastrophic for the investor who isn’t living at the property and will likely see no increase in income as a result of the new roof or windows. It’s not difficult to envision a scenario where a special assessment therefore negates positive cash flow or turns an investment cash flow negative for a year or several years.

Whereas SFHs never need similar but more costly repairs. :roll:

Other Investment Concerns With Condos

Landlord Control - Owners of single family and multifamily are free to make decisions as they see fit. Condo owners are subject to condo bylaws and must follow rules that others set for them.

In an SFH, your neighbours are free to do whatever the hell they want as well. That's fine if you are blessed with good neighbours but if not it can be a nightmare with little recourse.

Rental Restrictions – Too high of a ratio of non-owner occupants is bad for the financability of a condo. To combat this recent trend, condo associations have started limiting the number of units in a building that can be used as rentals. I’ve seen a few situations where the waiting list for permission to use a condo as rental, required a wait of 1-2 years. If you purchased a condo as an owner occupant with the intentions of renting it out as an investment down the road, consider the effect a 12-24 month vacancy would have on your return.

Investors know that it takes a 75% vote to introduce rental controls, something which is almost impossible in highly sought after rental neighbourhoods. They pick their properties accordingly. Any investor who buys into a building which is mostly owner occupied is an idiot. Maybe that's how the author of the article lost his shirt, he certainly doesn't seem to understand smart investing parameters very well.

BTW, a grow op can destroy a house or at least leave it uninhabitable for many months plus there's the massive costs of remediation. That's a pretty rare event in a condo and besides, concrete doesn't rot with mould.


Volatility – There’s plenty of data out there that shows condo values drop more quickly that single family homes and that condos don’t appreciate as well as single family homes. This volatility exposes the condo investor to increased risk as real estate prices fluctuate between cycles.

According to the experts, condos appreciate less in an up market and depreciate less in a down market. Which conditions do you think will dominate over the next decade? Yeah, I know, you disagree with the economists and the Bank of Canada, etc., etc.


Supply and Demand – Another concern with condos as investments in the possibility that a developer can come in and build a 100-200 unit condo building in the same space that say 20 or so homes would fit. Right or wrong I’ve always felt that this possibility makes condos less scarce and thus less valuable.

Whereas, if a developer builds a cheap 3 story stucco condo next door to you, it will have no negative impact on your property value. Nice.

Buying a condo as a quasi-investment might work for someone who has a full time profession, like a doctor or lawyer, if that person is willing to sacrifice ROI for the maintenance and management conveniences condos offer. Alternatively, a condo could work as a quasi-investment for a buyer who will eventually occupy the condo but is only looking for equity build up and tax breaks in the short term. For a real estate investor focused on ROI and cash flow, I simply can’t think of a reason that justifies buying a condo over single family or multifamily homes.

Words of wisdom from somebody who lost $40K on his own poor choice of condos. Personally, I think that any sane investor focussed on ROI and cash flow will not be buying anything in Vancouver, not only because the math doesnt work, but also the writing is now so clearly on the wall.

ETB, you feel condos are in line for a 60% drop in value do you? Condo prices detached from SFH prices years ago and are currently selling at around 2007, prices whereas SFHs have reached prices which most independent observers agree is unsustainable. In Vancouver it is obvious that the bigger downside risk is with the most inflated part of the RE market, SFHs. If you anticipate condos dropping by 60% which I think is unlikely but I agree is not impossible, then how much more do you expect SFHs to drop? Will they go down by 70% or do you feel they will they do a Tokyo on us and drop by 99%?

In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 2:41 pm

- Condo fees vs monthly utilities and insurance on a house - I'd have to do some math, but its probably pretty close to the same for both.

the insurance on my house is $82/month. I think strata fees are somewhere in the $350-600 range. Granted, strata fees usually include heat.

I did a calculation quite a few years ago on the cost/sqft condo vs. detached. Not only was condo/cost sqft substantially higher than detached, but calculation only included the cost of the structure...the land cost isn't included in the comparison. That's a big oversight. That would bring the cost/sqft of a detached property at about 15-20% of a condo. Crazy huh?

Okay, now you've confused me. How did you find out what the value of the condo was without the land cost? The land under a condo is owned by the individual condo owners in the form of a proportional share, you do know that don't you? Or are we talking about skyhooks again?

So either detached is fantastically undervalued, or the cost of a condo is fantastically overvalued. Since the value of a detached property is over $1M now I think the latter is more likely.

Huh??? So because condo prices haven't followed SFH prices into today's wildly unsustainable heights and because SFHs are far more out of line with the wage/rent/price metrics, this tells you houses are undervalued??? Excuse me, I have to go and get a drink. :lol:

I agree with pretty much everything mentioned in the article provided. And the piece was written by a former condo owner!

A former condo owner who appears to have made an idiotic choice of investment property. He'll probably end up renting an old house to a biker gang and when the grow op is busted he'll write another article about never buying another house.

Trust me, a lot of people have made a lot of money in the condo market and anybody who loaded up on investment units decades ago is still enjoying a very healthy return on that old original investment.

BTW, I notice that when you talk about owner occupiers of condos versus SFHs you appear to use shoebox condos as your reference point, never the well located luxury buildings, and you never mention the huge lifestyle deficits of living in the burbs.

In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 2:47 pm

wow geyser, looks like I struck a nerve :lol:
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 3:02 pm

wow geyser, looks like I struck a nerve :lol:
No, just trying to add a little balance. :D

BTW, did you read "The Greater Fool" blog today? He was talking about young folks committing financial suicide, here is part of it:
so many young people have decided to commit financial suicide, usually with the help of a realtor. Over 20% of all debt is held by people who owe 350% of what they earn. Another 40% of the debt was borrowed by people who owe 250% of their income. (The average for all of us is debt equal to 164% of earnings.) The Bank of Canada says the super-screwed tend to be the youngest borrowers, which only makes sense since they’ve bought houses with weensy down payments. But these are also the most vulnerable workers – the least experienced with lowest seniority, and the first to be booted when troubles come to town. - See more at: http://www.greaterfool.ca/#sthash.AamM6Htv.dpuf
Wow! Can you imagine owing that much in a falling market and corporate or government cutbacks cause layoffs? Scary for them eh?

Of course, you're okay, you put down a full 5% right? And prices have shot up so you've got a buffer now, here's hoping the pundits are wrong and it doesn't evaporate. :lol:
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 4:55 pm

Geyser

Since stock market has been on a tear the past few years your financial advisor suggested you pull your equity out of your condo, right?
After all, prices have been stagnant in your condo since 2008. So no value gained on your condo in 6 years, and stock market 200%.
Hope you did the right thing bud
 
rofina
Real Estate Talker
Posts: 1552
Joined: Fri Feb 06, 2009 6:39 pm
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 8:02 pm

You realize the only reason SFH are worth what they are is because of the density premium?

If for whatever reason there was a massive exit from condos by investors, and prices did indeed fall 60%, most SFH in the city get cut in half.

The only reason the "land always goes up" meme applies here is because developers are willing to pay millions for lots they can assemble into Mid or High density. Recent example being the Cambie corridor. Overnight SFH along Cambie went from 1.2 million to 2.8 million. You think this was insatiable demand by live in owners? No, it was developer demand for land based on the new neighbourhood plan for the Cambie corridor.

Better pray that the concrete palaces keep on rising, or you won't be able to brag about your ever appreciating land value.
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

Re: why condos aren't good investments

Thu Dec 11, 2014 9:27 pm

You realize the only reason SFH are worth what they are is because of the density premium?

If for whatever reason there was a massive exit from condos by investors, and prices did indeed fall 60%, most SFH in the city get cut in half.

The only reason the "land always goes up" meme applies here is because developers are willing to pay millions for lots they can assemble into Mid or High density. Recent example being the Cambie corridor. Overnight SFH along Cambie went from 1.2 million to 2.8 million. You think this was insatiable demand by live in owners? No, it was developer demand for land based on the new neighbourhood plan for the Cambie corridor.

Better pray that the concrete palaces keep on rising, or you won't be able to brag about your ever appreciating land value.
Somewhat correct.
The scenario you cited would effect west side prices dramatically. Developers there are always scouring for land to erect triplexs, townhomes, which are viewed as affordable compared to detached. This is much less the case on the east side where demand is primarily from single family home buyers. If we ever see typical east Vancouver land values at $1.5M and above like west side I think that removing developer demand would effect prices as you suggest.
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river
Contact:

Re: why condos aren't good investments

Fri Dec 12, 2014 8:57 am

Geyser

Since stock market has been on a tear the past few years your financial advisor suggested you pull your equity out of your condo, right?
After all, prices have been stagnant in your condo since 2008. So no value gained on your condo in 6 years, and stock market 200%.
Hope you did the right thing bud
I'm not a high stakes gambler like you. I was overweight on some Vancouver RE which had performed quite well, so it was obviously time to rebalance. I don't try to time tops and bottoms so I hedged my bets by reducing my condo holdings by a bit less than 50% and the proceeds were deployed in an area which has been far more profitable over the last few years. I admit to currently being overweighted in equities for my age but I have my reasons for that, and I'm certainly nowhere near 100% - that's nuts at any age!

Will the stock market crash? I don't know, but it certainly could. I won't lose too much sleep over it if it does because I know that the stuff I'm holding will eventually bounce back. (No small caps or junior mining stocks in my portfolio these days.) I feel the same way about my remaining RE, if we do get a dramatic plunge in values I won't be celebrating but it is unlikely to have any impact on my lifestyle.

By being debt free and having several (inflation protected) fixed income streams I don't share your heavy exposure to financial catastrophe. At my age I wouldn't dare risk having most of my net worth in a single massively leveraged, potentially illiquid investment and the entire balance of my liquid assets 100% in equities, particularly when amber lights are flashing on RE and the stock market. Your appetite for risk suggests that you are probably still young enough to recover from a bankruptcy and start over, I'm not, hence my greater caution.

In your post you mentioned financial advisors. Can I assume that your "financial advisors" are a realtor and a mutual fund salesperson, or is your current exposure due to your own inexperience? If it's either of the preceding, you might want to investigate a zero-commission, "fee for service" advisor. If you already have a "real" financial advisor you might be wise to sit down with another one and get a second opinion.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
User avatar
thompson2
Real Estate Talker
Posts: 317
Joined: Fri Dec 13, 2013 6:37 pm
Contact:

Re: why condos aren't good investments

Fri Dec 12, 2014 11:10 am

Your appetite for risk suggests that you are probably still young enough to recover from a bankruptcy and start over, I'm not, hence my greater caution.
+1.
Different age, different strategies. Eyes can't adopt yours, and you can't adopt hers. So, what's your purpose or point to argue with her all the time, and most of them are vey emotional and abusive?
Must be love, eh? a tough love. :lol:
 
User avatar
thompson2
Real Estate Talker
Posts: 317
Joined: Fri Dec 13, 2013 6:37 pm
Contact:

Re: why condos aren't good investments

Fri Dec 12, 2014 11:14 am

I feel condos are in line for a 60% drop when the investor component disappears
If that's the case, your SFH heads to a 75% drop. Make you feeling right, Geyser has no mistake on this one. :)
 
eyesthebye2
Real Estate Talker
Topic Author
Posts: 1207
Joined: Sun Jul 27, 2014 6:41 am
Contact:

Re: why condos aren't good investments

Fri Dec 12, 2014 1:38 pm

I feel condos are in line for a 60% drop when the investor component disappears
If that's the case, your SFH heads to a 75% drop. Make you feeling right, Geyser has no mistake on this one. :)
I'm not too worried about that Thompson. I don't really care what the market does. I provide stability and roots for my family with my home and don't
view it as an investment like others on this forum do.
When I no longer need it for the purpose intended I'll give it to my son and move into the laneway house in the backyard. I think he'll probably need it
for a few decades after this. So, unforeseen life events aside, the property will be in my family for another 50+ years. And what will a 5400sqft lot in
Vancouver look like in 2064? 4 or 5 million?
 
Geyser
Real Estate Talker
Posts: 3569
Joined: Tue Jun 05, 2012 5:26 pm
Location: In a van down by the river
Contact:

Re: why condos aren't good investments

Fri Dec 12, 2014 1:43 pm

Your appetite for risk suggests that you are probably still young enough to recover from a bankruptcy and start over, I'm not, hence my greater caution.
+1.
Different age, different strategies. Eyes can't adopt yours, and you can't adopt hers. So, what's your purpose or point to argue with her all the time, and most of them are vey emotional and abusive?
Must be love, eh? a tough love. :lol:
Ooops! I thought I was just being very direct rather than abusive. I try to limit my occasional abuse to the those who abuse me or others. I'll try to moderate my tone with her but I anticipate we will probably still exchange some sarcastic barbs. :D

I strongly support the concept of different strategies for different people whose ages and other circumstances are different. In financial planning there is no such thing as "one size fits all".

When I was young I took some big risks and got burned on some of them, my point in arguing with Eyes is to try and alert her to her significant profit opportunity which I believe is at risk. I'm not saying she shouldn't take that risk, it may well be worthwhile, what I'm arguing about is the degree of risk, something which Eyes seems smugly unaware of.

I think a lot of people who haven't lived through one of our many RE downturns think that RE is a guaranteed path to financial security, you and I both know that it can be, but sometimes some folks lose their shirts too. It's not a risk free game, particularly now when prices have just had their biggest and longest bull run ever.

My posts are also intended to add some balance to some of the uber-bull posts. I think it's useful to see the arguments from both sides. :)
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
  • 1
  • 2
  • 3
  • 4
  • 5
  • 9

Who is online

Users browsing this forum: Bing [Bot] and 7 guests