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HomelessinSD
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Re: Renters are getting hammered too...

Thu May 28, 2015 3:11 pm

With depreciation reports all coming on line, there will be guaranteed special assessments that come into play. I know with my building, I'm looking at $80k (give or take) over the next 30 years. How will this be factored into the investors calculations?
80K isn't that bad actually if consider your condo will be "trouble free" for the next 30 years. Using another words, it will certainly cost you that much for a SFH as well in that time period. If you still can not settle your heart, thinking about "capital appreciation"... price may be double or triple in the 30 years... :)

But one thing I agree you that the most home owner will definitely be panic by the #, and some of them will sell their condos like no tomorrow. It is actually happening now and I treat it as an opportunity. " Depreciation report" makes me a window ( FEEL SORRY for the seller, but price can go even lower without taken). Right now I am going to buy one more unit (have bought one in last year) in a highrise building in Lougheed Mall area: two br for little bit over 200k, beside skytrain, Rofina is right it can be rented at $1400/m, cash follow nicely at $700. The catch is ---> have a $70K credit ready in the bank. :P
$70k and a magic calculator that gives you $700 in cash flow / mth, at least based the $205k purchase price and $70k down payment.

Or maybe a different definition of "cash flow"?
 
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thompson2
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Re: Renters are getting hammered too...

Thu May 28, 2015 3:59 pm


Or maybe a different definition of "cash flow"?
Maybe.

for a 200k property, 25% down, borrow $150K from bank, at 2.35% interest (5 years term, today).

costs: 150K x 2.35% /12= $290/m, plus $275/m condo fee, $150/m property tax & water. Rent at $1400/m to $1450/m

Cash = 1400-290-275-150 =$685/m. See, if you are good at math your will get the same number as I do. :) Don't forget there are two portions in your mortgage payment: principle and interest. Only interest part is your cost.

(If all your $200k, including your down payment, was borrowed from bank, like I do, your cash flow will be $100 less .)
 
HomelessinSD
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Re: Renters are getting hammered too...

Thu May 28, 2015 5:08 pm

Yup, it's definition of cash flow....
 
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DAB
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Re: Renters are getting hammered too...

Thu May 28, 2015 9:28 pm

Checked out Tom's listing for the 7th / Main condo:

Asking $450k, strata fees of $300 / month, taxes about $1400 / year (can't remember exactly). Using Tom's mortgage calculator with 25% down at 3.25% over 25 years, monthly payments of $1600.

Why are you using 3.25%? 5 years are going for 2.7% and 2 year fixed at 2.2%. That makes a big difference in mortgage payments.
 
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DAB
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Re: Renters are getting hammered too...

Thu May 28, 2015 9:30 pm

Couple points of interest on rising rents.

Lougheed Mall area, 2 bedrooms, easy to rent, good tenant selection - $1400-1450. This is an increase of approximately $200-250 over 4-5 years.

Brentwood area, 2 bedroom, easy to rent, good tenant selection, $1700-1800. This is an increase of approximately $200-300 over 4-5 years.

With condo prices being largely stagnant over the same 4-5 year period, rents are starting to creep up and make the number more appealing, seems like a top to the Price/Rent has been set and is now returning to favour the investor.

Of course, these are 2 examples - possibly not a reflection of the broader market.
Some condos in the brentwood mall area have gone up 10% almost year over year. I am referring to the MOSAIC & FRESCO buildings on Madison & Hastings. I have a friend that lives there and he said units are sold in a matter of days with multiple offers for the ones that do sell.
 
tapioca
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Re: Renters are getting hammered too...

Fri May 29, 2015 5:57 am

gilmore skytrain is a popular location too
 
rMBA13
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Re: Renters are getting hammered too...

Fri May 29, 2015 7:04 am

Not nearly as popular as Brentwood, too many crows there... So creepy
 
rMBA13
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Re: Renters are getting hammered too...

Fri May 29, 2015 7:07 am

Couple points of interest on rising rents.

Lougheed Mall area, 2 bedrooms, easy to rent, good tenant selection - $1400-1450. This is an increase of approximately $200-250 over 4-5 years.

Brentwood area, 2 bedroom, easy to rent, good tenant selection, $1700-1800. This is an increase of approximately $200-300 over 4-5 years.

With condo prices being largely stagnant over the same 4-5 year period, rents are starting to creep up and make the number more appealing, seems like a top to the Price/Rent has been set and is now returning to favour the investor.

Of course, these are 2 examples - possibly not a reflection of the broader market.
Some condos in the brentwood mall area have gone up 10% almost year over year. I am referring to the MOSAIC & FRESCO buildings on Madison & Hastings. I have a friend that lives there and he said units are sold in a matter of days with multiple offers for the ones that do sell.
It's good news that prices have been rising there, the area needs people with higher disposable income to support the new coming Whole Foods
 
HomelessinSD
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Re: Renters are getting hammered too...

Sat May 30, 2015 9:06 am

Checked out Tom's listing for the 7th / Main condo:

Asking $450k, strata fees of $300 / month, taxes about $1400 / year (can't remember exactly). Using Tom's mortgage calculator with 25% down at 3.25% over 25 years, monthly payments of $1600.

Why are you using 3.25%? 5 years are going for 2.7% and 2 year fixed at 2.2%. That makes a big difference in mortgage payments.
Conservative, but just did a quick search on best mortage rates for 5 year fixed online. Came back with 2.99%. Use whatever rate you want, including interest only...

And yes, it does make a huge difference: both ways. If you think 3.25 to 2.7 makes a huge difference, imagine what the difference would be at 5%? I don't see that happening for many years, but I'll bet we'll see that, and higher, with what's left of my lifetime.
 
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thompson2
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Re: Renters are getting hammered too...

Sat May 30, 2015 12:17 pm

Use whatever rate you want, including interest only...
man, you are stupid. :lol:

In the old days when interest rate was high, 10% was "normal", almost all your mortgage payment is the interest. Say, a $100k loan at 25 years amort, mortgage payment is $894/m, interest portion is $812.88. There are much no difference between mortgage and interest. You can use them either way to obtain your cash flow correctly. Obviously, "mortgage" is easier for the public, because banks have it ready for them. I believe that was the reason why the mortgage was put into the formula.

However, today, in the "new normal" low interest environment, the biggest portion of the mortgage is not necessary the interest. Turning point is at 2.99%, under that rate the big portion of the mortgage is the principle. Oh well, if you insist to use the mortgage in your calculation, that's fine, I know your math is as good as my english, you just fool nobody but yourself by watch a distort mirror. :lol:

As an investor, I have to point out that the principle part of your mortgage is your "rental income" , Revenue Canada wouldn't give you a shit whether it's in "flow" or not!
 
jimtan
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Re: Renters are getting hammered too...

Sat May 30, 2015 12:53 pm

And yes, it does make a huge difference: both ways. If you think 3.25 to 2.7 makes a huge difference, imagine what the difference would be at 5%? I don't see that happening for many years, but I'll bet we'll see that, and higher, with what's left of my lifetime.
:roll:

Let me suggest to the permanently obtuse that they could lock the mortgage into 20 years if they think rates are rising a lot.

Here's something to think about. This weekend, there are only 32 open houses in Vancouver West between $500k to $600k. Most of this stuff are tired or problematic. Once it's gone...

There is a lot of new buildings being (or will be) marketed. But, the price is going up. Two years ago, you could buy a pre-sale from $600 psf along the Cambie corridor. Now, it's $700 psf.

Part of the problem are the 'investors' who are soaking up the new inventory. Unless the governments impose penalties/restrictions, it will remain a sellers market. :mrgreen:
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HomelessinSD
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Re: Renters are getting hammered too...

Sat May 30, 2015 2:20 pm

As I said earlier, you have a different definition of cash flow. I am aware of the tax implications, as I own (and report on my taxes) a rental property. With your definition, you should also factor in the depreciation credits you can get on the tax filing.

I don't consider the principle payments against my mortgage as a component of cash flow, only the net cash I collect each month after paying all the expenses. I'll count my eggs once they hatch - sell, if we choose to, and realize the equity build-up from the principle payments. I'll be paying capital gains on that as well.

As far as locking in rates, I have done so for the entire amortization period. I sleep very well at night. Especially because I suspect that if rates do go up, affordability will be more even more difficult and those without the ability of a sizeable downpayment will continue to provide a stable supply of renters.

As far as the rate used for the calculation: go ahead and use the interest only situation: put the "cash" in your jeans every month.
 
HomelessinSD
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Re: Renters are getting hammered too...

Sat May 30, 2015 2:27 pm

And yes, it does make a huge difference: both ways. If you think 3.25 to 2.7 makes a huge difference, imagine what the difference would be at 5%? I don't see that happening for many years, but I'll bet we'll see that, and higher, with what's left of my lifetime.
:roll:

Let me suggest to the permanently obtuse that they could lock the mortgage into 20 years if they think rates are rising a lot.

Here's something to think about. This weekend, there are only 32 open houses in Vancouver West between $500k to $600k. Most of this stuff are tired or problematic. Once it's gone...

There is a lot of new buildings being (or will be) marketed. But, the price is going up. Two years ago, you could buy a pre-sale from $600 psf along the Cambie corridor. Now, it's $700 psf.

Part of the problem are the 'investors' who are soaking up the new inventory. Unless the governments impose penalties/restrictions, it will remain a sellers market. :mrgreen:

Okay, then use the 20 year locked in rate then.

I could speculate on what point you are trying to make with your captain obvious statement about rising prices... Can you save me some time and explain / describe why these rising prices make owning rental properties better or worse?

My opinion is that renters can only pay what they can afford. If they can't afford Vancouver West, they will move elsewhere out of necessity.
 
jimtan
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Re: Renters are getting hammered too...

Sat May 30, 2015 2:37 pm

Our point is that there is a cost to Not Buying in Vancouver. Sometimes, you just buy what you can afford even if it is not the palace you hoped for. My post was to remind the retards.... ahem... fiscally conservative that time's a wasting. Yesterday won't come again. Bye Bye Blackbird!!!! :mrgreen:
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rofina
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Re: Renters are getting hammered too...

Sat May 30, 2015 2:41 pm

Use whatever rate you want, including interest only...
man, you are stupid. :lol:

In the old days when interest rate was high, 10% was "normal", almost all your mortgage payment is the interest. Say, a $100k loan at 25 years amort, mortgage payment is $894/m, interest portion is $812.88. There are much no difference between mortgage and interest. You can use them either way to obtain your cash flow correctly. Obviously, "mortgage" is easier for the public, because banks have it ready for them. I believe that was the reason why the mortgage was put into the formula.

However, today, in the "new normal" low interest environment, the biggest portion of the mortgage is not necessary the interest. Turning point is at 2.99%, under that rate the big portion of the mortgage is the principle. Oh well, if you insist to use the mortgage in your calculation, that's fine, I know your math is as good as my english, you just fool nobody but yourself by watch a distort mirror. :lol:

As an investor, I have to point out that the principle part of your mortgage is your "rental income" , Revenue Canada wouldn't give you a shit whether it's in "flow" or not!
If you purchase a unit and it rents for $1000 month, but your total payments (mortgage,tax,strata, etc) are $1200, you're losing $200 a month? Regardless of how much principal payback you get, I don't think the calculation will turn out in your favour long term.

And secondly, that $200 loss is a write off against other reportable income. No?
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