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Quotealex

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#1

How is buying a house, a great investment?

03-09-2007, 05:31 PM

Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!
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#2

03-09-2007, 05:32 PM

dont forget taxes
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#3

03-09-2007, 05:37 PM

don't let everyone know this. They think the house is an investment.
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#4

03-09-2007, 05:38 PM

some properties can be a investment, usually not your own home if you plan on staying there though. Depends how you make the money to pay for it too. If you make money from other properties to pay for yours thats cool.
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#5

03-09-2007, 05:39 PM

To me its a great investment - of course only if youre in it for a long haul - and very dependant on where you buy
Any improvements you make definitely accelerate the future profit potential and over a long period prices have always outpaced most other "conservative investments"

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#6

03-09-2007, 05:39 PM

There is no money in real estate.

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#7

03-09-2007, 05:41 PM

funny thread, I agree... no $$ in real estate
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#8

03-09-2007, 05:43 PM

Where I live, defaults are at 30%, and new home loans are down 50%, compared to the national average of 2%.
There are somewhere in the neighborhood of 38,000 homes on the market.

2 years ago, there was a waiting list for a home in this market.

I think now is a great time to buy, and you will get more home for less money, and it will increase in value when the market balances out.
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#9

03-09-2007, 05:54 PM

Real estate has a lot of variables.

It really depends on what you buy. For example if you buy a house that is very good shape, in a good neighborhood and is at the top part of the market, you may get what you want, but it will be a while until you see much equity in the house. However, if you buy something that needs a little work and do the work yourself or find someone to do it for a reasonable price you can get instant equity in a house and it can be a good investment.

A lot of it depends on where the house is too. you can have a great house, but if it's in a shitty neighborhood it will hurt you. You can also have an average house in a very good neighborhood and it will increase in value and be a better investment than the great house in a bad area.
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#10

03-09-2007, 05:57 PM

A Houses is NOT an investment. Rental properties are an Investment.

A House will not give you money back, you will have to pay monthly fees to have it. Rental properties will give you money back.

The only profit you may make with your house is when you will sell it. Or if you move out and rent it out.

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#11

03-09-2007, 06:14 PM

Originally posted by Linkster

To me its a great investment - of course only if youre in it for a long haul - and very dependant on where you buy
Any improvements you make definitely accelerate the future profit potential and over a long period prices have always outpaced most other "conservative investments"

In the long run, a well diversified stocks portfolio is a very conservative investment too.
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#12

03-09-2007, 06:18 PM

Originally posted by knewon

A Houses is NOT an investment. Rental properties are an Investment..

I see we are on the same page on this
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#13

03-09-2007, 06:21 PM

It depends where house is located and the country.

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#14

03-09-2007, 06:23 PM

i see owning a home as a great investment..
i bought our home for 86k in florida.
we put 15k worth the work into the house.. focusing on what would bring us the highest return , roof, kitchen, etc etc
house is worth 155k .. thats after 4 years time..i plan on selling when i can get 200k for it.. maybe another 3-4 years

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#15

03-09-2007, 06:52 PM

Houses aren't a 'great' investment they're 'forced' investment since so many people wouldn't have the fiscal responsibility to invest on their own.
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#16

03-09-2007, 06:59 PM

House isn't really a good investment, but if you'll want to live in a house one day then you're better off to buy now because the prices keep going up and up and up - at least that's the way I see it, kind of like a price protection plan... Then again, if you live in a cheap place and invest your money wisely you'd be much better off.

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#17

03-09-2007, 07:10 PM

Alex, take it from another Alex in Montreal, me... real estate can be a great investment, but there are plenty of pitfalls.

Taxes, maintenance, utlities, and so on all go against the deal.

If you are buying a primary residence and plan to live there a few years, then you will see that things are usually pretty good. You have to consider what you would have paid out in rent to live somewhere else, and understand that what you spend in your mortgage comes back as equity and return on investment. Remember also that your gains on reselling your principal residence are TAX FREE in Canada. So if you go through a series of houses (1 every few years) in your life and sell at a profit each time, you are making tax free profit in your pocket.

The downside on real estate is timing. If you buy on the high side of the market, it can take you many, many years to come up on the positive side of things. If you buy at the very bottom of the market and an upswing comes, you can make out like a bandit in a very short period of time. It isn't 100% certain, so there are risks inherent to getting into it.

You have to have somewhere to live, so if you can swing the expense, it is almost always worth it to buy.

PS: I bought new, and net net net I am up probably 80% in 5 years.
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#18

03-09-2007, 07:24 PM

Originally posted by RawAlex

So if you go through a series of houses (1 every few years) in your life and sell at a profit each time, you are making tax free profit in your pocket..

To make a profit, you got to trade down (i.e. buy the next house less than the one you sold). Unfortunately people tend do the opposite.
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#19

03-09-2007, 07:31 PM

depends on the house
you gotta make sure you get an inspection before you buy
money put into bathrooms and kitchens is always a great return
if you hold it for a few years and dont have to pay capital gains taxes
real estate can be a great investment

my neighbor bought their house for $200k and a few years later it was worth $450k
that was with no improvements

it just depends on the market and your location
everything is kinda dead right now
it'll probably pick back up in about a year
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#20

03-09-2007, 07:31 PM

Originally posted by slapass

don't let everyone know this. They think the house is an investment.

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#21

03-09-2007, 07:36 PM

If you don't know what you're doing, stay away from buying real estate, at least for the purposes of turning a profit.

More for me. :D

My family has done quite well in the Winnipeg market, since we all bought when the market was low. All our houses are worth 3 to as much as 7 times their original worth. I paid $70K for my rental house, it's now worth in the 150-200k range. My parents bought their house back in the 60's for less than $20k, similar homes in their area are now selling for over $250k.

I guess it's all a matter of perspective. :D

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#22

03-09-2007, 07:58 PM

Originally posted by Alex from Montreal

Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!

What a moron...
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#23

03-09-2007, 08:04 PM

Originally posted by Alex from Montreal

To make a profit, you got to trade down (i.e. buy the next house less than the one you sold). Unfortunately people tend do the opposite.

Who says you have to trade at all?
What if you buy a house and live there until you die?

Say your mortgage is $1500 a month, and you pay it off by the time you retire. That's the equivalent of $1500 a month in your pocket. You would need roughly $350K in treasury bills to earn that kind of interest income.

Plus if you rent for $1500 a month today, in 30 years rent on a comparable property will be more like $3000-4500 per month.

There are so many other advantages I can't even begin to list them here. The most basic of them is you're going to have to pay a monthly nut to live anywhere, and you have to live somewhere. Why would you pay rent instead of paying a mortgage that gives you tax benefits, builds equity, and allows you to realize the appreciation of the property?

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#24

03-09-2007, 08:04 PM

Originally posted by Alex from Montreal

To make a profit, you got to trade down (i.e. buy the next house less than the one you sold). Unfortunately people tend do the opposite.

incorrect.

Here's the thing. If you put 20k down on a 200k house, and sell it for a 20% profit 2 years later, you make 20% on 200k (40k).

Now, if you use all of that money to buy up, your next 20% profit will be on 240k, not 200k.

You do this by (surprisingly) buying low and selling high. You sell for the best money on that level, and buy for the lowest dollars on the next level up. You keep leveraging yourself up, and you keep increasing value.

So you buy at 200k, sell at 240k, buy at 240k, sell at 300k, buy at 300k, sell at 350k, etc. Done right, you stay ahead of the market, and you continue to get better and better properties at each step. You may have to trade away some location, or be first one to buy into a new project to truly make this work, but it can be done. It is one of the reasons buying new can be such a boost, because you avoid renovation costs up front, and it you can tolerate living in a construction zone early on, you get the benefits of steadily increasing property values as the community fills in.
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#25

03-09-2007, 08:05 PM

so what is a good investment? paying rent every month
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03-09-2007, 08:09 PM

Originally posted by Alex from Montreal

Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!

I usually don't post in no-business thread, but this is really ridiculous.

A lot of self-made millionaires are from real estate.

Fact #1: Everyboby need real estate to live.
Fact #2: Very low % of the population know the market.
Fact #3: You can buy any real estate below the market value.
Fact #4: You can sell any real estate more than the market value.

It's all about location, "home staging" and financing. The bank support most of the deal.

Tip #1: Forget high-class properties. No appreciation there (Westmount) Go with Hochelaga Maisonneuve.

Tip #2: Your offer must be minimum 20% lower than the sell price. Why not 30%? After 10 offer, you might get one that really needs to sell (see Fact #1 and #2)

Tip #3: Do some minimal home-staging in strategic area of the property. A simple $5k investment can boost the value of a $100k property by 15%.

Tip #4: Sell back the property that you bought $80k instead of $100k (-20%) @ $115k and you made a quick $35k profit in a few months with a cashdown of $20k for mortgage (25% of $80k)

$35k profit on $20k investment within 6 months = 175% profit.

There are plenty of ways to make money with real estate. (...)

Shhhhht, there is no money in real estate.

Last edited by the indigo; 03-09-2007, 08:11 PM.

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#27

03-09-2007, 08:12 PM

Originally posted by Alex from Montreal

In the long run, a well diversified stocks portfolio is a very conservative investment too.

Lets come back to this thread in 20 years and see which is more valuable, a well built house in a smart location, or the equivalent number of 1's and 0's dumped into todays "well diversified stocks portfolio".

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#28

03-09-2007, 08:15 PM

It would actually be $30k profit on $20k investment due to the $5k "home-staging" re-investment. Still 150% profit.

Originally posted by the indigo

I usually don't post in no-business thread, but this is really ridiculous.

A lot of self-made millionaires are from real estate.

Fact #1: Everyboby need real estate to live.
Fact #2: Very low % of the population know the market.
Fact #3: You can buy any real estate below the market value.
Fact #4: You can sell any real estate more than the market value.

It's all about location, "home staging" and financing. The bank support most of the deal.

Tip #1: Forget high-class properties. No appreciation there (Westmount) Go with Hochelaga Maisonneuve.

Tip #2: Your offer must be minimum 20% lower than the sell price. Why not 30%? After 10 offer, you might get one that really needs to sell (see Fact #1 and #2)

Tip #3: Do some minimal home-staging in strategic area of the property. A simple $5k investment can boost the value of a $100k property by 15%.

Tip #4: Sell back the property that you bought $80k instead of $100k (-20%) @ $115k and you made a quick $35k profit in a few months with a cashdown of $20k for mortgage (25% of $80k)

$35k profit on $20k investment within 6 months = 175% profit.

There are plenty of ways to make money with real estate. (...)

Shhhhht, there is no money in real estate.

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#29

03-09-2007, 08:19 PM

Another idea:

Offshore real estate is BOOMING.

30% deposit on pre-sell $100k Unit = $30k investment.

In some locations, the value will double from pre-construction to final, within 2 years.

In two years, the unit's value will be $200k, and you can sell it just before starting paying mortgage payments.

$200k - $30k = $170k profit.

That is 566% on your $30k investment in only two years. Let me know if you know of any mutual funds doing that great.

Last edited by the indigo; 03-09-2007, 08:21 PM.

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#30

03-09-2007, 08:25 PM

Buying your own house is a good idea, but buying houses to rent for "investment" is not the best plan in my opinion... unless you have a lot of time on your hands to make improvements yourself or find properties below value or have some hooks up for cheap labor, etc, you are probably better off buying shares in REITs... you will get same return as buying a house with 10x less bullshit to deal with...

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#31

03-09-2007, 08:26 PM

Originally posted by Lenny2

you're going to have to pay a monthly nut to live anywhere, and you have to live somewhere . . . paying a mortgage . . . gives you tax benefits, builds equity, and allows you to realize the appreciation of the property...

And being the king of your castle is its own reward.
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#32

03-09-2007, 08:40 PM

Originally posted by Alex from Montreal

Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!

Depends on how you define investment.

Robert Kiyosaki says assets produce cash flow. Strictly. It's safe to follow his definition, and consider a house as a place to live, that will hopefully appreciate.

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#33

03-09-2007, 08:43 PM

Originally posted by DareRing

Lets come back to this thread in 20 years and see which is more valuable, a well built house in a smart location, or the equivalent number of 1's and 0's dumped into todays "well diversified stocks portfolio".

Over the long term, smart money would pick stock over real estate.
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#34

03-09-2007, 08:49 PM

Originally posted by DaddyHalbucks

Depends on how you define investment.

Robert Kiyosaki says assets produce cash flow. Strictly. It's safe to follow his definition, and consider a house as a place to live, that will hopefully appreciate.

Sure, but that's not really an important distinction for this discussion.

He also strongly encourages people to own their own homes rather than to pay rent, and buying rental properties as an investment is his main investment strategy.

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#35

03-09-2007, 08:50 PM

I bought my house five years ago and its pretty much doubled in value!
and I have had a somewhere to live the past 5 years!
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#36

03-09-2007, 08:53 PM

Originally posted by Lenny2

Who says you have to trade at all?
What if you buy a house and live there until you die?

Say your mortgage is $1500 a month, and you pay it off by the time you retire. That's the equivalent of $1500 a month in your pocket. You would need roughly $350K in treasury bills to earn that kind of interest income.

Plus if you rent for $1500 a month today, in 30 years rent on a comparable property will be more like $3000-4500 per month.

There are so many other advantages I can't even begin to list them here. The most basic of them is you're going to have to pay a monthly nut to live anywhere, and you have to live somewhere. Why would you pay rent instead of paying a mortgage that gives you tax benefits, builds equity, and allows you to realize the appreciation of the property?

There more to house expenses than paying a mortgage. You also have to consider paying taxes, utilities, insurance and repairs and maintenance, and these expenses will continue to rise in time.

Also, renting an appartment is quite less than the sum of all the expenses of owning a house. If the person is discipline enough to invest the difference, I think he/she will be better off at retirement than the home owner.
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#37

03-09-2007, 08:56 PM

Originally posted by Alex from Montreal

Over the long term, smart money would pick stock over real estate.

That's not necessarily true. It all depends on your aversion to risk and how actively involved you want to be in your investments.

While stocks will bring a higher % return year after year that doesn't mean you make more money with stocks.

If I put $100,000 into stocks and earn 10% per year, that's $10,000 per year in investment income.

If I use $100,000 as a 20% down payment on 500K worth of real estate, and we assume real estate will appreciate over the long term at only 5% (half the rate of stocks) I earn a 5% return on $500,000 which is $25,000 per year.

This doesn't include rental income over and above your expenses or the fact that your tenants are paying down your mortgage for you, so that you're building equity in addition to the property appreciating.

However there are greater risks involved because you have to borrow the other 400K to buy the property, and you're liable for the mortgage whether the propery is rented or not, plus the multitude of headaches involved with being a landlord.

So while you have to willing to take greater risks and bigger headaches, you can earn substantially more in the long term with real estate than in the stock market, even though the rate of return on stocks is double that of real estate.

Counter-intuitive but true.

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#38

03-09-2007, 08:57 PM

Been in our house 2 years, and sitting on now 70k plus in equity. Its all about buying right, in the right area. Similar to the stock market you have to look at the building trends development etc etc.
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#39

03-09-2007, 08:57 PM

Originally posted by DaddyHalbucks

Depends on how you define investment.

Robert Kiyosaki says assets produce cash flow. Strictly. It's safe to follow his definition, and consider a house as a place to live, that will hopefully appreciate.

What a smart man
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#40

03-09-2007, 08:58 PM

Originally posted by Alex from Montreal

There more to house expenses than paying a mortgage. You also have to consider paying taxes, utilities, insurance and repairs and maintenance, and these expenses will continue to rise in time.

Also, renting an appartment is quite less than the sum of all the expenses of owning a house. If the person is discipline enough to invest the difference, I think he/she will be better off at retirement than the home owner.

Invest the difference? What difference?

The rent you pay on a house or apartment is usually more than the mortgage would cost to buy the property. Otherwise how does the landlord pay the mortgage.

Plus your rent will go up every year, your mortgage payment will stay the same until it's paid off.

Sure insurance and maintenance costs rise every year, but they're a small fraction of overall ownership cost, the mortgage is always the biggest expense and once you buy it's a fixed number.

But you keep paying rent bro....come tell us how rich you are in 30 years from "investing the difference"

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#41

03-09-2007, 09:04 PM

You know you can also use leverage in stocks, not just in real estate!
And by house, I was refering to a house you live in and not a multi-units property.

Originally posted by Lenny2

That's not necessarily true. It all depends on your aversion to risk and how actively involved you want to be in your investments.

While stocks will bring a higher % return year after year that doesn't mean you make more money with stocks.

If I put $100,000 into stocks and earn 10% per year, that's $10,000 per year in investment income.

If I use $100,000 as a 20% down payment on 500K worth of real estate, and we assume real estate will appreciate over the long term at only 5% (half the rate of stocks) I earn a 5% return on $500,000 which is $25,000 per year.

This doesn't include rental income over and above your expenses or the fact that your tenants are paying down your mortgage for you, so that you're building equity in addition to the property appreciating.

However there are greater risks involved because you have to borrow the other 400K to buy the property, and you're liable for the mortgage whether the propery is rented or not, plus the multitude of headaches involved with being a landlord.

So while you have to willing to take greater risks and bigger headaches, you can earn substantially more in the long term with real estate than in the stock market, even though the rate of return on stocks is double that of real estate.

Counter-intuitive but true.
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#42

03-09-2007, 09:10 PM

Example, on a per unit basis, a condo appartment cost alot more than an apartment in a multi-units property. Here in Montreal, it's not hard to find multi-units for less than $75,000 per appartment but the same size condo will cost you more than $130,000. thus, the rent will be less in an rental appartment than the mortgage and fees in a condo appartment.

Originally posted by Lenny2

Invest the difference? What difference?

The rent you pay on a house or apartment is usually more than the mortgage would cost to buy the property. Otherwise how does the landlord pay the mortgage
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#43

03-09-2007, 09:13 PM

Originally posted by Alex from Montreal

You know you can also use leverage in stocks, not just in real estate!
And by house, I was refering to a house you live in and not a multi-units property.

Ok well I was replying to a post that compared investing in stocks to investing in real estate, so that's why I made that comparison.

I really don't get why you refuse to believe that paying a landlord rent is better for your financial future than paying a mortgage to a bank. The evidence for my position is overwhelming.

If you found some way to live rent free and used what you would have paid in rent to invest in the stock market, then sure, stocks would make the better investment.

But if you have to pay a monthly fee to live somewhere, how is it not in your interest to be paying a mortgage instead of rent?

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#44

03-09-2007, 09:18 PM

Originally posted by Alex from Montreal

Chances are you going to spend a fortune in renovation to make it to your liking (not all of these expenses will be recoverable) and maintenance; and when you do to sell it, it will be to buy an even more expensive house.

As far as I concern, a house is buying into a lifestyle and not an investment!

Yeah,it is not wise to buy a house as a investment in USA.

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Quotealex

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#45

03-09-2007, 09:20 PM

Originally posted by Lenny2

If you found some way to live rent free and used what you would have paid in rent to invest in the stock market, then sure, stocks would make the better investment.

But you are not living rent free. All you did was paid a premium for 25 years (or whatever the term of your mortgage was) so that you can reduce your fees by maybe 50% (you'll still have to pays your taxes and other expenses).
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Boobzooka

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#46

03-10-2007, 12:32 AM

Originally posted by Alex from Montreal

Over the long term, smart money would pick stock over real estate.

This is Darwin Award worthy advice. Sorry, nothing personal, I just think it's dangerous to promote owning IOUs before essential real-world assets. Secure a place to live first, then go ahead and gamble after you're debt free. Especially if you're supporting a family, anything less is irresponsible.

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INever

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#47

03-10-2007, 12:45 AM

It's a good investment for the real estate agent when you want them to lie about how great an investment it is when you decide you wanna sell......

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#48

03-10-2007, 12:45 AM

Originally posted by Alex from Montreal

But you are not living rent free. All you did was paid a premium for 25 years (or whatever the term of your mortgage was) so that you can reduce your fees by maybe 50% (you'll still have to pays your taxes and other expenses).

I still don't get where you get this "premium" idea from.
Maybe you live in a fucked up real estate market.

Where I live it would cost me more to rent a house like mine than what I pay for my mortgage.
The same thing goes for condos/apartments in the area. So why on earth would I pay more to live in the same place and not build any equity?

Renting is for people who relocate frequently, are young and have roommates to help defray their living expenses, or who haven't yet built up enough savings to make a down payment on a home of their own.
There are of course exceptions, but that's the general rule. You're delusional (or live in a very fucked up real estate market) if you think that renting for the next 30 years is a better financial decision than buying your own home.

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#49

03-10-2007, 12:46 AM

like somebody said above a house is a forced investment and that's good.
for the average person it's the only investment of that size they will ever be able to make. somebody making $75,000 can go to a bank and get a mortgage on a $250,000 house - go try going to the bank to borrow $200,000 to start a restaurant or retail store. and of course if you don't make the investment in a house you're going to be paying rent to somebody else.

i know so many of my friends whose parents were middle class people - just normal middle management jobs, good blue collar jobs, small businesses - now those parents are dying off. the family homes they bought in the 50's and 60's for 20-40,000 dollars 40 years later are several hundred thousand dollars, some close to a million dollars in the right neighborhoods. my best friend's parent bought theirs in the 60's for 40K and it's now worth at least 2 or 3 million - whoever buys it when my friend's mom dies or has to get out will knock it down for sure.

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#50

03-10-2007, 12:55 AM

real estate will always be that. Real dollars, real emotions, real people. I found it impossible to continue in a career like this after I witnessed, and was involved in, the great crumble in 2004 in Australia, where houses had dropped by 10% in some places overnight. It was to no surprize that I had resigned 6 months after due to the massive decline in demand. Yes real estate is rediculous, but if wise about what option you use in what situation, you really can call it the wise investment, and beleive me, it has related to all my rises and falls from grace.
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