w.ll.am
Active Member
Yeah Yossi, That's what I was referring to. Though older apartment buildings have bad window insulation too. Eg. not double paned. That's rental units, not condos.
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- Thread starter radioheadmike
- Start date
radioheadmike
Active Member
Wow looking back at this thread, a lot of "good advices" were wrong. Prices continue to go up and I am finding it harder to catch up in regards to saving a good downpayment.
Kenny
Active Member
Wow looking back at this thread, a lot of "good advices" were wrong. Prices continue to go up and I am finding it harder to catch up in regards to saving a good downpayment.
radioheadmike, try this one exercise:
Imagine buying a place now. You put all your saved up money in for a down payment.
Six months from now, you lose your job. You can't get a loan to cover the mortgage. What are your options?
Why take the risk? Do you absolutely have to own a property?
If it's fear of being priced out of the market that's driving your decision, it could be that you're not making a rational decision.
cdr108
Senior Member
Wow looking back at this thread, a lot of "good advices" were wrong. Prices continue to go up and I am finding it harder to catch up in regards to saving a good downpayment.
to add to Kenny's comments ....
re-read what you wrote and think about it.
does it sound logical that prices have gone up as much as they have for as long as they have?
look at the monetary policies that have been implemented over the past decade and there are your reasons.
with accommodative standards changing, where do you think prices will go ?!?
interested
Senior Member
I agree with the other 2 posters radioheadmike.
If prices continue to rise, and rents don't follow as has been the experience in the last 10 years, then rent if you can, put the difference in another investment and you will make money.
If prices drop, you win no matter what eventually.
Unfortunately, none of us have the benefit of being able to see with a crystal ball the future and looking at the past, given all the rises beyond inflation, the risk/reward ratio is getting worse. Sure, if we all could go back and buy knowing prices rose far beyond historical or rational amounts due to accomodative stands, one would. However, the longer we go, the greater the risk.
Prices may continue to rise for another 5 years. It would be illogical but to leap in now just because one gives up and follows the heard does not make this the right business decision, unless you are prepared to live in it for 5 years at least and are prepared to accept that your equity position may deteriorate. If not, then rent that place and save the additional money. You will eventually get the chance to get in at some safer rates; especially if it is a condo you are looking to buy. Single family housing may not drop as much in my view as a condos potentially.
If prices continue to rise, and rents don't follow as has been the experience in the last 10 years, then rent if you can, put the difference in another investment and you will make money.
If prices drop, you win no matter what eventually.
Unfortunately, none of us have the benefit of being able to see with a crystal ball the future and looking at the past, given all the rises beyond inflation, the risk/reward ratio is getting worse. Sure, if we all could go back and buy knowing prices rose far beyond historical or rational amounts due to accomodative stands, one would. However, the longer we go, the greater the risk.
Prices may continue to rise for another 5 years. It would be illogical but to leap in now just because one gives up and follows the heard does not make this the right business decision, unless you are prepared to live in it for 5 years at least and are prepared to accept that your equity position may deteriorate. If not, then rent that place and save the additional money. You will eventually get the chance to get in at some safer rates; especially if it is a condo you are looking to buy. Single family housing may not drop as much in my view as a condos potentially.
radioheadmike
Active Member
Thanks Interested.
I am planning to keep the condo for more than 5 years; this is not an investment, it will be my home. I've decided to take the plunge before the end of year.
I am planning to keep the condo for more than 5 years; this is not an investment, it will be my home. I've decided to take the plunge before the end of year.
interested
Senior Member
I have often said there are other factors than pure economics if one is purchasing a home.
If you have a reasonably secure job, a steady income stream, and are unlikely to be forced out of your home earlier than a longer term time horizon, then you can take the plunge. There are no gains and no losses until one actually sells.
I wish you all the best with your home purchase.
One word of advise if I may; decide on what you wish to spend and try and stay within that budget. Don't get caught up in these bidding wars unless there is truly a property you want, it is truly underpriced, and you set a value which you are willing to spend. I have talked to a couple a few years ago who got caught up in a bidding war in 2008. Then the market declined in 2009. They were quite hard on themselves and very nervous as they watched the equity disappear. They were able to hold out but I can tell you speaking to them it was not a pleasant experience for them. Now they are well above water but their advise was they got caught up in the moment and overbid by at least 5%-10% the value; by the low point they figured the value was 20-25% below what they paid (their equity was wiped out) but they could hold on and now they are about 15% above they figure. However, they have said they will never "overbid" again. Just passing on a 2nd hand experience.
If you have a reasonably secure job, a steady income stream, and are unlikely to be forced out of your home earlier than a longer term time horizon, then you can take the plunge. There are no gains and no losses until one actually sells.
I wish you all the best with your home purchase.
One word of advise if I may; decide on what you wish to spend and try and stay within that budget. Don't get caught up in these bidding wars unless there is truly a property you want, it is truly underpriced, and you set a value which you are willing to spend. I have talked to a couple a few years ago who got caught up in a bidding war in 2008. Then the market declined in 2009. They were quite hard on themselves and very nervous as they watched the equity disappear. They were able to hold out but I can tell you speaking to them it was not a pleasant experience for them. Now they are well above water but their advise was they got caught up in the moment and overbid by at least 5%-10% the value; by the low point they figured the value was 20-25% below what they paid (their equity was wiped out) but they could hold on and now they are about 15% above they figure. However, they have said they will never "overbid" again. Just passing on a 2nd hand experience.
radioheadmike
Active Member
Great words Interested. My rule of thumb is to never pay asking price (or above asking price). If I lose the sale, I will move onto another property.
interested
Senior Member
Actually, that is not exactly what I said Mike:
I would evaluate the sales of the comparables. You should be able to come up with reasonable approximate value.
If something is fairly priced, in the present market, you will have to pay that in all likelihood. If something is priced at say $299K and it is worth $320K but they are trying for a bidding war, then try your price but decide in advance that beyond say $325K, you will not be invovled.
If it has been on the market over a month and is asking say $299K and worth in your view around that amount, then try around $290-295K.
If you go in at $275K after a month and it is realistically priced, if the vendor is not caught, he will be insulted, not respond, and then you will end up bidding more or close to full to get it instead of perhaps getting it at $290K.
At least the above has been my experience. Perhaps others could comment.
I would evaluate the sales of the comparables. You should be able to come up with reasonable approximate value.
If something is fairly priced, in the present market, you will have to pay that in all likelihood. If something is priced at say $299K and it is worth $320K but they are trying for a bidding war, then try your price but decide in advance that beyond say $325K, you will not be invovled.
If it has been on the market over a month and is asking say $299K and worth in your view around that amount, then try around $290-295K.
If you go in at $275K after a month and it is realistically priced, if the vendor is not caught, he will be insulted, not respond, and then you will end up bidding more or close to full to get it instead of perhaps getting it at $290K.
At least the above has been my experience. Perhaps others could comment.
radioheadmike
Active Member
Interested,
I know this is not what you said. But personally I prefer to negotiate a reasonable (lower) price.
If I see a property listed for cheap in a great neighbourhood , I would not bother putting an offer as I know they are trying to create a bidding war. Personally, I don't have the emotions and time to go through a bidding a war, so avoiding it all together would be the best case scenario.
I've been following certain pockets in the GTA and I am aware of what the average prices go for these areas that I am interested in.
For example, Islington Village is one of these pockets that I am interested in. There are newish condo units (1 bedroom or 1 + 1 bedrooms) that are selling for 244,000 - 267,000. I know the neighbourhood pretty well and I am aware of the negatives and positives of that neihbourhood.
If a 1 bedroom unit is listed at 267,000 (currently there is one listed for that price) , I would not pay for the full price. I feel this price is too high for a 560 sqft condo in a poor income neighbourhood. Therefore, I would offer much less (at least 250,000).
If I lose the offer, I am not going to cry about it. I will move on.
This to protect me from market jitters.
I know this is not what you said. But personally I prefer to negotiate a reasonable (lower) price.
If I see a property listed for cheap in a great neighbourhood , I would not bother putting an offer as I know they are trying to create a bidding war. Personally, I don't have the emotions and time to go through a bidding a war, so avoiding it all together would be the best case scenario.
I've been following certain pockets in the GTA and I am aware of what the average prices go for these areas that I am interested in.
For example, Islington Village is one of these pockets that I am interested in. There are newish condo units (1 bedroom or 1 + 1 bedrooms) that are selling for 244,000 - 267,000. I know the neighbourhood pretty well and I am aware of the negatives and positives of that neihbourhood.
If a 1 bedroom unit is listed at 267,000 (currently there is one listed for that price) , I would not pay for the full price. I feel this price is too high for a 560 sqft condo in a poor income neighbourhood. Therefore, I would offer much less (at least 250,000).
If I lose the offer, I am not going to cry about it. I will move on.
This to protect me from market jitters.
interested
Senior Member
Smart.
I am glad to see you are thinking. You won't get into too much trouble as long as you keep your wits about you and it sounds like that is what you are doing.
In the Financial post today, this article just appeared:
http://www.financialpost.com/news/Should+house+before+late/4984409/story.html
Talks exactly to the urgency feeling being intentionally created to buy.
I am glad to see you are thinking. You won't get into too much trouble as long as you keep your wits about you and it sounds like that is what you are doing.
In the Financial post today, this article just appeared:
http://www.financialpost.com/news/Should+house+before+late/4984409/story.html
Talks exactly to the urgency feeling being intentionally created to buy.
radioheadmike
Active Member
Great article.
I feel like the last two years I've been sitting on the housing sidelines. This is why I've decided to purchase a home this year. Whether interest rates go up or prices go down, I want to own a home for myself to live in and not be house poor.
Anyways, if the GTA is too aggresive for my approach in purchasing a home (in terms of paying lower than asking price) , I can always look into getting a beautiful 4+ bedroom old century home in downtown Hamilton near the GO train.
I feel like the last two years I've been sitting on the housing sidelines. This is why I've decided to purchase a home this year. Whether interest rates go up or prices go down, I want to own a home for myself to live in and not be house poor.
Anyways, if the GTA is too aggresive for my approach in purchasing a home (in terms of paying lower than asking price) , I can always look into getting a beautiful 4+ bedroom old century home in downtown Hamilton near the GO train.
jeff316
Active Member
I can always look into getting a beautiful 4+ bedroom old century home in downtown Hamilton near the GO train.
That was our backup plan too. Such a great town. But if you're not used to the trip, just ride the GO for a week or two steady before you start searching to make sure you can take the commute before committing to the Hammer.
to add to Kenny's comments ....
re-read what you wrote and think about it.
does it sound logical that prices have gone up as much as they have for as long as they have?
look at the monetary policies that have been implemented over the past decade and there are your reasons.
with accommodative standards changing, where do you think prices will go ?!?
I don't disagree with the comments made above and those made by Kenny and interested - all three are correct - but to be fair, radioheadmike's original post contained a valid point that gets glossed over with the whys and hows of the increase.
Waiting is a much smarter and smaller risk than taking the plunge based on the perception that prices will continue to increase, but it has been a risk nonetheless (definitely a declining risk as we round the peak).
People who were told three or four years ago to wait for prices to decline are ... still waiting. And will still be waiting for another bit of time for prices to slide down to the levels they were trying to wait-out three or four years ago.
And during that time, some of those people went from wanting to buy to 'needing' to buy (if there is such a thing as 'needing' to buy???) ... well, them's the breaks I guess.
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js97
Senior Member
Skimming through this thread, a few MAJOR items I would like to point out.
W.ll.am - Your profits are reflective of the ENTIRE market. Anyone that bought prior to 2001 and sold at ANY point during the last 10 years will make a substantial profit. I'm not sure how you can specifically take credit for that - Anyone on this board that bough and sold during that period will make profits.
Radioheadmike - You really have to establish 'why' you are looking to buy vs renting.
1.. There are many cost increases that you might not factor, including:
i. Annual Hydro increase
ii. Maintenance fee increases
iii. Property tax increases
iv. interest rate (mortgage payment) increases
After 5 years, those compounded increases can substantially change the amount of fixed expenses you will have, as opposed to renting, where it is generally much more stable.
2. Expected appreciation
Many agents will tell you that you will make a 'book' profit of 20k over the next few years, but if you calculated the associated costs to a real estate transaction deal
i. 5% agent fees (at 300k will be 6K)
ii. Land transfer taxes (approx 3k)
iii. closing costs ( aprox 1.5k each time 3k)
So as you can see, you're already down approx 10k.
3. Costs of renting vs owning.
1 br rent = approx 1300/m !
1 br own = 400 maintenance + 200 taxes + 800 mort (where approx 400 is interest) = 1600 to own where only 400 iexquity. Or 1600-400 iss 1200 cost to 'own (taxes, maintenance, interest) Cost of owning is no where as 'lucrative' as some might tell you. You're essentially paying the same as rent, plus all the risk of 'owning'.
So renting vs owning is no different if you're able to save 440 a month. with NO risk.
The 4000 you save in equity can disappear in a 300k listing through price negotiation.
I would recommend you 'save' a bit more before you buy, or get a roomie
It would be the more fiscally prudent decision.
And considering you're not from Toronto, you should definately see the different neighbourhoods before you commit to a building/neighbourhood.
W.ll.am - Your profits are reflective of the ENTIRE market. Anyone that bought prior to 2001 and sold at ANY point during the last 10 years will make a substantial profit. I'm not sure how you can specifically take credit for that - Anyone on this board that bough and sold during that period will make profits.
Radioheadmike - You really have to establish 'why' you are looking to buy vs renting.
1.. There are many cost increases that you might not factor, including:
i. Annual Hydro increase
ii. Maintenance fee increases
iii. Property tax increases
iv. interest rate (mortgage payment) increases
After 5 years, those compounded increases can substantially change the amount of fixed expenses you will have, as opposed to renting, where it is generally much more stable.
2. Expected appreciation
Many agents will tell you that you will make a 'book' profit of 20k over the next few years, but if you calculated the associated costs to a real estate transaction deal
i. 5% agent fees (at 300k will be 6K)
ii. Land transfer taxes (approx 3k)
iii. closing costs ( aprox 1.5k each time 3k)
So as you can see, you're already down approx 10k.
3. Costs of renting vs owning.
1 br rent = approx 1300/m !
1 br own = 400 maintenance + 200 taxes + 800 mort (where approx 400 is interest) = 1600 to own where only 400 iexquity. Or 1600-400 iss 1200 cost to 'own (taxes, maintenance, interest) Cost of owning is no where as 'lucrative' as some might tell you. You're essentially paying the same as rent, plus all the risk of 'owning'.
So renting vs owning is no different if you're able to save 440 a month. with NO risk.
The 4000 you save in equity can disappear in a 300k listing through price negotiation.
I would recommend you 'save' a bit more before you buy, or get a roomie
It would be the more fiscally prudent decision.
And considering you're not from Toronto, you should definately see the different neighbourhoods before you commit to a building/neighbourhood.
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