i think there was a misunderstanding.
the text was: "Anyways, real estate *can* drop to zero. If you don't have home insurance and your house burns down, for instance."
it about real estate (which can be different than "home", about a home or something personal; it was a little confusing, all doors open.
so everybody is right.
if you have 100 houses/apartments they are investment; if they are in manhattan they are the best investment, solid huge returns. if you have one house/apartment that may be a house.
bob hope had about 1000 properties in real estate and he was quite rich and successful.
There is no doubt that people can make money in real estate, as I've said. Real estate can, in fact, generate revenue through rent.
Most real estate investors buying condos as "investment properties" are not terribly concerned about generating income through rent. They merely see rent as a way to cover or temper the carrying costs, with the goal of cashing out the investment through higher future valuations on the property itself.
But that's the bubble mentality right there.
The goal is not income from rent. In fact, I know several people who own "investment condos" who are cashflow negative. They'll accept a $100/month loss on the property, because they can't command a high enough rent to fully account for the carrying costs.
But that's "okay" to them, because they're expecting to flip the property for $100k+ profit in five years.
In my investment mentality, this is almost the definition of insanity. I don't think it's *ever* okay to be cashflow negative on an investment. That should be the first sign to someone that stuff is out of whack. If you can't command a rent at carrying costs, then rent is too low relative to cost. If that's true, it probably means that the cost is too high. And indeed, rent-price ratios in Toronto are well above their 30-year highs.
This point is also something which must be considered by people who claim to support the price appreciation through underlying demographics -- immigration, people moving downtown. If the live-in demand is so damned high, then why aren't the rents tracking price increases? This divergence suggests, at least, that without low-interest mortgages, the market would not support price appreciation, since the modest rent price growth to sale price growth suggests that the affordability of downtown living is hitting a ceiling; underlying wage growth is not sufficient to support rental price appreciation commensurate with the underlying cost.
In that sense, this is as classic as a housing bubble can be -- prices out of a whack with demand. And when I say demand, I don't mean, people "willing to take on mortgages at current interest rates". I mean, people wiling to pay market rent, commensurate with the cost of the real estate.
Here's a simple thought: what do you think would happen to the housing market if the Bank of Canada overnight rate were to be say, oh, I don't know... pulled up to 3.25%? Which isn't even high by historical standards.
