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rbt said:
Quite possibly under 50%. Buy condo/townhouse, pay down property over 8 years ($150k household income; it goes quickly if you want), live in it for a couple more years, scale up to the $1M house with a $500k deposit.

It's very unusual for it to be a starter home to a couple with $200k/year income needed to carry an 85% LTV mortgage; $48k/year to the mortgage but it does happen.
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This, a lot of people are using the equity made in their previous property to put down on the new property. Especially when you consider a couple. Boy meets girl, boy sells condo, girl sells condo both use as a hefty DP for an expensive home. This is only happening because of the exorbitant increase in value of property.
 
I don't know too many first time home buyers who are able to afford a detached home in Toronto central. The ones that are, generally have financial assistance from family in some shape or form. The vast majority, from my anecdotal experience, are move up homeowners, typically single or dual income professionals. Many years ago, I'd see a lot of situations like the one TheKingEast described above (boy meets girl, then each sell their condo to buy one family home) but more and more, due to the disconnect of detached home prices from condo prices, selling 2 condos isn't even necessarily sufficient to afford them a home in the city without a significant salary increase for one or both individuals. I know of dual income professionals who sell their downtown condo but end up 'driving 'til they qualify" in the 905.
 
This all seems crazy. From my social circle, which is composed of 35-40 year old couples, I can say that everyone is *all in* the market. Leveraged to the max with the assumption that both husband+wife jobs are safe indefinitely with promotion increases embedded in. I've lost my job 2 times in the past 15 year because of a) dot.com bust (nortel) and b) 2008 bank bust (commodity trading desk in NY) so I know that no job is really safe.

I can't see how any of this is going to end well.
 
Hi
I might be a first-time landlord soon, and want to get a general idea of how much it will really cost me.

Say I buy a $150K condo, with 20% down.

$120K mortgage comes to $550/month (the first 5 years avg $220/month is just the interest)
Condo fee is $450/month
Property Tax is $150/month

Total expenses = $1150/month (am I missing anything?) I have a full-time job, so probably worthwhile to pay a property manager to take care of the property right?
Rent income = $1200/month... so it's barely positive cash-flow.

This is already a really good rent to price ratio. How are people investing in $300k 1bdrs in Toronto that rent for only $1800??

And I have to pay taxes on that... however I can deduct expenses from my income... is it basically everything minus the principal of the mortgage payment?

Even if I exclude the principal in the mortgage from my "expenses" (rent, minus condo fee/tax/$220 mortgage interest), that's only $380/month that I'm earning (cannot assume home appreciation). I might as well do my regular job an extra 10 hours a month! How does it work??
 
ccdd said:
Total expenses = $1150/month (am I missing anything?)
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Insurance, vacant months/tenant fails to pay months, minor touchups between tenants ($500/year; paint, clean carpets, vaccuming dryer vent ducts (fire hazard), etc.), big repairs (new appliances, chipped/stained counters, broken bathroom sink, etc.) every 15 years ($500/year), major renovation every 30 years ($40k in 2015 dollars, or ~$1250/year).

Also, don't forget to bill yourself for your own time. It's not ROI if you're working; it's an hourly rate. Give yourself at least minimum wage if you enjoy the work, and double or triple that if you don't. Work includes meeting time with your management company, doing paperwork/taxes, and other really simple stuff that you wouldn't otherwise be doing. This is strictly an accounting thing to ensure your investment is the best use for your money; you don't need to cut yourself a cheque.


The maintenance requirements vary a bit depending on the type of tenant you expect. Low-rent tenants have lower expectations; high-rent tenants have much higher expectations for maintenance. Your goal is to ensure you never have to charge less rent than the neighbourhood supports.

Both require proactive maintenance for anything involving water. If a tap breaks and floods something while the tenant is away it's your problem, not theirs.
 
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I guess that adds to the question of "how is any of this worthwhile?" Unless one is expecting a sharp home value appreciation (which gets taxed). And the rent-to-price ratio is already pretty good here relatively speaking...
 
ccdd said:
...
Even if I exclude the principal in the mortgage from my "expenses" (rent, minus condo fee/tax/$220 mortgage interest), that's only $380/month that I'm earning (cannot assume home appreciation). I might as well do my regular job an extra 10 hours a month! How does it work??
Click to expand...

The short answer is: It doesn't. With the soaring prices, even in the softening condo apartment sector, rent is increasing but not at a proportional rate. Remaining cash flow positive is difficult without a substantial down payment. Many newer investors are more or less just covering the costs of the unit and realizing the capital gains (that, yes, will be taxed) when they sell many years from now.
 
algotr8der said:
Interesting mention of the economic situation in Alberta and the Commercial Real State Market. Vacancy rates inching up across the country.

http://www.zerohedge.com/news/2015-...berta-soar-wake-plunging-oil-prices-and-econo
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It's tough out west. I have friends out there who are invested in their local real estate and the impact of the energy sector has been slowly having an affect.

Not specifically related to real estate but Alberta's suicide rate recently reported a 30% increase for the first half of this year as compared to last year. The economy is having an affect on everyone and everything.

http://www.cbc.ca/news/canada/calgary/suicide-rate-alberta-increase-layoffs-1.3353662
 
Wish I had better covered my CAD exposure! I wonder how low the loonie will go with these moves.

With so many countries playing the same game of chasing investment by offering cheap money, isn't it a race to the bottom?

Wouldn't it make more sense to recognize the problem of high asset valuations, and rather than prop that up, invest in increasing our workforce's productivity and discourage investment in things like houses that have no productive capacity? Many of the most successful entrepreneurs were renters so they could put their money in their business and be flexible. Wouldn't experiencing some pain be preferable to a crash later on? Is this related to the short-term focus of politicians?
 
ponyboy said:
Is this related to the short-term focus of politicians?
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Indeed. Not to mention the fastest way to enslave a population is through debt. Convince everyone that they are "rich" by purchasing "things" using immense amounts of credit. Lots of people are still dancing, but the music is slowly fading, until finally, there will be silence, and people will wonder what the hell they were doing.

Governments are complicit because they serve the interests of bankers and corporations. And they also profit handsomely, which is why we see so little regulation and transparency in the whole RE racket.
 
Canada tightens mortgage rules to help cool blistering Toronto, Vancouver housing markets

Finance Minister Bill Morneau announced the plans on Friday morning in Ottawa. The required down payment on homes worth at least $500,000 will rise to 10 per cent from 5 per cent starting Feb. 15, 2016 — however the higher threshold will only apply to the portion in excess of that mark. That means the minimum down payment for a home worth up to $1 million would be 7.5 per cent.

“The government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable,” Morneau said in a statement. “The actions taken today prudently address emerging vulnerabilities in certain housing markets while not overburdening other regions.”

http://business.financialpost.com/p...-blistering-toronto-vancouver-housing-markets
 
10 Incredible Numbers from Canada’s Real Estate Bubble

I'll post a few from here I found interesting.

5. 900,000 Jobs
Such a boom in real estate has reshaped the Canadian economy. Today, more than 900,000 people are employed in home construction, renovation and repair. This figure doesn’t include the hundreds of thousands of people in industries directly tied to real estate, including finance, government and other trades. In total, residential housing represents 8.9% of Canada’s gross domestic product.

6. 42,000 Realtors
According to the Toronto Real Estate Board, there are 42,000 licensed brokers working in the Greater Toronto Area. This means one out of every 133 people in Canada’s largest city is a real estate agent.

7. $1.87 Trillion in Debt
What is fuelling the nation’s housing boom? Debt.

By the end of the second quarter, total household debt in Canada hit a record $1.87 trillion. Canadians now hold a record $1.65 in debt for every $1.00 of disposable income. This figure is far larger than the levels seen in the United States at the peak of the country’s debt binge in 2005.

9. 26% Price Collapse
With prices so frothy, even a small hit to the economy could hammer real estate prices. In a presentation to a private audience in New York last month, the CMHC predicted Canadian home prices could crash 26% if oil prices stay below $35.00 per barrel. In such a scenario, Canada’s unemployment rate could spike to 12%.
 
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