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buying an apartment

March 9, 2014, 3:15 p.m.
Posts: 1790
Joined: Feb. 15, 2003

So I would like to buy an apartment somewhere in the greater vancouver area. It would be my first ever property purchase. As stupid and vague as this question may sound, but can anyone here provide any good advice/experience they've encountered in the real estate market for first time buyers?

March 9, 2014, 4:04 p.m.
Posts: 3775
Joined: Nov. 19, 2002

get a realtor, ideally someone you know

March 9, 2014, 4:15 p.m.
Posts: 429
Joined: Feb. 28, 2005

http://www.greaterfool.ca/

Do yourself a favor and have a read through the archives.

I seriously doubt that you can find an apartment or condo that costs less to own than it does to rent at current prices.

If you do, please post up an example.

March 9, 2014, 4:37 p.m.
Posts: 1745
Joined: Nov. 23, 2002

http://www.greaterfool.ca/

Do yourself a favor and have a read through the archives.

I seriously doubt that you can find an apartment or condo that costs less to own than it does to rent at current prices.

If you do, please post up an example.

the argument can be made that even though the rental may cost you less on a monthlty basis, over the long term owning will provide a better return even if the market stays flat or dros slightly. to be fair one also has to consider similar properties. for example a 2 bed in my complex rents for between $1100 and $1300 per month. my mortgage plus strata is $1150/month.

the numbers here are simple, but provide a general idea
say you have an $1100/month mtg and $200/month strata

mtg (not incl strata): 1100/month * 60/months = $66,000
rent: 900/month * 60/months = $54,000
saved: 400/month (incl strata) * 60/months = $24,000
assuming that 1/2 your mtg payment goes to principle that = $33,000 equity

invest that $400 and you may come out ahead a bit or maybe break even, but i would argue most people will not be disciplined enough to do that. how much of that $54K in rent is coming back to you after you move out of your rental?

the key is to run the numbers and see if it works for you. for some people renting may definitely be better, for others ownership is a better option. you can't make a blanket statement that it's better to rent.

Luck is what happens when preparation meets opportunity ~ Seneca

March 9, 2014, 5:09 p.m.
Posts: 429
Joined: Feb. 28, 2005

Don't forget maintenance. Even condos need a new dishwasher and paint once in a while. New flooring after a few years? Be conservative, say 100/mo.

What about special assignments? That 15k for your part of a new building envelope, roof, or leaky parkade has to come from somewhere. Be ultra conservative, say 50/mo for contingency.

How much did you put down? 40k? If you were making 5% on that, you'd have 150/mo after taxes.

What about when you sell? Gonna FSBO? Not in this market. Commission on your 400k sale price is a smidgen under 20k. Let's say you have managed to stick it out there for 5 years. 20k/5yrs =334/mo That's a lot. Let's say 10 yrs. 167/mo.

Conservatively, that's an additional $467/mo in expenses that you haven't considered.

Even if prices stay flat, which is not what the forecasts are saying they will do, from what I can see, it still makes sense to rent in the Lower Mainland.

March 9, 2014, 5:12 p.m.
Posts: 429
Joined: Feb. 28, 2005

Also, you didn't include property taxes in your calculation. If they're included in your 200/mo strata, you are getting a great deal. If not, how much? Let's say 100/mo.

That's $567 difference.

March 9, 2014, 5:18 p.m.
Posts: 429
Joined: Feb. 28, 2005

And early in a mortgage, less than half of the monthly payment goes to principal. On an $1100 payment, the average amount going towards principal over 5 years would be closer to 477. That's another $73,

That's $640 difference now.

March 9, 2014, 5:54 p.m.
Posts: 1745
Joined: Nov. 23, 2002

And early in a mortgage, less than half of the monthly payment goes to principal. On an $1100 payment, the average amount going towards principal over 5 years would be closer to 477. That's another $73,

That's $640 difference now.

ok, so take your $640 * 60 = 38,400, now you're coming out a bit ahead on the renting. so yes in a 5yr sample the benefit may go to renting - but that's the trap. home ownership has to be veiwed as a long term deal. extrapolate that out to 10, 15, 20 yrs and ownership becomes more attractive.

if you look at your finances with primarily short term thinking you'll basically be treading water.

again there's not a right or wrong answer that fits everybody's scenario, so the key thing is to look at all the variables as they pertain to a person's circumstances. the op hasn't given us a lot of details so right now we're basically throwing darts with a blindfold on.

Luck is what happens when preparation meets opportunity ~ Seneca

March 9, 2014, 6 p.m.
Posts: 429
Joined: Feb. 28, 2005

That's 640/mo on top of the 400/mo. Total of more than 60k over the 5 year period vs 33k. That's a pretty significant difference. And that was applying the sale commission over a 10yr period, not 5. Over 5, the 60k difference would increase by an additional 10k.

March 9, 2014, 6:04 p.m.
Posts: 14407
Joined: Feb. 19, 2003

Even if prices stay flat, which is not what the forecasts are saying they will do

Link to sources please?

March 9, 2014, 6:06 p.m.
Posts: 429
Joined: Feb. 28, 2005

http://www.cbc.ca/news/canada/toronto/canadian-real-estate-most-overvalued-in-world-study-says-1.2462374

http://business.financialpost.com/2014/03/03/pimco-sees-canadian-housing-market-falling-as-much-as-20/

http://business.financialpost.com/2014/02/03/imf-td-both-conclude-canadas-housing-market-overvalued-by-10/

March 9, 2014, 6:12 p.m.
Posts: 1745
Joined: Nov. 23, 2002

That's 640/mo on top of the 400/mo. Total of more than 60k over the 5 year period vs 33k. That's a pretty significant difference.

doh! ok yes, but there are many what-ifs in your example inflating the costs. new flooring every few years? please. special assesment in a newer building? riiight. we can go back and forth and nit-pick over numbers all day but there's no point in that.

look, i agreee that you bring up a number of valid points and considerations and they are similar ones i've taken into account as well, but at the end of the day each person has to evaluate what works best for them.

for myself i'm further ahead owning vs renting.

ymmv

Luck is what happens when preparation meets opportunity ~ Seneca

March 9, 2014, 6:16 p.m.
Posts: 1745
Joined: Nov. 23, 2002

http://www.cbc.ca/news/canada/toronto/canadian-real-estate-most-overvalued-in-world-study-says-1.2462374

http://business.financialpost.com/2014/03/03/pimco-sees-canadian-housing-market-falling-as-much-as-20/

http://business.financialpost.com/2014/02/03/imf-td-both-conclude-canadas-housing-market-overvalued-by-10/

canada wide estimates are nice, but the op is looking to buy in the LM. you also need to factor in projected demographics for a specific region against those reports.

Luck is what happens when preparation meets opportunity ~ Seneca

March 9, 2014, 6:25 p.m.
Posts: 429
Joined: Feb. 28, 2005

Over time, prices always revert to the mean. Many of the stories dealing with Canadian real estate that I've read identify Vancouver as the Canadian city most ripe for a correction.

March 9, 2014, 7:04 p.m.
Posts: 3
Joined: July 4, 2003

You can maybe make an argument for buying a house, lots of intangibles.

But condos are an awful idea, the math always stays the same. Right now it makes zero financial sense to purchase a condo.

$330,000 purchase price.
$20,000 down.
$310,000 mortgage - $1330 a month
Maintenance fee - $220 a month (or more)
Taxes - $110 a month
Water/Garbage - $40

Total - $1700 a month.

That condo will rent anywhere from $11-$1300 a month.

Over 5 years it will cost $24,000-$36,000 more to own the same unit as it would to rent.

The best part is it will cost you $46,000 dollars over 5 years to borrow that money.

$770 dollars a month goes towards servicing interest - renting money.

This doesn't include any opportunity cost on the downpayment, or compound interest on the savings.

The upside? Potential for appreciation, and equity growth. Call it an extremely expensive forced savings plan. And if you think that buying will help you climb " the property ladder" - think again. That ladder is missing about a dozen rungs in the lower mainland.

Notice that condos and attached have been flat for about 4 years.

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