The Decline of Vancouver.

Posted by: syncro

with the exception of ppty taxes/fees which are typically miniscule compared to the rent of an equivalent property.

Tax deferral on property taxes starts at 55 (in BC), so that's a nothing burger.

yeah, but there's still utilities. either way though, it's a heck of a lot cheaper than spending $24,000 - 36,000 per year on rent. that's a good prescription for working till you die or living on the street. no thanks.

Posted by: syncro

yeah, but there's still utilities. either way though, it's a heck of a lot cheaper than spending $24,000 - 36,000 per year on rent. that's a good prescription for working till you die or living on the street. no thanks.

The key is to save and invest while renting. Eventually the investment income will pay for that rent just like the home you own pays imputed rent.

If someone can't afford to save after paying rent and living expenses, they likely can't afford to own a similar home either.

And if someone can afford to own a home, they could instead rent a similar home and have money leftover to save and invest.

However the renter needs to be disciplined and actually save and invest instead of spending on consumption whereas the home owner is forced to make mortgage payments. So owning has the better reputation but it's mostly because of behavioural reasons, not because it's a better investment.

If you understand the mechanics and can be disciplined, financially it's a toss up. Which brings us back to Kenny's point that it should be a lifestyle decision dependent on personal circumstances.

Helpful to think out the scenario could model it out in excel if I was actually buying into Vancouver's crazy market.  

So let's say a 1.5M condo in North Van.  Assuming the person had the 20% down payment, quick check on a banking website is about 7100 monthly (1.2M mortgage).  Taxes and utilities call it another 10K/year.

Rent on that same condo is probably between 3 and 4K a month (guess on my part).   So you'd have maybe 53K/year to pump into the S&P (if rent was 3500/month).  

From there just make some assumptions about rate of return for the condo and the S&P and math it out 30 years.  You're not working till you die or living on the street under that scenario, you're ending up with 5-10M$ in the bank depending on the annualized rate of return out of the S&P (7% was 5M, 10% was 10M).  I reserve the right for my 5 minute XLS to be incorrect due to user input error.

I'm happy I'm not having to make those decisions in reality though, just getting back the 7K/month number out of the mortgage calculator gave me a cold shiver.

actualy I talked to some old guys who came up to BC ski in BC and the taxes for a 2 bedroom in Dunbar and a small house in point grey were pretty high cuz the land is super valuable, they told us taxes on those kind of homes which they had long ago paid off were 30K and I think there are lots of those scenario's in vangroovy 

OR they could sell them to a developer who would knock them down to build condos

Posted by: [email protected]

The key is to save and invest while renting. Eventually the investment income will pay for that rent just like the home you own pays imputed rent.

If someone can't afford to save after paying rent and living expenses, they likely can't afford to own a similar home either.

And if someone can afford to own a home, they could instead rent a similar home and have money leftover to save and invest.

However the renter needs to be disciplined and actually save and invest instead of spending on consumption whereas the home owner is forced to make mortgage payments. So owning has the better reputation but it's mostly because of behavioural reasons, not because it's a better investment.

If you understand the mechanics and can be disciplined, financially it's a toss up. Which brings us back to Kenny's point that it should be a lifestyle decision dependent on personal circumstances.

How many people do you think are actually smart and disciplined enough to do that?

It's an argument that's been beat to death, and my perspective is that most renters aren't  going to be making enough money to also invest nor may they be disciplined enough.

Sure it sounds like a great idea, but in reality how often do you think it happens?

Posted by: syncro

How many people do you think are actually smart and disciplined enough to do that?

The better question to ask oneself, is am I smart and disciplined enough?  What others do, does not matter.

for sure, but the discussion is on what other people are doing. 

i can think of one guy, who did all the right things while renting. but even he ended up buying a property at one point. 

ymmv

Posted by: syncro

How many people do you think are actually smart and disciplined enough to do that?

It's an argument that's been beat to death, and my perspective is that most renters aren't  going to be making enough money to also invest nor may they be disciplined enough.

Sure it sounds like a great idea, but in reality how often do you think it happens?

If the renter doesn’t have enough money to also invest, then they also don’t have enough money to buy the house.  So then the financial comparison of renting vs buying is irrelevant.

I worked with a guy who owned 2 rental properties but he lived in a rented house all in east van, i assume he was doing it for tax advantage and he would have had the DB pension so he would have done just fine

For a lot of years it wasn't so bad renting instead of owning until it wasn't a good idea ... which is now

Posted by: Couch_Surfer

Posted by: syncro

How many people do you think are actually smart and disciplined enough to do that?

It's an argument that's been beat to death, and my perspective is that most renters aren't going to be making enough money to also invest nor may they be disciplined enough.

Sure it sounds like a great idea, but in reality how often do you think it happens?

If the renter doesn’t have enough money to also invest, then they also don’t have enough money to buy the house. So then the financial comparison of renting vs buying is irrelevant.

The comparison is buying vs renting, so to even make the comparison you have to assume buying would be an option, or nearly so. But this is sort-of missing the point in terms of the links I was posting, because the comparison would be buying at 60% market with 40% deferred, vs renting.

Side note- another possible benefit of the 60/40 program is that rents should become cheaper (after some time).

Also, I'll give you that you noted you were just guessing, but your comparo is pretty flawed. Renting a 1.5m condo in north Van for 3500/mo is not happening. You're 1-2k shy.

That's part of the problem, rental rates here are very nearly mortgage rates, because people can't pull together the down payment. It's predatory and broken, but also what the market bears. That's another reason that in Vancouver at least the scale doesn't tip very well in favor of rent + investment vs mortgage, because the differential between rent and mortgage monthly is not very high, it's mostly downpayment. People only have so much money, but another argument might be is that people with enough discipline to invest probably have the discipline to extra pay on their mortgage principal. If you have the cash to not have a long protracted mortgage term paying a ton of front loaded interest, things change again. 

And again this program might help.

It's funny though, every housing discussion turns into an "investment" discussion which just goes to show how broken our mindset is about housing in the lower mainland, fundamentally.

There are a lot of people that have been screwed out of buying a home in Vancouver because the prices have been going up at a faster pace than their ability to save for a down payment. It's crazy that there are professional couples with a combined income of $200-250K that can't buy a SFH due to how fast the prices have gone up.

Posted by: syncro

There are a lot of people that have been screwed out of buying a home in Vancouver because the prices have been going up at a faster pace than their ability to save for a down payment. It's crazy that there are professional couples with a combined income of $200-250K that can't buy a SFH due to how fast the prices have gone up.

Agreed, but again, at 60% market, they probably could, which is what makes the program interesting to me (as a bystander, anyways, but I am working on my empathy skills haha). It kinda turns back the clock in some ways. These are not SFHs but they'd allow equity building on a reasonable mortgage term, which would be a step in the right direction for many people. I know we disagree on SFHs in general but I still maintain they need to be obsolete at least within a roughly 1hr-ish radius of downtown, anyways. 

That said there are household income limits, so it will be interesting to see where the province decides to peg those, I don't think I've seen those posted any where.

Posted by: Kenny

Posted by: Couch_Surfer

Posted by: syncro

How many people do you think are actually smart and disciplined enough to do that?

It's an argument that's been beat to death, and my perspective is that most renters aren't going to be making enough money to also invest nor may they be disciplined enough.

Sure it sounds like a great idea, but in reality how often do you think it happens?

If the renter doesn’t have enough money to also invest, then they also don’t have enough money to buy the house. So then the financial comparison of renting vs buying is irrelevant.

The comparison is buying vs renting, so to even make the comparison you have to assume buying would be an option, or nearly so. But this is sort-of missing the point in terms of the links I was posting, because the comparison would be buying at 60% market with 40% deferred, vs renting.

Side note- another possible benefit of the 60/40 program is that rents should become cheaper (after some time).

Also, I'll give you that you noted you were just guessing, but your comparo is pretty flawed. Renting a 1.5m condo in north Van for 3500/mo is not happening. You're 1-2k shy.

That's part of the problem, rental rates here are very nearly mortgage rates, because people can't pull together the down payment. It's predatory and broken, but also what the market bears. That's another reason that in Vancouver at least the scale doesn't tip very well in favor of rent + investment vs mortgage, because the differential between rent and mortgage monthly is not very high, it's mostly downpayment. People only have so much money, but another argument might be is that people with enough discipline to invest probably have the discipline to extra pay on their mortgage principal. If you have the cash to not have a long protracted mortgage term paying a ton of front loaded interest, things change again.

And again this program might help.

It's funny though, every housing discussion turns into an "investment" discussion which just goes to show how broken our mindset is about housing in the lower mainland, fundamentally.

Yep - twas a thumb in the air guess based on extensive time reading r/Vancouver. ;)

So I plugged 4500/month into my XLS and if the S&P were to return on average 10% and the home equity were to return an average of  7%, then the renter is ahead by about 250K. At which point you'd probably have to have a discussion around historical rates of return and blah blah blah.  Point is only that excel is a really great tool when faced with big financial choices.

I'm not gonna get into modeling a 60/40 split as I'm just not that 'invested' in this exercise. It did however prompt me to read your linked article on the BC NDP 60/40 home buyer program. Interesting, and I'm sure it will be divisive to the "That must be communist... durrrrrr" crowd. Also it's a good reminder that a provincial election has just been called and one party is at least trying to do something, and the other party were the ones that got us here.