COVID and the housing market | Page 222 | GTAMotorcycle.com

COVID and the housing market

timtune said:
Bought mine in 2012 for 70K with 20K down. Rent covered everything. They go for north of 300K now. Maint. fees have inched up to about 300$.
Wish I'd bought 2.
Can't paint em all with the same broad brush.
Click to expand...
At five figures you have a hard time losing your shirt. As condos push seven figures, it gets a lot easier to get wiped out.
 
timtune said:
Bought mine in 2012 for 70K with 20K down. Rent covered everything. They go for north of 300K now. Maint. fees have inched up to about 300$.
Wish I'd bought 2.
Can't paint em all with the same broad brush.
Click to expand...
Comparing 70k to current pricing is a much different ballgame.

Yes yes diff incomes and rates etc etc….

But 70k compared to even 500k the risk is much different.
 
Georg3__ said:
CONDOS sound like a big nope
Click to expand...
A well built condo, properly maintained by a knowledgeable manager that is backed by resident owners can be a good home. That's a lot of wishes in one sentence.

With a high rise, the home inspection would IMO be to find the possibility of a special assessment. They tend to run in five figures but can be six. Parking garages, elevators, fire alarm upgrades, roofs and balconies come to mind.

Knowing the age of the components, life expectancy, replacement costs and funds in reserve accounts is a barometer of future budgets.

I can't help but feel that the newer units are being purchased by investors that will let the building deteriorate to minimize fees now. They dump the units when the serious bills come in.
 
nobbie48 said:
A well built condo, properly maintained by a knowledgeable manager that is backed by resident owners can be a good home. That's a lot of wishes in one sentence.

With a high rise, the home inspection would IMO be to find the possibility of a special assessment. They tend to run in five figures but can be six. Parking garages, elevators, fire alarm upgrades, roofs and balconies come to mind.

Knowing the age of the components, life expectancy, replacement costs and funds in reserve accounts is a barometer of future budgets.

I can't help but feel that the newer units are being purchased by investors that will let the building deteriorate to minimize fees now. They dump the units when the serious bills come in.
Click to expand...
On a newer building, it may not even be physical deterioration, they may just keep the fees artificially low to kick the can down the road. Sell the units before the updated reserve fund study indicates how big the hole is. I dont know if any developments have have a small enough owner pool (or at least a small enough coalition) to completely control the path.
 
mimico_polak said:
Comparing 70k to current pricing is a much different ballgame.

Yes yes diff incomes and rates etc etc….

But 70k compared to even 500k the risk is much different.
Click to expand...
Agreed the prices were lower but I still pondered risk.
What's the 3 most important things when buying real estate? Location, Location, Location.
The condo was in a poor location. When I googled the area the first thing that came up was a homicide. But then I banged on doors and actually talked with a number of tenants/owner.
I think there's quite a number on this forum who would have bailed on it and lost out.**

**I say that because on this forum I've been derided for touring 2up without a cell phone and not wanting nanny state electrics on my bikes, which I actually think is funny considering the risk every time you swing up the kickstand.
 
timtune said:
Agreed the prices were lower but I still pondered risk.
What's the 3 most important things when buying real estate? Location, Location, Location.
The condo was in a poor location. When I googled the area the first thing that came up was a homicide. But then I banged on doors and actually talked with a number of tenants/owner.
I think there's quite a number on this forum who would have bailed on it and lost out.**

**I say that because on this forum I've been derided for touring 2up without a cell phone and not wanting nanny state electrics on my bikes, which I actually think is funny considering the risk every time you swing up the kickstand.
Click to expand...
People always need a place to live. Buying the cheapest dwelling in town may not maximize returns and you may not personally want to live there but assuming the building doesn't have fundamental issues like the one above in Van, it is really hard to lose.

A friend of the wife is a RE agent. He posted a FB memory from 12 years ago. He listed a typical subdivision house in barrie, "great for an investor" for just over three. Same house now is about 1M more.
 
The problem is you have all this cash (equity) but you can't get it if the place is your principal res. Yeah, you can borrow against it (heloc) but the only way to get hard cash is sell. Then what?
 
timtune said:
The problem is you have all this cash (equity) but you can't get it if the place is your principal res. Yeah, you can borrow against it (heloc) but the only way to get hard cash is sell. Then what?
Click to expand...
One of the rumours about impending changes are preventing HELOC use for purchasing investment properties. That seems both short-sighted and useless as it more firmly ties up money in housing instead of allowing it to be spread but nothing is stopping you from cranking up a larger mortgage and using the cash to buy an investment property. All it hurts is liquidity and flexibility for the small guys. Big guys weren't using Heloc already.

I am very conflicted about locked up money in our house. I suspect there will be a slow down in growth so it will generate lower return than the market. Mortgage+heloc combined maxes at <40% of current market value so >60% is solidly locked up. That being said, I am still too chicken to max out the available money as a market downturn could leave me with a bill I can't afford to pay. It's fun seeing big numbers on paper but I think it's better for almost everyone if housing had stayed far cheaper. The exception is those cashing out of housing to go to LTC. Afaik, LTC prices haven't been dramatically affected by this runup.
 
I once , on advice of my EX advisor , used the equity in my house in the market . Once . I was left owing many many thousands and digging out sucked . Because the people you owe, they want paid .
HELOC money being locked for investment property? Never going to work . Transfer $500k or what ever into your bank account then buy the house, your approved for the loan , the yacht got canceled so you bought a cottage .
Banks want to loan money , investors playing with HELOC will always find a work around . It’s capitalism


Sent from my iPhone using GTAMotorcycle.com
 
crankcall said:
I once , on advice of my EX advisor , used the equity in my house in the market . Once . I was left owing many many thousands and digging out sucked . Because the people you owe, they want paid .
HELOC money being locked for investment property? Never going to work . Transfer $500k or what ever into your bank account then buy the house, your approved for the loan , the yacht got canceled so you bought a cottage .
Banks want to loan money , investors playing with HELOC will always find a work around . It’s capitalism


Sent from my iPhone using GTAMotorcycle.com
Click to expand...
I haven't decided yet where my HELOC limit to invest is. My current plan is every time I pay off x dollars, pull another x dollars to invest so the total owed stays relatively constant. Started in december, so far paid off 3% using dividends and unrealized cap gain of 9%. As long as all three securities don't suspend dividend, I am fine. Any one of them will more than cover interest. Two of the three are funds so they can't go to zero (and the third is big and highly unlikely to go to zero). If they go down, that's ok as the loan shouldn't get called and put me in a cash crunch.

I am reasonably convinced that I need to keep leverage up on the house. It has become unhealthy to have such a high percentage of net worth in one asset (although you are likely the same way with your business but at least on average it is kicking money out instead of sucking money).
 
GreyGhost said:
One of the rumours about impending changes are preventing HELOC use for purchasing investment properties. That seems both short-sighted and useless as it more firmly ties up money in housing instead of allowing it to be spread but nothing is stopping you from cranking up a larger mortgage and using the cash to buy an investment property. All it hurts is liquidity and flexibility for the small guys. Big guys weren't using Heloc already.

I am very conflicted about locked up money in our house. I suspect there will be a slow down in growth so it will generate lower return than the market. Mortgage+heloc combined maxes at <40% of current market value so >60% is solidly locked up. That being said, I am still too chicken to max out the available money as a market downturn could leave me with a bill I can't afford to pay. It's fun seeing big numbers on paper but I think it's better for almost everyone if housing had stayed far cheaper. The exception is those cashing out of housing to go to LTC. Afaik, LTC prices haven't been dramatically affected by this runup.
Click to expand...
Secured lending against a house maxes out at 80% LTV for conventional mortgages (subject to lender's sliding scale rules). You can have a mix of revolving (HELOC - up to 65% of the home value) and installment (mortgage - up to 80% including HELOC borrowings ) credit . TDS of 40% of income for most borrowers,.

I highly doubt there will be restrictions on how one can use their HELOC monies, banks don't care and I'll bet they really don't want the burden of policing the use of funds.

If you want easy quick money off your equity, borrow against it and buy safe dividend stocks (banks?). Even better is to arrange a HELOC that has the flexibility to convert a portion from revolving to installment as the interest is lower. I do this because I'm getting older and there is very little risk to my overall equity. Imagine borrowing $200K on a conventional mortgage at 1.5% then dumping it into you and your partner's TFSA as bank stock. The monthly interest would be about $250, the dividend about $583. Over 5 years the shares appreciated by 35%.

So... for just moving equity from your house into your TFSA with a conservative investment in a bank stock, you could have made $125K.

Annual5 year
Investment$200,000.00
Shares (TD Bank)30773077
Share Price$65.00
$100.00​
Share Value$200,000
$307,692​
Interest (1.5%)250
$3,000​
$15,000​
Dividend (3.5%)$583
$7,000​
$35,000​
Net$333
$4,000​
$20,000​
Gain
$127,692​

Could you have bested that with real estate? Sure, but you'd have capital gains to pay and you're probably going negative cashflow and taking on considerable risk.
 
Mad Mike said:
Secured lending against a house maxes out at 80% LTV for conventional mortgages (subject to lender's sliding scale rules). You can have a mix of revolving (HELOC - up to 65% of the home value) and installment (mortgage - up to 80% including HELOC borrowings ) credit . TDS of 40% of income for most borrowers,.

I highly doubt there will be restrictions on how one can use their HELOC monies, banks don't care and I'll bet they really don't want the burden of policing the use of funds.

If you want easy quick money off your equity, borrow against it and buy safe dividend stocks (banks?). Even better is to arrange a HELOC that has the flexibility to convert a portion from revolving to installment as the interest is lower. I do this because I'm getting older and there is very little risk to my overall equity. Imagine borrowing $200K on a conventional mortgage at 1.5% then dumping it into you and your partner's TFSA as bank stock. The monthly interest would be about $250, the dividend about $583. Over 5 years the shares appreciated by 35%.

So... for just moving equity from your house into your TFSA with a conservative investment in a bank stock, you could have made $125K.

Annual5 year
Investment$200,000.00
Shares (TD Bank)30773077
Share Price$65.00
$100.00​
Share Value$200,000
$307,692​
Interest (1.5%)250
$3,000​
$15,000​
Dividend (3.5%)$583
$7,000​
$35,000​
Net$333
$4,000​
$20,000​
Gain
$127,692​

Could you have bested that with real estate? Sure, but you'd have capital gains to pay and you're probably going negative cashflow and taking on considerable risk.
Click to expand...
That's roughly what I'm doing. With crazy house price runup, my max approved loan (Heloc+mortgage) is <40% of current market value of house. TDS will limit us long before percentage of house value.

A bunch of the money I pulled out of the heloc is at 1.5% for six months as the bank wants me on the treadmill. I didn't buy a car or consumer electronics with it though so I can get off at any time. I pulled more than I wanted and by sending the money between banks, paid off some of the normal heloc loan with the special rate loan. Bank doesn't really care what I do with the money but to qualify for special promotions they want you to send the money to an external location (presumably to turn into smoke and then you are hooked).

Your example has 54% appreciation in five years not 35% but the concept is valid. ($65 went up by $35).
 
I just started this as well with my HELOC a few months ago. I'm not planning on paying down the line. Instead I'm going to reinvest the dividends. There is a lot of room to go in my RRSP so how I see it for taxes is deduct HELOC interest from regular income, pay taxes on the dividend but put those dividends into my RRSP for that deduction. The tax advantages help justify it to me.

In terms of risk my comfort level is for every $1 I have invested I will use up to 40 cents of the banks money. This should give me enough of a buffer that if markets crash I won't panic over the borrowed funds.
 
Alright...finally the HELOC came in. What a mess that was lol

Originally offered around 150k or so and then a total of $0! WTF! The underwriters messed up, thank you Mr. Broker (who doesn't get a cut), for straightening things out.

Time for a Viper!
 
blackcamaro said:
I just started this as well with my HELOC a few months ago. I'm not planning on paying down the line. Instead I'm going to reinvest the dividends. There is a lot of room to go in my RRSP so how I see it for taxes is deduct HELOC interest from regular income, pay taxes on the dividend but put those dividends into my RRSP for that deduction. The tax advantages help justify it to me.

In terms of risk my comfort level is for every $1 I have invested I will use up to 40 cents of the banks money. This should give me enough of a buffer that if markets crash I won't panic over the borrowed funds.
Click to expand...
So you're paying heloc interest out of conventional income? Your plan seems ok. I havent done enough research on cra's view on a perpetual loan for an investment. You dont want cra to argue with you.
 
You must log in or register to reply here.

Back
Top Bottom