cdr108
Senior Member
i believe 777 sq ft (without parking + locker) in LV will fetch ~ $1750/m.
if it was dt core, i think rates might be $1950-2150/m
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Baby, we got a bubble!?
- Thread starter simuls
- Start date
i believe 777 sq ft (without parking + locker) in LV will fetch ~ $1750/m.
if it was dt core, i think rates might be $1950-2150/m
interested
Senior Member
CDR, You may be right. Won't be ready for 2 years anyhow. I have the locker and parking, about a 100 sq.ft. balcony; and when I quoted $1800-1900 I was including these in the price.
Renting is only if my family member does not wish to live there (the reason we bought). And I figured when I bought the property that I would get
$1600 just to allow for price decreases though I expect to do better.
Renting is only if my family member does not wish to live there (the reason we bought). And I figured when I bought the property that I would get
$1600 just to allow for price decreases though I expect to do better.
cdr108
Senior Member
we both could be right since your estimate was based on parking + locker included.
all i know for sure is that rental rates for the past decade have been pretty stagnant for newer condo products, excluding a few luxury / highly desirable buildings.
rents haven't covered carrying costs for many years now.
even urbanation (BMyers) figures for calculating carrying costs is based on 3% variable rate provides negative cashflow ... it'd be even worse for something more realistic along the 5-8% range for fixed rate terms in coming years.
ILuvTO
Active Member
With that said, why are so many people buying condos downtown to rent them out? Am I missing something? I know I sure wouldn't want negative cash flow every month on my real estate investment.
Unless these investors are putting in way more than 25%.
interested
Senior Member
I think a lot of the people buying to "invest" in the past year are still of the belief that they will get capital appreciation of their unit. As I said, I stopped buying
for investment at around the $410/sq.ft. mark (which included parking and locker). I don't think it makes sense at $500-600 or more/sq.ft. but I believe there
are a fair number of people who will settle for 3% return in this environment. (GIC refugees and hope to make a longer term capital gain on appreciation).
Or people putting down up to 100% and saying OK to nominal if any returns. For those levering, ILuvTO, you are absolutely correct. It makes littler or no sense.
for investment at around the $410/sq.ft. mark (which included parking and locker). I don't think it makes sense at $500-600 or more/sq.ft. but I believe there
are a fair number of people who will settle for 3% return in this environment. (GIC refugees and hope to make a longer term capital gain on appreciation).
Or people putting down up to 100% and saying OK to nominal if any returns. For those levering, ILuvTO, you are absolutely correct. It makes littler or no sense.
cdr108
Senior Member
IIRC, unless one puts down 50% dp, the cash flow will remain negative.
i've noticed that not many realtors / developers provide cashflow numbers as they wouldn't make financial sense.
only premise to buy seem to be capital appreciation, foreign rich asian buyers pricing locals out, we're cheap compared to the rest of the world, and it's different here.
adeel
Active Member
has to be capital appreciation...its very difficult in this environment to make good returns.
Although I should note that profit and positive cash flow are not the same thing. While my investments dont have positive cash flows on balance (one does, one doesnt), that doesnt mean I am not profiting when comparing rents to expenses...just that the profits left over are being reinvested to reduce mortgage principal.
While cash flow positive is always good, i think its shortsighted to say that an investment that is not returning positive cash flows is not worth it.
Although I should note that profit and positive cash flow are not the same thing. While my investments dont have positive cash flows on balance (one does, one doesnt), that doesnt mean I am not profiting when comparing rents to expenses...just that the profits left over are being reinvested to reduce mortgage principal.
While cash flow positive is always good, i think its shortsighted to say that an investment that is not returning positive cash flows is not worth it.
interested
Senior Member
adeel,
you are actually profiting and having a positive cash flow, you just choose to reinvest to reduce mortgage payments.
I think you would agree that one should look on an operating basis and if there is money left over, and one reduces the mortgage payment, that is fine but
still does not change the fact that just because one chooses not to report a profit does not change the fact that there is in fact one there (a good thing).
(You just choose to apply it to the mortgage thereby reducing your liability and not have a profit showing). Smart investing.
you are actually profiting and having a positive cash flow, you just choose to reinvest to reduce mortgage payments.
I think you would agree that one should look on an operating basis and if there is money left over, and one reduces the mortgage payment, that is fine but
still does not change the fact that just because one chooses not to report a profit does not change the fact that there is in fact one there (a good thing).
(You just choose to apply it to the mortgage thereby reducing your liability and not have a profit showing). Smart investing.
adeel
Active Member
Yes, operating basis is an appropriate measure. The use of cash flow terminology just bugs me for some reason haha.
Back to my above point, I think the hope of most investors (speculators?) is to break even on an operating basis and hope/expect (given past history) that after the first mortgage contract ends, a tidy profit can be realized via selling.
Back to my above point, I think the hope of most investors (speculators?) is to break even on an operating basis and hope/expect (given past history) that after the first mortgage contract ends, a tidy profit can be realized via selling.
KA1
Senior Member
Adeel, take it from this 'old' pro. On this thread, you are never going to win an argument and you are never going to have the last word either. If you are generating positive return by re-investing excess cash flow or by making a down payment 0f 25, 50 or even 100%, someone will have a not so positive comment on that.
On this thread, you are dealing with savy investors -- Cdr 108 and Interested -- and a highly qualified technical/financial analyst -- Daveto -- whose head is buried so deep in the data that he can never see sunshine. His outlook is always cloudy -- as far forward as you can see.
A highly smart individual whose opinions I respect-- CN Tower -- has not commented on your posts. As such, you seem to be on the right track.
Make your life easy on this thread. Stop making any further posts. Just be a spectator.
Redfirm had wanted to be a 'devil's advocate' on this thread to keep discussions going. He doesn't have to
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interested
Senior Member
Ka1, so you "don't have the last word".
Thank you for referring to me as a "savvy investor". Not sure it is correct but I will acknowledge I have an opinion (not only on this issue but others though
in fact they may be quite uninformed at ties).
However, I don't always have to have the last word but will on one point. suggesting that an investment should make "investment sense" and not rely soley
on an automatic price escalation to justify it is in my view just prudent advise. What anyone does with the advise/comment is up to them. And as you have pointed out, so
far the prudent advise has been "wrong". Doesn't mean it should not be made.
As to the comment that an investment not returning +VE cash flow is not worth it being short sighted, I agree with that statement. That said, however, unless
one has a crystal ball, I would feel it is somewhat myopic to assume that if an investment makes sense only by exaggerated price increases over historical prices;
that may make sense to some and may prove correct for further years to come...but I don't think that makes for "prudent investing" and is more akin to
gambling or speculating. Again fine if one can afford it but not so if one is stretching or betting with one's lunch money.
Perhaps CN Tower will comment. I too value his opinion but I would be suprised if he would advocate investing based on future price appreciation alone, especially at present values
for investment purposes.
Thank you for referring to me as a "savvy investor". Not sure it is correct but I will acknowledge I have an opinion (not only on this issue but others though
in fact they may be quite uninformed at ties).
However, I don't always have to have the last word but will on one point. suggesting that an investment should make "investment sense" and not rely soley
on an automatic price escalation to justify it is in my view just prudent advise. What anyone does with the advise/comment is up to them. And as you have pointed out, so
far the prudent advise has been "wrong". Doesn't mean it should not be made.
As to the comment that an investment not returning +VE cash flow is not worth it being short sighted, I agree with that statement. That said, however, unless
one has a crystal ball, I would feel it is somewhat myopic to assume that if an investment makes sense only by exaggerated price increases over historical prices;
that may make sense to some and may prove correct for further years to come...but I don't think that makes for "prudent investing" and is more akin to
gambling or speculating. Again fine if one can afford it but not so if one is stretching or betting with one's lunch money.
Perhaps CN Tower will comment. I too value his opinion but I would be suprised if he would advocate investing based on future price appreciation alone, especially at present values
for investment purposes.
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ILuvTO
Active Member
Well said, interested. Investing based on future price appreciation alone, and completely ignoring monthly +/- cash flow is foolish. You're investing based on hope, and nothing more.
Why would anyone put their money in an investment that is guaranteed to cost them money, with only the hope that they will make money based on future appreciation? I'd rather have it the opposite way. Know that I'm making money on a monthly basis for as long as I own the investment, and if the asset happens to also increase in value, then great, it's gravy. As long it didn't decrease then I'd be happy.
I recently started reading a great book called Real Estate Investing in Canada by Don Campbell. This guy is a very successful RE investor that stresses positive cash flow as well as using as little of your money as possible to purchase property (this is why I also shake my head at the thought of putting 50% down just to create positive cash flow). Makes sense to me, but apparently not everyone agrees.
KA1, I don't see this thread as a place where people come and have the "last word". This is an ongoing discussion where people with many different opinions can express and share their ideas. When reading many of your posts it comes across to me as if you take the opinions of the RE bears very personally. Like you have a lot to lose if the market does decline and are hoping against hope it doesn't happen (I would too if I were in that position, but I wouldn't begrudge the bears for expressing their opinions).
Why would anyone put their money in an investment that is guaranteed to cost them money, with only the hope that they will make money based on future appreciation? I'd rather have it the opposite way. Know that I'm making money on a monthly basis for as long as I own the investment, and if the asset happens to also increase in value, then great, it's gravy. As long it didn't decrease then I'd be happy.
I recently started reading a great book called Real Estate Investing in Canada by Don Campbell. This guy is a very successful RE investor that stresses positive cash flow as well as using as little of your money as possible to purchase property (this is why I also shake my head at the thought of putting 50% down just to create positive cash flow). Makes sense to me, but apparently not everyone agrees.
KA1, I don't see this thread as a place where people come and have the "last word". This is an ongoing discussion where people with many different opinions can express and share their ideas. When reading many of your posts it comes across to me as if you take the opinions of the RE bears very personally. Like you have a lot to lose if the market does decline and are hoping against hope it doesn't happen (I would too if I were in that position, but I wouldn't begrudge the bears for expressing their opinions).
anddan
New Member
Johnzz / KA1, thanks for those numbers - indicative figures to gauge. Would like to confirm - those are TREB released #?
redfirm
Active Member
ILuvTO wrote:
"I recently started reading a great book called Real Estate Investing in Canada by Don Campbell. This guy is a very successful RE investor that stresses positive cash flow as well as using as little of your money as possible to purchase property (this is why I also shake my head at the thought of putting 50% down just to create positive cash flow). Makes sense to me, but apparently not everyone agrees."
I referred to this basic concept on this forum several days ago (POL, power of leverage). I admit I was a bit cynical ... used it in a negative way. Why? Not because I don't believe in it (I used it myself) but because one needs to be really careful with it. And many r/e agents will try to convince you of its merits even in the present market conditions, while not disclosing the downside. In short, make sure you're not swimming naked when the tide goes out! And be very, very careful to analyzie all aspects of your investment before you pull the trigger. I know it sounds a bit corny but here it comes: leverage is a mother of all evil (Gordon Gekko .. hahaha). Cheers
"I recently started reading a great book called Real Estate Investing in Canada by Don Campbell. This guy is a very successful RE investor that stresses positive cash flow as well as using as little of your money as possible to purchase property (this is why I also shake my head at the thought of putting 50% down just to create positive cash flow). Makes sense to me, but apparently not everyone agrees."
I referred to this basic concept on this forum several days ago (POL, power of leverage). I admit I was a bit cynical ... used it in a negative way. Why? Not because I don't believe in it (I used it myself) but because one needs to be really careful with it. And many r/e agents will try to convince you of its merits even in the present market conditions, while not disclosing the downside. In short, make sure you're not swimming naked when the tide goes out! And be very, very careful to analyzie all aspects of your investment before you pull the trigger. I know it sounds a bit corny but here it comes: leverage is a mother of all evil (Gordon Gekko .. hahaha). Cheers
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CN Tower
Banned
Strikes me as a fraud/salesman. Were he actually a 'very successful RE investor' he wouldn't be peddling his wares across the country. The former should generate a exponentially more cash flow for him that the latter, particularly in small market Canada, and especially if he employs his patented 'maximum leverage' techniques,
In my opinion you misread KA1's comments. He has a very sharp sense of wit that perhaps you haven't picked up on. He furthermore possesses a wealth of experience and knowledge that can only be earned not acquired. Pay attention carefully to his words.
As far as investing for cash flow v. appreciation my brief comments are simply that I always invest with a plan and then stress test the sh*t out of my plan. It's always 90% luck anyway of course but I want to ensure that the 10% that I can control is as tight as possible. If your plan is simply 'real estate never goes down in value' or '100,000 immigrants move to Toronto every year' (untrue btw) I suggest that your plan is flawed. It may be a good excuse to open a Tim Horton's franchise at Yonge and Bloor but it's not a wise investment strategy imho.
btw, ILUVTO 2.