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Baby, we got a bubble!?

I wonder what people value their time at for directly managing real estate. I've never been a landlord but I imagine it's a ton of work and stress. I don't think it's worth my time when I could invest in other assets that are passive. I have a full-time job, I don't want to go home and do landlord stuff. Just a personal preference thing more than anything.

Depending on the property and tenant, being a landlord takes very little time and energy.
 
Or, depending on the property and tenant, being a landlord takes a lot of time and energy
 
As a small landlord with a few properties that I manage, you need a few good people for appropriate repairs unless you are very handy. It is easy until it is not. Bad renters, non payment can all add to aggravation.
Condos are easiest because the common area is looked after.
Houses by their nature..tenant does routine maintenance if you are lucky but being a house there is more to do. The ROI is better however than condos and the return on the investment so far better than condos.
Commercial is a whole other issue.

Money in the stock market has been great if you came in after 2009 and did not ride down 2008. It is much more volatile. Had things been allowed to unfold without the massive intervention, houses would still have been worth something and the stock market probably would have totally collapsed.

Over the long term...if you can, just diversify. Eventually you will be caught offside unless you are extremely lucky. Even very smart people get caught offside. The idea of balancing a portfolio is that hopefully that not all asset classes dive at once. And if they all do, well at least "you tried" to mitigate risk.

As has been pointed out,all asset classes have risen in the past few years totally due to ZIRP and low interest policies. So simply having any wealth has been a benefit. When the interest rates eventually rise expect all/ most asset classes to fall just as they rose with the artificial devaluation of interest rates. Just my opinion.
 
I'm assuming you're hiring professional management for your properties if that's the case?

Nope. I do it all myself (which isn't much). I'm not saying it isn't a lot of work/energy. It can be. I just haven't had to go through that after 4 years of being a landlord. I've had an issue with a clogged bathtub and that was it. Took me 5 minutes to resolve.
 
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Nope. I do it all myself (which isn't much). I'm not saying it isn't a lot of work/energy. It can be. I just haven't had to go through that after 4 years of being a landlord. I've had an issue with a clogged bathtub and that was it. Took me 5 minutes to resolve.

Are you "handy"? What do you do when you're busy/out of town/unavailable and a tenant calls you with an urgent/emergency situation?

Just wondering as I am amazed that people are part-time landlords. Maybe I'm just lazy though... :p
 
Are you "handy"? What do you do when you're busy/out of town/unavailable and a tenant calls you with an urgent/emergency situation?

Just wondering as I am amazed that people are part-time landlords. Maybe I'm just lazy though... :p

Has never happened where I was busy or out of town. Never had a major issue. Yes, I am handy but I would call in a professional if I needed to. Knock on wood. I don't talk to my tenants too often at all.
 
I've been a landlord for 12 years (triplex), and am definitely conflicted about the tradeoffs. Early on, I expended most mental energy just worrying about stuff happening, or stewing over stuff that happened and pissed me off. It was distracting me from other things I wanted to be doing well (advancing in my career, my own human capital, enjoying the city, dating, relationships, etc). Occasionally, unfortunate and inconvenient events require middle of the night attention, and there is always a need to do preventative maintenance. Water has been enemy #1 (washing machines, basements, leaky roof). Over time, I've matured and learned to not stress so much, and I am less under the gun with my career and in a better place overall. I've been lucky to see it through. Personality and temperament are also important -- some people are not cut out to be good landlords, but most can adapt to make the best of it. This is just the non-economic stuff. Economic considerations suggest most RE investments in Toronto (for cash flow) today make little sense, even with recent rent increases. Property price and monthly costs are really important. I feel that you need 1% of the purchase price in monthly gross rents to get ahead on a cash-flow basis (that's 12% per year). Hoping for price appreciation is speculation that some have luckily benefited from (but those who make money off of transactions have benefited the most).

I feel that rental property is a good investment today only in the form of residential/apartment REITs that are benefiting from the increases in rental rates in cities like Toronto. Their rental inventory has been built up over a long time -- they are not buying many buildings at the current high costs. Although you can't so easily leverage your investment in the likes of Canadian Apartment REIT like you can with buying a property, the yields are good and the stress of passive REIT investment is worth it, especially if you have full time work and you don't need a few extra dollars from managing it all yourself.
 
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prices in Toronto are over-valued by 30% because of ultra-low rates and buyers/consumers are being fed the idea that prices are affordable due to monthly serviceability.
That is a pretty debatable claim.

however, that's only applicable for the short term until one's mortgage is due for renewal at the new rate which will definitely not be current ~3% for 5-year fixed.

many are not aware that a rate increase of only 1% (100 basis point to 4%) will cause one's monthly payment to increase by 9+% based on original 5-year term/25-year amortization even with the smaller loan outstanding after 5 years of interest and principal repayment.

if rates go up by 2% (ie. 200 basis points to 5%), that will increase the monthly payment by ~19%;

if rates go up by 3% (ie. 300 basis points to 6%), that will increase the monthly payment by ~29%;

if rates go up by 4% (ie. 400 basis points to 7%), that will increase the monthly payment by ~39%

http://www.cbc.ca/news/business/canada-s-inflation-rate-jumps-to-2-3-in-may-1.2682011

What these articles never mention is that those numbers assume one is locked into a specific amortization schedule, which is not the case.

If someone has a 25-year amortization, and rates go up significantly and they're strapped for cash, then they can effectively increase the amortization period. IOW, at the end of 5-years, they can get a new mortgage with a new 25-year amortization. This effectively (and legally) increases the true overall amortization period to 30 years but it decreases the impact of higher rates by reducing monthly payments.
 
That is a pretty debatable claim.



What these articles never mention is that those numbers assume one is locked into a specific amortization schedule, which is not the case.

If someone has a 25-year amortization, and rates go up significantly and they're strapped for cash, then they can effectively increase the amortization period. IOW, at the end of 5-years, they can get a new mortgage with a new 25-year amortization. This effectively (and legally) increases the true overall amortization period to 30 years but it decreases the impact of higher rates by reducing monthly payments.

Yes, or the bank can just say tough luck, get f'd depending on the specifics of the situation.
 
Yes, or the bank can just say tough luck, get f'd depending on the specifics of the situation.

No bank does that for a client with reliable payment history.

Each of the big 5 has a department dedicated to handling difficult mortgages, including where the customer shows zero or significantly reduced income. Even if they don't issue it themselves (using private investor money with non-standard terms/rates) they still want to be part of the process and will try to convert it into a normal mortgage under their name after equity is built up.

The only time they would say fu is if everybody (not just the banks) were making money hand over fist elsewhere; in which case congratulations on your recent substantial raises.
 
No bank does that for a client with reliable payment history.

Each of the big 5 has a department dedicated to handling difficult mortgages, including where the customer shows zero or significantly reduced income. Even if they don't issue it themselves (using private investor money with non-standard terms/rates) they still want to be part of the process and will try to convert it into a normal mortgage under their name after equity is built up.

The only time they would say fu is if everybody (not just the banks) were making money hand over fist elsewhere; in which case congratulations on your recent substantial raises.

I disagree. That has not been my experience at all.
 
I disagree. That has not been my experience at all.

In the last 15 years? Second, personal or professional experience? Third, what law was trying to be broken? The third point is particularly important.

The alternative mortgage departments will go a long way to making something work as those staff often work on commission and don't get an overwhelming number of referrals.
 
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That is a pretty debatable claim.

so what you're trying to tell me is that monthly affordability isn't/wasn't being used as a marketing tool ?!?
geez, wonder why there was such huge uproar by the real estate industry when amortizations were reduced from 40 to 35 and back down to 25 years ?


What these articles never mention is that those numbers assume one is locked into a specific amortization schedule, which is not the case.

If someone has a 25-year amortization, and rates go up significantly and they're strapped for cash, then they can effectively increase the amortization period. IOW, at the end of 5-years, they can get a new mortgage with a new 25-year amortization. This effectively (and legally) increases the true overall amortization period to 30 years but it decreases the impact of higher rates by reducing monthly payments.

all that's happened above is extended your mortgage, and hence over time, paying thousands more interest to the bank so it's okay to rent from a financial institution but not a landlord ...

oh btw, you just provided a perfect example of how affordability/monthly serviceability would be marketed to the buyer/consumer.
guess there wasn't really a need for reduction and return to 25 year amortization.

if prices can't be covered by the traditional 25 year amortization at a higher interest rate which would be marginally higher than today's ultra-low emergency rates, something is really wrong !
 
In the last 15 years? Second, personal or professional experience? Third, what law was trying to be broken? The third point is particularly important.

The alternative mortgage departments will go a long way to making something work as those staff often work on commission and don't get an overwhelming number of referrals.

What you're describing is another symptom of the current bubble economy. It does not happen in a bear market. In fact, the opposite happens as lenders look to limit their exposure and risk.

It definitely will never happen if the market value of a property declines at all and is worth less than the mortgage.
 
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