interested
Senior Member
I think if you are 40% capitalized and 60% leverage, that is fine. One can plan on a downturn but 40% is a good cushion. However, please realize that your cushion is largely due to above average rates of return in real estate the past 16 years. The cushion I assume would be a lot lower if we just go back to historic returns. And now, without the benefit of much further rate decreases, I think there are risks. That is all I am saying.
Toronto's doubling from 1971 to 1976 was largely due to a mass exodus of bank headquarters and people from Montreal due to the FLQ crisis in 1970. Hence the doubling in price of your dad's house. Toronto went on to replace Montreal as the financial capital of Canada. That was a very significant event. Please also remember that back in the late 70's and 80's, you could have obtained double digit returns on money with bond purchases as well. Of course the house today is worth a lot.
Please understand Speculator. I too own real estate but it is part of a diversified portfolio. I get other things have done as well.
I also understand that you picked the winning race horse. My concern is that and perhaps we agree, we are getting to some lofty PRECON construction costs; $700/sq.ft. and surely at these prices vs. $150-400/sq.ft. where a lot of your real estate would have been purchased I am guessing if in downtown, there was a return to be made, and you could refinance because mortgage rates were decreasing. How do you apply the same rationale going forward? I mean with $600-700 / sq.ft. PRECON where you will have to subsidize the rent; therefore how do you refinance and get equity going forward unless interest rates fall further. We are at 50 year historical lows now, so how much lower can they go. Maybe they will pay everyone to buy real estate.
Before this sounds so stupid, this is just what they effectively did with NINJA loans in the US and look how that ended up. I am not suggesting we are the US and I do believe we are better off her with stricter guidelines, but still. I could argue offering 2.99% for 5 years is also irresponsible. We will all have to revisit in 5 years and see if 2.99% was brilliant or a real disaster when those people have to refinance at 2016 rates, whatever they may be.
Toronto's doubling from 1971 to 1976 was largely due to a mass exodus of bank headquarters and people from Montreal due to the FLQ crisis in 1970. Hence the doubling in price of your dad's house. Toronto went on to replace Montreal as the financial capital of Canada. That was a very significant event. Please also remember that back in the late 70's and 80's, you could have obtained double digit returns on money with bond purchases as well. Of course the house today is worth a lot.
Please understand Speculator. I too own real estate but it is part of a diversified portfolio. I get other things have done as well.
I also understand that you picked the winning race horse. My concern is that and perhaps we agree, we are getting to some lofty PRECON construction costs; $700/sq.ft. and surely at these prices vs. $150-400/sq.ft. where a lot of your real estate would have been purchased I am guessing if in downtown, there was a return to be made, and you could refinance because mortgage rates were decreasing. How do you apply the same rationale going forward? I mean with $600-700 / sq.ft. PRECON where you will have to subsidize the rent; therefore how do you refinance and get equity going forward unless interest rates fall further. We are at 50 year historical lows now, so how much lower can they go. Maybe they will pay everyone to buy real estate.
Before this sounds so stupid, this is just what they effectively did with NINJA loans in the US and look how that ended up. I am not suggesting we are the US and I do believe we are better off her with stricter guidelines, but still. I could argue offering 2.99% for 5 years is also irresponsible. We will all have to revisit in 5 years and see if 2.99% was brilliant or a real disaster when those people have to refinance at 2016 rates, whatever they may be.