If I wanted to buy now, I would closely look at: Inventory, Listed vs. Sold, BOC Prime, CPI, population growth and of course my personal financial situation.

If I would invest for rental purposes I’d would further look for: low GRM, high CapRate, high DSCR, low Interest Rates, positive after tax cash-flow and high CCR.

Yeah and let’s not forget positive effects of the Olympics … just kidding!

I would probably not buy now, because prices are to high for a decent return on investment. But nevertheless that doesn’t apply to people who entered the market a couple of years ago. Receiving over $1,000 dollars per month rent for a condo that you have bought 5 years ago for a mere $120,000 will make things look much more positive than one would expect!

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If we happen to own a property - either outright or with a mortgage close to being paid off - and we can at least break even renting it, chances are we’ll hold on to it whether prices go up or down. It may not be the best financial decision, but it’s still the one we make.

I know a few people who’ve held on to condos they bought years ago and have since moved out of. They’re quite happy to collect the small sum that comes to them in rent each month.

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I am talking about rental market not the real estate market in general. The rental market is great. Vacancy is low. A “blow-up” of the “bubble” will just flood the rental market with demand and raise rental prices. People always complain about the high Gross Rent Multiplier (GRM) in Vancouver, but they do not realize that in the last couple of years rent has actually increased quite a bit (for me average 5% annually in the last 3 years) and my net operating income increased even more. Perhaps appreciation outperformed the increase in rent by far, but for me as an investor it is the increase in rent that I am looking for. Appreciation is just a bonus.

“if rental income covers mortgage with profit >>> definitely will not have to sell”

That is absolutely correct. As I mentioned: Positive Cash-flow after tax, Cash-on-cash return in 2007 of 7% and expected lower interest rates will boost my total return on investment this year to almost 9% and allows me to further exploit leverage effects. That is investing, not speculating!

Why is Drachen talking about speculating? Please correct me if I am mistaken, but isn’t a real estate investment for rental purpose a conservative form of investing.

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We’ve got a record number of condos under construction, we don’t have as much immigration as we had ten years ago, and new residents are coming with less money than they used to. BC Hydro says there are 18,000 empty units just downtown. I work with people who have ‘invested’ in condos - this means they pay several hundred dollars a month over what they earn in rent from these units. Do you think they’ll hold on to them if they lose their jobs?

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Ok, let’s assume that 75% or more of landlords in the city expect a return for their investment which is equal or better than they can do with a high security mutual fund. I think this is a safe assumption because with the hassles and extra work of being a landlord as opposed to parking your money most people would prefer the latter if returns are the same.

So, to your examples:

1) Rent = Mortgage payment +

This landlord has two problems. One There must be a significant amount of money tied up in the property for it to be positive cash flow. If one compares the return on that money you’ll always find (in the current market) that if the property is not appreciating in value the owner would be better off putting that money in mutual funds (anyone out there have a real world example?).

So, hypothetically (this is a pretty normal ‘investment’ property in Vancouver AFAIK):

Property is a house with 4 units for rent.

Value to sell: $1,000,000
Rents for: $4,000 (48,000 per year)

So, even if the property is owned OUTRIGHT, the return per year before property tax, maintenance and times when a suite is open the return is 4.8% per year. Someone with a good mutual fund help me out here, it’s what 6-6.5% for “safe” returns?

Keep in mind that all of this is with the property value flat, if it’s going down the math gets rapidly worse. If the property value dropped by 50% it would take over 20 years of rent to offset that loss in value.

You tell me, is the property worth hanging on to or would you sell once prices start to drop?

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this high priced market is creating a lot of renters. and these renters need a place to stay. why would current owners sell their place if they can find renters to rent too?

if rental income covers mortgage with profit >>> definitely will not have to sell

if rent covers mortgage >>> will not have to sell

if rental is below mortgage >>> not the end of the world, may sell or not sell.

if rental income is way below mortgage >>> will have to sell.

would be great if someone understands what im trying to say and explain in simple terms.

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What numbers do you look at when deciding whether to buy or sell a property?

What mathematical formulae do you use to decide whether the numbers work for you or not?

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If you own Real Estate in Vancouver that you don’t live in you are a speculator. An investor would only buy when the rent/price ratios were reasonable and would sell if those ratios went too far off base. If there’s no profit margin you are speculating that prices will go up.

“I am sure I am not the only market participator who thinks like that and keeps his eye on the fundamentals”

If you currently own real estate in the lower mainland you either do not understand what the fundamentals are or you most certainly are not keeping a close eye on them.

Please explain what you see as the “fundamentals” of the market.

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I have a variable mortgage at TD. They have followed the BOC each and every time in the last three years with interest rate adjustments. They have just lowered there prime rate again (one day after BOC). And as I recall, all major Canadian banks have followed suite in the last couple of months.

For me as an investor (not speculator), a 50 base point cut is a good reason NOT to sell. Fortunately, positive After-Tax-Cashflow doesn’t push me into having to sell. Therefore the most important figure for me is not the fluctuating market value of my property but perhaps the Cash-on-cash return as well as the total return on my rental investment (including principle reduction, which is directly affected by interest rate adjustments).

I am sure I am not the only market participator who thinks like that and keeps his eye on the fundamentals, while others get carried away by emotion!

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then why did he throw at me with some other reference? if you are trying to correct him write it down with request otherwise I won’t accept your recomendation.
Don’t waste my time again.

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Month Sales Ave Price Sales Value
Mar-08 2,997 $616,496 $1,847,638,512
Mar-07 3,582 $554,941 $1,987,798,662

Total sales value is down 7% year over year.

Meanwhile, as the US Fed has slashed interest rates, new home sales in the US have fallen from 611k per month in Nov 07 to 590k per month in Feb 08. Numbers for March out tomorrow.

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Did you really fill out your own mortgage application or did someone do it for you?

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Paying down the principal on your mortgage faster does not equal more spending money now. To dumb it down for you. If you had a mortgage in 1994 and went to renew the 5 year terms they’d have allowed you to keep the payments the same but pay it off 7 years faster, this means that instead of paying it off in 2019 you could pay it off in 2012, this does not mean more money or increased buying power in 2008, and since everyone knows the market is going to tank they’ll be no extra buyers.
Display Suites for new condos are now offering an additional $15,000 for 2 bedroom units on top of the usual commission and $5,000 for 1 bedrooms. If Vancouver is so great why are they still for sale Krisssh?

Each Bank sets it’s own prime rate, you do not and never will hold a mortgage with the Bank of Canada.
You might be looking at your variable mortgage and seen that your bank mimicked the Bank of Canada but if you read any of the links or the newspaper you’d have seen that the banks initially balked at changing their rates.

In all likelihood you have a mortgage with one of Canada’s subprime lenders like Xceed or Maple Trust.

It’s going to be wonderful watching you trying to explain the market as it tanks 40% this year, idiot.

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Existing Home Sales - April Report
Last Updated: 3/28/2008
Home Sales Report Summary

Sales of existing homes in the USA went up by 2.86% last month, from 4.89 million homes to 5.03 million homes.

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If by “same as usual” you mean higher than it’s been in at least 4 years then yes…

“Metro Vancouver population 2,289,900 (2007)”

Is this somehow relevant? You keep bringing it up. You DO know that Vancouver is not an especially large city right?

“1.rates cut always encourage new buyers to get into the market.
2.rates cut also encourage the present owners to hold their properties.”

You’re still pretty unclear on the whole bank rate thing aren’t you? Also, as an added bonus, if you’d read and understood my above quote from the BMO site you’d realize that even if banks cut their rates it has no impact on the amount of money their clients pay each month. Rather the time line of the mortgage is adjusted.

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you said:
1.rates cut always encourage new buyers to get into the market.
No. Rate cuts in the US have so far not encouraged new buyers. As pointed out before Japan cut their rates to 0% (YES ZERO) to try to bring in new buyers. Whats next, paying people to take loans? I’ll have a trillion dollars in that case.

you said:
Current MLS around 14,000.same as usual.
Wrong again. Since the very first month of 2005 REBGV listings have NEVER gone over 14,000. As of yesterday current listings stand at 14,731 which is a thousand more than we’ve had at any point on this graph.

Try posting something that isn’t completely false.

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I sometime wonder just how heavily invested Bill Good is in Real Estate.

I am tempted to phone him and ask for disclosure, and if he is heavily invested should he not announce it every time he does a show, and call it an infomercial?

I wonder if the CRTC would be interested

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Wrong,
1.rates cut always encourage new buyers to get into the market.
2.rates cut also encourage the present owners to hold their properties.

Result
*Threat to economy and real estate downturn since 2005 (VHB era).
*Metro Vancouver population 2,289,900 (2007)
*Current MLS around 14,000.same as usual.

*March Sales Results

Detached $764,616 +3,274 +.43%
Attached $473,543 +1,396 +.29%
Apartments $389,609 +2,577 + .67%

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The Fed, in the US can set rates because it is a “wholesaler” of a sort to the banks in the US, and therefore it can control short term rates.

In Canada such is not the case, although BOC could become a lender of last resort to retail bankers in the event there is a run on a particular bank.
When BOC sets the rates in Canada it is a signal to the banks as to the direction it wants the banks to move, if the banks do lower or increase their loan rates, they do so voluntarily.

BOC has other methods of influencing interest rates, but that’s another story, and I doubt Krrissh , Krassh or whatever the fool calls himself today could possible be made to understand .

But suffice to say, BOC won’t save you when the bubble pops.

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The more people that buy at the peak, the less there will be to buy at the bottom.

We should applaud Bill Good for getting as many people as possible to buy at the top. I hope he can keep it up in the face of plunging sales and rising inventory.

Sure, it will be a financial disaster for those who listened to Bill but it will be great for me and and other bears because we will profit more because of his efforts.

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The market is a dead man walking. The more people that buy now at the peak, the more severe the bust will be.

I always hope that more people will buy at the peak. When their capital and credit is destroyed in the bust, there remains VERY LITTLE MONEY out there chasing the available inventory. This means that my money and credit will buy more.

Therefore, the more real estate people buy now at the peak of the market, the cheaper housing will be as the bust progresses.

For this reason, I LOVE hearing Bill Good pump the market. All he is doing is luring suckers in to have their capital evaporated. In a bust it amounts to a destruction of copetition for houses as there is very little money out there to compete with.

I bet Bill Good has a hoard of cash ready to buy when he and the few others who have saved are the “last men standing” to buy from despterate sellers who have no other buyers.

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http://www.cbc.ca/money/story/.....erate.html

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