Just cuddle up.

Here’s one way to deal with overpriced housing: share your home and mortgage with a friend or stranger! You get all the comfort of renting with roommates combined with the excitement of being responsible for repairs!

“I learned it from Sesame Street,” said Rob O’Dea, who co-owns a heritage-style home in Strathcona with his wife, Sharon Petty, and a close friend, Chris Allen.

It may not be popular -it may even be downright frightening to think about -but sharing space, land title and financial responsibilities can work.

“It’s kind of like getting in bed with someone (or more than one someone),” said Ryan McKinley, Mortgage Development manager for Vancity: it’s probably a good idea to be on the same page as to what kind of relationship you’re committing to.

McKinley has helped plenty of odd couples -sets of couples, parents and kids, siblings, single friends -get into the market with non-traditional “mixer mortgages,” but he cautions that an air-tight legal agreement is part of the deal.

“It’s definitely more commonplace today, and it was born out of necessity. If you are going into a single, detached house in Vancouver you either need a significant income, an inheritance or a friend who is willing to make an investment with you.”

Anybody know what SFH is supposed to stand for?

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patriotz

@chip: As for earnings, while immigrants who arrived in the 1970s took 10 years to reach or exceed income levels of people born here, by the end of the 1990s those who had been here for 10 years were still earning less than 80 per cent as much as native born Canadians. The main reason for that IMHO is deindustrialization. In the 70's there were lots of good paying jobs available for immigrants (and native born Canadians for that matter) with poor education or English ability. Not so today. Another factor is that a large proportion of immigrants in the 60's and 70's were US draft dodgers who were generally well educated and fitted into the job market well. The first wave of Canadian immigrants ended up on the farm, the second wave in factories, and they now end up… Read more »

chip

@Anonymouse: "$625? Most of them probably pay at least an order of magnitude more than this in taxes in their first year alone. In fact, even their application fees probably cover it fully." I see your wild guess and raise you with reality: "According to Statistics Canada, the percentage of those who have low incomes after being here for almost two decades is still twice as high as it is among Canadian-born. As for earnings, while immigrants who arrived in the 1970s took 10 years to reach or exceed income levels of people born here, by the end of the 1990s those who had been here for 10 years were still earning less than 80 per cent as much as native born Canadians. The gap, moreover, has continued to widen according to 2006 census data." Note the last part that… Read more »

southseacompany

Many thanks for writing that fine article. And your efforts in getting it published.

local observer

Way back in 1980 my husband and I bought a house in Kitsilano (it was a mini-boom then) from two couples that had purchased it a year earlier intending to fix it up and share the house. Needless to say things went south and we got it for a song (although we couldn't get a mortgage until we replaced the drywall that had been ripped out). Apparently the renovations came to a screeching halt for some reason or another but the telling sign of a huge rift was an upturned bucket of concrete that had just been left in place in the basement when the proverbial shit hit the fan.

observer

@jesse: One way to quantify this is to maybe calculate a beta for RE? That way one can compare the rate of returns together with risks involved with each investment.

On the other hand, this still doesn't address your point about certain properties running into trouble. That would seem to be harder to get a handle on without doing some kind of survey among property owners and charting out a distribution of expenses.

manna from heaven

How do you like them apples?

Vancouver East & West*

New Listings – 106

Back On Market Listings – 1

Price Changes -39

Sold Listings -44

Vancouver All Areas*

New Listings – 356

Back On Market Listings – 4

Price Changes – 156

Sold Listings – 161

*Attached & Detached – Date: 04/26/2011 Time:18:22 Pacific YatterMatters.com: Courtesy REBGV. Data believed to be accurate but is not guaranteed.

jesse

@patriotz: I have yet to see a "rent vs buy" calculator that explicitly includes major unexpected repairs or hardship (like divorce, injury or job loss). The two are tangible risks despite people's best efforts. People are definitely aware of them but assume they won't happen to them — they aren't included because they would be filled in as $0. ("Gee, honey, what % chance is there we will get divorced?" (sleeps on couch for the night))

But yes, even if they assume these, rising prices will bail them out. The point is that observer's math is a straight buy-vs-rent calculator and my statement is the severe but less probable risks should be added to the calc if it's to be compared against another investment.

jesse

@Anonymouse: "still struggle to find a job when they get here."

Finding a job is only part of the challenge an immigrant faces. They need to learn the laws, tax regime, language, and often don't have immediate family in the city. Having a support group can help when they have emergencies, like say having to work late but needing to pick up a child from school. Not so easy when you're not established. That is a tangible benefit their network provides that the government cannot do well.

Maybe the answer is to cut all immigration programs altogether and deal with the problems of a declining population instead. Or raise the birth rate and pay the expenses of raising significantly more children to first-world education and health levels.

patriotz

@Anonymous:

CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009.

Note that CMHC's assets comprise money owed to them by Joe Homedebtor. Doesn't sound so great when you put it that way.

Anonymouse

@jesse:

"Yeah, there is an inherent cost in ensuring immigrants become productive quickly and that involves support groups."

Some immigrants, maybe. Perhaps those that are qualified in one of the skills shortage categories and meet all other immigration requirements, yet still struggle to find a job when they get here. Others will have jobs arranged before they arrive in Canada.

patriotz

@jesse:

The mistake that most homeowners make is assuming a too-rosy scenario when it comes to investment risk and ignoring the accrued capital costs a property accumulates.

I think most homeowners don't even understand what these terms mean, so it's a bit of a stretch to say they're assuming anything about them.

Better to simply say that the mistake most homeowners make is assuming that prices always go up.

Anonymous

@Anonymouse: ….$625? Most of them probably pay at least an order of magnitude more than this in taxes in their first year alone……….

Ya, me too, this yeara and every year before, – I've always been here and they didn't give me $625.

jesse

@observer: "What should you do?" The mistake that most homeowners make is assuming a too-rosy scenario when it comes to investment risk and ignoring the accrued capital costs a property accumulates. That is, the yield you get off paying down a mortgage is only part of the expected expenses you have. The problem is many of these expenses aren't meted out evenly so, say, only 1 in 50 homeowners will experience distress of selling when they don't want to or having a major unexpected repair, but that's a killer in magnitude. Average it all out across all homeowners and the expected value of the spread to a GIC decreases significantly. With lower prices this spread is justifiably positive; in today's environment one can argue the spread to GIC is negative when factoring in all homeowner plights. 49 of 50 homeowners… Read more »

observer

@Anonymous: You might like to check out the same stats for freddie mac and fanny mae before the US housing crises 😉

Anonymous

From Wikipedia:

CMHC is the second largest Crown Corporation after Canada Post in terms of revenue with some $4.6 billion in 2004. It has an annual financial surplus of more than $2 billion.

CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009.

observer

@patriotz: Yes, technically, you are correct. But once the mortgage is paid off, the owner is left with a free and clear claim on the property, whose value fluctuates if they want to liquidate to cash, why I made the analogy with a stock.

bubbly

@DaMann: I know a lot of skilled immigrants (from Europe) and almost all of them brought their own money. Always > $10,000. The only exceptions were former au-pairs or a few that borrowed and paid back once they have saved through their regular jobs.

The ones that don't have the money usually don't bother applying in the skilled worker category and instead try various tricks via work permits or refugee applications.

There are cheaters for sure but I don't think that they are that common. The social support for skilled FOBs is very weak for the first 6 months after their immigration.

patriotz

@observer:

every dollar you put towards your principal is like investing in a stock with yield equal to 4.29%.

More correctly, it's like investing in a GIC with yield equal to 4.29%. A mortgage is just someone else's fixed income investment, and you are buying it back from them. You can get around the taxability issue by assuming it's in a TFSA or RRSP, neither of which today's homedebtors have any spare money for.

But you will always have to pay more on a mortgage than you will get on a GIC of the same term (banks have to make a profit), so you are better off paying down the mortgage. Exception being if you think you might go BK in which case an RRSP is protected.

observer

@kansai92: Yes, you are right. Say 500 per month, that would shave about 1.3% off the 4.29% yield on your "apartment stock".

In the US, you could say wages have dropped if you count unemployed together with still employed.

kansai92

@observer:

Condo fees are huge dude.

Often $300 to $400 for 2BR units depending on the age and amenities.

Don't just put it in as a caveat in a rent vs own calculation.

Ditto for property taxes.

Sure there's a lot of disagreement on whether home prices will go up or down. And also no one knows what the stock market will do.

However, most will agree that both taxes and interest are on the way up.

Same with the cost of living whether it's food, transportation, energy.

Your salary, on the other hand, most likely stagnant (if you don't get laid off).

I'd say anyone without a secure job and who's purchased with less than 20% down and/or higher than 25yr AMT is putting themselves in a risky situation.

Wally

Observer

Suppose your rent is 1600 per month…

______

What is your frickin' point? What is the rambling for?

observer

Suppose your rent is 1600 per month. Suppose you can buy the place for 447,552. Suppose you take out an interest only loan, no down payment. Your monthly payment would be 447,552*0.0429 = 19,200 a year or roughly 1600 per month (assuming interest rate is 4.29%). Obviously, no one takes out an interest only loan, with no down payment. But the above is still a good way to view things because: Say you can choose to pay back a small amount every month (for example, 200). What should you do? buy or rent? Well, comparing things this way, you can see that whether you pay 1,600 in rent or 1,600 in interest, it doesn't much matter to you, the money is gone. But the 200 that you pay back is being put into your home at the price you payed… Read more »

Westside Hag

"The Chinese in Africa"

Article from this weeks Economist.

The last sentence is interesting.

http://www.economist.com/node/18586448?story_id=1

jesse

@Anonymouse: "$625? Most of them probably pay at least an order of magnitude more than this in taxes in their first year alone." Yeah, there is an inherent cost in ensuring immigrants become productive quickly and that involves support groups. SUCCESS is mostly known as gearing itself towards Chinese immigrants but provides services to pretty much any immigrant who asks for assistance. Its services extend to families well beyond their first year in the country, especially the older generations. I have relatives who used the service and actively "give back" because they are thankful for what the agency did for them when they first arrived in Canada. It always amuses me when people complain about governments sponsoring non-profit organizations but don't bother to look at, let alone quantify, the benefits they provide. I shudder to think what it might cost… Read more »

kansai92

I'd love to be a fly on the wall when Rob and Sharon return

from the hospital with their first child and it looks a lot

like Chris.