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My $370,909 Dream Home

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I’m getting settled into my new home, a newly renovated duplex in a great neighbourhood near recreation and transit. It’s got all the features I’ve been looking for – 3 bedrooms, 1 1/2 bathrooms, stainless steel appliances, fireplace, garage, you name it.

But the best thing about it is the price. I got it for a one-time payment of $370,909 – including all future taxes and maintenance.

Now wait a minute you say, nobody can get a deal like that. Well here’s how. I figure I get an after tax cash yield of about 5.5% on my investments. If I set aside $370,909 worth of my investments, I get $1700/month, which is what I pay for rent. My name is on my brokerage statement rather than on the deed, but I get the same shelter.

So what if I bought a similar property? I’d have to pay taxes, maintenance and insurance. Say these total $5K/year. Again using the 5.5% yield I’d have to set aside $90,909 more of my investments to pay these. So I figure the property would be a decent buy at $280,000.

Which gives a price/rent of 165. I’m quite willing to wait for that to buy – in the meantime I’m doing just fine.

patriotz

(hat tip to M-)

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Li Kai Shing
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First ……dumb round eyes

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7 years 5 days ago
Romeo Jordan
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Dumb dumb and dumber.

Have I taught you nothing?

Your a loser Li Kai Shit.

xoxox

Romeo Jordan

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7 years 5 days ago
N
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N
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And if things should change in you life, you can cash out with a call to your broker — no open houses, no worries.

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7 years 5 days ago
Roberto Luongo
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A shit…..

If we lose tommorow…Aquiloonie cement reeboks 4 me.

patriotz can have my condo.

Sorry for the pizza stains on the mirror'd ceiling.

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7 years 5 days ago
painted turtle
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Property sales may start to slow as the government’s policy “starts to bite,” leading to price cuts that may drive home prices 10 percent lower in the next 12 months, the credit rating company said. Hong Kong’s real estate market faces the risk of a “sharp correction,” S&P also said in the statement today.

“The important signal Chinese authorities have sent is, unlike their counterparts in the West, they are focused on relieving or deflating bubbles before they become a major problem for the economy.”

Sales at 10 of Hong Kong’s biggest private residential developments fell 58 percent over the weekend from a week earlier after the city’s government last week raised minimum down payments and deposits for foreign buyers, according to Centaline, the city’s biggest privately held realtor

http://www.bloomberg.com/news/2011-06-15/s-p-cuts…

http://www.bloomberg.com/news/2011-06-14/china-in…

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7 years 5 days ago
Li Kai Shing
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Luongo

or Lululemon

who cares

Go Bluins Go !

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7 years 5 days ago
Dave
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Patriotz, you didn't account for real estate appreciation in your math. Historically, it has been 5.5% per year. We could argue what that number will be, but it should be accounted for. Better beef up that investment or be willing to pay a higher price.

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7 years 5 days ago
CC
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This blog is a piece now. F**ing li kai shing, romeo jordan, and the like, go get a f**ing life. You are all douchebags.

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7 years 5 days ago
real_professional
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I must admit, romeo and mclovin are kind of creepy.

Li kai and ravishing rick are pretty funny at times.

The rest is same old same old.

@painted turtle

I read those articles … I wonder if that is a pro chinese event for them flooding into the vancouver market. I mean: At the first signs of real estate weakness in HK or mainland, would the chinese decide to take assets out of china? Have they already seen the cracks and were they fleeing the collapse all along?

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7 years 5 days ago
Ahab
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Dave Says:

June 14th, 2011 at 10:13 pm

Patriotz, you didn’t account for real estate appreciation in your math. Historically, it has been 5.5% per year. We could argue what that number will be, but it should be accounted for. Better beef up that investment or be willing to pay a higher price.

Take out the tripling of prices in Vancouver over the last 8 years, and that number is more like 1.5%. You need to work on beefing up your math.

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7 years 5 days ago
patriotz
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@Ahab:

The point, which you seem to have missed along with Dave, is that the price of an investment must fall in line with earnings in the long run. Prices do not magically go up by themselves X% per year.

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7 years 5 days ago
Anonymous
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Nice post over at theeconomicanalyst:
http://theeconomicanalyst.com/content/have-canadi…

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7 years 5 days ago
Dave
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@patriotz:

Heard of inflation?

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7 years 5 days ago
Dave
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@real_professional:

I think the problems in China are far deeper than we appreciate in the West.

http://www.theaustralian.com.au/news/world/beijin…

Tip of the iceberg? Maybe the smart money in China is leaving early and maybe they are looking for a safe place to put money and hege their bets.

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7 years 5 days ago
patriotz
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@Dave:

Heard of inflation?

Well of course, we, the US and Europe have had positive consumer price inflation continuously since WWII.

So how come all these places have had RE and stock market busts during that period, including the high inflation 70s-early 80s (e.g. Vancouver)?

Maybe rising consumer prices don't magically support RE and stock prices? Ya think?

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7 years 5 days ago
Li Kai Shing
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@CC:

You Daddy shouldn't buy offshore prophylactics

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7 years 5 days ago
jesse
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The optimist's view on housing

Don't let the title fool you.

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7 years 5 days ago
jesse
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One thing about the $370K in investments is that income growth does matter. Dave is right that rents will generally increase over time, taking a larger percentage return from the $370K over time to compensate. So either the $370K asset value grows with inflation, dividends keeping pace, or some of these returns must be reinvested. I don't know what's generating 5.5% return here, but, if it's an inflation-trending revenue stream say from stocks that increase dividends over time, we can expect the 5.5% to continue based on the asset real value, i.e. not a fixed coupon bond. So if that's the case then inflation doesn't matter at all. If averaged over several years, a 5.5% real return isn't bad. But my bet is patriotz would have had to buy low and let's face it most people don't. Just saying… you… Read more »
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7 years 5 days ago
Troll
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I got it for a one-time payment of $370,909 – including all future taxes and maintenance.

But not including any rent increases.

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7 years 5 days ago
jesse
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@Troll: "not including any rent increases"

Not necessarily. Guess how.

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7 years 5 days ago
patriotz
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@jesse:

That's a 5.5% yield on current market price, not total return.

As to how I get it, go to GlobeInvestor and look at PWF.PR.F, BA, PGF for example.

I bought most of my holdings below the current market price, but that's really not relevant to my argument.

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7 years 5 days ago
Li Kai Shing
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Who stealing my posts?

They gone !

MIT , Harvard and Sprott College want them ..pay big bucks too !

Reward coming soon !

2 Tickets to Stanley Cup game 7 ..then limo to #5 Orange !

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7 years 5 days ago
Ridiculous
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TO all the dummies on the blog who don't read and can only see what is right in front of their noses, housing has been EMPIRICALLY PROVEN to be only marginally effective as a hedge in an inflationary environment. Stocks out perform real estate in all except the most irrational of economic environments. This is not opinion, it is a FACT. In consuming real estate through a diversified portfolio, Patriotz will not only benefit from lower cost of consumption right now, but his portfolio WILL perform much better in an inflationary environment than the real estate he could have bought for twice the price. Capital value and dividend increases through stock ownership have been shown to be far more effective tools in preserving value than any other investment class. There aren't many guarantees in life, but dividend growth beating rent… Read more »
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7 years 5 days ago
Patiently Waiting
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FP has lots of fun stuff today. Apparently Tal has been sampling our main export:

"I cannot think of a more sustainable trend than China growing and Chinese money entering Canada," Mr. Tal says. "People say it's crazy, crazy, but it's the most sustainable trend I can think of."

http://www.financialpost.com/news/Condo+buyers+lo…

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7 years 5 days ago
Patiently Waiting
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I had to stop short of quoting the whole article 😛

If the trend of international investment were to continue indefinitely, it would not be a troubling issue for the country's banks. Problems would come if transient foreign interest were to contribute to formation of a real estate bubble.

"If demand for residential real estate were to dry up in Canada, it would not be good for Canadian banks," said Peter Nerby, senior vice-president at Moody's Investors Service Inc., and responsible for rating Canadian financial institutions.

While preliminary research at Moody's indicates domestic banks are in fairly good shape, the banks don't publicly disclose information on regional concentration or the creditworthiness of individual home owners, Mr. Nerby said.

http://www.financialpost.com/news/Housing+rush+sc…

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7 years 5 days ago