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GreysAnatomy

When should I buy a condo (Toronto)?

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My plan was to live with my parents until I finished articling and then put a down payment on a condo as an investment the minute i get hireback..i'm not confident that i'll get hired back but with the recent crisis, i'm not sure what my best move is. Should I buy now when my articling term ends ? Wait longer until the market crashes (or perhaps does not crash)? Just looking for some thoughts here! 

Edited by GreysAnatomy

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On top of the actual mortgage itself, you have to factor in condo fees as well as property tax. All considered, it doesn't make financial sense to own a home. Renting is cheaper and gives you the flexibility to move to a new home if you so choose. While you rent, the money which would otherwise be going to condo fees and property tax will be going towards expanding your investment portfolio.

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14 minutes ago, harveyspecter993 said:

All considered, it doesn't make financial sense to own a home. Renting is cheaper

That's not true long-term. Renting is money you will never see any return on - especially important considering rental prices now. In comparison, when paying your mortgage, you're at least getting some ownership in return for your payments. And in the long-term, real estate prices rise in value (often at rates higher than stock market return in the long run). But validly, condo fees and property tax are things to be considered, but that doesn't mean that real estate is therefore a bad investment.

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4 minutes ago, georgecostanzajr said:

That's not true long-term. Renting is money you will never see any return on - especially important considering rental prices now. In comparison, when paying your mortgage, you're at least getting some ownership in return for your payments. And in the long-term, real estate prices rise in value (often at rates higher than stock market return in the long run). But validly, condo fees and property tax are things to be considered, but that doesn't mean that real estate is therefore a bad investment.

Real estate is a fantastic investment. Owning a home is not. Home ownership takes money out of your bank account every month and gives you nothing in return. It's as bad for you as a car lease.

The equity you have in a home can't be tapped into unless you get a HELOC or sell the property. A HELOC is just another debt obligation and if you sell your home you're back where you started as in you have to either rent or put the money towards another down payment. 

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@RollMaster Let's compare the two. With a home mortgage, in addition to the monthly mortgage payments you're also on the hook for property tax and condo/HOA fees. For reasons I've described above, the equity you have in a home isn't all that useful. With a car, you're on the hook for monthly car payments, as well as gas, insurance and maintenance. Both purchases are money sinks.

Edited by harveyspecter993

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Financially, it can certainly make sense to own a property. Especially with tax breaks and such, and current low borrowing rates. It's just neither "it's always a good decision", nor "it's never a good decision". Home ownership should take into account a multitude of factors that are unique to each individual, such as career stability, earning growth potential, location, how long you plan on living in that home, and more. It's a decision that should be made with the help and advice of (ideally) multiple financial professionals.

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1 hour ago, harveyspecter993 said:

@RollMaster Let's compare the two. With a home mortgage, in addition to the monthly mortgage payments you're also on the hook for property tax and condo/HOA fees. For reasons I've described above, the equity you have in a home isn't all that useful. With a car, you're on the hook for monthly car payments, as well as gas, insurance and maintenance. Both purchases are money sinks.

The largest difference: a car decreases in value while a home increases in value.

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36 minutes ago, pzabbythesecond said:

Nope.

It isn't always the case, but it is often the case. There are many real estate markets that outperformed the stock market. E.g. homes in the suburbs of Toronto in the past decade. Also, owning industrial/commercial properties very frequently outperform the stock market to a significant degree.

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buy pre construction. my dad bought me one that is supposed to close in a few years and it has gone up 150k already even though it is not paid for yet. 

Edited by jatthopefullawyer

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27 minutes ago, jatthopefullawyer said:

buy pre construction.

It's a gamble. See: Ice Towers in Toronto, where the apartments turned out smaller than planned, had a design change with poor construction quality, and is now 80% AirBNBs.

Edited by lolnope
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13 minutes ago, lolnope said:

It's a gamble. See: Ice Towers in Toronto, where the apartments turned out smaller than planned, had a design change with poor construction quality, and is now 80% AirBNBs.

yeah I agree if you are smart and do your homework, you should end up making some money. the key is choosing builders with a history of delivering and location (the closer to the core is better). also near the subway or PATH system 

Edited by jatthopefullawyer

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1 hour ago, georgecostanzajr said:

It isn't always the case, but it is often the case. There are many real estate markets that outperformed the stock market. E.g. homes in the suburbs of Toronto in the past decade. Also, owning industrial/commercial properties very frequently outperform the stock market to a significant degree.

I worked in real estate investment prior to law school and this is not true. Most real estate, and especially single family homes, barely beat inflation and are usually 30-40% of the returns you’ll get in the stock market long-term. The real returns come from the leverage, which can also multiply your losses if things go bad. Sure you’ll get a once in a blue moon market that appreciates like crazy like Vancouver or Toronto (cough*money laundering*cough), but you shouldn’t be buying a home thinking youre gonna make 15% year-over-year returns. Financially speaking, in most places in the world, you are better off renting, saving on the hidden costs like transaction fees property taxes and insurance, and putting the savings into low-cost index funds. The major benefit of owning your own home is psychological (have your own castle and no one can evict you).

The guys crushing the stock market in real estate are the ones running the development companies or investment funds and taking a promote off of their investors money (i.e., put in 10% of the capital and walk away with 30% of the profit because you get a bigger piece of the pie with each successive return hurdle you pass). But that’s more akin to running your own business, not passively investing. Or you could have a horseshoe up your pass and bought a detached home for $200,000 in Toronto or Vancouver in 2002 then wait for foreign investors to come and bail your ass out with 20% annualized returns for 15 years, which is what happened to many boomers.

As to OP’s question, buy whenever you save up a down payment large enough to ensure that your monthly housing costs don’t eat up more than 1/3rd of your gross salary. No matter what people say, they don’t actually know what’s going to happen to real estate prices in the short-term, unless they have some inside information about upcoming zoning changes, density bonuses, etc. I think the market will have a bit of soft landing in the next year or two because of the precarious economic situation and number of unemployed people, but it could also jump up big because of pent-up demand and very low interest rates. Only time will tell. The key is to not take on too much mortgage for your income.

Edited by hitman9172
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56 minutes ago, jatthopefullawyer said:

buy pre construction. my dad bought me one that is supposed to close in a few years and it has gone up 150k already even though it is not paid for yet. 

Might be coming back down if this recession leads to massive mortgage defaults, which is a real possibility right now. 

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1 hour ago, georgecostanzajr said:

in the past decade.

There's a reason they say don't time the market. That goes double when your whole portfolio is in one asset.

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1 hour ago, georgecostanzajr said:

The largest difference: a car decreases in value while a home increases in value.

Home equity is not a liquid asset. If you want to access it without selling your home you have to take out a HELOC. If you're using a HELOC to invest you better be sure your investment will pay off your HELOC on its own because otherwise you just have another line of debt to worry about.

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