My question is: Canadian-specific
QUESTION: I am looking at buying one of the many, yet to be built, condos in
Vancouver. In general are these a good investment. Some of them will not be
finished for 2-3 yrs and would tie up from 10-20% of the selling price as a
downpayment.
It is possible, I've been told, to sell your your stake in these properties
before they are finished. Am I better off buying an already built unit or
some other form of real estate?
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In his book, Ozzie Jurock says: "Forget about Location, Location, location".
That is also the title and you can get it at www.jurock.com.
In this case, it is more a question of timig, timing, timing.
For the last five years, if you had done what you are contemplating, you
would be happy now.
However, there is no guarantee that the same thing will happen in the next
three years, Olympics or no Olympics.
I am happier with your buying an already built unit with a cash flow that
you can live with.
For instance, in the post 1981 debacle units which had sold for $125,000 at
145 East 4th in North Vancouver, were selling in 1985 for $38,000 each - My
associates and I bought 16 of them from Counsel Trust which had foreclosed
on the units which were mostly owned by doctors and dentists who had bought
on spec.
That debacle was sparked by 22% interest rates and a BC economy which had
sunk to number 60th in North America of all the provinces and states.
Under Bill Vander Zalm, we rose to close to number one and then sank down to
number 60 again under the NDP.
We are flying too high again and can not expect to sustain the euphoria.
For instance, I now have had two clients in San Francisco sell their house
for 20 to 30% less than they expected four months ago and 1 in Florida and
one in New York.
I do not expect our BC prices to fall dramatically. However, a 2% rise in
interest rates on a $400,000 mortgage means $8,000 more interest cost The
payer has to make $14,000 more and pay $6,000 tax, CPP and EI to have $8,000
left to pay the interest.
The average person in Vancouver can NOT just go out and get a $14,000 raise
just to stay even.
For instance, last June, a 5.1% interest rate seemed VERY expensive. Today
it is cheap.
I am not suggesting that anyone should sell their existing home. I for one
am NOT thinking of selling mine even though I think it will go down $75,000
to $100,000 in the next year. I thought it would go down last year to and
it went up another $100,000.
If i sell and it goes up $50,000 more, I have to make $100,000 and pay
$50,000 in tax, etc to have $50,000 left to buy back the house. In
addition, if I sell, there would be a $25,000 real estate commission and
$20,000 of moving expenses and where would I go. So don't sell what you
have but be careful what you buy. In today's market, you have to buy well,
on reality, not on speculation.
For instance, you can get some pretty good cash flows in the Chilliwack
area.
For a really good analysis of the falling San Francisco market, go to:
http://patrick.net/housing/crash.html
Hope this helps you with your decision.
-----------------------
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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