First-Time Amateur Landlord Speculators: “Did I tell you they get home stay students in their house?”

People are not just borrowing and betting to play the RE game in Vancouver… they are also extending themselves personally by taking on tenants in their basements, or even within in their own homes. All the gory details (in fact more than we need) about being an amateur landlord in Vancouver, circa 2009, from Greenhorn at RE Talks Tue Oct 27, 2009 9:33 am -

“I know several first time home buyers under the age of 30 who are also first time landlords. Buying an investment property is the only way they can afford to buy a house in Vancouver. Perverse isn’t it? The plan involves getting a 5% down mortgage on their house which is borrowed from the Bank of Mom and Dad or the Bank of Grandma. They also borrow the down payment for the investment property from the same place. Once the investment property doubles in value in 5 years, they pay off the parents/grand parents and pay down the mortgage on the house that they really can’t afford. Did I tell you they get home stay students in their house? Several people I know are renting out bedrooms to two or more students at $750 per student. That’s an extra $1,500 per month so they can pay the mortgage they can’t afford. So they have international students and their friends coming and going all night. They wake up early to make breakfast and lunches like slaves. Did I tell you some of these students have poor hygiene and stink? Did I tell you jewelery has gone missing? Did I tell you some students forget to flush the toilet everyday so there is a nice present waiting to be seen every morning? Did I tell you about the lack of tenant screening on the investment property because they ask an above market rent and only get the riff raft? The bounced cheques. The late cheques. It is causing lots of stress.”…”What is scary is the parents/grand parents had to mortgage their homes to lend junior the money. Vancouver has made a whole industry/economy out of high priced real estate and entitlement.”

kansai_92 adds, at 11:01 am -

“This is the same as what I’m seeing amongst people I know. On paper it looks fine, but the one HUGE assumption is rising prices. If prices fall or even if they are FLAT, the strategy unravels.”

One response to “First-Time Amateur Landlord Speculators: “Did I tell you they get home stay students in their house?”

  1. I simply dont understand all these people killing themselves to buy a home. I think it is just so engrained in our minds that owning is the way to go that people will try to do it at all costs.

    I was talking to a coworker yesterday and he was trying to figure out when he was going to move out of his parents house. He figured he would have all his debts paid off (student loans) and enough for a down payments by the time he was 25.

    “But then you live at home until you are 25, why don’t you just rent and save money once you have your debts paid off?” I asked.

    “But renting is just a waste of money, I would rather just own from the get go” he answered.

    I quickly explained the rent I pay is less than what my landlord pays in property taxes, strata fees and mortgage interest, which are all ‘a waste of money’ as well. If I was to purchase my current place with 10% down and a 25 year mortgage, interest would be 1050, strata 250 and property taxes 125. (total 1425). Yet my rent is only 1200. That doesnt even take into account special assessments and the depreciation of the building.

    After this explaination of how I was actually saving 225 a month he began to reconsider his way of thinking.

    I got the feeling from this conversation that most people probably have the idea that renting is always a waste of money without doing any math. This is probably because save for the last 4-5 years and the blip in the early 80s, this calculation would show that the numbers are pretty close.

    People just haven’t realized how much this calculation has changed in the past few years.

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