“Here’s our family real estate history in Vancouver. I suspect we are not atypical.
HOUSE 1, Kits
1985 purchase price: $180K
Renovations, over 10 years: $150K
Mortgage & Taxes: $130K
Rental income (basement suite)over 14 years of ownership: $140K
Value of Occupancy over 14 years: $450K
Sale price after commission, 1999: $580K
What’s my profit: ?
HOUSE 2, Point Grey
1999 purchase price (land only): $450K
Building and landscaping cost: $450K
Mortgage & Taxes: $200K
Value of Occupancy over 12 years: $700K
(3 blocks from beach, water & mountain view)
Current value (based on recent sales in neighbourhood): $3.8M
What’s my (potential) profit: ?
I purchased both homes during a time when prices were flat or depressed. Definitely a buyers market which gave me some room to negotiate the purchase price.
These two homes have gone a long way to helping provide financial security for my family. Yes, a substantial part of our net worth is tied up in real estate, but how else could I essentially triple (quadruple?) my investment in around 10-12 years while providing a decent roof over our heads?
Our mutual funds have come in at around 6% the last 15 years in comparison.
Having said that, I don’t think I would be a buyer in this market. The numbers don’t make sense. And I’m often tempted to cash out and rent.
However, I’ve been thinking this for a good 10 years now. I could still live to regret my decision not to sell, but at this point my worst decision was selling our place in Kits. The place next door sold for over $1.8M in 2010.”
“We have been with one of the top investment firms in Canada (PHN) for over 20 years and our returns are in the 6% range. Half that for our kids RESPs the last 12 years.
Making investments with the benefit of hindsight is easy. It’s not so easy when the future is unknown/uncertain. That’s why I’m torn between staying the course and cashing out — like a lot of us probably are.”
“Just to be clear, I think I’ve been darn lucky rather than smart to have gotten into real estate when I did. And yes, I can’t imagine that returns over the next 25 years are going to be anywhere as good, or even positive.
The problem for many of us is that the alternatives are not that attractive either.
I’ve seen the stock market go down as much as 50% not that long ago. What’s the difference if you lose 50% of your house value or 50% of your investments?
Handing your money over to someone, no matter how reputable, to invest for you is risky. Just as home ownership is risky. Just as buying gold is risky.
Up until a few years ago, investing in real estate made some sense to me. However, I think it’s highly unlikely that the returns of the past 25 years are going to be replicated again anytime soon. I can’t imagine how current prices can be sustained at least in the medium term. However, I’m not convinced there are a lot of viable alternatives for many people.
Many of us are neither bulls nor bears. We’re trying to make the best choices for our families without a crystal ball to the future.”
[Some posters have already added intelligent commentary to this anecdote on yesterday's thread. Headlined here for the chronological record. Thanks, 'kautious'. - vreaa]
Artificially low interest rates encourage speculation in whatever appears to be the current ‘hot’ sector.
In kautious’ case, we are seeing the same forces that have driven buyers into the local RE market keeping him in the market.
If he had to sell, his profits would be tax free.
14% per annum, compounded, over the last 12 years. *
Only a very small percentage of investors have beaten that performance in other sectors.
* Past performance not reflective of likely future performance.