A Big ‘Thank-You’ To The Insanity Of The Vancouver RE Market – “I sold my loft in a seedy part of Gastown that I bought for $168K in 2005 for $520K in 2011. Paid $220K for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free, with $200K in the bank, at 26.”

“I recently moved to Halifax from Vancouver for grad school and its amazing how much more enjoyable life is when your debt free. I sold my loft in a seedy part of gastown that I bought for 168k in 2005 for 520k in 2011. Paid 220k for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free at 26. I’ve got 200k in cash in the bank too, how many 26 year olds can say that?! and I have all of this thanks to the insanity that is the vancouver real estate market! I feel for these people though, our generation really got the shaft when it comes to the economy and real estate. I’ve got plenty of friends who did everything they were supposed to do to succeed in life and are working temp jobs to pay off 100k in grad school debts. If I didn’t have supportive parents I don’t know where I’d be right now.”
jj at VREAA 27 Nov 2012 9:22am

Well done, jj. You were fortunate with the timing (because 2008 could just as easily have taken you back to pre-2005 prices), but that is now not material.
jj saw that $520K cash was of far, far higher value than a “loft in a seedy part of Gastown”. Anybody who cashes out in the vague vicinity of a top, by virtue of luck or skill, will do fine.
The point is that the person who overextended to allow jj to cash out, and all the thousands of other Vancouver buyers over the last 3, 4, 5 years who have done the same, are left holding the other side of the deal: A property that is worth far, far less than the future earnings that they have promised to pay to buy it.
– vreaa

79 responses to “A Big ‘Thank-You’ To The Insanity Of The Vancouver RE Market – “I sold my loft in a seedy part of Gastown that I bought for $168K in 2005 for $520K in 2011. Paid $220K for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free, with $200K in the bank, at 26.”

  1. I have a hard time swallowing this anecdote. If this guy is 26 now that means he was 19 at the time of purchase in 2005. I have a hard time thinking he would have had the down payment and a decent job to qualify at that time.

    • I’d be curious to get more details too.

      • I definitely had help as I mentioned in the last line of my comment. I inherited 50,000 dollars from a relative who died when I was 19. Instead of buying a new bmw like my siblings did, I bought a condo. I really could care less if the value of the Halifax condo drops 15-20%, although I doubt it will. I have a feeling with the 35 billion dollar ship building contract Halifax received there will be a large market for 1 bedrooms downtown in a couple years.

      • @ jj

        Thanks for the clarification.

    • DJB/HD -> Agreed, more details would be good.
      I strongly suspect (1) that this is indeed an authentic story and (2) that the purchase at 20 involved “bank of mom and pop” for downpayment (note his comment about supportive parents).
      jj please clarify, if you can.

    • Story could be a proxy but it happens all the time. We bought in 2005 for $698k (I was 33) we sold in 2011 for $2.1m and were looking for the Punk’d cameras as we faxed the agreements back and forth. Parents could have easily had the down payment on the kids apartment and not asked for it back when he sold.

      • A small aside to my story. We rented back for 6 months (for 1$) so the kids could finish school with no disruptions, the new owner was adamant that he was tearing down the second we moved out. Had surveyors, architect dudes coming by the measure stuff, lot was marked out and trees surrounded as we were getting ready to leave. We moved out and a couple months pass.. nothing. We went trick-or-treating in the old hoods and low and behold hes rented the house out to two students for a year.. how fast things change. How fast indeed.

  2. I’ve got 200k in cash in the bank too, how many 26 year olds can say that?! – …you and the organized crime gangsters running around our streets

  3. Thats like selling a stock making money, then putting it into a losing stock. He will lose 100 k over the years on the home. Bad investment. Houses will be crashing in Halifax, its NOT different there.220k for a TINY 1 bedroom in a snowstorm? Insanity.

    • If his loft in Halifax crashes 50%, he’ll still have $220,000 in the bank, and no mortgage debt or rent to pay. The kid did alright, regardless of his questionable timing on the Halifax purchase.

      • Agreed. That’s an important point. He can now afford to have his property price plunge by 50%! It’ll sting (he’ll lose 25% of his net-worth), but he’s only 26. In Vancouver, that magnitude of drop is going to wipe out many many leveraged players. They can’t afford to ride out such a drop.

      • Naked Official #9000

        He’s from Vancouver – he can’t resist speculating – go forth, and spread your disease across our vast and once hard working country..

      • …”…that magnitude of drop is going to wipe out many many leveraged players.”…

        Indeed. And not all the ‘players’ actually realize they are players, whether they like it or not. A cautionary tale…

        [REUTERS] – Special Report: How a vicious circle of self-interest sank a California city

        “(Reuters) – When this sun-drenched exurb east of Los Angeles filed for bankruptcy protection in August, the city attorney suggested fraudulent accounting was the root of the problem.

        The mayor blamed a dysfunctional city council and greedy police and fire unions. The unions blamed the mayor. Even now, there is little agreement on how the city got into this crisis or how it can extricate itself.

        “It’s total political chaos,” said John Husing, a former San Bernardino resident and regional economist. “There is no solution. They’ll never fix anything.”

        Yet on close examination, the city’s decades-long journey from prosperous, middle-class community to bankrupt, crime-ridden, foreclosure-blighted basket case is straightforward — and alarmingly similar to the path traveled by many municipalities around America’s largest state. San Bernardino succumbed to a vicious circle of self-interests among city workers, local politicians and state pension overseers….

        …James Penman, the longtime city attorney who critics say is closely aligned with the unions, alleged during a council meeting this summer that 13 of the past 16 city budgets had been falsified. He has refused to elaborate on that accusation since, but told Reuters that he hasn’t retracted it, either.”…

        http://tinyurl.com/avnyn6f

  4. From $168K in 2005 to $520K in 2011 and the “experts” did not see a bubble.

    Also – $220k for a 1 bedroon in Halifax? WTF?!

  5. At least this kid gets it. I see so many comments on the Internet along the lines of, “If I’d have held off buying my condo/house/loft ten years ago, I’d be way further behind now. Thank God I didn’t listen to people like you!” It’s as though they can’t grasp that the market has changed drastically from a decade ago, and that what turned out to be a great purchase in 2002 is a potential disaster in 2012 at 2 or 3 times the price.

  6. Is this really true? I echo the others. How can a kid afford a 168k condo at 19? Unless he had parental help, which isn’t unreasonable. However, for me, with student loans and parents lending me money for school at that age I never would’ve been able to afford a loft. His parents must’ve been well off in the first place, which leads me to believe he woulda done well regardless.

    • See above. I suspect he had parental help with downpayment.
      We’ve asked him to confirm.

    • I definitely had help. I had very supportive parents who paid all my school expenses and let me live rent free in their house while I leased the condo. I also received a small inheritance to pay for the down-payment. Obviously my situation is uncommon, but I felt the need to leave a comment in the earlier post, as in almost every post the comments are always about how irresponsible and over-leveraged my generation is…

      • UBCghettodweller

        I’ve had similar generosity from my parents. Since they let me stay at home during undergrad rent free (although I had to do most of the house work in exchange) I ended up being able to save money between working and winning scholarships. In grad school, a NSERC studentship and frugal spending since I’m in the lab so much I don’t have time to spend money on all the expensive fun stuff in Vancouver has led to me being a PhD student in his late-20s well in to the black with easily liquidate-able assets. Rich? Hell no. Not a heavily indebted student with a slightly positive cash flow? Yes.

        It is possible to not join the smouldering wreck that is Generation Y’s financial situation.

      • I think you were lucky, but at least you didn’t blow all your inheritance on a new BMW. For me, at your age, I was cleaning diapers for 18 bucks an hour (lucky to have a union job at that age, and that was a lot of money circa 1999-2001), doing a math and physics degree at the same time, and helping my parents out (as my dad had been laid off and my mom wasn’t making much more than minimum) with their day-to-day living expenses. With med school on the horizon, I had absolutely no way of buying a condo.

        Now, I’m 32 and a millionaire, with all my student loans paid off. Not through real estate though, but through sheer hard work (it helps being a doctor) and making good investments throughout the years (saved at least 10% per month even when I was 19). I envy people like you, but at least you know the value of money. Many Gen-Y’ers (including my generation) don’t.

    • Who cares if it’s true? It makes everyone annoyed, bears for being unwilling to compete with such brazenness, bulls for being envious at not having $200K in the bank at 26. Everyone wins.

      But, if this anecdote is true, its real power is in the words “in the bank”. The guy probably knows nothing else but real estate and even then I think we can agree it’s unlikely he knows enough to be successful in real estate in the long run. Maybe “in the bank” is a figure of speech but, if he’s like some people I know, the road to riches is real estate, ING, real estate, ING.

      • I’m a bear and this story doesn’t annoy me.
        Sure, he did a small bit to contribute to the mania in 2005 by overextending to buy at the early age of 20, something he likely wouldn’t have done during normal market conditions.
        But, it’s largely the story of a fortunate innocent passing through our battlefield.
        I don’t hear arrogance in the account.
        He was lucky with his timing, but he’s not bragging that he’s now an investing genius.

      • jj, I have a question for you. If you weren’t moving to Halifax would you have still sold your loft? Good on you for realizing things don’t make sense but is there a reason you didn’t rent in Halifax? Much cheaper, gives you mobility which is important for someone who is young, saves you lots of expenses and fees when you inevitably sell it as you outgrow the place (figure close to 10% in total transactional fees) not to mention a declining market etc etc

      • Agree vreaa. There is nothing wrong with any of this, really, on the whole. Live by the sward…

      • yltnboomerang

        No anger here.

        I bought the first time in 2001. It was pressure from the ‘rents to “be responsible”. I was a newly minted P.Eng, had a decent job and could easily afford the mortgage so what the heck, 250K for a 900 sqft waterfront yaletown townhousey apartment. Three years later my neighbor sold for 400K, WTF??? I’d paid my mortgage down from 200 to 180 so screamed bubble and cashed out turning 50k to ~200K in 3 years. I then rented my buddies new wife’s old apartment for 500/month. They wanted to sell but it was covered in a tarp so I helped them; they helped me. A year later things were still going up so wtf, I put my 200K into a 600K waterfront townhouse in yaletown again (caveat, my folks pre-purchased the place in 2002 and then got cold feet so I said split the diff on day 1 after I move in – they pocket the bubble proceeds from 2002-05). The place kept going up so in 2007 I said enough, prices are a bubbliscious joke so 9 months later we sold at 1.65M and I’ve been renting since. My folks made a cool 1M and I pulled in 300K.

        Would I do it again? Hell no! I got lucky with the first place, I got greedy (and lucky) with the second. I could have gambled again in 2009 but I was older and smarter (and no longer listening to my folks dogma about real estate never going down. My parents kept going. The 1M is about 600K now (they bought and sold in Victoria).

        My grandparents came to this country with nothing; real estate was cheap and got my family to the wealth they have today. It’s different now and one day my folks may understand but my position remains that I made a bunch of money off the bubble because I was young, naive, and lucky. Those that are young and naive And invested in RE will not be so lucky today.

      • yltnboomerang

        Shoot, I forgot to add that the reason I was so skeptical of the bubble was I had just been burned by the .bomb bubble. I had finally paid off student loans and amassed a massive savings of about 10k that I promptly lost. 10k was a lot to me at the time but I thank my stars that losing everything in a speculative bubble on,y cost me 10k as it occurred early in my investing life and made me wary of TGTBT. The poor kids today who graduate and save up 10K leverage themselves to the hilt on RE with free money. A 10k loss to me stung, a 300k loss to kids today is beyond imagination.

  7. On the other hand if he took his $50k and bought 10000 shares of Apple stock in 2005 at $45/share he would have had $7,000,000 if he sold at $700/share.

  8. Hang on…so now we praise and even respect the speculators? Well done jj? I know you get a range of opinions here but I thought unanimous disgust and hatred for the so-called specuvestor was sacred on your site VREAA. Aren’t they all largely to blame for the insane situation we find ourselves in? How is this anecdote any different from the feared off-shore buyer attempting the same bit of lucky timing pushing prices to stupid levels?

    • Easy credit, inflationary monetary policy, and taxpayer supplied mortgage insurance were what set the stage for the specuvestor. You can’t blame people for acting in their own rational best interest.

      • UBCghettodweller

        The thing is, this guy was actually rational and called himself on the general bullshit thinking that’s gone on for years. Careful praise of thoughtful decision making isn’t out of order.

        Why is relatively good judgement not something to be lauded? We condemn the opposite with ample vitriol on this forum, don’t we?

    • allen -> “I thought unanimous disgust and hatred for the so-called specuvestor was sacred on your site VREAA”.

      Do you not have any compassion?
      Is there no room in your heart to accept those who repent?
      Do you want to force evil specuvestors to take their sins to their graves? Or even to bestow their past sins of overleverage onto the heads of their children, and their children’s children?
      Do you not see that a specuvestor who casts off all their RE holdings, and follows the bearish path, has asked for forgiveness, has come into the light?
      ;)

      • Haha, okay, okay…we can all use a little more compassion in this world.

      • I’ll bet you were standing on a Mount when you wrote that, ED…

        I’m still trying to figure out how how they pulled off that Loaves&Fishes thingy… But no one at ‘Indocilis Privata Loqui’ would tell me.

      • Real Estate Tsunami

        No forgiveness.
        Once a specuvestor always a specuvestor.
        And Naked Official is right. He should be stopped from spreading his disease.
        All specuvestors moving from Vancouver to other parts of Canada should be quarantined for at least 3 years, meaning they’d be forced to rent for 3 years.

      • Naked Official #9000

        @real estate tsunami

        No quarantine can stop the legions of loyal cadres!

        By even provincial nomination program minimum requirements in Quebec!

        We must continue the assault on PEI!

        We will keep the mystique and prestige of Anne of Green Gables from the hated Japanese imperialist running dogs!

        (I can go on like this all day, sometimes I roll around with the national anthem blaring in traffic just to make sure loyal cadres haven’t figured out irony yet – if they ever do, the party will have to quarantine them upon their return, re education facility, all that jazz)

      • Real Estate Tsunami

        Commander Naked,
        I believe the White Devil, JJ, has breached security.
        Should alert our comrades in Halifax!
        I think Code Red should be implemented immediately, before Vancouver RE speculation disease spreads out of control.

  9. Our taxes were used to back stop jj’s speculative bet. Good decision making on his part and well played, but for the rest of us, just more redistributive madness.

    • Yeah. We’re congratulating jj in much the same way we’d congratulate a gambler for walking away from the table ahead of the game. “Good move; very wise”. We’re not congratulating him about sitting down at the table in the first place.
      He’s only ahead out of shear luck, but good for him to walk away.

      • Ralph Cramdown

        OK, seriously? That place would have carried for less than $1k/month all in, even with a 25 year am. Were rents so low that from a price/rent perspective, this was a dumb move even then?

      • Cyril Tourneur

        He’s not ahead out of sheer luck, he’s ahead because he acted rationally in an environment that encourages malinvestment and that artificially rewards exactly this sort of dangerously speculative behavior. In other words, it was a sure thing.
        What he is to be most congratulated about is his recognition of the situation, cashing out and walking away when he did. That’s real smarts.

      • Naked Official #9000

        @cyril

        I wouldn’t call the one bedroom in Halifax for 220k real smarts, but he has that Vancouver valuation system stuck in his head – we all do.

    • I disagree with the premise that buying a home or a rental unit is always “speculation”. Sometimes a house is just a home and a rental unit is just one way to diversify assets. JJ made a smart choice. Yes he could have bought Apple stocks, but he could just as easily have bought RIM. Rather than piling on, or questioning his veracity, why not just congratulate him?

      • I agree with you. For me, I have bought, because my wife and I need a place to live. I don’t want to put all my money in the bank or in equities or in funds or bonds, and so I have some (not all) of my money in my home. My monthly payments are easily manageable, and even if rates were to jump to 20% I can still afford the monthly payment (well, I would’ve taken out my money from my other investments to pay off the mortgage). In fact, we are paying less than what we would be renting for. Yes, the downpayment is gone into the house, but again, that is the part of diversification I am talking about. I would not buy for speculation or to rent out to others.

      • Price is what you pay, value is what you get. As long as we all understand the risks. Diversification does not mean both buying high and selling low as well as buying low and selling high.

      • Ralph Cramdown

        Diversification isn’t a goal in itself. It’s good to have a diverse portfolio of income generating assets, but it isn’t good to buy underperforming assets (currently investment grade bonds, rental units in most large Canadian cities, and always precious metals) just to be diversified. What’s the expected upside of buying a house with a cap rate of 3% if you can instead buy a REIT containing a diverse portfolio of properties with professional management and more tax efficient distributions yielding 4.5%? The house only makes sense if you’re expecting capital gains, and that’s the greater fool theory of investing.

        While I agree that sometimes a house is just a home and that ideally everyone of sufficient earning power ought to be able to own should they choose, I also note that, when real estate markets are rising, one never hears this jazz. When things start to go sideways or worse, agents always trot out the “your house is primarily your home and you shouldn’t think of it as an investment” BS.

  10. useless anecdote, a kid sucking off the teet of momma and daddy deserves praise? tells you a lot of the state of affairs in this country when we applaud someone for buying an overpriced condo at 19 with no job, no education and the umbilical cord still attached and then repeating the same thing at 26. grad student (unemployed)? 250k for one bedroom?? halifax???congrats JJ for having a rich family, by no means do you deserve it though as you have learned nothing. no surprise. ps see you in dartmouth.

    • Was that really necessary?

    • He bought when prices were reasonable and with a $50k down payment. That’s not much of a mortgage, probably cheaper than renting, so I don’t know how he’s sucking off the teet of his parents. He sold at the right time when it was overpriced and more expensive than renting.

      I don’t think the NS purchase was all that smart but hey, he’s still got money in the bank.

      Also, a $50k inheritance does not imply a “rich” family, especially in Vancouver…

  11. JFK's limo driver

    people making good money from flipping houses and selling illicit drugs. Two of the biggest and most important industries involved in Reducing Fertility Rates.

    • Bs2300@hotmail.com

      Loyal cadres everywhere approve of the watering down of national sentiment of this vast and mostly empty resource zone / lebensraum!

  12. Absolutely, this anecdote is of no use whatsoever. He should be patting his parents on the back instead of himself. Meanwhile his tuition (payed for by his parents) is still subsidized by this country. As an individual, JJ is still leeching off our economy.

    “Derp Herp, my parents bought me a house, and they sold it because I had to go to all across the country to halifax because I couldn’t get into a better grad school despite not working at all for tuition or housing. But since my parents are so rich, they let me keep the proceeds. Now pat me on the back” Hahahaha, get lost.

  13. Runforthehills99

    Great timing! The fact still remains is that some poor bloke is living in a loft that cost $520 k! Musical chairs anyone?

  14. From jj’s earlier comment above: “I had very supportive parents who paid all my school expenses and let me live rent free in their house while I leased the condo.”

    He didn’t buy the Van condo to live in, but as an “investment” to lease out, from what I read here…? I’d say that is a little weird for age 19.

    • I was 21 when I bought my first place, granted I was not living at home and renting it out, but whatever.

      It’s not weird, unusual yes, but not weird. He made an investment (as all people do, spec or not) and it paid off. Now he’s out, and into another investment, win or lose.

      What else should he have invested his $50k in at the time? It seems to have turned out well for the lad…

  15. Why are banks in vancouver still giving out money like free candies? Someone i know mine just got a 600K loan with 20% cash down. He has no job. The bank still push him to get another 600K if he can put another 20% down. He is a specker/builder and only deals cash.

  16. helped my parents out with 50 grand so they could keep their place. helped my in laws out with 15 grand so they could keep driving their stupid car and put food on their table.
    we life in a shit hole with fucked up neighbors.
    inlaws are telling us we should have bought earlier.
    can’t wait for this hideous stupid bubble to burst.
    its destroying the fabric this country is made off.

  17. You guys got to stop hating on JJ, he exercised rational economic thinking and gain from it, there is nothing wrong with his story and he should be congratulated for his gain.

    I had a similar story where I bought my first place when I was 22 (2001.) I think 9/11 just happened then and everyone were freaked out. I had a 100K 25 year mortgage, and at that time I was freaking out big time by such a large mortgage even with a very high paying job, but my monthly was less than rent (around $900 including property tax, strata fee, etc.)

    When the place when up to $500K in 2007, I was like my place was way overvalue, so I sold it to some idiot, and use the money to buy a $600K townhouse as I was starting a family, still holding $100K mortgage since I have aggressively saving and paying off my first place mortgage, I think I had like $15K left on my first mortgage.

    Seeing that the price continue to rise, I ended up cashing up my downtown 3 bedroom townhouse for $1M last year as it was super over value and started renting, as owning no longer make sense. So without the intention of speculating myself, I too have a massive win due to the bubble.

    It is foolish to hate on everyone who have gain from the Vancouver housing bubble, cus not everyone of them are speculator. The market(stock and housing) is always irrational and mad, but if you focus on value and economics thinking, there is always gain to be made, and there is nothing wrong with that. I think a big part of this site is a public service to remind people about this.

    • Nothing wrong with it, I think we can agree the people to whom you sold will not be as fortunate. If I aggregate you and they together I can make a strong case the economy is worse off than if prices stayed tracking incomes and rents. I can also make an argument you are doing everyone a service taking dumb money.

      I think you are putting more faith in acumen than luck of timing. I wouldn’t let past successes go to my head without humility.

      • “If I aggregate you and they together I can make a strong case the economy is worse off than if prices stayed tracking incomes and rents.”

        +1
        This is the point.
        The misallocation of resources causes all kinds of wasteful ‘slippage’.
        In the end the group is worse off, even though we may be able to point to some individuals who are better off.

    • I agree

  18. Has anyone considered that buying in 2005 in Gastown might have been a +EV (plus Expected Value) gamble. That is, it was not guaranteed to work, but the odds favoured it.

    Most of life is about making decisions in a state of uncertainty. The best we can do is get all the information and make the best decision we can at the moment, knowing that chance has a very big role to play.

  19. perfect example of taking advantage of mania instead of just predicting it . if you see crash is coming you should find a way to make profit .

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