DM at VREAA 2 Jun 2011 10:31 am – “My mother owns a condo in White Rock which she bought in 1995 for $144K. It is now assessed in 2011 at $275,000. Looks like it almost doubled in price right? It is now at the stage when it requires a renovation and realtors have suggested it its current state it may sell for around $239,000.
Purchase price $144,000
Leaky condo repair $42,000
Additional condo fees/repairs $6,000
Condo fees over 17 years approx $39,000
Taxes $23,600
Estimated renovation cost $40,000
Total cost, not including property transfer taxes, other repairs, mortgage interest and realtor’s fees: $294,600.
A loss for holding the property for 16 years of more than $20,000.”
Common scenario. Many RE investors use fudged headline ‘numbers’ to kid themselves and others that they have done better than is actually the case. They don’t bother to do the back-of-the-envelope math which shows different. DM’s example shows that, even through a rabid mania, RE can have very ordinary returns. In normal times, it can be a money sink. And, needless to add, in bear markets it can wipe people out. It’s just shelter, folks, it should be priced accordingly. – vreaa