Spot The Speculators #51 – “If these people succumbed to the greed, I can just imagine how many more there are out there.”

“I have some friends here who live in a nice, upper-class neighbourhood full of big houses. They are absolutely stretched to the limit. There’s no money for anything anymore. And unfortunately they aren’t the only ones I know who are basically counting down the days until there’s not a penny left on the line of credit to draw from (the credit cards are long maxed out). Next stop is cashing out their RRSPs, they tell me. Then that’s about it. End game. Why the mess? A bad investment in a condo that’s done nothing but depreciate in value since they bought it presale (flip gone wrong). Now it’s a losing rental property that is draining their every last resource. And these were people I looked up to financially, they were very conservative with their money for the past 20 years, even had their mortgage on their principal residence paid off by age 45! I can’t believe the risk they took. And if these people succumbed to the greed, I can just imagine how many more there are out there.”
pricedoutfornow at VREAA 9 Aug 2011 8:53am

15 responses to “Spot The Speculators #51 – “If these people succumbed to the greed, I can just imagine how many more there are out there.”

  1. Whatever they do, they shouldn’t draw on their RRSPs. As I understand it, any amounts contributed to their RRSPs more than 2 years ago are protected in the event of bankruptcy. So if going BK is the end game, it’s probably best to do it with your retirement savings intact…

    • Sage advice but see vreaa’s Australian anecdote a few days ago. Families get so emotionally tied to providing stability for raising their children they will make bad decisions to keep it a reality. Madness!

  2. Somehow I don’t think they will get that important piece of legal advice or pressured not to take advantage of it.

    Either way I find it hard to believe people in a nice neighborhood with a paid off house can run into these much money trouble, maxed out CC, almost no LOC room left? Just how much can a relatively new condo bleed that makes it this bad? There must have been a LOT of large spending/over spending going on as well.

    • pricedoutfornow

      Yes, there’s more to the story than just the condo-I don’t want to post too much information about these people. Let’s just say the other debt also went to some sort of property-related purchases.

  3. Another landlord buying an “investment” that doesn’t pay. I hear this story at least once a week.

    That’s why I get so mad when I hear Don Campbell and his ilk talking about great investment properties. They actually ran on BNN. He did a segment on Surrey & one on Hamilton. Both using unrealistic numbers.

    I did this post about it http://landlordrescue.ca/how-to-analyse-property-cash-flow/

    • pricedoutfornow

      To be clear, they didn’t plan on becoming landlords-this was to be a flip, pure and simple. Unfortunately it didn’t work out that way and now they’re stuck as accidental landlords.

    • Thanks Rachelle.
      That post of yours you link is a good read. Good analysis.
      Have you done any similar analysis for Vancouver recently? (Even just for a laugh?)

    • CanuckDownUnder

      Thanks Rachelle. I second what would surely be a hilarious Vancouver example. 🙂

    • I have no idea how the idea got started that you can strike it rich as a landlord with one Condo. MDUs, sure, but a single unit?

      I very very briefly a few years back considered this as well but after looking at the rental market and calculating costs I realized I’d lose money every month.

      The most bizarre thing was a chit-chat with a guy who worked with me. He told me wanted to buy a condo, rent it out while he still lived in a rental unit in the Westend. The argument he made for it was that because it was rented out he didn’t rely on appreciation. When I pointed out to him that he would lose money every month on it he actually IS looking for appreciation he “covered his ears” and started singing “nanananana I can’t hear you” very loudly.

      I really don’t get it. Even when they do their own math they see something else than what stares at them from the paper.

  4. Well, looks like the bubble might get even bigger before it gets smaller:

    ‘”To raise interest rates would drive up the Canadian dollar, making our exports that much less competitive. Now it seems almost inevitable that the next move for our benchmark interest rates will be down.”

    But that could push the country into a deep and prolonged recession with record levels of private debt, according to Hlinka.

    Cutting interest rates could further overheat the housing market and encourage people to spend beyond their limits, creating a bubble that will soon burst, predicts Hlinka.

    He points to Vancouver, a city whose housing market has cooled considerably this summer, as a harbinger of things to come for Toronto and other Canadian cities.’

    Source:
    http://www.cbc.ca/news/canada/story/2011/08/10/canada-interest-rates.html

  5. I have nine friends, family, co-workers in that boat. They used their principle residence as a bank machine to do renos, buy investment properties, travel, buy new cars. Everyone almost said the same thing: “Money is so cheap to borrow and everyone else does it”

  6. Prolonged low interest rates = no rush to buy now. People waiting to see what happens knowing rates not going anywhere will cause stagnation which could spur flippers to pull the cord and get out thus initiating the fall. I’d prefer rates going up but certainty is good too.

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