Spot The Speculators #86 – “My unemployed friend bought two townhouses in Langley, one for him to live in (20% down) and one as an investment (30% down). His retired father bought four townhouses in the same development, all of them bought with 20% down.”

“I had dinner with a good friend of mine last night. He got back from Korea five months ago after four years working there. We were discussing about his work situation as he can’t find a job here and is now considering moving out of Vancouver.
The trick? He bought two townhouses in Langley, one for him to live in (20% down) and one as an investment (30% down). His father bought four townhouses in the same development (“his retirement plan”), all of them bought with 20% down. He told me: “we got them under market value, the developer gave us a discount”…
I asked him the question:”if the market goes down by more than 20% in the next 5 years and the bank asks you to put more money into the houses at refinancing time, will you be able to do so?” Puzzled answer: “no”.
He and his dad have basically put all their savings into that development. These are not the type of people you would imagine being RE speculators (they don’t see themselves as such), but they just don’t have a clue of what’s going on in the RE market here. They’ve bought into what the developer told them…
So here we are: one unemployed and one retired putting all their savings into RE. How strong can the market be when people like them are so over-leveraged in real-estate? How many people like them on the market?”

Makaya at VREAA 6 Jul 2012 10:41pm

These guys are gamblers who don’t even see themselves as such. They think they’re ‘investing’. They’d be better off taking their down-payments, walking up to the roulette table, and putting everything on black. In that scenario the close to one in two chance of doubling their money is better than their current set up, where there is a close to 100% chance of losing it all. Seriously… Gambling is not raised here as metaphor nor as hyperbole… they statistically would be better off with a two to one bet. Even at this extremely late stage of the cycle, we have buyers entering who cannot imagine Vancouver prices dropping. Truly mind-boggling.
And the “got them under market value” line is just so pathetic that hearing it induces cataplexy, a state where, overcome by emotions, your muscles lose tone and you collapse to the ground.
As Makaya says, how many like them in the market?
– vreaa

19 responses to “Spot The Speculators #86 – “My unemployed friend bought two townhouses in Langley, one for him to live in (20% down) and one as an investment (30% down). His retired father bought four townhouses in the same development, all of them bought with 20% down.”

  1. Carioca Canuck

    The only people who ever get their hands on an asset priced at “under market value” are the trustees in a bankruptcy………..heh.

    • Pirates often do quite well, CC… And dont get me started on WarPrizes… Booty, “commandeering” and all that… Then there’s EminentDomain… And a veritable host of other opportunities/categories…

  2. but this guy is making an amazing return on his initial investment. I must say I am so confused about real estate here . I spoke to my uncle last week who has lived in vancouver for 25 years and has been building and selling houses. He has reassured me with all he is worth that the prices in vancouver will NEVER fall. People have too much holding power. He says the very worst case scenario is an increase of 2 to 3% this year and that would be a disaster as hisloan is being charged at 4% and he would loose 1% on his investment, I am so confused. I followed these type of boards several years back hoping for price to fall but wjhat happened is they went up by 35% since 2008.

  3. …”since 2008″. You’re basing what will happen in the future on four years of data? Apologies if you’re being sarcastic but you obviously have not lived through the bad times in this city. Yes prices have gone way up but they can come down here. I remember in the 80s, 90s and early 00s when real estate had its ups and downs and when the Canadian economy was in the tank. If china goes down (and it will) mark my words, Canada will go down as well. Real estate can drop like crazy. There is nothing special about Vancouver.

  4. Carioca Canuck

    Nemesis said……”Pirates often do quite well, CC”

    True ‘dat……..the folks who work in the real estate industry have done quite well for themselves.

    • Dimitri Tishchenko

      Great article. The last comment caught my eye.

      “Ok…so again another Turner advocate. I tend to agree that there are certain geographical areas in Canada that housing is overvalued and potentially facing a housing downturn. Maybe 10-15%?, who knows. Overall this will be a good wake-up call for those who are bidding on another “investment” property, and hopefully stabilize the Canadian housing market. Secondly, rates are low and they will increase at some point in the future, we get that. But for those who are locking into a 5yr fixed at 2.99% today will not be affected for 5 years, or those who locked into 3.49% last year will not be affected for 4 years..etc… However, what I am getting sick of hearing is the comparison between the “US Subprime Mortgages”, and the “Canadian High Ratio Mortgages”. There is simply no comparison other than the fact that they are both loans secured against a residential property. The US Subprime were loans for people with poor credit, no credit, no provable income, or no income period, and ended up having to pay a high interest rate just to acquire a home.
      The Canadian High Ratio 5% or no money down purchase had to adhere to strict qualifying criteria, good credit, and good provable income. I could go on and on but now just tired of typing. All I can say is that there is no comparison between the two, they are completely different, and the risks associated are not what Turner and others think.”

  5. I actually think it may go down as much as 40% not 20%. Having said that, at the time of mortgage renewal as long as your friend keeps up the payments to the bank they will renew him a the going rates and terms.

  6. Great investment! Because there are so few townhouses in Langley…

  7. When we bought our townhouse in Richmond 10 years ago for 206K (we sold it last summer to get out in time), we asked how much the previous owner paid for it – they bought for 280K when there was a previous RE boom – the example of the prices going down in Richmond where everyone was saying that the prices can only go up since it is very popular within the HAM buyers.
    @ACP – who said that there are few townhouses in Langley? Have you checked the new development and the ones that are planned soon? There are going to be the flood of of them.

    • I have a friend who bought a condo in Richmond in 2001 for $207K. The previous owner had paid $300K. It came fully furnished too and had never been lived in. The previous owner lived overseas.

    • 4SlicesofCheese

      ACP was being sarcastic

  8. The Poster Formerly Known As Anonymous

    Heard on CKNW six months ago:

    “Sales are booming in Langley City! We are 50% sold at Serenade”

    Heard last week:

    “Sales are booming in Langley City! We are 50% sold at Serenade”

    Sales are booming and yet they can’t sell anything for six months?? How does that work??

    • I work at home, and generally leave the radio (on CKNW) on low as it relaxes the dog and distracts him from outside noises. You would not believe how frequently this ad plays. I generally work with headphones on, but take them off when I go for a snack etc – it’s virtually impossible to go for those headphone-less periods without hearing this ad.

      They must be desperate.

      • The Poster Formerly Known As Anonymous

        LOL yeah, I know… I only listen to catch the market and traffic news when I am driving, which is not that many hours of the day… and yet I could recite the ad almost word for word. I like how long it has been playing with 50% left, and a “limited” number of high yield investment suites… all in a booming market.

  9. The Poster Formerly Known As Anonymous

    Actually while on the subject: recently an ad began appearing on CKNW calling on people in Vancouver to come and learn how to flip houses for a living. The host of “flip this house” is coming to vancouver and offering people an opportunity to make 10 to 40k per deal without risking their own money. Has anyone else heard about this? The ad runs quite frequently.

  10. I heard that back in 2005/2006 in the USA, no down payment, and we all know what happen.

  11. What better place for a little light YVR RE flavoured socio-cultural/BattleOfTheSexes detritus… than “SpotTheSpeculators!” (which, come to think of it, sounds like a terrif! premise for a LowBudg GameShow)… From the comments/respondents to a Sun piece entitled, “Vancouver’s dating scene: Why is it so hard to score?”:

    “These ladies are known as “Vancouver Specials”. Just like the house[s], [they] are over valued. The[y] expect a bidding war. etc.” – anon126985045

    http://tinyurl.com/bvehagr

    • and according to WhiteNinja in the same comments thread….

      …”About three years ago I stopped even bothering to attempt to pick up Vancouver women. It’s the female equivalent of a housing bubble – Vancouver women have a ridiculously over-inflated opinion of themselves, and what they feel they ‘deserve’. A few times I’ve had women that wouldn’t give me the time of day find out more about my business, where I live, and what I do, and all of a sudden I’m attractive (I’m only ‘cute’ normally). I’ve gone on dates with some of these girls, and it was all about what I could do for them, and how much I could provide for them. When I contrast this with women I meet in most other cities in the world, I just can’t be bothered with Vancouver women.”

      [NoteToEd: the prevalence of RE – both as metaphor and in the literal sense, as a crucial social signifier employed in the process of assortative mating – in that article’s comments thread is simply staggering]…

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