Vancouver Sun Profiles A First Time Buyer – “I just wanted to build equity and not pay rent.”

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“Myles Wilcott, a single, 31-year-old general manager at Canadian Linen & Uniform Service, is among those who have met new financial requirements in order to buy a condo. He paid $412,000 for 705-square feet two-level loft in a 16-year old building in the Gastown district of Vancouver.

Wilcott had been looking at condos throughout the winter, waiting to find what he was looking for at a price he could afford.

By this spring, he had almost enough in his registered retirement savings plan to meet the minimum down payment set by the federal government. He had sufficient income to cover the monthly payments, even though new federal regulations meant he would be paying hundreds of dollars more each month than he would have been required to pay before the rule changes.

He was not concerned about reports of record high prices and talk of a possible crash in the real estate market. “A lot of people talk about getting into the market to make a quick buck,“ Wilcott said. “I just wanted to build equity and not pay rent.” …

Mr. Wilcott, who graduated from Simon Fraser University in business and human resources, said in an interview he had thought about buying a home a few years ago but did not qualify for a mortgage that was big enough to buy what he wanted.

He turned his attention to improving his credit rating, pursuing his career and putting aside some savings. “I was able to climb the ladder enough to the point where I qualified for a [25-year] mortgage.”

Mr. Wilcott started the home-buying process in December. The first step was to arrange for pre-approval for a mortgage. He had an agent to help him search in earnest for what he wanted – a loft-style condo in the downtown area. He looked at 12 different condos before finding what he was looking for.

He put down the minimum five per cent, which was about what he had saved in his tax-free registered retirement savings plan. A federal program called the homebuyers plan allows purchasers to use their RRSP as long as the money is paid back within 15 years.

His mortgage payments of $1,900 will be considerably higher than the rent of $1,200 he was paying before he bought the condo.

However it was his outstanding debts — not the monthly payments — that almost tripped up his mortgage application. Arrangements were finally confirmed at an acceptable rate with Vancity Savings Credit Union.

The whole process was a bit more stressful than he anticipated. The most difficult aspect of the purchase was evaluating the conflicting points of view he received on home buying. “I got too many people involved … there was such a wide array of opinions — buy now, don’t buy now; wait five years, don’t wait; don’t go into that neighbourhood, go over there.”

But once he met the qualifications and found what he wanted, he was ready to close the deal.”

– image and text from ‘First-time homebuyers adjust to federal changes; For those who can afford it, home ownership still a viable option’, Robert Matas, Vancouver Sun, 15 March 2013 [hat-tip OH YAH]

“$700 per month more outlay for accomodation plus condo fees, taxes, legals, move etcetera, etcetera (you all know the drill) and no mention that all his savings were wiped out during the purchase. Live and learn. Got to get on that ladder even if it only leads to a periscope.”
Farmer, commenting on the above story, at VREAA 16 Mar 2013 3:22am

Agreed, we don’t think Myles really did the math on this.
He says “I just wanted to build equity and not pay rent”.
Even if he’s not fully conscious of it, he’s speculating on future RE price strength.
We’d bet the math shows that he wouldn’t “build equity” without that.
– vreaa

61 responses to “Vancouver Sun Profiles A First Time Buyer – “I just wanted to build equity and not pay rent.”

  1. This story seems to show the current sentiment that real estate will always go up. He researched 12 condos (i.e. researched the product) quite extensively it appears. However, when it came to researching the market it looks like he just asked some friends around a table while having a beer (some buys, some don’t buy).
    Nothing said about maintenance fees as well. The difference is probably closer to $1000.00 a month at the end of it. I am making an assumption that he is stretched based on his downpayment and efforts to qualify for a mortgage. When interest rates go up he will be in a more challenging situation.
    Gastown is a neighbourhood in transition but the DTES right next door isn’t. Some would argue they are the same neighbourhood.

    • He should be chasing his career wherever that may lead. Not buying an albatross that will weigh him down and cost more than he will ever dream it could. I feel sorry for him.

  2. Good luck with that, your 2 cop guards will need bigger guns.

  3. SFU Business degree and you made that decision?

    • I agree. It just show that educated folks often have no clue about personal financial management ….they do well at work, and poorly at home. I have a few of them at work. Doesn’t matter how much cash they make, or how many bonuses they get….always in sht..state financially.

    • There’s an OhSo important distinction [first popularized, I believe, by Samuel Clemens] between ‘yer schoolin’ ‘n yer education’, QuadrangleAlumni…

      Although Mr. Wilcott, formerly a BizStudies matriculant ought to know better – he will undoubtedly receive, in short order, an outstanding ‘education’ – as it were.

      [NoteToEd: Reading between the lines, poor Mr. Wilcott has unwittingly gone into hock to acquire a SocialSignifier that – without which – he had been incorrectly led to believe he could not possibly achieve his life’s larger amibitions. The technical term is, “BamBoozled”.]

      • A timely example of the phenomenon from another domain…

        [G&M] – Toronto Police issue buttocks-enhancement warning

        http://tinyurl.com/czaqr46

        [NoteToEd: Cue “EnglishHungarian PhraseBook Trial”]

      • Oh Nem, it would be such a shame if your hovercraft were full of eels. Nevertheless, I’m sure it’s in a better state than Myles’ loft will be in a few years.

    • Probably from one the other sub-disciplines besides finance ie. marketing, organization behaviour, management info systems etc.

  4. This read like an advertorial to me. Cheerleadering. The timing is vital: Friday before a key selling weekend. If this message doesn’t get bought soon, we’ll be waiting for next Chinese new year again.

    • this article was also listed in the Province ‘focus’ section… which i believe is a paid advertorial portion of the paper

  5. Ralph Cramdown

    I’d love to know where this “viable option” phrase originated as it relates to first time buyers blowing their brains out. I’ve seen it in both Toronto and Vancouver palaver of late. Maybe CREA has a secret talking points memo?

  6. pricedoutfornow

    He didn’t want to pay rent…these people crack me up! They’d rather shackle themselves into a bigger monthly payment (plus maintenance, property tax) for 25 years than a nice, easy rent payment that won’t go up more than 4% a year. I called my credit union once and the woman asked me “Aren’t you TIRED of paying rent?” trying to promote their low mortgage rates….I thought “yeah…well won’t I be TIRED of paying a mortgage that’s even higher than any rent payment on basically the same crappy condo that I currently live in?” I already calculated it would cost be double to buy the same place that I live in, even with 10% down. And I’m not overly fond of this crappy condo in the first place, if I had to buy it, I think I’d go into a deep depression.

    • Ralph Cramdown

      Maybe we should print buttons: “I’m throwing my money away on rent!”

      • “Proud to throw money away on rent!”

        Proud… hmm… reminds me of another movement. We can borrow from them. =) Run our own parade…

  7. So, whats he going to do with his “loft style” condo when it’s worth X% less, interst rates hae gone up, and he has a wife and a kid or two squished into a shoebox? People never think ahead, it seems.

  8. It seems that this guy has very little savings and outstanding debts. Why on earth would he overstretch himself even more and buy a condo downtown?

    Notice how the article is very ambiguous about actual numbers (down payment, Condo price, fees, etc) ….they know his situation doesn’t make sense by any standards.

  9. As it turns out his monthly payment obligation will actually more or less double with this purchase. A quick browse on the MLS will show a unit identical to his for the same price as his in Gastown.

    I posted this in the original thread, but its worth repeating. How does someone willingly submit to this punishment? Unless they figure serious appreciation is ahead?

    Paid $412,000 and put 5% down.
    Mortgage: $1900 a month
    Maint Fees: $300 a month
    Taxes: $100 a month
    Utilities: $50 a month

    Total: $2350 a month, or $28,200 after tax dollars a year just to pay for the condo.

    Horrifying numbers.

    I hope being a general manager at a linen and uniform service company pays $90,000+ a year.

  10. Buddy is 31 and he just managed to scrape together 20K for his 5% downpayment? Sheesh. This is going to be “foreclosure” story in 5 years.

  11. Real Estate Tsunami

    Another Vancouver RE success story.
    You’re just jealous bears. 🙂

  12. He just wanted to build equity…. at or near market peaks. A 10% drop in property value equates to a loss of about $40,000 (or 2X his RRSPS savings), which at $1900/mo payments translates to about 5 years of payments to the bank to break even on the equity loss. In that time he will have also given the bank about $75,000 for the privilege of having name on title. Hamster, meet guinea pig wheel. The banks must make money at all cost, no matter what the message is they distribute to the masses.

    • The craziest damn part, Roy, is that he was already going underwater between the time he chose the place and when he actually moved in. That took 30 days and in todays market we can easily estimate how long it will be before his 5% down is wiped out to zero.

      Who shops for housing under those conditions. Sheesh!

      • Yes Farmer, in a buyer’s market there is no rush to get in. For someone with a business degree it is concerning (if there is any truth to this story) that someone would think (as per the article):

        “He was not concerned about reports of record high prices and talk of a possible crash in the real estate market”

        Which shows tremendous ignorance of current reality and market fundamentals.I wonder is that him saying that, or the industry? Sadly I am not surprised they would pump this message out.

      • Maybe he spent all his time getting drunk in “The Pit” and cheated on the exams. Oh wait….was he an SFU guy? Of course, that changes everything.

    • Can he get fired by the owner after this article is published as his serious lack of judgement and logical thinking are exposed=professionally incompetent? I guess he would need to have a proper level of these skills to be a successful general manager – to be able to recognize and estimate the risks associated with the current market conditions? Arrogance, denial and stupidity?

  13. DearReaders… your MondayMorningZen… and Quote ‘O TheDay…

    “There’s no easy way to do this when you’re dealing with peoples’ homes.” Mayor Dennis Walaker, Fargo, ND

    [WSJ] – For Sale, Cheap: Homes in Fargo

    …”Seven waterfront homes in Fargo, N.D.—with as many as four bedrooms and assessed values ranging above $500,000—will be sold at auction for as little as pennies on the dollar Monday.

    Although hundreds of people saw the houses in recent walk-throughs, the residences weren’t necessarily the focal point. Many would-be buyers were likely eyeing details like the stainless-steel appliances, custom cabinets and fancy light fixtures, said Jim Lakoduk, a Realtor with Pifer’s Auction & Realty, which is running Monday’s auction.

    “These homes are some of the very best in the city,” Mr. Lakoduk said.

    The catch? The houses, which were purchased by the city and must be moved away from the flood-prone Red River of the North or a creek that flows into it, are so large they can’t be hauled to higher ground without being cut into pieces.”…

    http://tinyurl.com/cc6b86g

    • TeeHee!… Shall we employ the DarkArts… just this once, ATP… to peel back the curtain and expose the Wizard operating TroyMedia’s ‘levers’…???

      ….”The other 50 per cent of Troy Media’s content is responsible for 90 per cent of their revenue. Organizations that want to have their voices heard, such as the Canada West Foundation and the Frontier Centre for Public Policy to name a few, pay Troy Media to edit opinion pieces and distribute them to a network of daily, weekly, monthly and online publications. This original idea, which distinguishes Troy Media from traditional news outlets, is the brainchild of founder and editor-in-chief Gary Slywchuk.”…

      A cursory ‘network profile’ of Mr. Slywchuk&Cronies combined with a quick flip through the Directors of either the CWF and/or the FCPP tells you everything you need to know about Troy’s ‘editorial slant’, ATP… i.e. it’s ties to RE, Construction, BigBusiness & EvenBiggerFinance… [and let’s not talk about ElLobbyistas…].

      I almost feel ‘dirty’. Better have a shower.

      [NoteToEd: More AstroTurf than the SuperBowl!]

  14. A story from me…..

    My buddy was looking to upgrade to a house in the Coquitlam area. Currently they own a apartment. Not sure if they even have than 10% down payment for a “used” single family home. The other day we were chatting and he mentioned how he wants to upgrade to all new appliances and do a bunch of renos when he buys a place. He said that I bought a house without a mortgage so I could upgrade all the fancy appliances at my place. Here is my thought: my place is in Surrey, which is 500k, for a single house. He wanna buy a house for 700k. His household income is not more than mine. If he is not overextending himself, he could easily do the upgrades. With 200k extra for a home, that’s half of lifetime saving between him and his wife. I guess no more trips and fancy toys.

  15. i weep for another brain wash soul. With all the media and cohorts/family wearing away the patience and pushing the desire button, another one bites the dust and will be naked when the tide recedes. tear drop.

  16. Knowing that tax payers are backing buddies mortgage makes me want to cry.

  17. Can’t decide:
    King of Kensington or Stayin’ Alive

  18. Has anyone checked to see if “Myles Wilcott” exists?

    This may be shocking, but I have heard rumours that the real estate industry has invented buyers for the purpose of propping up a falling market!
    I’m truly sorry if my suspicions have shaken your faith in the realtor profession. 🙂

    • 4SlicesofCheese

      Apparently he was in SanDiego for school till 04, missed one crash but wont miss this one.

    • Yes. He also is a professional bagpiper. You can hire him for events.

      http://vancouverbagpiper.com

      Och, yee old Vancouver Market Lament.

      • On the brighter side, the LoftWarming Cèilidh is sure to be a success….

        [NoteToEd: All in all, given TheBurough’s love of Piobaireachd and GaelicDancing, I’m shocked – simply shocked – that Mr. Wilcott hadn’t considered YaleTown.]

    • Dadeedumer….what are you implying? I suppose now you want Myles to start deleting his facebook page….

      Shame on you, bitter bear.

  19. 4SlicesofCheese

    http://www.cbc.ca/player/News/Canada/BC/ID/2348578858/

    The Irish are coming! Bringing engineering and construction skilled immigrants, cause thats what we need more of.

  20. Here we go again. So we have this Myles Wilcott, a guy who cannot save even 5% of his down payment. Instead he’s pulling out of his RRSP via the HBP program. So that CHMC and some bank can lend him money for a $412K crapbox in the sky in still transitioning part of town.
    I dunno how many times we have to shake our heads in disgust.

    Wake me up when will we see the day people who cannot save $20,000 are no longer allowed to get a mortgage.

    • pricedoutfornow

      I would have to say that the vast majority of people who pull money out of their RRSPs via the HBP never pay it back-they just let it be added back onto their tax returns as income for the 10 or 15 years. Kind of a waste I think.

  21. Thank you VREAA for introducing us to this Greater Fool.

  22. A simple run of the numbers easily reveals that this guy will be seriously f**ked. Why outlay $2300 a month for a loft that will rent for, at most, $1700? Common sense isn’t so common.

    • Vancouver Hipster

      But he is building “equity”. Favorite word of REALTORS.
      You can take any asinine decision in your life as long as you think you are building “equity”.

  23. realistically….what type of appreciation does he expect on a 700 sq. ft. shoe box in Gastown? That kind of space isn’t even worth what he paid for it. Vancouverites need to start looking at price per square foot to assess real value and not perceived value.

  24. The scariest part of the article is that his existing debts caused a kafuffle in the mortgage approval process. It says his down payment came from his RRSP. So was the debt that he now has to pay back to himself factored in there? And someone should have told him that the $700 difference going in savings every month WAS building equity.

  25. For those of you that thought Myles made a mistake… the property has now increased almost 15% in value in less than one year and similar units in the same building are renting-out for over $2,100 per month.

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