09-06-2019, 07:55 AM
Rainrider22 Wrote:Quote:I have been investing in Condo's for rent for the past five years. I agree at best, they are cash neutral right now. However, you guys are missing a very important factor, it isnt just how much the property appreciates, you have someone else paying for your investment. Every year that goes by is more equity I have built up, opening more room to purchase more..... If I said here is 100 stocks, it is worth $100 000. you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???. Oh, did I mention the whole tax write off component too ? So when you say you "crunch the numbers" make sure you take the whole picture into account. If it is a bad investment then why are so many people doing ?
Don't get me wrong: I have owned rental units, and am not negative about real estate as an investment generally. I just can't see the sense in purchasing at today's prices. You've been very lucky the last five (more like fifteen) years in Canada with real estate, but at some point- logically- the luck will run out. The people buying today are I think in most cases in a cash flow neutral or negative position, and are speculating that prices will continue to appreciate. I'm not really in a position to say whether they will or not, but the one thing we can agree on is that there is risk.
You're right that real estate offers the ability for individuals to leverage, and that's a benefit. But, of course, leverage cuts both ways, and if we see capital depreciation in the future, leverage will magnify that loss.
To answer your question about your hypothetical stock pitch, of course I would take that deal if I knew the stock was going to appreciate- but that can't be known. Buying equities on margin is rightly considered by most people to be an extremely risky proposition. But leveraging into real estate for some reason is not.