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New investor here...

3

3dartist

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Hey guys,

I'm new here and just wanted to introduce myself. I'm 27 years old, born and raised in t-dot in the corso italia area. Unfortunately these days I live in a communal gathering called London, ON. (start laughing)

I've always been interested real estate (and investing into it especially these days) and have been reading some very insightful postings to several pre-construction threads for the past few days. I've been contemplating dumping my money into pre-construction condo(s) rather than the stock market these days. I've been personally entering every condo presentation in the downtown core and researching everything I can.

And.. in conclusion:

The only ones profiting in the black are those who picked up condos 5-10 years ago, and the rest of the people are flocking in hopes to do the same, but profit margins are deteriorating and it's just not a reality. The reality to me, feels that the market has hit a tipping point, most condos are picked up by investors basically skimming the top and HOPING for a saturated market to further grow in the next 5 years. It feels like lots of investors ran too late to the ringing of a gold rush.

I am pulling back more and more from the idea of condo investing and will look into homes, or vacant land outside of the city, something around the Grimsby area.

I think the real estate areas to make some serious cash is not in Canada, but the US. I bought a lot of cash when the Cdn dollar was above $1. I just may do that.

Thoughts on my thoughts?
 
I would be careful with the US. It might be just a tip of the iceberg hearing how they only have to make small deposits. At least in Canada you have to put up 20% of the cost for pre-constructions. In the US I heard you only had to put up 5% which makes the market very dangerous.
 
if that's your requirement from builders then I don't think you're suited to buy US real estate. If it's just you, you'd just fall into the trap of everyone putting up little down payment and having to sell to pay off. Alot of sell offs too fast pulls the market down and you with it.
 
AKS said:
In the US I heard you only had to put up 5% which makes the market very dangerous.
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Depends on the bank and the location.

It might be worth looking at bank repossessions.
 
There were/are several condos in Toronto that only required 5% down and then 5% 90 days later.
 
I wonder why you are considering the Grimsby area? It's a pleasant little town but not growing quickly, and won't grow quickly due to land controls on the Escarpment and the fruit-growing agricultural areas.

You mention vacant land outside the cities. Unless you are prepared to buy and hold for many many years, you should probably forget that as an investment. Such land is bought in large chunks by the big developers, who are prepared to sit on it for ten years or longer until it is time to develop. In the meantime, of course, it generates no cash flow.

Sorry if I'm sounding negative. If an investment is what you're looking for, research your desired locations, buy a rental property (condo or otherwise) in a decent location, put 25% down, leverage the balance, and collect your cash flow.
 
Also the prices in Grimsby are pretty high already when you could probably buy a cheaper plot of land in either Beamsville or Winona but also be advised that most of the land around is under strict control. Or some celebrity has already paid a fortune to start up a crappy new winery.
 
Observer Walt said:
I wonder why you are considering the Grimsby area? It's a pleasant little town but not growing quickly, and won't grow quickly due to land controls on the Escarpment and the fruit-growing agricultural areas.

You mention vacant land outside the cities. Unless you are prepared to buy and hold for many many years, you should probably forget that as an investment. Such land is bought in large chunks by the big developers, who are prepared to sit on it for ten years or longer until it is time to develop. In the meantime, of course, it generates no cash flow.

Sorry if I'm sounding negative. If an investment is what you're looking for, research your desired locations, buy a rental property (condo or otherwise) in a decent location, put 25% down, leverage the balance, and collect your cash flow.
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Walt, don't sweat it. I want to hear people's thoughts.

In regards to the US real estate. I think that is where the real profits are to be made. If you picked up USD when it was around or over par , head to LA, pick up a foreclosured house at 40-50% cheaper than previously priced, hold onto it for 5-10 years. (pick up a 700k home for about 450k) In the mean time the canadian dollar will return down, perhaps not to 60/70 cents, but it's predicted to land at around 80-85~ in the longer term. Factor in the appreciation on your 700k home, then the CDN exchange rate, you'll make more than a million bucks on a 200k downpayment within 10 years.

Walt: in regards to vacant land.. I would be thinking long term, again like 10 years.

Making money off of condos is a lot harder now than it was 5 years ago. I want more value for my dollar, and toronto is a pricey market right now. So i'm looking else where.

The only thing I would consider to buy in toronto is a house, and only if i either had positive cash flow or lived in it for YEARS. If things continue to weaken, the 1 bedroom "investor preferred" condos are the first thing to lose their value... you already see the quick depreciation condos are facing. You already see people on this forum calling "used" condos that are just a few years old.

I'd like to hear everyone's thoughts about where the best place to invest is. People are ducking their heads on the markets or riding it out, looking for deals on homes(which is still rare in toronto).. or dumping their money in the US housing market.
 
Jayomatic said:
Also the prices in Grimsby are pretty high already when you could probably buy a cheaper plot of land in either Beamsville or Winona but also be advised that most of the land around is under strict control. Or some celebrity has already paid a fortune to start up a crappy new winery.
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Haha, that's good to know. Perhaps not grimbsy though, but i was using it as an example of "out of the city". My bad.
 
3dartist said:
In regards to the US real estate. I think that is where the real profits are to be made. If you picked up USD when it was around or over par , head to LA, pick up a foreclosured house at 40-50% cheaper than previously priced, hold onto it for 5-10 years. (pick up a 700k home for about 450k) In the mean time the canadian dollar will return down, perhaps not to 60/70 cents, but it's predicted to land at around 80-85~ in the longer term.
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3D,

Both bets- a stronger greenback and a rebound in US housing are speculative bets, not investing. Your goals could be accomplished dramatically easier by just buying shares in beaten down US homebuilders that act as a proxy for the health of the US housing market.

My advice is for you to head to somewhere like South Florida, find a distressed condo on the ocean, and buy only if your true net income divided by your purchase price can generate a return today of say 8%+. If it can then I believe you are capitalizing on the weakness in the housing market.

If not, then I believe you are asking for trouble. Just because a house was worth $700,000 in 2006 does not mean that it's a deal in 2008 at $400,000- unless of course you intend on occupying it as your primarily residence!

Peace & Kindness
 
The past is no indication of the future. Don't assume since these once-overpriced US homes will ever reach that value again. I don't know that we'll ever see a RE bubble of that proportion again.

Aside from the mortgage crisis, there are other perils to consider. The entire US-styled suburbs will need a serious rethinking in near future, with peak oil upon us and no decent mass transit system in most US cities, the investment potential isn't so great for many properties down there. As well, there is little reason to believe our dollar will go that low in the near future, and possible it could end the other way around. They are trillions in debt with little hope of recovery, meanwhile Canada economy will remain strong due to our commodities/natural resources.

I'm sorry to say that there's no sure fire way to invest, but it's important to look at all scenarios and not follow anyone's advice without researching yourself. The general rule is, don't buy something if it can't rent for 10% of it's value. That means if a 200K home can't fetch 1600$ a month in rent, it's not a good investment.

The value created in RE today is all artificial. Not long ago, Americans would celebrate paying off their mortgages by having mortgage burning parties... now a days people are buying without any intention of ever actually owning the property.
 
New investor here...

Phew, i read that and shuddered. I thought he was back in a different form.

(some newbies may not get that)
 
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