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Old Apr 20th 2012, 8:20 pm   #76
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Default Re: Buying v/s Renting

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Originally Posted by Hawk13 View Post
OK, I get that but must be missing something, how do they track that? Say my friend has five gold coins that he bought years ago and is planning on going to say Australia for work for four years and sells me one of his gold coins. He keeps the other four as he plans on cashing them in when he retires 'cus he didn't believe in RRSP's. When to they capture the capital gains? and how would they capture the CG if I cashed in his gold coin when I was going thru retirement in say the next 5 years?
Canada's tax system is based on self-assessment and there is an assumption that you will be honest. When you become non-resident you are supposed to report all your capital assets and their values.

With some commodities like precious metals and stones that are not easily identified I am sure it is possible to avoid paying taxes if you have a mind to do so. However, just because "they" can't trace it does not mean it is not taxable. Not declaring taxable income is still fraud.

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Interesting, why then does everyone moan and groan about how the government grabbed when they sold their parents home?
Two possibilities:

a) people like to moan about stuff even if it is not true (present company excepted of course)
b) they need a better accountant.
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Old Apr 20th 2012, 8:24 pm   #77
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Default Re: Buying v/s Renting

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Interesting, why then does everyone moan and groan about how the government grabbed when they sold their parents home?
Why do Brits moan and groan about anything? In this case it's Inheritance Tax, which Canada doesn't have. BTW I don't know what the IHT threshold is at the moment in the UK, but it was about 360K pounds a couple of years ago. Tax payable only on the bit over that, if any.
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Old Apr 25th 2012, 2:31 pm   #78
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Default Re: Buying v/s Renting

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Aviator,

Your underlying assumption is that property will continue to rise in future as it has in the past - remember the old hackneyed phrase "past performance is not a guide to future returns".

I don't know what the house price to average salary ratio is like for Greater Vancouver but let's say conservatively 6x. How much longer can the market sustain this kind of increase before housing becomes totally unaffordable to the locals.

You could say, "look at London where prices have been increasing relentlessly for a some time", well as a seller I can tell you that the prices bottomed out (SW London anyway) about 3-4 years ago and in fact have dropped about 8-10% during that period. So if I had bought my house in 2008 I'd be sitting on a loss.

I reckon house prices here may have reached a peak and may drop a bit over the next year or so, in which case it might be worth renting a while longer and buying (hopefully) cheaper.
http://www.investplusproperties.com/...ate_stock.html

As this investment firm states, let the renters pay your mortgage and build your wealth as a landlord.
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Old Apr 25th 2012, 3:46 pm   #79
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Default Re: Buying v/s Renting

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Originally Posted by Aviator View Post
http://www.investplusproperties.com/...ate_stock.html

As this investment firm states, let the renters pay your mortgage and build your wealth as a landlord.
The OP won't be a landlord so they have 2 options.

1, Pay rent to the landlord and put the potential mortgage payment minus Rent into a savings account to build cash, and hope prices stagnate or dip.

2, Pay interest to the bank, have the remainder go to equity, and hope prices continue to rise.

Interest over the life of the mortgage could cost $400k. Rent could cost around $600k+. Factor in property tax, renovations, repairs, price increase/decrease. Who knows which will end up being the best financial option over the longer term. Maybe the west coast could replicate the Japanese housing issues soon in terms of a long term bear market
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Old Apr 25th 2012, 9:26 pm   #80
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Default Re: Buying v/s Renting

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Originally Posted by el_richo View Post
The OP won't be a landlord so they have 2 options.

1, Pay rent to the landlord and put the potential mortgage payment minus Rent into a savings account to build cash, and hope prices stagnate or dip.

2, Pay interest to the bank, have the remainder go to equity, and hope prices continue to rise.

Interest over the life of the mortgage could cost $400k. Rent could cost around $600k+. Factor in property tax, renovations, repairs, price increase/decrease. Who knows which will end up being the best financial option over the longer term. Maybe the west coast could replicate the Japanese housing issues soon in terms of a long term bear market
+1

Excellent summary, as you say "Who knows which will end up being the best financial option over the longer term"
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Old Apr 25th 2012, 9:30 pm   #81
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Default Re: Buying v/s Renting

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http://www.investplusproperties.com/...ate_stock.html

As this investment firm states, let the renters pay your mortgage and build your wealth as a landlord.
As I was reading the above article I thought it was extremely biased and some passages are simply not true. Alas, the reason is in the last line: they manage property on behalf of landlords - no surprise therefore that they encourage house purchases.
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Old Apr 26th 2012, 1:28 am   #82
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Default Re: Buying v/s Renting

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As I was reading the above article I thought it was extremely biased and some passages are simply not true. Alas, the reason is in the last line: they manage property on behalf of landlords - no surprise therefore that they encourage house purchases.
I guess we read into things what we want to see! I have done handsomely on real estate and managed without renters thankfully. My kids will do well in themarket I am sure, whether it is as well as their parents, time will tell.My grandfather was offered a new house in the 30s for £600, selling now for £475000. If he had bought the right stocks he may have done well, if not he could have lost his shirt like many others in the 30s and since. Depends on how high a risk one wants, or no risk and leave it in the bank. What would a 1930 pound be worth now?

Out of interest, which passages are not true? false advertising is an offence.

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Old Apr 26th 2012, 2:05 pm   #83
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Default Re: Buying v/s Renting

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My grandfather was offered a new house in the 30s for £600, selling now for £475000
Interesting but what would £600 worth of gold purchased in 1930 be worth now - just a little bit more than the house.
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Old Apr 26th 2012, 2:16 pm   #84
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Default Re: Buying v/s Renting

Shouldnt we also take into account that if the person doesnt qualify for a mortgage or has the downpayment then they really have no option but to rent or is that too simplistic?
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Old Apr 26th 2012, 3:56 pm   #85
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Default Re: Buying v/s Renting

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Interesting but what would £600 worth of gold purchased in 1930 be worth now - just a little bit more than the house.
At $20 an ounce in 1930, you would have got 93 ounces for £600 ($1873USD) . At today's price of $1656 an ounce that would be worth $154008, or £95161 or 20% of the house value. It would not have even kept up with the RPI. Had he had not owned a house and had to pay rent for the same period, one would likely end up with a zero gain or loss. Take £95161 divide by 80 (number of years), had anyone paid more than an average of £1190 a year on rent they would be making a loss if they invested in gold vs real estate. It is not as simplistic as that, rents were lower in 1930, but are a lot (lot) higher now, but gives an indication.

Many people run businesses as landlords, if it was not a money maker why would they do it? Fortunately for landlords there are always plenty of people who want to rent.

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Old Apr 26th 2012, 4:17 pm   #86
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Default Re: Buying v/s Renting

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Out of interest, which passages are not true? false advertising is an offence.
Misleading: “the benefit of having real-estate in your portfolio is clearly evident from the historical returns of such assets”. The key word here is “historical” you cannot predict the future from past trends. Also try saying that to someone who bought property in Phoenix in the noughties. Phoenix is by no means an isolated case.

Not true (depending on where you are): “There is usually a small amount of money remaining each month, even after mortgage and other expenses are covered”. Certainly in and around Vancouver this does not hold. I estimate that if I bought a flat with a $100,000 deposit I would be out of pocket by between $200 - $300 pcm if I rented it. This assumes that the tenants are decent people who behave themselves, don’t trash the place and pay rent on time.

Misleading: “Owning 5 or 6 properties or, even better, owning a share in InvestPlus Properties investments, can generate a substantial monthly income that will continue to increase with every passing year”. Note that only the “income” is guaranteed they are conspicuously silent regarding the “capital”.

Misleading: "leveraged investments give better returns". Many, many books have been written on the subject and we could open a thread just to discuss this topic alone. This statement is laughably simplistic and misleading in its present form.

The comparison between real-estate and equity investments is not fair in the sense that they appear to be assuming that the investor will invest directly into equities. To do this requires a very deep knowledge of company valuations, interpretation of company accounts and detailed knowledge of the company’s industry sector. Your average investor is not that sophisticated and yes they could end up losing everything. Much safer to invest in unit / investment trusts which in the long term should give you a positive return (once again no guarantees).

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My grandfather was offered a new house in the 30s for £600, selling now for £475000
I can also point to my grandfather who bought my parents a house for GBP 6,000 in Chiswick, West London in 1963. The same house sold for 1.4M in 2006 (sadly my parents sold it in 1972). That is an increase of 233 times the original investment. A semi-detached house in the London suburbs is currently going for GBP 480,000. Do you really think that in 2062 the same house will go for GBP 111,000,000 (480,000 x 233)? I cannot see into the future but I seriously doubt it.

I truly understand all the points made during this debate and truth be told I am leaning towards buying a house myself. The thing I object to is when people say that investing in property is a no brainer. It has been in the past (depending of course on when you bought and sold). Personally there is no way that real-estate inflation can carry on as it has for the past 40-50 years, it simply isn’t sustainable.

So, as far as I am concerned I will probably buy in the next year. Yes, I will then have an asset that will be worth something, I would also expect that over the next 10 or 20 years it will appreciate in value. But I don’t expect the gains to be as stellar as they have been in the past. Hence my original question: would I be better off renting and investing the surplus (cash saved on tax, maintenance etc, etc) in bonds or equities – the answer to which is: “who knows”? But it did make for an interesting debate.
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Old Apr 27th 2012, 3:57 am   #87
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Default Re: Buying v/s Renting

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I truly understand all the points made during this debate and truth be told I am leaning towards buying a house myself. The thing I object to is when people say that investing in property is a no brainer. It has been in the past (depending of course on when you bought and sold). Personally there is no way that real-estate inflation can carry on as it has for the past 40-50 years, it simply isn’t sustainable.
The weird thing, I bought my first house back in 1987 for £28,000, many of the other houses on the street were occupied by the original owners from the mid 1950s. They were all very happy to tell us that we must have overpaid on the house as there was no way the prices could go up anymore and it was incomprehensible that one of those houses was worth so much. They exhibited a similar level of incomprehension when we sold the place 4 years later for £55,000, and we were told 'no way can they possibly go up from that price'. Last time I looked those houses were selling at £220,000.

Maybe you are right and a correction is pending but my experience has been that people have been thinking for a very long time that the increase in real estate prices is unsustainable , and a lot of people have made a lot of money during that time.

The bottom line is, if you are buying a home to live in, and plan to stay there for several years, it is irrelevant if it is worth less sometime after you bought it than you paid for it as the value only matters when you convert it to cash when you sell. And, over the years, investment in real estate has proven to be relatively safe.

If, on the other hand, the cost of buying the house, maintenance, property taxes etc. results in a significantly greater monthly outgoing than renting and you are not sure how long you are going to stay in an area then there is a good argument for renting.
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Old Apr 27th 2012, 11:27 am   #88
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Default Re: Buying v/s Renting

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false advertising is an offence.
This is a misleading claim, it's true only in the narrowest technical sense. In practise, it's usual for people selling property and related services to present them in terms far from the literal truth. It'd be some struggle to get anyone prosecuted for presenting a house as something it wasn't.
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Old Apr 27th 2012, 2:19 pm   #89
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This is a misleading claim, it's true only in the narrowest technical sense. In practise, it's usual for people selling property and related services to present them in terms far from the literal truth. It'd be some struggle to get anyone prosecuted for presenting a house as something it wasn't.
However that quote you used is out of context and relates to a real estate investment company advertising their investment products for sale, they were not selling a specific house, but investments in real estate.
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Old Apr 27th 2012, 4:21 pm   #90
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Default Re: Buying v/s Renting

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At $20 an ounce in 1930, you would have got 93 ounces for £600 ($1873USD) . At today's price of $1656 an ounce that would be worth $154008, or £95161 or 20% of the house value
Sure but let's use my parents house an example. They bought a house for $120K 30 years ago, price of gold was $40 an ounce so they could have bought 3000 ounces. Their house today is worth $280K, so a tidy sum of $160K. Today's price of gold is $1664 per ounce and that works out to almost $5million.

It all depends on where you buy, when you buy - nothing is a given as we may discover a planet made of solid gold and the price may plummet but I don't think so.

Aviator - one last thing, I think you mentioned that you are mortgage free. If that's the case, why? Why not take all the equity out of your house and buy a bunch of income properties, rent them out as they will more than cover their costs.

It's all about timing and risks.
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