Comments on: Running the Numbers http://www.moneysmartsblog.com/running-the-numbers/ Investing and Personal Finance Fri, 10 Feb 2012 14:34:49 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Michael http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-43239 Michael Mon, 09 Nov 2009 02:18:45 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-43239 Condos were never intended for landlords. That's what apartment buildings are for. If you want to be a landlord, buy an apartment building, don't go turn somebody else's home into a slum, because that's what investors do to condos. That's why banks either charge more or won't lend at all to buy a condo in a development that's less than 80% owner-occupied. There should be laws against these speculators. Furthermore, NEVER buy a condo that was converted from rental property. The walls are paper thin. You get a lot of noise from neighbors. And the shared heating system is an invitation to waste and sky high heating bills. (PS: I live in a townhouse condo that was built as condos. I bought it pre-construction. We have separate heating systems, and we're over 90% owner-occupied. I put down 20% when I bought it, refinanced it 4 times, each time getting a lower interest rate and buying DOWN the principal. I paid off the mortgage in 16 years. When my employer was bought by a foreign competitor and shut down, I was sure glad I didn't have mortgage payments, and without an income, there was no tax advantage to having one anyway.) Condos were never intended for landlords. That’s what apartment buildings are for. If you want to be a landlord, buy an apartment building, don’t go turn somebody else’s home into a slum, because that’s what investors do to condos. That’s why banks either charge more or won’t lend at all to buy a condo in a development that’s less than 80% owner-occupied. There should be laws against these speculators.

Furthermore, NEVER buy a condo that was converted from rental property. The walls are paper thin. You get a lot of noise from neighbors. And the shared heating system is an invitation to waste and sky high heating bills.

(PS: I live in a townhouse condo that was built as condos. I bought it pre-construction. We have separate heating systems, and we’re over 90% owner-occupied. I put down 20% when I bought it, refinanced it 4 times, each time getting a lower interest rate and buying DOWN the principal. I paid off the mortgage in 16 years. When my employer was bought by a foreign competitor and shut down, I was sure glad I didn’t have mortgage payments, and without an income, there was no tax advantage to having one anyway.)

]]> By: Shotgun Investing http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-5459 Shotgun Investing Thu, 24 Apr 2008 09:03:55 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-5459 [...] My brother has to travel constantly for his job. While he was in North America, he and his girlfriend owned a Mazda3. As they were getting ready to leave North America they wanted to sell their car (instead of paying for it to sit in storage). A bunch of his co-workers were also going to sell their cars, so they invited a used car dealer to come and view them all at once. My brother was offered $8500 for his car, and after refusing, sold it later for $19,000. Apparently the dealer made everyone similarly low offers and no on sold to him. The dealer was following what some people call the “shotgun approach” to investing (which I touched on in a previous post). [...] [...] My brother has to travel constantly for his job. While he was in North America, he and his girlfriend owned a Mazda3. As they were getting ready to leave North America they wanted to sell their car (instead of paying for it to sit in storage). A bunch of his co-workers were also going to sell their cars, so they invited a used car dealer to come and view them all at once. My brother was offered $8500 for his car, and after refusing, sold it later for $19,000. Apparently the dealer made everyone similarly low offers and no on sold to him. The dealer was following what some people call the “shotgun approach” to investing (which I touched on in a previous post). [...]

]]> By: Thicken My Wallet » Blog Archive » How to Conduct Due Diligence http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4895 Thicken My Wallet » Blog Archive » How to Conduct Due Diligence Wed, 02 Apr 2008 09:01:18 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4895 [...] world, authors, financial institutions, television personalities etc.) throw around the term “due diligence” a lot as a “cop out” (or prudent litigation proofing depending on your point of [...] [...] world, authors, financial institutions, television personalities etc.) throw around the term “due diligence” a lot as a “cop out” (or prudent litigation proofing depending on your point of [...]

]]> By: Chain Investing http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4841 Chain Investing Mon, 31 Mar 2008 09:41:51 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4841 [...] AND its very unlikely any income from the property will support such a high price (I recently did a post that (hopefully) showed how hard it can be making money from a property, even when its “reasonably” [...] [...] AND its very unlikely any income from the property will support such a high price (I recently did a post that (hopefully) showed how hard it can be making money from a property, even when its “reasonably” [...]

]]> By: Roundup and Link Love Stuck in the Airport Again Edition | The Wisdom Journal http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4811 Roundup and Link Love Stuck in the Airport Again Edition | The Wisdom Journal Sat, 29 Mar 2008 06:02:14 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4811 [...] Cheap runs the number on some real estate investments at The Quest for Four Pillars. I’m running the numbers on my [...] [...] Cheap runs the number on some real estate investments at The Quest for Four Pillars. I’m running the numbers on my [...]

]]> By: Mr. Cheap http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4788 Mr. Cheap Fri, 28 Mar 2008 14:25:41 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4788 I think its two-fold why they're bad. There's the "tragedy of the commons" issue, where people don't conserve common resources (like heat, water and electricity), because they know the cost will be shared across all units in the building. Everyone doing this leads to higher costs for everyone. The second element is that obviously a condo should be quite a bit cheaper than a house, since MUCH of the infrastructure is shared. People compare the purchase with a house, and want to get a better deal, but tend to bid up the price higher than what it should be. The higher price leads to it being a worse investment. Many apartment building owners get fantasies of turning their building into condos. If they did, they see that the value of the building would jump significantly. Apparently there are a LARGE number of legal and politcal hurdles to make this happen, which is why owners don't do this. If there was less friction in the process, this would be a GREAT investment strategy. Buy a building, turn it into a condo corporation, sell enough units to make back what the building's purchase price was, then rent out or sell the remaining units (which you got for free*). * Minus the cost/effort of the purchase and conversion of course. I think its two-fold why they’re bad. There’s the “tragedy of the commons” issue, where people don’t conserve common resources (like heat, water and electricity), because they know the cost will be shared across all units in the building. Everyone doing this leads to higher costs for everyone.

The second element is that obviously a condo should be quite a bit cheaper than a house, since MUCH of the infrastructure is shared. People compare the purchase with a house, and want to get a better deal, but tend to bid up the price higher than what it should be. The higher price leads to it being a worse investment.

Many apartment building owners get fantasies of turning their building into condos. If they did, they see that the value of the building would jump significantly. Apparently there are a LARGE number of legal and politcal hurdles to make this happen, which is why owners don’t do this.

If there was less friction in the process, this would be a GREAT investment strategy. Buy a building, turn it into a condo corporation, sell enough units to make back what the building’s purchase price was, then rent out or sell the remaining units (which you got for free*).

* Minus the cost/effort of the purchase and conversion of course.

]]> By: Four Pillars http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4775 Four Pillars Fri, 28 Mar 2008 02:55:04 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4775 Why are condos bad for landlords? Because of the condo fees? Interesting case study. Mike Why are condos bad for landlords? Because of the condo fees?

Interesting case study.

Mike

]]> By: AJC @ 7million7years http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4769 AJC @ 7million7years Thu, 27 Mar 2008 19:57:38 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4769 My Rule of Thumb: invest in your own home, then the 'cap rate' is meaningless and eventually you will build up enough equity (see my 20% Rule for more on this) to do some 'real investing'. Even if the cap rate is no higher than a bond, long-term capital appreciation should do the trick ... esp. if you can lock in at today's low interest rates for as looong as possible. My Rule of Thumb: invest in your own home, then the ‘cap rate’ is meaningless and eventually you will build up enough equity (see my 20% Rule for more on this) to do some ‘real investing’.

Even if the cap rate is no higher than a bond, long-term capital appreciation should do the trick … esp. if you can lock in at today’s low interest rates for as looong as possible.

]]> By: Mr. Cheap http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4759 Mr. Cheap Thu, 27 Mar 2008 13:50:43 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4759 CC: I agree, this isn't the best deal in the world. I definitely agree with what you've written before that many real estate investors deceive themselves about the real return from their property. Samantha: Yeah, agents might resist. I don't think its about hurting their credibility, its just more work for them. Ultimately you can approach the selling agents directly and low ball them if you wanted to try low balling but couldn't find a buyers agent who would work with you. Guiness416: Yeah, MLS conviniently omit DOM. The agents get them on their version of the system (so if you have a buyers agent, they can tell you the DOM). MM: Yes, they used to come with Gnomes, but we're heading into a recession you know... (ELF stands for Electrical Light Fixtures) CC: I agree, this isn’t the best deal in the world. I definitely agree with what you’ve written before that many real estate investors deceive themselves about the real return from their property.

Samantha: Yeah, agents might resist. I don’t think its about hurting their credibility, its just more work for them. Ultimately you can approach the selling agents directly and low ball them if you wanted to try low balling but couldn’t find a buyers agent who would work with you.

Guiness416: Yeah, MLS conviniently omit DOM. The agents get them on their version of the system (so if you have a buyers agent, they can tell you the DOM).

MM: Yes, they used to come with Gnomes, but we’re heading into a recession you know… (ELF stands for Electrical Light Fixtures)

]]> By: MM http://www.moneysmartsblog.com/running-the-numbers/comment-page-1/#comment-4758 MM Thu, 27 Mar 2008 13:25:06 +0000 http://www.moneysmartsblog.com/running-the-numbers/#comment-4758 From the listing: "EXTRAS **** Fridge, Stove, Elfs, Window Coverings** " Elfs come with real estate in Toronto now? From the listing: “EXTRAS **** Fridge, Stove, Elfs, Window Coverings** ”

Elfs come with real estate in Toronto now?

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