Comments on: Has real estate ever been the path to wealth? http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/ Everything to do with thickening your wallet by entrepreneur turned President of an Investment Company Wed, 17 Mar 2010 13:21:25 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Plamen http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-16541 Plamen Fri, 22 Aug 2008 06:39:05 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-16541 Interesting numbers ... I do not know much about REIT, so it is difficult for me to judge whether this is really a good investment option. As Yann says above for some people (including me) renting looks to be a better option having in mind the Quebec’s control on the rents and the current forecasts for real estate appreciation. Interesting numbers … I do not know much about REIT, so it is difficult for me to judge whether this is really a good investment option. As Yann says above for some people (including me) renting looks to be a better option having in mind the Quebec’s control on the rents and the current forecasts for real estate appreciation.

]]> By: Traciatim http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15921 Traciatim Mon, 04 Aug 2008 10:47:01 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15921 Hey Yann, I hate to break it to you, but " If I add condo fees, property taxes, maintenance costs, furnishing costs, AND the opportunity cost of not investing that money and spending it on the house instead . . . " and then you add in someone else's profit, the costs are exactly the same only renting is more expensive. The only reason Toronto isn't much of a good deal to buy right now is because the prices rose too quickly in the past few years making the price to median incomes go out of whack. This means that people who purchased the apartments 20 years ago can still rent them because they are protected from inflation and price increases while you are not. That just means it's time to save your money for when the price/income ratio falls back in line, not that real estate isn't a good place to hold money. Take for example your 900 in rent, at 3% inflation, if you are 30 now when you retire at 65 you'll be paying about 3550 for the same place. If you owned the same place you would owe nothing in 35 years, only having the maintenance and the upkeep (and taxes as always). Also, since our average saving rate is hovering right around nothing keep in mind that you are the exception and not the rule, the vast majority of the population doesn't save 25% of their gross income. Also your quoted 1.4% for the rent increase is only for 2008, it basically follows inflation. The increase will be adjusted each year, and if inflation spikes it will increase too. Oh, and add in . . . do you really want to live in a 'trendy in 2008' sardine can for you're whole life? You should move to the Maritimes where the average median incomes aren't much lower but you can buy a nice house for 150K. ;) Hey Yann, I hate to break it to you, but ” If I add condo fees, property taxes, maintenance costs, furnishing costs, AND the opportunity cost of not investing that money and spending it on the house instead . . . ” and then you add in someone else’s profit, the costs are exactly the same only renting is more expensive.

The only reason Toronto isn’t much of a good deal to buy right now is because the prices rose too quickly in the past few years making the price to median incomes go out of whack. This means that people who purchased the apartments 20 years ago can still rent them because they are protected from inflation and price increases while you are not. That just means it’s time to save your money for when the price/income ratio falls back in line, not that real estate isn’t a good place to hold money.

Take for example your 900 in rent, at 3% inflation, if you are 30 now when you retire at 65 you’ll be paying about 3550 for the same place. If you owned the same place you would owe nothing in 35 years, only having the maintenance and the upkeep (and taxes as always). Also, since our average saving rate is hovering right around nothing keep in mind that you are the exception and not the rule, the vast majority of the population doesn’t save 25% of their gross income.

Also your quoted 1.4% for the rent increase is only for 2008, it basically follows inflation. The increase will be adjusted each year, and if inflation spikes it will increase too.

Oh, and add in . . . do you really want to live in a ‘trendy in 2008′ sardine can for you’re whole life? You should move to the Maritimes where the average median incomes aren’t much lower but you can buy a nice house for 150K. ;)

]]> By: Riscario Insider http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15726 Riscario Insider Sun, 03 Aug 2008 03:25:37 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15726 At the Real Estate and Wealth Expo in Toronto in 2007 (headlined by Donald Trump and Tony Robbins), many presenters stated as a given that real estate was the path to wealth. There were claims that real estate outperformed stocks over various periods etc. How could you lose? So it's interesting to see there are other points of view. It's hard to believe there's a one-size-fits-all solution. At the Real Estate and Wealth Expo in Toronto in 2007 (headlined by Donald Trump and Tony Robbins), many presenters stated as a given that real estate was the path to wealth. There were claims that real estate outperformed stocks over various periods etc. How could you lose?

So it’s interesting to see there are other points of view. It’s hard to believe there’s a one-size-fits-all solution.

]]> By: Yann http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15585 Yann Sat, 02 Aug 2008 04:51:58 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15585 There is a saying that buying a home forces you to save, but I think that only applies to those who are not good savers in the first place. I currently live in Toronto central where I rent a wicked cool one bedroom apartment for ~$900/month. I also save/invest ~25% of my gross income, and I strongly doubt I would be able to sustain that savings rate if I bought a house or a condo of similar standard. If I add condo fees, property taxes, maintenance costs, furnishing costs, AND the opportunity cost of not investing that money and spending it on the house instead, I am not sure if buying is a better deal (financially speaking that is). The argument that mortgage protects you from inflation may be a good one, however there is a limit on rent increases in Canada - it is currently 1.4% in Ontario, which I suspect is less than the inflation rate. There is a saying that buying a home forces you to save, but I think that only applies to those who are not good savers in the first place. I currently live in Toronto central where I rent a wicked cool one bedroom apartment for ~$900/month. I also save/invest ~25% of my gross income, and I strongly doubt I would be able to sustain that savings rate if I bought a house or a condo of similar standard. If I add condo fees, property taxes, maintenance costs, furnishing costs, AND the opportunity cost of not investing that money and spending it on the house instead, I am not sure if buying is a better deal (financially speaking that is). The argument that mortgage protects you from inflation may be a good one, however there is a limit on rent increases in Canada – it is currently 1.4% in Ontario, which I suspect is less than the inflation rate.

]]> By: Jon Kepler http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15503 Jon Kepler Fri, 01 Aug 2008 17:57:05 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15503 I think the validity of this study, while present, is limited by the fact that they don't separate residential real estate from commercial real estate. Owning an office building is different than owning an apartment building, and the cycles and cashflow of each are not always comparable. In addition, someone like Donald Trump may appear to be completely exposed to real estate, when in reality a large portion of his business is licensing. Sort of. By licensing other peoples' real estate, he's still directly exposed indirectly, so it's all in the technicalities. I think the validity of this study, while present, is limited by the fact that they don’t separate residential real estate from commercial real estate. Owning an office building is different than owning an apartment building, and the cycles and cashflow of each are not always comparable. In addition, someone like Donald Trump may appear to be completely exposed to real estate, when in reality a large portion of his business is licensing. Sort of. By licensing other peoples’ real estate, he’s still directly exposed indirectly, so it’s all in the technicalities.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15491 admin Fri, 01 Aug 2008 17:15:43 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15491 Traciatim: Most of the data I have seen only relates to debt loads of renters vs. owners but I will dig it up and post on it. However, most of the data are from Department of Housing, Federal Reserve etc. (i.e. those with a vested interest to promote home ownership) so, as with anything in life, take it with a grain of salt. But I'll put this in the "things to blog about" list. Thanks for the suggestion. You also have to remember that the survey I quoted removed principal residence from the equation so we are doing an apples to apples comparison. Mainly, after the house is mortgage for monthly your home, how are the rich investing their money? Your point is a valid one but it may be an apples to oranges comparison with the book since it looks at allocation of disposable income in investments and not essentials like shelter. Traciatim: Most of the data I have seen only relates to debt loads of renters vs. owners but I will dig it up and post on it. However, most of the data are from Department of Housing, Federal Reserve etc. (i.e. those with a vested interest to promote home ownership) so, as with anything in life, take it with a grain of salt. But I’ll put this in the “things to blog about” list. Thanks for the suggestion.

You also have to remember that the survey I quoted removed principal residence from the equation so we are doing an apples to apples comparison. Mainly, after the house is mortgage for monthly your home, how are the rich investing their money? Your point is a valid one but it may be an apples to oranges comparison with the book since it looks at allocation of disposable income in investments and not essentials like shelter.

]]> By: Traciatim http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15484 Traciatim Fri, 01 Aug 2008 16:32:35 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15484 See, that's why I would really like to see a study done on people who are in retirement who's average life time income was between A-B and owned a home in their life vs A-B who rented and who ended up better off in the end, then repeat this process for B-C, then C-D . . . and onward up the income scale. We could put it to rest on which people end up better in the real world and not just in some numbers on a blog post that 'prove' either side depending on how a person writes the story. See, that’s why I would really like to see a study done on people who are in retirement who’s average life time income was between A-B and owned a home in their life vs A-B who rented and who ended up better off in the end, then repeat this process for B-C, then C-D . . . and onward up the income scale. We could put it to rest on which people end up better in the real world and not just in some numbers on a blog post that ‘prove’ either side depending on how a person writes the story.

]]> By: This and That # 103 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15415 This and That # 103 Fri, 01 Aug 2008 04:11:54 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15415 [...] Thicken My Wallet questions if real estate has ever been the path to wealth. [...] [...] Thicken My Wallet questions if real estate has ever been the path to wealth. [...]

]]> By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15378 A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com Fri, 01 Aug 2008 01:04:51 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15378 [...] Thicken My Wallet wonders if real estate has been the true path to wealth (or not). [...] [...] Thicken My Wallet wonders if real estate has been the true path to wealth (or not). [...]

]]> By: telly http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/comment-page-1/#comment-15074 telly Tue, 29 Jul 2008 16:40:32 +0000 http://www.thickenmywallet.com/blog/wp/2008/07/28/has-real-estate-ever-been-the-path-to-wealth/#comment-15074 traciatim, I would argue that in many (clearly not all) cases renters have lower incomes than home owners. Students, single parents, the unemployed, and other people going through a transitional period in their lives are generally renting rather than owning. This will skew those numbers drastically. traciatim, I would argue that in many (clearly not all) cases renters have lower incomes than home owners. Students, single parents, the unemployed, and other people going through a transitional period in their lives are generally renting rather than owning. This will skew those numbers drastically.

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