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rentah
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:24 am

Thompson said: I like to keep the renters in a dark room as long as I can
Sounds dangerous...not to mention kinky...Count me in!
 
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Thompson
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:28 am

Thompson said: I like to keep the renters in a dark room as long as I can
Sounds dangerous...not to mention kinky...Count me in!
Yup, me or polemics will buy one for you. :lol:
 
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rentah
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:33 am

Johnny said: (All sorts of stuff, very loudly.)
Actually, I believe that Mohican can afford to buy the property he is renting outright.
And, if I chose, I could buy the house I rent outright (no mortgage).
I have friends who are renters who can easily afford to buy, even at current prices.
But the math is so preposterously in favour of renting, and homes are such incredibly poor value at current market prices.
And we'd rather avoid the plunge that is going to destroy so much equity.

Johnny just can't accept that there are renters who can do simple math, and who rent by choice.
 
Johnny Horton
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:46 am

Rentah, read Mohican's letter, specifically....
[quote] Little do you know that I could easily purchase the home you rent to me but I won't because it would cost me nearly double what I pay to you every month..... because the rent I pay you doesn't even cover your costs, including the interest you pay on the mortgage, strata fees, and property taxes [/quote]

If he can buy it outright, then what in the world is he talking about?

Those who can't just whine. So quit yer whining! :mrgreen:

(PS. I'm not YELLING. Yelling is when there are all upper case.)
 
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rentah
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:51 am

"it would cost me nearly double what I pay to you every month"

Mortgage cost or opportunity cost, makes no difference.
It costs more than twice as much to own as it does to rent. Period.
Do you disagree with that?
 
Johnny Horton
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:54 am

Opportunity cost?
Elaborate. :mrgreen:
 
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rentah
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 11:57 am

polemics said: Me, I always buy. And no regrets.
Owners/Buyers: Decisive He-men.
See also: Wayne, John; Bond, James; Bilbao, Rocky; Segal, Stephen.

Renters: Wimpy n'er-do-gooders. The odd little fella who yells "they went thataway!"
See also: Lemon, Jack; Allen, Woody; Astaire, Fred; Marx, Harpo.
 
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semven
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 12:01 pm

Stephen Seagal is homeless, he fits neither category
 
Johnny Horton
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 12:02 pm

Rentah, Mortgage cost does not necessarily equal opportunity costs. :mrgreen:
 
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freako
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 3:55 pm

Rentah, Mortgage cost does not necessarily equal opportunity costs.
Here is how opportunity cost figures:

Tenant: Thank I can rent for half of mortgage payments.
Landlord: Fine by me, I bought in the spring of 1962 and I make money even off your piddly rent.
Tenant (to himself:) Lucky my landlord is oblivious to opportunity cost.
 
Johnny Horton
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 4:18 pm

Sorry, nope, doesn't cut it.
It might be the LandLords opportunity cost, under renting to the Tenant.
But in the Tenants case, how is the Tenants Opportunity Cost > Mortgage Cost?

edit: add: The only way it would make sense is if the Tenant can get a better return elsewhere.
 
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freako
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 4:34 pm

edit: add: The only way it would make sense is if the Tenant can get a better return elsewhere.
In the case of the tenant, it is the fact that he can live in same/similar home, but has "extra" money that he can invest elsewhere (or stuff in his matress for all that matters). I don't know if "opportunity cost" is the best term to describe this. In any case, we need to make assumptions about appreciation/depreciation in order to get definitive answers.

If rate of appreciation exceeds rate of rent increases, then the tenant "subsidy" situation will just become worse and worse, so view rate rent increases as a long term ceiling on appreciation.
 
Johnny Horton
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 4:57 pm

[quote]Actually, I believe that Mohican can afford to buy the property he is renting outright.[/quote]

Rentah, where do you infer that??? If the rent that Mohican pays doesn't cover the LandLords costs , why would the payments be double if he bought? I'll tell you why, because Mohican doesn't have a big enough downpayment.

You Bears just make sh*t up as you go along.
 
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rentah
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 6:06 pm

Johnny: Are we really going to have the downpayment conversation again?
You likely believe that, if a person bought a million dollar home for cash, then their cost of housing would be..... 'nothing' (No monthly payments!!).
 
Greenhorn
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Re: Top 15 Real Estate Myths

Sun Apr 27, 2008 6:09 pm

[quote]Actually, I believe that Mohican can afford to buy the property he is renting outright.


Rentah, where do you infer that??? If the rent that Mohican pays doesn't cover the LandLords costs , why would the payments be double if he bought? I'll tell you why, because Mohican doesn't have a big enough downpayment.

You Bears just make sh*t up as you go along.
[/quote]

Horton hears a Who. The opportunity costs is what you can earn on the money you would use to buy the house. I assume the purchaser can pay cash. Let's say you live in a $500,000, 1 bedroom condo in False Creek. The property is clear title, so your only costs are strata and property taxes for a cost of $400 per month. Suppose you sold the condo for $500,000 and made a deal to rent it back for $1,500 per month. You invest the proceeds into a mortgage fund yielding 8%. This investment would give you $40,000 per year. At a 35% average tax rate, you would net $26,000 per year after taxes or $2,166 per month.

When you owned the condo, your housing costs were $400 per month.

On a sale and rental basis, you would actually make $666 per month ($2,166 investment income less rent of $1,500). You are better off by $1,066 per month ($666+$400) or $12,792 per year.

This is what a friend of mine is doing right now, but he is buying income trusts and dividend yielding stocks.
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