1451 replies to this topic

[rjag]

 

I find people go five year fixed due to some sense of "security," problem is if rates exploded you are 100% screwed. What are you going to do at the 5-year mark when you have to refinance at 10%?

 

 

You are obviously too young to have had a mortgage in the 80's and early 90's. Our first mortgage in 1989 was 12% and the following year it went up to 14%. We were first time buyers and had enough of a downpayment so as to not need CMHC. We took a 5 year term and paid a fortune in interest differential when we sold 2 1/2 years in but we re-signed at 8% which everyone was saying was a gift and lock it in....this is after 20 years of above 10% rates with them spiking at 21%. Nobody knew where rates were going and everyone was locking in...banks made a fortune on interest differential penalties. It wasnt until 1998/99 that the trend remained below 10% for 8 or so years that folks started playing variable in a bigger way

 

In todays market I would probably look at locking in my primary residence and stay variable for another year or so in my rental units. Fortunately I cleared my mortgage 8 years ago so its not a problem. 

[tjv]

^I would agree variable interest rates have been the way to go in the last 8 years and I was variable up until about 16 months ago when I locked in.  We are now in a period of rising interest rates and I can see mortgage rates hitting 4.5-5% by the end of next year and will continue to rise.  Meanwhile I am locked in at below 2.7% until mid 2022.  Its at renewal time where I will cringe

 

Its a personal preference really

[Mike K.]

With inflation a mortgage increase from 2.5% to 4.5% is small.

 

At 2.5% a $350,000 mortgage is $1,568.

 

In five years at 4.5% it's $1,937 ($369 difference).

 

Inflation over 5 years is roughly 10%, so $1,568 is $1,725 at the time of renewal. Factoring in inflation, the 4.5% interest rate is $212 more per month.

[MarkoJ]

You are obviously too young to have had a mortgage in the 80's and early 90's. Our first mortgage in 1989 was 12% and the following year it went up to 14%.

 

I am 100% screwed either way. If rates start going up linearly 1% per year right now either I am screwed in 3 or 4 years with a variable or I am screwed in 5 years with a fixed.

 

At least with the variable I can get out at year three with only three months interest and re-finance at with a 5-year fixed if bankruptcy is looming with further hikes.

Edited by MarkoJ, 01 October 2018 - 01:02 PM.

[MarkoJ]

 We are now in a period of rising interest rates and I can see mortgage rates hitting 4.5-5% by the end of next year and will continue to rise.

 

It isn't just about rates rising, but when they rise within the 5 year period.

 

Let's say, hypothetically the spread is 1% between variable anf fixed (not uncommon to see right now). Not only do rates have to go up but they have to go up relatively quickly. The variable rate could increase 2% in the 5 years, but you could still be head if the 2% is more loaded towards the second half of the 5 year term.

 

And you always kind of know what the expect in the near term (i.e. 6 months). You aren't going to sign a 0.5% discount on a variable over a fixed if BOC is announcing the next day and 24 out of 24 economists are predicting an increase. BOC does increase and if the variable is 1% discounted, for example, no brainer. You have a 1% discount and the increase just lowered the odds of further increases.

[rjag]

With our commercial properties we knew we were playing the long game so took the max on offer each time. 

 

You indicated you are in it for the long haul, and we are about to enter a period of interest rate hikes, we know that, what we dont know is how high and what the confidence in the market will be. What we do know is that the current government Fed and Provincial are trying really hard to crash the market.

 

So with those 2 factors in mind, I'd be looking at locking in for at least my principal residence and possibly the one investment place I know I want to keep. Too many folks have over extended and had to walk away from it all. Its happened before and it will happen again.

 

As an aside, I rewatched the Big Short the other day....it should be mandatory viewing for every kid in Grade 12 as well as in University/college. I'm not saying our local market is in for a crash, but I can see a few folks under water with another 1/2 point or more and big trouble when they rise another 1/4 point

Edited by rjag, 01 October 2018 - 01:15 PM.

[MarkoJ]

I have plenty of a safety buffer at this point. My first four rental properties have all appreciated over 50% and the rents are up 40%. The 40% increase in rental rates can offset quite the mortgage rate increase and unless the market tanks I can always sell one rental property which would leave me with a stack of cash to make mortgage payments at very high rates for a long time on the remaining properties.

 

I guess the market could tank big time and rents could drop 40% and interest rates could go up to 10% but even at that point at 32 yrs old if I had to start from scratch I would probably be okay by 60. 

 

That is why my plan is to stop buying at around 40 and pay everything off by 50 yrs old. I am not going to be taking risks that late in life. Now is the time to take calculated risks. If everything blows up I still have time to recover prior to retirement.

Edited by MarkoJ, 01 October 2018 - 01:43 PM.

[spanky123]

I have plenty of a safety buffer at this point. My first four rental properties have all appreciated over 50% and the rents are up 40%. The 40% increase in rental rates can offset quite the mortgage rate increase and unless the market tanks I can always sell one rental property which would leave me with a stack of cash to make mortgage payments at very high rates for a long time on the remaining properties.

 

I guess the market could tank big time and rents could drop 40% and interest rates could go up to 10% but even at that point at 32 yrs old if I had to start from scratch I would probably be okay by 60. 

 

That is why my plan is to stop buying at around 40 and pay everything off by 50 yrs old. I am not going to be taking risks that late in life. Now is the time to take calculated risks. If everything blows up I still have time to recover prior to retirement.

 

If your properties have appreciated by 50% then that is the value you should be using for your ROI calculations, not what you purchased the properties for. After all, you can always sell and then redeploy the capital.

[MarkoJ]

If your properties have appreciated by 50% then that is the value you should be using for your ROI calculations, not what you purchased the properties for. After all, you can always sell and then redeploy the capital.

 

Not really. You can re-deploy capital post transaction fees and capital gains. It is not as simple as moving into better ROI because if you move a chunk of your capital if wiped out. Not to mention all the other crap like personal time, accounting, etc.

Edited by MarkoJ, 01 October 2018 - 03:40 PM.

[sdwright.vic]

Well... People Voting Helps is referring people to Citified!

Attached Images

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[Mike K.]

Hey, it is a great tool, lol!

Citified is a-political

[Bob Fugger]

I have a recently renovated, one bedroom apartment coming up in a purpose-build multi-family building.  Mark my words, I will be shooting the moon on the rent.  And if I don't get it, I'm going to furnish it and rent it out for more as a furnished short term rental.  **** you, socialists.

I got $320 more p/m than when I last rented this unit in July 2015 and have a waiting list for future vacancies.  Suck it, NDP.

[Baro]

My landlord refuses to raise any rents in the building this year despite his kids pushing him hard to do so.  He says his costs haven't gone up, the property has appreciated, and he's got enough money to put food on his table so why exploit struggling young families?

 

He also fixes everything on time and is extremely nice.  We are ridiculously blessed.

 

(at this point I almost rather he raise the rent 2.5% if it means his kids don't renovict or demovict us the moment they can)

Edited by Baro, 03 October 2018 - 12:02 PM.

[Mike K.]

(at this point I almost rather he raise the rent 2.5% if it means his kids don't renovict or demovict us the moment they can)

 

So add 2.5% more to your rent when it's time to do so. He'll be tremendously grateful and your relationship with him will be forever remembered, especially if a situation arises where he may be faced with the prospect of a reno or demo-viction.

 

That was the old school way of doing things before society lost touch with the common good and government had to step in. Everyone's costs go up, and whether he admits it to you or not his costs will be higher: taxes will be higher next year, his utilities will cost more, his maintenance costs will rise and other costs will also be felt. Where landlords get themselves into trouble is by not moving the rent for two or three years, then come year four and the sewage treatment site comes online, a pipe bursts, the roof springs a leak and there's a foundation issues that needs some attention and bam, resentment rears its head and stems from the immediate realization that the tenants are no longer pulling their weight.

[Citified.ca]

Ross Marshall of CBRE Victoria speaks with Reed Kipp of Devon Properties about the Capital Region's rental housing market in Citified's inaugural Ten on the 10th Q&A segment with local real-estate and business leaders.

 

Ten on the 10th: Q&A with Reed Kipp of Devon Properties

https://victoria.cit...von-properties/

[tjv]

https://www.cheknews...oophole-498934/

[Linear Thinker]

Legislation for the BC Speculation tax was introduced today.

https://news.gov.bc....8FIN0009-000501

[Sparky]

Victoria is # 7 in Canada for 1 bedroom apartment rental cost.

 

https://blog.padmapp...ian-rent-trends

[Nparker]

 

...We've actually built or are building several rental buildings which is a big improvement over the total ZERO number built in the last few decades...

Which has practically nothing to do with CoV policy and nearly everything to do with low interest rates for borrowing money.

[cathawk]

Which has practically nothing to do with CoV policy and nearly everything to do with low interest rates for borrowing money.

 

If that were true wouldn't we have started to see rental stock increase around eight years ago? Interest rates have been at an all-time low for the last ten years or so, but rental stock started to increase I would say about 3 years ago here in Victoria. 

 

I find it interesting that this forum spends a lot of time blaming council for everything that is bad in the city, but not giving credit for anything that's good. So slanted....