Jack

[mcgregok]

When I came to Calgary around 1981 the world had ended for Calgarians. House prices colasped, oil industry disapeared, unemployment ran rapid, business going under. Real bad times. When I told friends I was going to buy a house they thought I was crazy. Total fear. Lucky me. I bought a house in Calgary and never looked back. Again fear rules the day. house prices are colasping, oil indusrty in bad shape, job layoffs most likely comming. I have cash, credit lines ready to go and no debt. Again lucky me. Again I am not listing to anyone. I know a good deal when I see one.

So how is your day Jack?

 

[ZanderRobertson]

an interesting point. i`ve been thinking about this lately. some pundits liken this "economic meltdown" to the great depression. Others are more optimistic. in any case the person who takes consistent and prudent action (especially in times of fear) will come out on top.

the great investors of the 30`s likely saw an overheated market in 1929 and bought when things were cheap. a great example of this today is Warren Buffett. He`s one of the few fearless voices we`re hearing out there these days because he`s doing what you are, buying. and like you he`s got the cash because he saved it when there were no deals to be had during the big run-up.

i guess the main question is this: where is the bottom? my sense is that investors should no more try to time the bottom (to buy) than they should the top (to sell).

timing markets is a fool`s game. when we look at actual fundamentals below market valuations, alberta in 2008 offers the same thing alberta in 1981 did; a natural abundance unrivaled by most locations on the planet. some of the other important factors have tipped in our favour and others against us since then, but i think you`re ultimately right that alberta is still a pretty good bet.


QUOTE (mcgregok @ Nov 23 2008, 02:26 PM) When I came to Calgary around 1981 the world had ended for Calgarians. House prices colasped, oil industry disapeared, unemployment ran rapid, business going under. Real bad times. When I told friends I was going to buy a house they thought I was crazy. Total fear. Lucky me. I bought a house in Calgary and never looked back. Again fear rules the day. house prices are colasping, oil indusrty in bad shape, job layoffs most likely comming. I have cash, credit lines ready to go and no debt. Again lucky me. Again I am not listing to anyone. I know a good deal when I see one.

So how is your day Jack?

 

[RedlineBrett]

Jack is posting articles relevant to the real estate market... but he`s going about it the wrong way. By putting every new bad-news article in it`s own thread he is giving off the vibe that he is "trolling" for responses.

Posting articles is fine, but all the articles should be posted in the same thread for those that want to read them, and in the economic fundamentals section. I don`t need to open up REINspace and see ten identical threads showcasing Jack`s doom and gloom crusade for attention.

QUOTE (ZanderRobertson @ Nov 23 2008, 04:18 PM) an interesting point. i`ve been thinking about this lately. some pundits liken this "economic meltdown" to the great depression. Others are more optimistic. in any case the person who takes consistent and prudent action (especially in times of fear) will come out on top.

the great investors of the 30`s likely saw an overheated market in 1929 and bought when things were cheap. a great example of this today is Warren Buffett. He`s one of the few fearless voices we`re hearing out there these days because he`s doing what you are, buying. and like you he`s got the cash because he saved it when there were no deals to be had during the big run-up.

i guess the main question is this: where is the bottom? my sense is that investors should no more try to time the bottom (to buy) than they should the top (to sell).

timing markets is a fool`s game. when we look at actual fundamentals below market valuations, alberta in 2008 offers the same thing alberta in 1981 did; a natural abundance unrivaled by most locations on the planet. some of the other important factors have tipped in our favour and others against us since then, but i think you`re ultimately right that alberta is still a pretty good bet.

 

[Jack]

QUOTE When I came to Calgary around 1981 the world had ended for Calgarians. House prices colasped, oil industry disapeared, unemployment ran rapid, business going under. Real bad times. When I told friends I was going to buy a house they thought I was crazy. Total fear. Lucky me. I bought a house in Calgary and never looked back. Again fear rules the day. house prices are colasping, oil indusrty in bad shape, job layoffs most likely comming. I have cash, credit lines ready to go and no debt. Again lucky me. Again I am not listing to anyone. I know a good deal when I see one.

Key word here: 1981. That`s a long time. Actually, that`s even before I was born!

Congratulations, I`m happy for you, but before calling yourself this grand investment genius for buying a house in Calgary at a time of low confidence in the economy, why not compare your ROI from your house purchase to what your ROI would`ve been in that same 27-year period if you had invested that same amount in the DJIA. Or an emerging market mutual fund. Or an upstart company like Microsoft. You get the point.

 

[Jack]

QUOTE timing markets is a fool`s game.

Is it? Doesn`t that contradict what you were also saying about "being fearful when others are greedy, and greedy when others are fearful"? Doesn`t that contradict your reference to Warren Buffett and other successful investors of the `30`s?

I don`t think it`s a fool`s game. In one of my most dumb moments, I bought a condo in Calgary in January of 2007, AKA right near the peak of one of the greatest seller`s markets in this country`s history. So I`ve now owned it for almost two years, and I`d guess that it`s probably gone down about 10% since my purchase, a significant amount of money. I bet the guy who sold it to me isn`t thinking that timing is a fool`s game, either.

 

[MonteDobson]

QUOTE (Jack @ Nov 23 2008, 09:24 PM) Key word here: 1981. That`s a long time. Actually, that`s even before I was born!

Congratulations, I`m happy for you, but before calling yourself this grand investment genius for buying a house in Calgary at a time of low confidence in the economy, why not compare your ROI from your house purchase to what your ROI would`ve been in that same 27-year period if you had invested that same amount in the DJIA. Or an emerging market mutual fund. Or an upstart company like Microsoft. You get the point.

ROI on house investment = 31.2% (simple interest) based on 25% down payment.

• 1981 avg home price in Calgary = $114,838 (25% down payment = $28,709.50)
• 2007 avg home price in Calgary = $356,957 (source, Thomas Beyer post on Calgary avg house prices)Capital appreciation of $242,119 / $28,709.50 = 843% / 27 years = 31.2% (non-compounding, not including mortgage paydown)

You tell me what his ROI would have been in the stock market, mutual funds, etc etc. Most advisor`s are happy with an average return of 7% per year?

Debt free and in a great position to BUY whatever he chooses...sounds OK to me!!

 

[Jack]

QUOTE ROI on house investment = 31.2% (simple interest) based on 25% down payment.

• 1981 avg home price in Calgary = $114,838 (25% down payment = $28,709.50)
• 2007 avg home price in Calgary = $356,957 (source, Thomas Beyer post on Calgary avg house prices)Capital appreciation of $242,119 / $28,709.50 = 843% / 27 years = 31.2% (non-compounding, not including mortgage paydown)

You tell me what his ROI would have been in the stock market, mutual funds, etc etc. Most advisor`s are happy with an average return of 7% per year?

So if he put down $28,709.50, and if he winds up with $356,957 27 years later (assuming the mortgage had just recently been paid off), that amounts to a 9.8% annual return. Not too shabby.

But, if he would`ve invested that same principal into the DJIA, he would`ve wound up with $542,559.10. Their average annual yield throughout that period was 11.5%. Fine example of the real power of compounding interest! On the surface, 11.5% doesn`t sound like much more than 9.8%, but those meager 170 basis points sure leave him with a lot more money at the end of the day.

QUOTE Debt free and in a great position to BUY whatever he chooses...sounds OK to me!!

Absolutely! And I never said otherwise!

 

[selansa]

QUOTE (Jack @ Nov 23 2008, 09:41 PM) So if he put down $28,709.50, and if he winds up with $356,957 27 years later (assuming the mortgage had just recently been paid off), that amounts to a 9.8% annual return. Not too shabby.
But, if he would`ve invested that same principal into the DJIA, he would`ve wound up with $542,559.10. Their average annual yield throughout that period was 11.5%. Fine example of the real power of compounding interest! On the surface, 11.5% doesn`t sound like much more than 9.8%, but those meager 170 basis points sure leave him with a lot more money at the end of the day.



Absolutely! And I never said otherwise!


If this house was a rental with cash flow what would be the return?

 

[tbarcier]

Exactly!


The numbers on the DJIA, what pricing are you using because from Jan 2nd 1981 to Nov 23rd 2007 I get $382,935.96. And as of Nov 21st 2008 $237,369.39

 

[TommyK]

QUOTE (C2Ventures @ Nov 23 2008, 08:47 PM) ROI on house investment = 31.2% (simple interest) based on 25% down payment. [*]1981 avg home price in Calgary = $114,838 (25% down payment = $28,709.50)[*]2007 avg home price in Calgary = $356,957 (source, Thomas Beyer post on Calgary avg house prices)Capital appreciation of $242,119 / $28,709.50 = 843% / 27 years = 31.2% (non-compounding, not including mortgage paydown)

CORRECTION!! ROI for the Property is INFINITE (you can`t even calculate a ROI!)

A house that was bought in 1981 for $114,000 is now worth about $350,000.
25% Down payment required in 1981 was $28,000

Assuming the investor RE-FINANCES the property right now at 50% LTV = 175,000
$175,000 - original down $28,000 = tax-free gain of $147,000 (can easily re-invest in two other cash-flow properties! Plus NO capital taxes like stocks/mutual funds!)

The property is now sitting at 50% LTV ($175,000) and can easily generate $400-600 of CASH FLOW each month.
*A property that is worth $350,000 is either a single-detached or bungalow which easily rents out $1500-1900 (mortgage payment is roughly $750 + other expenses).

The original principal is gone and taken away, and yet the return of $400-600 a month is still there. I don`t know which investment can be as good as this one.

mmmmmm.... wish I had a property back in 1981!

Good luck investing real estate!


Tommy

 

[tbarcier]

CMHC Calgary avg price 2007, $415,392. 2008 YTD , $409,388. So it`s down 1.4%. And the DJIA is down what? 30%?

 

[ZanderRobertson]

buying when a market is down is not exactly the same as timing a market. the point is that you have cash by not timing markets, by holding for a very long time. that`s what buffett does, he uses cash proceeds from long term holds to buy when the market is not overheated. the person who started this post noted that he bought when others weren`t doing it and all were fearful. he wasn`t trying to time the bottom of the market. he was just buying when there was a deal available. it`s the same as a stock investor buying right now; why should they try to time the bottom, there are great deals right now, if you know what the company you`re buying can earn, and it`s trading cheap, just buy it, don`t time the bottom.
it is a fool`s game, i`ve never heard or read one shred of evidence from any respected investor who thinks it`s wise to time markets. if you could point me to some compelling evidence, i would gladly change my opinion on this.

for sure buying at the peak is not recommended, but i wouldn`t judge your investment of january 2007 too harshly, it hasn`t been two years yet. it is possible that you could have found some other vehicle to invest in which might have given you a much more favorable return over the past 2 years (stocks maybe?). i don`t think it`s an insult to any RE investor to say this, but it takes a truly special talent to beat the stock market, and well... investing in an index wouldn`t have been too fruitful over the past 2 years either. certainly very few have done well in the past 2 years (stocks/RE/you name it). at least with your condo, you`re earning a monthly income from it which is helping you to own the asset outright; not a bad strategy


QUOTE (Jack @ Nov 23 2008, 08:31 PM) Is it? Doesn`t that contradict what you were also saying about "being fearful when others are greedy, and greedy when others are fearful"? Doesn`t that contradict your reference to Warren Buffett and other successful investors of the `30`s?

I don`t think it`s a fool`s game. In one of my most dumb moments, I bought a condo in Calgary in January of 2007, AKA right near the peak of one of the greatest seller`s markets in this country`s history. So I`ve now owned it for almost two years, and I`d guess that it`s probably gone down about 10% since my purchase, a significant amount of money. I bet the guy who sold it to me isn`t thinking that timing is a fool`s game, either.

 

[mcgregok]

QUOTE (C2Ventures @ Nov 23 2008, 08:47 PM) ROI on house investment = 31.2% (simple interest) based on 25% down payment.

• 1981 avg home price in Calgary = $114,838 (25% down payment = $28,709.50)
• 2007 avg home price in Calgary = $356,957 (source, Thomas Beyer post on Calgary avg house prices)Capital appreciation of $242,119 / $28,709.50 = 843% / 27 years = 31.2% (non-compounding, not including mortgage paydown)

You tell me what his ROI would have been in the stock market, mutual funds, etc etc. Most advisor`s are happy with an average return of 7% per year?

Debt free and in a great position to BUY whatever he chooses...sounds OK to me!!

Wow! you figured it out. The real listing price was $119900. Purchased for $78000. 3 bedroom bunglow , fully developed basement $20000 down, in dalhousie calgary. there were 12 homes on the street for sale. It took roughly 6 -7 years to regain a value of $115000. To complicated for my old head to figure out.

 

[kenko]

great post guys...I think everyone just need to give their properties some time before seeing the real profit from it, and seriously, it does not take that long. I personally invested in calgary back in 2001, originally with 25% down, gave me overall of +200/mo cashflow..and this property now gives me well over +700/mo due to rent increase and the huge appeciation that we all experience in 06. Not even mentioning mortgage paid down and equity take out and brought another property with the equity that also gives me cashflow recently.

I admit that back in 2001, even with +200/mo, I was stressed as the cashflow was not great. Not even talking about the economy was not even close to the economy that we are seeing right now. (Vacancy was like 5-6% and interest rate was +6%) Over the past 6 years, this property has only been vacant for 2 months, and the property is still in a very good shape. I wish I have acquired more properties like this at that time....and regret everyday that I got scared by listening to the daily news and so called "expert" advices at that time...

Oh well, I guess I will just have to wait for another 3-6 years for getting scared..