Station Park | 18, 28, 36, 40, 50 fl | U/C

[Rainrider22]

If I said here is 100 stocks, it is worth $100 000.  you give me $20 000 now and I will pay the remaining 80 000 plus interest while you sit back and watch the stock appreciate, even if it is slowly, you wouldn't take that investment ???.  Oh, did I mention the whole tax write off component too ?   So when you say you "crunch the numbers"  make sure you take the whole picture into account.

Of course you can do that with stocks, too: it's called a margin account, and you are borrowing money to invest, allowing you to leverage your investment.

So, suppose that you have $200,000 to invest in the stock market, and you borrow another $800,000, and invest in Acme Inc., which is a hot growth stock. If the stock goes up 20%, your holdings are now worth $1.2M, and you have doubled your own investment, net of the $800K loan. Great, isn't it? But wait, if the stock drops 20%, you have suddenly lost your entire equity. This is clearly much, much riskier than investing your own money only, without margin. (And, yes, I personally know someone who lost over $1M, and most of his retirement savings, investing on margin.)

So let's flip over to the real estate scenario: you have the same $200K to invest, and you take a $800K mortgage to buy a $1M condo unit. If the real estate prices go up 20%, your holdings are now worth $1.2M, and you have doubled your own investment here, too, net of the mortgage. But the downside is the same: if prices drop 20%, you have suddenly lost your entire equity here, too.

And how much have prices dropped in Vancouver already?

Anyway, to each his (or her) own. I look at the Canadian bank stocks, which pay a 5-6% dividend yield and tend to appreciate in value. And require no maintenance, repair or tenant management. For me, this works much better. But if the condo rentals are working out great for you, more power to you.

If it is a bad investment then why are so many people doing ?

The "50,000,000 Elvis Fans Can't Be Wrong" argument?

To be clear, I am not arguing.  I am just making sure all the points are taken into consideration when the numbers are crunched.  Real Estate isnt for everyone.  If you want an aggressive high risk investment that will yield high returns in short order, definitely dont buy a condo and rent it.