Real estate gains not as healthy as they seem – Financial Post

Jeff Evans

I came across an article on the Financial Post today that addressed the costs of buying and selling real estate, and how it can minimize what looks like substantial profits on a real estate transaction. From the article:

Add it up, using the 7% figure for the first three sales and 9% for the last two, and that house that sold for $1.15 million has had close to $300,000 sucked out of it over the past decade through taxes, realtor fees and other costs. And, it should be noted, the owner who sold for $1.05 million in 2012 put $100,000 worth of renovations into the home. As long as real estate prices rise 5% to 10% year over year, the fees seem tolerable if you hold for a decent stretch of time. But moving five times in a couple of decades can destroy your equity gains even in the best of times.

I agree with much of the article regarding fees and how they take substantial amounts from the profit obtained from a real estate transaction. I have stated on here a number of times that flipping homes is not an ideal way to profit from real estate, mainly due to the costs involved in real estate fees and taxes. However, one aspect of the article I do not agree with is that it seems to imply that realtors should be paid less or that maybe you should avoid fees by not paying a realtor to sell your home. From my experience, this is not a good idea.

There are realtors out there that are not good at their jobs, and there are dishonest ones, and there are lazy ones who just hang a sign on the front lawn and hope it will sell. However, the real estate business is a difficult one and realtors who work hard for you are worth the full commission that they receive.

In conclusion, I do not advise buying a residential property as a short term hold and there is no way around the costs except to hold for the long term. The infamous Donald Sterling (not to say to be like him in many ways, but you have to give him credit for his business strategy) bought a property and would never sell. In his life he went from a middle class family to be a billionaire. He was not one to pay those fees and it worked in his favour. Buying a home is not a bad investment, but buying one for the short term is questionable.

Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

home buyer mortgage broker
First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
No Comments

Among the services I provide to my clients, I consider myself to be a "first-time home buyer mortgage broker".  As a first time home buyer mortgage broker, I know how difficult it is to get into the real estate market, particularly in Vancouver, and it brings me a particular amount of job to help someone get past the challenges if being a first time home buyer.

I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

mortgage broker Vancouver BC
Good news regarding OSFI rule changes
Jeff Evans
No Comments

This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More

OSFI B20 mortgage guideline changes 2017 – Part 2
Jeff Evans
No Comments

This is a continuation of the article published here about the OSFI B20 morgage guidline changes for 2017.

If you are familiar with mortgage brokers at all (which you probably aren't) you would know that we also have alternative sources of lending for situations where a mortgage borrower will not qualify with a prime institution.  We have what we call "B" lenders, who have higher rates but more flexible lending criteria, and we have private lenders, which are individuals and corporations who can lend money on on anything that suits them.Read More