I am a student in Toronto, Canada in my last year and I am considering purchasing a place after I graduate, so it is a great coincidence that I stumbled upon your website.

I wondered if there are comparable Canadian sites to rate the schools and walkability factors, and I am not sure if there are major differences in the way the real estate market works in Canada vs. the US.

Can you give me some guidance and direction?

Thanks

I wish I had read this post two years ago before I bought my home in Ocoee, FL. Which was easily one of the most overpriced markets in the country when I purchased (Summer 2007). I am in the middle of a short sale now (third try) and I hope to get rid of this property soon enough. Not only does it have an HOA fee ($167/month), but the mortgage is underwater by $165K. I also bought it with 100% financing. Cash flow? Mortgage is $1,911/month, interest-only, and the the highest rent I can get for it is $1,300. I pretty much made the worse real estate purchase in history.

Why did I buy it? A broker convinced that at $275K it was at the bottom in the area. The neighboring houses all sold for $300K. He also promised he could find a renter at $2,000/month from out of town. He failed to deliver on both counts. The home’s value continued to fall, and when I realized what was happening, I knew I had to get rid of it ASAP to cut my losses. Unfortunately, the home is so overpriced and my bank has been difficult to deal with in terms of a short sale price, so I’ve had the property up for sale for the last year.

I stopped making payments a while ago, the home is in foreclosure, so I’m hoping to short sell it before the auction. I’ve lost close to $20K so far, and the bank or mortgage insurance company will no doubt have me sign a promissory note to absorb the deficiency between the short sale and the mortgage. If my internet marketing efforts don’t take off my next stop will be bankruptcy.

If anyone is reading this post, pass it along to everyone you know. Erica is sharing information that virtually no one will tell you because brokers, mortgage lenders, title companies, etc. are all incentivized to get you to buy a house and will distort information to make everything seem like a really good deal. The fact is Erica’s formula (the rent-to-price ratio) is the only metric you need to listen to. If you decide to still purchase a house that doesn’t pass this test, realize that its for emotional reasons–not a rational one– and your house becomes an expense, not an investment.

Sadly I’ve had to learn real estate investing the hard way. And frankly the entire experience has left a bad taste in my mouth, and I probably will be reluctant to buy another house even after I bounce back from this.

I downloaded your real estate cash flow spread sheet. I thought I should inform you that there are some serious errors in the calculations that give inaccurate representations of cash flow.

Two examples are the following:

1. Depreciation is included as if it’s income for the purpose of calculating cash flow. Depreciation does not create any cash so it can’t be included as part of cash flow (except for the tax savings it creates but that is not how the calculation is done)

2. Income taxes are calculated on rent – depreciation but mortage interest (which isn’t separated out individually) as well as all other cash expenses are deductible against the income before any taxes are due. In nearly all new purchase real estate transactions the first few years there are no taxes due because the expenses and depreciation exceed the income. Even if its cash flow positive, its typically tax negative.

This was one of the best real estate articles I have read.

Question: Are you worried about the risk of inflation since the government is printing massive amounts of dollars these days? How do you feel about real estate as a hedge against inflation?

8% is too low?

aggressive targets..

And also great replies.

I am grateful to Chris for the Geocode link.Very helpful for us humans to have the same info as used by institutions.

>>How many people do we know who are in danger of foreclose? Why is that? A: because they bought something they can’t afford (and now want their neighbors to pay their bills ala bailouts) – they did not use wisdom and patience.
Not always the case. Unexpected catastrophic medical bills and layoffs are two major causes of financial woes that are not under your control.