United States real estate market

Smart people don’t work for money, the money works for them.

A few posts back, I mentioned the living costs of California compared to Ontario. Those are based on the assumption that you will rent. Renting is perhaps the least wisest financially, in ways that you live. The money goes to the landlord and you will never have anything to show for it. Rent a place 10 years, and that’s 10 years worth of money gone.

However, the best way to live is to own a property. Housing is the least volatile and most durable consumer good. The collapse of the US housing market bubble therefore, represents a golden opportunity for investors like myself to get in. Basically, it was stock adjustment. Poor regulation and Sub-prime lending led to consumers buying homes they couldn’t afford. They defaulted on their mortgages, and since they were no-recourse mortgages in the US, banks and investment firms lost a ton of money. The stock of houses were too high, they had to be foreclosed and banks had to get rid of these toxic assets fast – so they sell the homes at breakneck prices.

My parents just bought a condo in Toronto for $37x,xxx and the first thing I thought was ‘what a waste of money’. Thing is, they could’ve bought 3 or 4 condos in the US for the same amount of money. Take a look around ebay, craigslist, any online site, and you will see that many condos sell for under $100,000 in the US (good luck finding one in Canada). I’ve seen townhouses and condos for as low as $20,000 in Las Vegas (see here). Certainly, if I were my parents – I would have invested my money into several properties in the US – California, Nevada, Florida, etc. Those areas are all experiencing massive foreclosures because they were heavily affected by the housing boom. I believe that an initial investment could yield much money in the future. If you were to buy those properties, hold on to them for couple years, then sell them – massive profit is there to be made. You hire a property manager and get those places rented out in the meantime to account for maintenance fees and property taxes.

Alas, my parents are not as risk-taking as I am. All it would take are a few phone calls, flights here and there, and good business know-how. My dad still has not rented our apartment out – it’s been over 2 years! I could never let a potential money-making opportunity slip away. Hmm…maybe I should have specialized in Commerce from the beginning =(.