So we nearly bought. Someone very close to us is working very hard to help their kids get into the RE game. Not as investors, but using the "paying rent to yourself is better than to your landlord" belief. We will benefit directly from their generosity. For that, we are extremely grateful and felt somewhat compelled to take them up on their offer.
This person owns a 2-bed 2-bath condo, in-suite laundry, very close to downtown. It falls in the downtown catchment of MLS, but I hesitate to compare this property to other downtown condos, that are more, well, downtown. It is worth more than we would have considered spending in our search. It is somewhere we we discussed we could live for the next 5-7 years if need be (market or other financial issues dependent).
Through some gifting (no we wouldn't owe this money) we were set to get into this property for a perceived 15% discount from where this person felt it will be priced when it goes on the market. Honestly, if our own financial situation was different, like say where we plan to be in 12 months, we would have jumped on this regardless of my bearishness on this market (for the record, Ms. HHV does not share the same bearishness, she's certainly no bull, but let's say she's more of a JMK-type who sees value in this market and a soft landing and continued growth at 3-5% over the next few years). Despite this, we get on very well.
Now our financing situation is a wee bit complicated. We had a bit down, we have a bit of outstanding student debt and the price of this place was such that our entire debt would have to be retired in order to get traditional mortgage financing. When we sat down with the banker, we qualified, but it required a higher interest rate than we are comfortable with and a longer term than we'd like.
But the real kicker was when the banker, who was Ms. HHV's previous manager, and someone with 30 years experience writing mortgages, said to us
"I wouldn't recommend you get into this."
"Why?" we asked.
"Look at how many condos are set to come online and how many units haven't sold yet. There's your answer."
"I told you so." says I to Ms. HHV, but only once we've left of course. Needless to say I've been doing dishes like crazy since Saturday :)
Anyway, to make a long story short, we nearly bought, it didn't end at the trip to the bank either. When we went to tell the seller the news, they bent over backwards to help us even further. It was really difficult to say no. But at the same time it was really easy. Like I said in the title, a 15% gamble. Not really actually, it works out much less when we take time, interest and any other number of factors into it.
The moral of this story is that it's really easy to be a bear from the sidelines, not so easy to put your money, or the potential risk that another 8-10% gain would mean to us, where your mouth is. That and the really interesting aspect of a mortgage seller recommending that a client "don't do this deal" at a time when mortgages are not getting sold too much in the branch. HELOCs, that's a whole other story :)
CBC MARKETPLACE has a special on condos tonight at 7:30 on Ch2. I'm watching now on CBC Winnipeg. You should watch this if you are thinking pre-sales are good deals.