Originally posted by Lighthouse
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With that in mind I keep a close eye on the market and to be honest when things started to move up in price I was very disappointed. While this sounds strange it is the case because in the old days I would be one of only a few people making offers and with such low demand we could use our negotiation skills to our advantage but as things started to heat up it became very hard to negotiate a deal and our buying ceased. Fast forward a few years and I have to accept that the market is now way above the level it once was and I can't imagine buying at this level which is an emotional response as if I was entering the market for the first time today and I was assessing things using the same financial criteria I always have then at the current levels Cannons Creek is a buy because the yields are still high (rents have gone up inline with prices).
Put simply - 2 x 3 units are selling for around $420k and the rent on a well presented 3br unit is $400/wk - this is nearly 10% gross. In the old days we'd buy at 10% gross even when interest rates were higher than they are today.
So if you think rents are not inflated (can be maintained at the current level) and you bought a block of units for $425k today even if the market crashed tomorrow and the unit prices dropped to $350k next week it wouldn't be a problem UNLESS you were forced to sell. The rent would continue to come in, service the mortgage and provide you positive income. The paper value of the asset will only come into play if and when you decide to sell. An emotional response might be that if you waited a week you could achieve the same rent $400/wk for a purch price of $350k which is 11.9% gross but as they say, timing the market is near impossible. You were happy with 10% then so why not now?
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