REIT's Beat Condos as Investments? No Way...Seriously?

REITs Beat Condos Every Time

Looks like those of you that prefer paper over bricks and motar, might be on to something. The latest anayslis by the Financial Post proves that if you were to hold your assets in paper Real Estate holdings you'd actually do better financially than if you put that money into the bricks and motar tower skyscraper investment. I've always had a feeling this was the case, but there is also something to the idea that it's nice to hold something that's real and solid. But at the same time, Warren Buffet didn't get rich by holding onto a lot of motar assets. His strategy is buying what's behind the bricks and motar, and that's the payoff the Financial Post seems to be coming to with it's article here.

That’s the conclusion of Michael Smith, a real estate analyst at Macquarie Equities Research, in the fourth annual installment of his study comparing a REIT investment in the apartment sector to a condo investment. The REITs are still way ahead.

The Toronto-based analyst compared the returns of a Calgary condo to Boardwalk REIT, which is based in the city, and Toronto condos to Canadian Apartment Properties REIT, which is based in that city. He has now looked at five investment periods.

Over a Five year Period, the Condo investment returned about 10.4% per year, however the REIT's weighted average return over that same period was closer to 75%. Now that's what I call getting your money's worth out of an investment. The assumption made in the analysis was that the condo purchase was leveraged and a 900 square foot condo was used as the example.

For income he used the actual distributions of the REIT over the time period and for the bricks and motar he used the CMHC market Rental report. For capital apprication he used the Royal Lepage House Price Survey. However he didn't include the transaction costs of purchasing a condo or a REIT. Something that would have tipped the returns even greater to the favour of the REIT. As the cost of purchasing a condo can be quite burdansome as most of you realize. The transaction cost of purchasing a share of a REIT in comparison are almost next to nothing.

Getting a Mortgage and Mortgage Insurance through Empire Life for financing a loan to purchase at FIVE Condos is actually a relatively easy process, and new rules from the federal government has required that company include new regulations, which have made the home loan and mortgage process a bit more difficult. Those changes at Empire Life include shortening the amortization period for which the loan can be held by the consumer, and the degree to which the property is financed by the mortgage. They have also increased deposit requirements to lift the loan insurance amount. Mortgage insurance from Empire Life is actually one of the major financing costs on home loans.

Investment Trusts have no taken to looking to purchase rental properties and acquiring mortgages through financing auctions by the banks looking to shore up their balances sheets in light of stricter government regulation. These regulations have actually made holding residential mortgages by the large financial institutions harder to hold. Currently investors are looking to increase their position in rental properties in Toronto, at the same time the federal government in co-operation with the financial institutions are making getting and qualifying for loans and mortgages more difficult

Empire Life : What is Condo Insurance?
Condo Insurance is required to protect your personal contents from theft or fire damage in your condo if these unforeseen events should happen you should make sure that you have adequate protection. Some items in your condo are will also be protected by your condo association insurance policy which covers the general building. The events that are covered by condo insurance include Fire, as well as Lighting. Other weather related causes such as Windstorms, and Hail are also covered. The major one that most people worry about is theft which is covered by condo contents insurance policies.

Toronto Condo Market Report – February 26, 2014

Toronto Condo Prices continue to trend upwards, as sales also move up with general improvement not only in the Toronto economy, but the nation as a whole. Condo sale prices have not increased to the same degree as detached family housing, due to new supply coming onstream. However fears of a condo bubble, have not proved accurate, as trends move to the upside. Average Home prices are still up in Toronto, and look like they will continue to rise for the remainder of 2014. Year over year, detached housing prices increased by over 14%. Just amazing.

What to Expect for Home and Condo Prices in 2015 in Toronto and the Greater Toronto Area

The latest reports on the Toronto Real Estate market predict that the condo prices if left unsupported will fall, due to oversupply. However, this prediction has been the case for over 10 years now, and nothing has come to pass with regard to any major price drop even with predictions of a correction coming from the world’s largest and most respected financial institutions.