Throwing in the towel

GIN modified

Jason makes a lot of money on Bay Street and has a spouse who can’t understand why he’s so cheap. “Just my background,” he says. Later he hints he has about two million in cash, works like a dog at his finance job, and just got notice his executive-style rented house has been sold.

“Now I’m committed. I have to buy, or get a new wife.” The target house (probably an offer this long weekend) is owned by people asking $1.7 million and has been on the market many months. Jason says he gave a verbal of $1.5, and was told the vendors were “highly insulted” by the paltry amount proffered. “Then I found out they’d already bought,” he says. “Not only that, but they bought a place for $1.8 million that was originally listed for $2.5 million. So they can be as insulted as they want.”

Of course, I told him to put the vendor in a vice and show him no mercy. The crumble in prices – even in affluent and snooty parts of the GTA like North Toronto – is now leading to some interesting dynamics. Anyone who believes the realtor hype about ever-increasing prices is missing the real news.

In the upper ranges over $1 million there are no more widespread bidding wars. Activity over the summer has shriveled like a dude in a lake. As I detailed here some days ago, the average price of a SFH in 416 dropped 17% between April and August. Of course there is always a seasonal dip (which is exactly why you should buy before Labour Day), but this year it’s been twice the norm.

That’s a big deal when it comes at the same time as a crash in mortgage rates. As you know, five-year fixed-rate home loans are now available for less than 3%. Variable mortgages are as cheap as a buck ninety-nine, which means carrying a bloated and morbidly obese mortgage is easier than ever.

In fact, that’s just what the Royal Bank had to say this week when it released the latest Affordability Report (love that name).

“Housing across Canada became more affordable in the second quarter of this year because mortgage rates dropped, according to a report from RBC,” says the incisive media coverage. “Even with prices moving higher, homes became more affordable in nearly every market across Canada, according to RBC’s Housing Trends and Affordability Report.”

Of course, this report is a disappointment on many fronts. First, its basic premise is that houses are bought with a 25% down payment, then financed with a five-year fixed mortgage at current rates. Because the average down in Canada is less than 10%, the full absurdity of current house prices is masked.

Second, the bank found that to afford the average two-storey house in Canada (even with that whopper of a down) takes 48% of a family’s pre-tax income. What does that mean? Well, here is the bank’s own explanation:

“An affordability measure of 50% (for example) means that home ownership costs, including mortgage payments, utilities, and property taxes take up 50% of a typical household’s pre-tax income. Qualifying income is the minimum annual income used by lenders to measure the ability of a borrower to make mortgage payments. Typically, no more than 32% of a borrower’s gross annual income should go to ‘mortgage expenses’—principal, interest, property taxes, and heating costs (plus maintenance fees for condos).”

In other words, the average detached house is already unaffordable – even with the lowest mortgage rates since ever. It also suggests banks are routinely exceeding gross debt servicing ratios. Or, where else are all these mortgages coming from?

Of course, Toronto and Vancouver are off the charts. To buy a two-story house in the GTA now takes 65% of the average family’s pre-tax income, and in the Mouldy City that number soars to 85% – which is a tad less than a few months ago when home loans were more expensive. Of course, 85% of gross income is more than 100% of take-home pay, which is why household debt is rising faster in BC than anywhere else.

Jason knows this. In his job he moves vast sums of money and is acutely aware of risk and return. For years he’s resisted buying because it made so much more sense to rent – and his ballooning bank account is evidence. He’s 100% convinced Canadian real estate will fall, the way he watched it happen back in California before coming here five years ago. After all, when most people are gutting their incomes and swallowing debt to buy something they could rent for less, how can the outcome be in doubt?

So here’s his plan: Vultch hard and get a low price. Use a home inspection report to hammer it down further (“There’s always something wrong”). Pay for the place with cash. Borrow 65% of it back on a home equity loan and invest. Write off 100% of the interest expense from his sizeable salary. Mitigate his real estate risk with a nice, balanced, diversified portfolio, financed with a loan costing him 1.5%. “If I make only 5% a year, I’m laughing,” he says, “and I can now sustain a $55,000 annual loss on the house.

“Sure hope it’ll be enough. No new wife, though.”

179 comments ↓

#1 Bob on 08.29.14 at 6:27 pm

GET A NEW WIFE!

#2 Silent the people on 08.29.14 at 6:27 pm

You’re right Garth! It won’t be enough and he better pray all else goes well!

#3 Jon on 08.29.14 at 6:32 pm

If only I had the courage to borrow 65% against my recently paid for house.

#4 Ex-Cowtown on 08.29.14 at 6:33 pm

It amazes me how much money the banks are willing to throw at youngsters and hipsters et. al. In 1996 I had a fully paid for house in Calgary and it was pulling teeth to get a $10K unsecured line of credit from TNL@TB.

Fast forward to today : My friends 22 year old daughter who is going to Mount Royal College, has no assets and is working part time for minimum wage has a maxed out $10K line of credit. When I asked her why she has one, she said “It’s no big deal, all my friends have one too.”

Sheesh!!!

#5 Retired Boomer - WI on 08.29.14 at 6:34 pm

Jason is smarter than the average buyer of all things RE.

Anybody wise enough to haggle like mad on price, then actually PAY for it, then borrow back a safe percentage on a HELOC, into a balanced portfolio to write off all the interest carry… smart dude.

Oh well. He has seen the RE melt before. Nothing better than experience to teach.

#6 Happy Renting on 08.29.14 at 6:38 pm

I’m against the washing-and-reusing-dental-floss brand of cheap, but generally speaking, you don’t have money if you spend it. So right on, renting up until now, Jason, and happy vultching.

#7 David McKenna on 08.29.14 at 6:44 pm

Can you really get a rate that low on a line of credit for investing?

A secured LOC at prime, after tax. — Garth

#8 Yogi Bear on 08.29.14 at 6:44 pm

Personally, I’d dump the wife.

#9 Jay J on 08.29.14 at 6:55 pm

Whooot first in line today SN ;)

#10 FormerSaskie on 08.29.14 at 6:57 pm

I wonder when people will look at a house and say “ya know, it’s just not worth that price” ? Kind of like tulip bulbs.

#11 Smudgekin on 08.29.14 at 6:57 pm

Bay street money market siphon being out-snorted.

#12 Jay J on 08.29.14 at 6:58 pm

Now a serious comment: are you implying that going for the lowest price possible (let’s say you get between 5%_10% off asking) is a good deal and if that is possible a new home owner should make the leap and buy?
Or is this just a scenario for Mr. 2 mill-cash in the bank?

#13 Nemesis on 08.29.14 at 6:59 pm

#StrictlySpeaking… #LeadingForensicAccountants… #AreStillArguingOver… #FirstVs.SecondWives’… #AsRegardsCostliness.

http://youtu.be/aPrURpNEtkg

#14 Catalyst on 08.29.14 at 7:01 pm

Can you clarify, how can he write off the interest expense. Is he claiming it as a business expense?

Interest on money borrowed against residential real estate used for investment purposes is 100% deductible from earned income. — Garth

#15 Cici on 08.29.14 at 7:02 pm

I like your advice Garth, but what happens if the rate on the LOC goes up at the same time the markets go down?

Seems slightly risky to me.

Interest rates will move slowly upwards, no spike. And all interest is deductible. A very controlled risk. — Garth

#16 Van Isle Renter on 08.29.14 at 7:02 pm

#2 Yogi Bear on 08.29.14 at 6:44 pm

Personally, I’d dump the wife.
++++++++++++++++++++++++++++++++++++

Cheaper to keep’er. The divorce will cost minimum of a million plus spousal support. He’d be broke and she’d go buy the house anyway.

At least this way he gets to sleep in the house he bought.

Having said that, I’d pull the $1.5 offer, come back in at $1.4 and go buy a brand new corvette with the difference. No point rewarding rude people.

#17 Italians love real eatate on 08.29.14 at 7:03 pm

Lucy armstren # 74 from yesterday

“welcome to the 21st century. It’s our turn as women to lead the way for a prosperous and growing city.”

The only thing women going to be leading is their me. To the nearest home furnishings store after they have strong armed and nagged them to death to buy them a house..lol

#18 Italians love real eatate on 08.29.14 at 7:03 pm

Their men not me

#19 raisemyrent on 08.29.14 at 7:09 pm

I’m always a bit flabbergasted by successful people who are unable to communicate well and agree enough with their spouse to have the same opinion on real estate.

#20 Nemesis on 08.29.14 at 7:11 pm

#@VanIsleRenter/16… #WayCheaper&… #’Bitchin’Betty’CanAlways… #BeDeactivated*. #*OptionalAtAdditionalCost.

http://youtu.be/eucnb7Qf08U

#21 juno on 08.29.14 at 7:11 pm

#12 Jay J on 08.29.14 at 6:58 pm

I would go for 20% or more. depending on what you think is the market future.

Now to play the game you have to ask yourself how much you want the place. If you go in desperate, thats not good.

Go in ask if you don’t give a damn, if you get it or not. Low ball and say you don’t care, you have the cash, I am interested, please make a counter offer.

This way you doing two things, You may piss off the owner, but they may have to rethink about the original offer.

If they are desperate or the Broker is desperated they may give you a counter to feel you out.

If the house has been on the market and housing starts trending downwards you may get a hit!

#22 BT on 08.29.14 at 7:16 pm

#4 Ex-Cowtown:

Problem with banks borrowing to hipsters is CMHC….when the risk is downloaded to taxpayers, the differential between the mortgage rate and BOC rate becomes almost riskless profit to the banks. That is why bank prefs are such great investments, you get to participate in this. If you can’t beat ‘em, join ‘em.

#23 stop lying on 08.29.14 at 7:16 pm

The interest deduction makes even more sense now that Wynne has jacked taxes over 150k income… and retroactively to the beginning of the year too. What a scumbag.

#24 Nemesis on 08.29.14 at 7:18 pm

#CaptainBillyBob… #HolyCrap&Boomin’Retiree… #WillGetThis:

http://youtu.be/r0AK4yxBGnM

http://youtu.be/bzlP1kwR7KM

http://youtu.be/LrTFElfXK-g

#25 Freedom First on 08.29.14 at 7:18 pm

I think this idea would work.

A married couple would do well to go to an independent Financial adviser, like Garth for instance. The man and woman would then put their thinking/perspective about all financial matters in front of their financial adviser, with an agreement to follow the advice of their adviser.

Upon the Financial adviser telling either the man or the woman they are a financial idiot, all financial decisions would henceforth be handled by the adviser and, in this case, that would be Jason. However, in other couples, it is the man who is the financial idiot, and then it would be a “Janet” working with the adviser.

With the couples who are both financial idiots, well, there will be blood.

#26 james on 08.29.14 at 7:19 pm

Yikes, I feel poor now. When I get to half of his net worth I’m taking off for Latin America.

Not a bad idea about the HELOC and writing off interest. The trick is that you have to have the equity first. As Garth is fond of pointing out, the tax system favours people with money, as opposed to those with mere employment income.

#27 Smoking Man on 08.29.14 at 7:26 pm

My theory on when markets crash.

On my resent trip to the desert I had a chance to do some reflecting, for you lucky ones that know where the dyslexic smoking man blog is, I got a selfish up.

I’m concerned with the timely synchronization of news stories in MSM, especially geopolitical in nature.

OK, my trusted tinfoil hat, worn upside down allowing the parabolic arch to zero in on the UCC. The signal is frightening at the moment.

911 building 7, it’s owner admits the pull, BBC reported it falling down while it was still up on the live shot in back ground. Tells my tin foil hat, 100% pre knowledge.

MH17 a non disclosure agreement between investigating counties on what they will release, each with Vito power on press info . Off the debate table is who done it. Like I perfectly called it, the story has vanished.

Now we have terror crimes in the West imminent.. Red alert…

Take them seriously folks.

If there is one thing I know, is how fkd up and power hungry the newvo rich get, you become superior to the low life scum surrounding you, you can’t help it, they kiss your ass like little dogs.. And that’s someone who’s only made say 10 to 20 million.

The billionaires that shape and control the world look at the population as nothing more than tools, and unless eaters, the end will always justify the means. The above two examples of there control over MSM should scare anyone with half a brain.

Can you beat them? Not a chance, penatrate and get your small psc of the pie is the best outcome you can hope for.

And stay away from crowed places on weird Callender Dates co insiding with military or police drills. Recent History proves those are bad days for the disposal tools.

Do you want to know when we get a real estate, or stock market crash? It’s when these buggers will it. Not a second before.

And lucky for you bastards I’m around to give you all a heads up.

No one has a better inverted tin foil hat than me.

#28 Thor on 08.29.14 at 7:27 pm

If you borrow against your house can you still write off the interest if you invest it all in a TFSA?

Nope. Only non-reg accounts. — Garth

#29 Baz on 08.29.14 at 7:33 pm

Why Jason don’t search for another rental , is it just because the wife ?

I really love my wife for supporting me on my decision for not buying.

#30 Metrotownboom on 08.29.14 at 7:46 pm

I like that 17 percent “drop” in the average gta price….got any numbers for van?

#31 Prairieboy43 on 08.29.14 at 7:49 pm

Buy it at $0.25 on the dollar. Pay cash. ##$% the banks. Or don’t buy.
How do you think people get rich!! I know a few, including myself, who wait for opportunity. Buy Drill rigs for $0.15 on the dollar. Buy a $2,000,000.00 drill rig for $ 300,000.00 cash. Hell buy 10 of them and you have a fleet. Oil/Gas Price comes back. Boom sell. Retire!! Travel the world, etc. Then wait the cycle comes around again.

#32 Observer on 08.29.14 at 7:51 pm

Kids could teach adults a thing or two….

http://www.youtube.com/watch?v=4hDOlSG2QyE

#33 Kenchie on 08.29.14 at 8:01 pm

#14 Catalyst on 08.29.14 at 7:01 pm
“Can you clarify, how can he write off the interest expense. Is he claiming it as a business expense?

Interest on money borrowed against residential real estate used for investment purposes is 100% deductible from earned income. — Garth”

Garth, won’t it be a primary residence? Therefore, not an investment property…

You borrow against your house. You buy investments. The interest is a write-off. — Garth

#34 Daisy Mae on 08.29.14 at 8:04 pm

“and I can now sustain a $55,000 annual loss on the house.”

********************

A ‘$55,000 annual loss’? What is he thinking? Very disturbing! He should know better.

#35 Darth on 08.29.14 at 8:07 pm

In 10-12 years, these condos built post 2010 will be worth 30 cents on the dollar and will be the rental housing of the future (they kind of already are now)… owners will be throwing away keys at all costs as they get crushed by special assessments to repair the very poor construction (crumbling underground parking, poor insulation, failing floor to ceiling glass, pipes bursting and flooding 8-10 floors at a time, etc) and the less undesirable buildings will be bought by REITs, while the crappiest ones will be left to rot… in 20-25 years, a generation of move-up buyers will be obliterated, interest rates will normalize, a generation (currently unemployed or making minimum wage) with no money will be bidding 60 cents on the dollar for the dilapidated semi we paid a mint for from 2008 to 2014… I wouldn’t be surprised if house prices don’t reach these levels again for another 30 years.

#36 TEMPORARY® Foreign Prime Minister on 08.29.14 at 8:07 pm

“…..Housing across Canada became more affordable in the second quarter of this year because mortgage rates dropped, according to a report from RBC,” says the incisive media coverage. “Even with prices moving higher, homes became more affordable in nearly every market across Canada……”
==========================

Sure, kind of like playing a game of “put your wet fingers in a light socket.”

The media tells you ‘even though the voltage is getting stronger, the current is getting weaker’, so it’s all good (until the voltage returns to normal, then all bets are off….)

#37 Kenchie on 08.29.14 at 8:09 pm

“The target house (probably an offer this long weekend) is owned by people asking $1.7 million and has been on the market many months. Jason says he gave a verbal of $1.5, and was told the vendors were “highly insulted” by the paltry amount proffered. ‘Then I found out they’d already bought,’ he says. ‘Not only that, but they bought a place for $1.8 million that was originally listed for $2.5 million. So they can be as insulted as they want.'”

1 – $1.8m/$2.5m = 28% discount to asking price.

$1.7*(1-.28) = $1.224m.

That would be quite the “insult” lol.

#38 Daisy Mae on 08.29.14 at 8:10 pm

#8 Yogi Bear: “Personally, I’d dump the wife.”

****************

Abit extreme. I betcha they work it out!

#39 Shawn on 08.29.14 at 8:45 pm

Trying to Lower the Tax Bill

You borrow against your house. You buy investments. The interest is a write-off. — Garth

******************************************
What if one is cursed with suberb investment skills and makes lots of money on the investments and thus the tax bill rises despite the write-off of interest?

Pay it. — Garth

#40 sue on 08.29.14 at 8:50 pm

Wouldn’t 2 million generate 10 grand in dividends a month? You could rent Buckingham Palace for that. Why are men so afraid of their wives?

#41 ozy - get a condo you know where on 08.29.14 at 8:56 pm

ozy – get a new condo you know where

dump the old for the new :) :) :)

#42 Shawn on 08.29.14 at 8:57 pm

Writing Off the interest?

Let’s say you have a house mortgage free and decide to get a loan and invest.

At 2% interest you can claim a whole $2,000 in interest for every $100,000 borrowed. At a 40% marginal tax rate (Alberta is a bit less than that for most people), that’s a saving of a measly $800.

Basically the fact that it’s tax deductible amounts to squat.

Better off to borrow and put in RRSP or TFSA if you can and not bother with the deduction.

Borrowing to invest, if it is a good thing is good because of incredibly low interest rates. Forget the tax deduction it hardly amounts to anything. Hardly worth the paper work really.

90% of people have no need to invest beyond RRSP, TFSA and RESP. If you maxed out those you should do very well. Therefore no need to borrow to invest.

Yes a few people (very few) have good reason to invest in non-registered accounts and then have to bother with the income tax complexities.

I have a taxable account for my corporation. For my personal investing it’s just not needed. Government gives me so much in tax-assisted plans so why bother with taxable?

Because you are obsessed with RRSPs. Claiming interest is simple. Writing off four-tenths of carrying charges is meaningful for many. — Garth

#43 DM in C on 08.29.14 at 8:58 pm

Sue;

I don’t think they’re afraid of their wives, per se. They’re afraid she won’t put out anymore if they don’t do what they’re told.

#44 TnT on 08.29.14 at 9:00 pm

The target house (probably an offer this long weekend) is owned by people asking $1.7 million and has been on the market many months. Jason says he gave a verbal of $1.5……

~yawn~

Rich people problems are sooooo boring these days…..

When are we going to see these opportunities for the under $700K crowd?

#45 Piccaso on 08.29.14 at 9:06 pm

Listening to the radio on the way to work in Calgary and the house pumping commercial comes on.. Get a home STARTING at $450K

So it’s a $$ half million $$ for a starter shoe box in Calgary now.

LMAO

#46 Kenchie on 08.29.14 at 9:07 pm

“You borrow against your house. You buy investments. The interest is a write-off. — Garth”

So just to be clear, in the tax code, it doesn’t matter if it’s your primary residence if the borrowed funds are used solely for investing, the interest can be written off?

Sounds too good to be true…

#47 gladiator on 08.29.14 at 9:12 pm

Seinfeld’s shrinkage video is due here :)
https://www.youtube.com/watch?v=GG2dF5PS0bI

#48 liquidincalgary on 08.29.14 at 9:18 pm

Shawn,

What if one is cursed with suberb investment skills and makes lots of money on the investments and thus the tax bill rises despite the write-off of interest?

Pay it. — Garth

“”””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””””

until you made this statement, i never believed you to be a troll

#49 Smoking Man on 08.29.14 at 9:21 pm

#40 sue on 08.29.14 at 8:50 pm

Wouldn’t 2 million generate 10 grand in dividends a month? You could rent Buckingham Palace for that. Why are men so afraid of their wives?
…….
Experience, I doesn’t start of that way…

#50 45north on 08.29.14 at 9:25 pm

Daisy Mae : A ‘$55,000 annual loss’? What is he thinking?

maybe after 2 years his wife realizes that the $1.5 million house is now worth $1.4 million. Seems to me, that Jason and wife need to be circumspect about their financial position. I mean Garth says that prices between April and August have dipped more than usual but Jason’s new neighbours don’t know this. Wait until they do!

#51 Anson on 08.29.14 at 9:30 pm

Borrowing 65% of ones house equity sounds risky to me.
After all these heloc’s are still vulnerable to rate increases.
Do not let low rates make you feel comfortable carrying debt, and remember the lender can call your loan if house prices drop signifficantly.
Heloc’s are interest only lones as long as the equity in your house stays positive.
Don’t believe me look south of the border where banks demanded customers top up payments not just interest.

It must be wee timorous beasties night. — Garth

#52 EmpCod on 08.29.14 at 9:37 pm

HELOC are callable loans, hence too risky to invest in volatile financial assets. If the markets tank and the bank becomes distressed and calls the loan, you get a double-whammy. Better to secure a non-callable mortgage with fixed term for investing IMHO.

Markets are unlikely to tank, and only a fool would sell then. No Canadian bank will become distressed. No HELOC will be called unless the borrower’s credit fails. Lines of credit are simple interest, mortgages are amortized. And many worthy investments, such as bank preferred shares, are not exactly volatile. But fret all you like. — Garth

#53 Ruthen Jensen on 08.29.14 at 9:44 pm

Housing prices in Toronto are too cheap. The workforce has evolved into equal opportunity, development for the hardworking and a growing Canadian economy.

Women, far more than men, appear to be drawn to jobs in the caring professions which earn at least 60k a year such as teaching, nursing and child and youth care. As a result, women’s earnings in Toronto were closer to men’s in the Manhattan district of NYC. Canadians are richer than Americans because Americans in the Southern states deny the rights of women.

Women in Toronto earn more money than men in only 16 cities in America because the feminist movement fought for the equal rights of women in Canada, unlike the southern states.

#54 Anson on 08.29.14 at 9:48 pm

Garth in a perfect world we could borrow money cheap say 3 % and invest in dividend paying stocks paying 5 to 6 % and live off the spread, or better yet buy pre construction and make tones of easy money selling on completion.
I love this new economy because one no longer has to work for a living.
………………..This will not end well……..

#55 NostyVlad the Snugglebombed on 08.29.14 at 9:57 pm

May as well throw in the towel on RE, ‘coz it’s done like dinner.
*
#119 Nemesis on 08.29.14 at 12:48 pm — “…Wedged between a rack of 99-cent Cheetos and a display of pork rinds stood a life-sized cardboard cutout of a buxom blond in a red miniskirt. Resting on her inner thigh was a frosty bottle of Miller Genuine Draft.”

The buxom blonde isn’t needed, but not to put too fine a point on it whilst we’re all moving ahead:

Create a gargantuan Vanilla Fudge Cheesecake, lined with zesty BBQ sauce swaddling rashers of crispy oven-baked bacon, spewed upon with cream corn and Dr. Brown’s Cream Soda then garnished with a combo of Cheetos, Pork Rinds and Mudsharks (thanks Bill!). The MGD can be used as an alternate to Drano in washing it down. No thanks necessary!

Other than eating it while staying vomit-free, what can you do to top this?!
*
A blast from the past — a different take on the Pythons’ Spam sketch. (Note to those who take life too seriously — this is satire and may be too complex to absorb. It does not need any critical thinking. Suggest those concerned check in with Dr. Phil for advanced therapy).

#27 Smoking Man on 08.29.14 at 7:26 pm — “Now we have terror crimes in the West imminent.. Red alert … Take them seriously folks.” — Which leads to this piece of work. Post is well taken, SMan. Where has the third MH 777 gone? It was being ‘cleaned up’ in a hangar in Israel; Ukraine buys tanks from Hungary then frames Russia Unfortunately I don’t know how to use Google Translate, so the article is in a foreign language; The US recovery — Not necessarily, but Denny’s opened a new upscale eatery; Henry Kissinger speaks on the NWO; While condo prices in NYC reached a new high today, Oil tanker taken by UFO?

#56 ruralsenior on 08.29.14 at 10:06 pm

One year follower, rural farmcountry real estate has a huge inventory of longtime listings, Farm Credit is carrying many bad loans and has foreclosure’s for sale thru RE which are being marked down 50 to 60% and still not selling even after reading your advice I am For sale by owner going on six months with few inquiries. My business ran me while interest rates were 18% and were still able to profit. Disipline is the main reason many are not able to handle investments see what half a mil will by you in farm country http://vancouver.craigslist.ca/pml/reo/4570461841.html Thanks Garth for keeping us thinking

#57 april on 08.29.14 at 10:23 pm

#37 – Kenchie. I don’t believe they were “insulted” at all, their just being greedy.

#58 Andrew Woburn on 08.29.14 at 10:26 pm

#46 Kenchie on 08.29.14 at 9:07 pm
“You borrow against your house. You buy investments. The interest is a write-off. — Garth”

Sounds too good to be true…
=============================

It’s pretty simple, in principle. If you earn taxable income, the costs of earning it are probably deductible against that stream of income. If you won’t pay tax on the income, no deduction. Employment income is the obvious major exception.

The key test in deciding if interest is deductible is the purpose for which the loan is made. If you borrow money to buy a principal residence, the house doesn’t generate income so no deduction. If you borrow to buy a rental property or a business asset, the income is taxable so the interest should be deductible in most cases.

People seem to get hung up on the idea of tax deductible mortgage interest as if it is somehow amounts to pulling a fast one. Remember that we we call a mortgage is truly just a loan secured by a mortgage. Generally speaking, CRA doesn’t care how, or if, a loan is secured, only what it is used for. Therefore you can buy investments with your credit card, your HELOC or a loan from your dad and the interest should be equally deductible but you must be able to prove that the cash you borrowed went straight into investments that provide taxable income and wasn’t used for some other purpose. Muddy bookkeeping will cost you.

Another important wrinkle in the tax regime is that each tax year is separate for calculating net income. Costs can usually only be set off against related income from the same tax year. Even though the income you earn in an RRSP will be fully taxable at some point, it is not taxable from year to year, so annual interest on money borrowed to invest in the RRSP is not deductible.

The general organizing principle is to use cash to invest in registered plans or personal assets and borrow to make taxable investment income. For example, if you want to buy a pricey auto and you have cash, pay cash up front for the car and then use it as collateral for an investment loan. Other things being equal, you should be paying about the same car payments but saving tax. However most people need professional advice before attempting to structure tax deductible interest. The Income Tax Act is a minefield.

#59 cowtown cowboy on 08.29.14 at 10:29 pm

#14 Catalyst on 08.29.14 at 7:01 pm
“Can you clarify, how can he write off the interest expense. Is he claiming it as a business expense?

Interest on money borrowed against residential real estate used for investment purposes is 100% deductible from earned income. — Garth”

Garth, won’t it be a primary residence? Therefore, not an investment property…

You borrow against your house. You buy investments. The interest is a write-off. — Garth

This is not a complex issue…I’ve done it, borrowed over 100k and invested, took a sh!t kicking on some spec stocks…DOH!…made a tidy some on some others. Much easier when it was prime – 1 and my monthly nut was only about $200/month, suddenly CIBC tells me it is no longer prime – 1, it is prime + 1, literally double the cost. Might still keep doing it but at 3.5%, you need to find some good stocks or you’re working pretty hard for 2-3%, but it is hard to beat the leverage, just be smart with what you invest in and it is almost free money! Enjoy what’s left of the summer…

Vini, Vidi, Victus Sum

#60 Andrew Woburn on 08.29.14 at 10:32 pm

Profits Without Prosperity – Harvard Business Review

“Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming. Yet most Americans are not sharing in the recovery. While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid. Corporate profitability is not translating into widespread economic prosperity.

The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.

The buyback wave has gotten so big, in fact, that even shareholders—the presumed beneficiaries of all this corporate largesse—are getting worried. “It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,” Laurence Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, wrote in an open letter to corporate America in March. “Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.”

Why are such massive resources being devoted to stock repurchases? Corporate executives give several reasons, which I will discuss later. But none of them has close to the explanatory power of this simple truth: Stock-based instruments make up the majority of their pay, and in the short term buybacks drive up stock prices.”

http://hbr.org/2014/09/profits-without-prosperity/ar/pr

#61 The American on 08.29.14 at 10:35 pm

One day ago, the Huffington Post had a wonderful article about an element of Canadian real estate. The article’s name? Foreigners Are Taking Over Canadian Real Estate. The nutshell of the article? “Canada’s realtors “don’t have any method to capture foreign activity in the Canadian real estate markets with any kind of accuracy,” the Canadian Real Estate Association said.”

Just as a fun takeaway… Chinese invest more in the U.S. and Australia than they do in Canada, making China the #1 foreign investor in U.S. real estate. So, contrary to what I read on this blog all the time, Canadians are not the top foreign investor in the real estate market down
South. We all saw what happened in the U.S. real estate bubble, collapse, and recovery. Stop believing everything you hear about foreign investors. Instead, try to understand fundamentals that support a healthy market and do the math yourselves!

Another fun takeaway from this article is from Vancouver Urban Planner, Andy Yan. “His estimates suggest as much as 60 per cent of downtown Vancouver condos are not used by owners and 15 per cent are empty.”

Sheeeesh! I’ll say! I have to admit that Vancouver feels like a ghost town after 7 p.m. No wonder with figures like these! It makes me wonder here would it be without the cruise ships, with the newly-weds and nearly-deads?!?

http://www.huffingtonpost.ca/2014/08/27/foreign-real-estate-ownership-canada_n_5718705.html

#62 Investx on 08.29.14 at 10:42 pm

“A crash in mortgage rates”

And yet rates were predicted by this blog to be well on their way up by now. There was no chance rates could stay low for an extended period. No, that only happens in Japan.

“It’s different here.”

Sustained low rates mean a sustained weak economy. I wouldn’t gloat too much over that. — Garth

#63 Porsche on 08.29.14 at 10:50 pm

#61 The American

newly-weds and nearly-deads?!?

……………………………………………………………………

That’s good… i’m a nearly dead. lol

#64 Shawn on 08.29.14 at 10:51 pm

Investment Math

Because you are obsessed with RRSPs. Claiming interest is simple. Writing off four-tenths of carrying charges is meaningful for many. — Garth

*****************************************
Obsessed with RRSPs? Maybe. They have worked out very well for me.

My financial goal has generally been to get as stinkin’ rich as I can. It looked to me like tax-assisted investing (RRSP, RESP) with something close to 100% equities (especially before age 50) was the way to go.

I generally maxed out all the tax-assisted stuff. TFSA would have been great in my younger years except like most I might not have left it untouched. RRSP have the advantage of being basically untouchable at least in my mind while working. RESP are considered untouchable as well until the kids hit college. My kids have now hit college and the RESP stands at just over $200k for two if I add back last year’s $10k withdrawal.

There was a time when four tenths of the interest back as a tax deduction would have been very meaningful. But four tenths of squat (2% in the example) is squat. Getting back 0.8% is not going to entice me to borrow money.

If you believe 40% of 3% is .8%, you are less rich than you think. — Garth

#65 Nemesis on 08.29.14 at 10:59 pm

#JustForSmokingMan… #JD’sOptional.

http://youtu.be/y-xG44ExDwM

#66 Inglorious Investor on 08.29.14 at 11:02 pm

“Why are such massive resources being devoted to stock repurchases?”

• So executives can goose their own compensation
• No confidence that investing back into the business will pay off
• Interest rates are artificially low (corrupted credit markets caused by bond price fixing by central banks)
• Insiders will sell to the greater fools (the retail public) and leave them holding the bag

It may seem paradoxical, but today a rising stock market is a sign of declining aggregate wealth, and a moribund monetary system. Be prepared, for when the government admits what’s happening, it will be the end, not the beginning of the crisis, and any action you may take to protect yourself will be too late.

#67 Bob Rice on 08.29.14 at 11:22 pm

17% ? That’s a very significant drop in a short amount of time. So why hasn’t the media picked up on this? And where did you get this figure, Garth?

From the realtors. Charted here days ago. — Garth

#68 Kenchie on 08.29.14 at 11:25 pm

#58 Andrew Woburn on 08.29.14 at 10:26 pm
“It’s pretty simple, in principle. If you earn taxable income, the costs of earning it are probably deductible against that stream of income. If you won’t pay tax on the income, no deduction. Employment income is the obvious major exception.”

Thanks for the comprehensive response.

My only hiccup was about the primary residence mortgage v regular debt interest deduction aspect. Not many ppl my age can buy homes with cash or have had a home long enough to pay off the mortgage entirely.

#69 Smoking Man on 08.29.14 at 11:30 pm

#62 Investx on 08.29.14 at 10:42 pmSustained low rates mean a sustained weak economy. I wouldn’t gloat too much over that. — Garth
…..

Go easy on the Garth, his heart is in the right place but he’s not me…

He comes from education, I mean schooling.. He’s worked for MSM. He has a safe plan, not a risk taker..

He don’t know any better, he’s never inverted a tin foil hat, and if he did, he will never admit what he saw…

There is only on Smoking Man…

#70 Spectacle on 08.29.14 at 11:53 pm

” The crumble in prices – ”

Now that line is a chapter unto itself Garth. Well done !

***************************

#63 Porsche on 08.29.14 at 10:50 pm
#61 The American

newly-weds and nearly dead
That’s good… i’m a nearly dead. lol

My reply to #63 Porsche;

I’m newly wed……
she said :
1) I do ( will take me to be her…)
2) and , we won’t ( buy real estate, in the next while)

Thanks in big part to Garth and all the bloggers !

#71 RAL on 08.29.14 at 11:54 pm

#59 Cowboy is right. Just make sure you show where the $$$s came from when you invest to avoid any confusion so you can write off the interest.

Did this last year. Borrowed against house and locked in at 3.29% last August. Bought basket of higher yield dividend stocks paying 7%. There is enough income to make payment. Smoking man is right and I have learned to be afraid of my wife I agreed to pay principal down as fast as possible. Making the 15% prepayment for last year and again for this year I now have 65% left of the loan. Leveraged return has been 35%, would have been closer to 200% if I had only made mortgage payments with appreciation. Tax time came and wrote off loan interest against taxable income.

She asks this summer if we want to do it again. Now I’m afraid of her for one more reason. And no we didn’t, I still want to sleep at night :) When I do though, it will be more dividend aristocrats than higher yield. Anson #54 As with anything it is about managing risk.

#72 Kenchie on 08.29.14 at 11:56 pm

#61 The American on 08.29.14 at 10:35 pm

“Chinese invest more in the U.S. and Australia than they do in Canada, making China the #1 foreign investor in U.S. real estate.”

Regarding US real estate, China only overtook Canada in 2013. And the margin only grew significantly in 2014. So forgive people for not keeping up-to-date on the difference between Canadian and Chinese investment in the US.

You say:
“Stop believing everything you hear about foreign investors. Instead, try to understand fundamentals that support a healthy market and do the math yourselves!”

But the HuffPost article says:
“Another study by the Conference Board’s Robin Wiebe found a correlation between Chinese GDP and the average price of Vancouver homes, while there was no link between prices, and employment levels and interest rates, which are usually the prime indicators in local markets.”

I guess you didn’t get that takeway, eh?

#73 Exurban on 08.30.14 at 12:26 am

#61 The American

Another fun takeaway from this article is from Vancouver Urban Planner, Andy Yan. “His estimates suggest as much as 60 per cent of downtown Vancouver condos are not used by owners and 15 per cent are empty.”

That sounds about right. I know people working in property management and multi-unit renovation and repair, and people who live in downtown buildings. What they tell me is pretty consistent with Yan’s estimates — that is, about one-sixth to one-fifth of downtown condos are “dark”, the worst area being Coal Harbour, and the rest are about equally divided between live-in owners and sublet renters.

#74 Ronaldo on 08.30.14 at 12:50 am

#40 sue on 08.29.14 at 8:50 pm

”Wouldn’t 2 million generate 10 grand in dividends a month? You could rent Buckingham Palace for that. Why are men so afraid of their wives?”

Because they realize that if they don’t give them what they want, their net worth could suddenly drop by 50% or more. After all the divorce rates in Canada are running around 40 to 50% and 75% of divorces are initiated by the woman. So the saying, ”happy wife, happy life”.

#75 1% Doomer on 08.30.14 at 1:32 am

Jason should grow a pair. Unless the wife is bringing somewhere close to $2 million to the table too, she should not get a say in how the money is spent. He’s obviously doing something right by renting and banking more than most people can.

Jason, dump the wife. Mistresses are much cheaper to maintain.

#76 The American on 08.30.14 at 1:35 am

@#63: Porsche, do we know one another? ;-) Love the handle!

#77 CBC on 08.30.14 at 2:05 am

This story has a lot parallels to my story, the difference being i’m on the west coast.
2 months ago I made an offer on a new house in burnaby west. This house had been on the market for a year, initially asking 1.79mil then dropping to 1.74 then 1.69.
I decide to offer 1.43 with 1.5 being my high end.
My plan being to sell my current residence (low rise vancouver condo assessed at 490k which i bought for 295k pre construction in 2006, i didnt know any better garth)
and having enough to pay the balance with my savings.
The message that i got from the builder/owner through his agent was that he was insulted at my offer and countered $1000 off asking and told me to come with a “real” offer if I was serious. Needless to say, his hubris turned me off any type of better offer. Had he countered with anything, I would have went to my top $ limit.

2 weeks later his agent contacts my agent saying his client is a little more flexible and willing to meet in the 1.55 range. I decline and let him continue his montly carrying cost on his brand new 1yr old empty house.

Anything under a mil in burnaby is selling at a healthy rate but once you get into the 1.5 plus range its literally nothing selling.

May 3%
June 5%
july 3%
and I imagine Aug is about the same
http://vancouvermarketreports.com/index.php?fuseaction=cPageGoTo.DisplayDoc&DocumentID=86087

I feel with sales like this in this price range I can just wait for prices to drop.

#78 goood news bad news on 08.30.14 at 2:19 am

The bad news….Poloz the Dwarf Mind is going to get pressured to raise rates at some point…….towards the end of ’15…….it has to be out of the way for Hillary to run.

People with monster mortgages in an environment where wages are not going up are really going to feel like they are being kicked smashed…..crushed. Oh well.

The good news…..the stock market is going to tear debtors a new a-hole while they watch it roar past just at the time they don’t have apot to pee in…because they have everything plus the 85% a month nut…tied up in boobies dram bungalow.

The money guy…Jason….is going to feel like a complete douche bag…the used kind……when he see’s what he could have done with his paltry 1.7.

The big story….as usual the stock market is a forecasting indicator and will rip while Main Street looks on in disgust and terror. persoanl debt will skyrocket when greeeeeeeeeedy home owners start taking out the HELOCS to buy Mutual Funds. This will go one for a couple of years while all the soft meat gets sucked into the vortex…….the pro’s will make out like bandito’s. People will watch real estate lose momentum….’cause the front pages will refocus elsewhere…real estate will go static and die….homeowners will be stuck with depreciating assets that will suck their free cash flow dry for at least ten years before the slack gets picked up.

“Canada’s economy accelerated at its fastest pace in more than two years in the second quarter, fresh evidence the country could be emerging from a period of uninspiring growth.

Gross domestic product expanded at an annual rate of 3.1 percent in the second quarter, led by exports and household spending, Statistics Canada reported Friday. GDP grew 0.3 percent in June from May, Statscan said.

Both figures were stronger than most on Bay Street were expecting. The consensus forecast was for growth at a 2.5-per-cent rate in the quarter and a 0.2-per-cent gain in June from May. Revisions left the first quarter even more disappointing than the sluggish annual rate of 1.2 percent that Statscan first reported. The agency now says GDP grew at annual rate of 0.9 percent over the first three months of the year, reflecting a difficult winter that slowed trade and weighed on household spending.

Canada’s economy is getting a lift from demand in the United States, where GDP surged to an annual growth rate of 4.2 percent in the second quarter. Exports, which the Bank of Canada says are central to the economy rediscovering its vigour, jumped 4.2 percent from the first quarter, reversing a small decline over the first three months of the year. (At an annual rate, exports surged 17.8 percent.) Household consumption increased 0.7 percent from the first quarter.

The GDP data are the last significant indicators the Bank of Canada will receive before it restates its policy position next week. Evidence of stronger economic growth will sweep away any lingering talk that the central bank could cut interest rates. Still, central bankers will want to see more evidence that Canada’s economy has found another gear. Governor Stephen Poloz made clear in an interview last week that he is in no hurry to raise the benchmark interest rate from 1 percent. He said there is still “slack” in the labour market and that the economy has “lots of room to grow” before it puts upward pressure on inflation.”

Jason….ditch the broad…..with 5 million you could be beating them off with a stick.

#79 Tony on 08.30.14 at 2:21 am

Re: #60 Andrew Woburn on 08.29.14 at 10:32 pm

The whole explanation is stock options for the executives. The executives end up making money and the company goes chapter 11. All of this through share buybacks but paying a 400 percent premium for those shares.

#80 Singaporean Investor on 08.30.14 at 2:29 am

The poor (renters) get poorer, while the rich (landlords) get richer… That’s how the world works, son!

#81 Nathan on 08.30.14 at 3:46 am

For those looking to get more information on how this works (borrowing on a HELOC to invest) it’s referred to as the Smith Manoeuvre.

No, it is not. The SM is far riskier. — Garth

#82 Happy Renting on 08.30.14 at 4:52 am

#56 ruralsenior on 08.29.14 at 10:06 pm

Wowee, a whole vineyard! Nice to have a Canadian example of how far your RE buck goes outside of the insane hotspots.

Tempting, but you know what they say about becoming a millionaire… Start off as a billionaire, then open a winery.

#83 backwardsevolution on 08.30.14 at 5:37 am

Where is “Aggregator” (he used to be Canadian Watchdog)? Is he still around? Thanks for responding.

#84 I'm stupid on 08.30.14 at 6:17 am

Jason has a net worth of 2million and makes a ton of money. He has plenty of options, he’s not going to starve anytime soon. His wife wants a house, why not buy a house. He might loose a little money on the home but he can withstand the shock. He might be better off buying a home and leveraging out of his home and using a Loc to invest and writing off the interest.

#85 Crossbordershopper on 08.30.14 at 7:25 am

Garth its labour day long weekend and you are talking about a millionaire stockbroker from Toronto buying a house. You are way to close to the screen, back off and see a little perspective.
This weekend you should of discussed the truth about the current labour market and where young kids today in terms of getting work, are they not marrying as before. Some are not having children etc.
You should of discussed how employees and employers in 2014 interact, what dynamics exist now that didnt exist then.
The labour unions and their respective loss of power and influence as they had in the 70’s. With all these high tech jobs etc, no union stewart anywhere to be seen.
My childhood memory about parade and anxiety going back to school, and what school is now compared to before. You should of done a whole week on it and you instead talk about a millionaire stockbroker squeezing a guy down on a house when he pays cash!
How far removed is that then the reality that 99% of people in Canada exist. Everyone is maxed out financially, emotionally, even spiritually. Union’s are busted, everyone is tech wacked out, no jobs for our youth, the balance of power is now in the employer side fully. etc. etc.
Your preaching to the wealthy, converted, you have lost your way garth. Come to Hamilton where people line up for a minimum wage job paying 11 bucks. I wil show you stuff you thought didn’t exist in Canada.

There are lessons on this blog for everyone, far better than unions. The union makes you and your brothers strong because it keeps you as a person weak. — Garth

#86 liquidincalgary on 08.30.14 at 7:32 am

# 84 I’m stupid says:

He might be better off buying a home and leveraging out of his home and using a Loc to invest and writing off the interest.

==============================================

isn’t this EXACTLY what garth was proposing?

whomever named you, was prophetic

#87 Steve French on 08.30.14 at 7:35 am

This tune’s for Sir Garth, the Smoking Man… and all the other too cool blog dogs out there.

Listening to this on an Australian Saturday night, with a tipple of single malt.

Enjoy.

https://www.youtube.com/watch?v=Lz1TlJGLzqs

#88 Steve French on 08.30.14 at 7:38 am

And one more, from Mr. Knopfler:

Lady killer, regulation tattoo.

https://www.youtube.com/watch?v=amVqlbGBHbw

#89 Herb on 08.30.14 at 9:11 am

The union makes you and your brothers strong because it keeps you as a person weak. — Garth

BS, Garth! Stand between an employer and his maximum-profit-at-minimum-cost by yourself and see how long you stay employed. Or, using another scenario, do you think Harper would have fired you if caucus had been behind you?

Divide et impera has been around forever and still works.

#90 Scott on 08.30.14 at 9:17 am

Garth when I read “throwing in the towel” I panicked for a second that you were quitting this blog.

If you ever start thinking that you’ve said it all before and you’re just repeating yourself… trust me my generation (35) DOES need to be told over and over. You are slowly getting through to a few of us.

Cheers

#91 Smoking Mab on 08.30.14 at 9:20 am

Crossbordershopper on 08.30.14 at 7:25 am

Knowing this, why the hell would anyone chose to be an employee, when it’s so damn easy to be an employer.

Success has always come easy to people with the ability to quickly react and change course for better opportunities.

Those that think they can prosper trading time for wages in a global market are idiots…

It’s reality, get over it, move forward..

#92 Mixed Bag on 08.30.14 at 9:28 am

#85 crossbordershopper

Should HAVE, should OF makes no sense.

Haven’t figured out how to copy/paste with this tablet …. agree with Garth’s comment. I’ve worked union shops before, felt constrained. The entrepreneurial or ambitious spirit won’t be found in the union shop. Although a couple of folks still stand out in my mind as being conscientious and hard workers, twenty years later.

#93 liquidincalgary on 08.30.14 at 9:41 am

There are lessons on this blog for everyone, far better than unions. The union makes you and your brothers strong because it keeps you as a person weak. — Garth

==============================================

socialism in a nutshell?

#94 liquidincalgary on 08.30.14 at 9:43 am

#90 Smoking Mab

=============================================

hallelujah brother!

#95 liquidincalgary on 08.30.14 at 9:44 am

garth, are my posts disappearing or is something wonky going on with your blog?

#96 The American on 08.30.14 at 9:58 am

At #72: Kenchi, China has overtaken Canada as top investor in American real estate, and it isn’t by a narrow margin. China invested $22 Billion in 2014, while Canada sat at $13.8 Billion. This is two years in a row now that China has topped Canada. So, the Chinese invested nearly 63% more than Canadians in 2014, and the year isn’t over. That is substantially larger. Canada is the third most attractive market for Chinese investment, following Australia in the #2 spot, and the U.S. in the #1 spot. Here’s a great report to read about the top 5 countries investing in U.S. real estate.

http://www.realtor.org/reports/profile-of-international-home-buying-activity

At #73: Exurban, agreed. Frankly, I’m surprised the figures aren’t even higher for the amount of condos sitting empty in Vancouver. Walk through downtown Vancouver in the evening. Now tell me how many lights you see on. The towers are dark in general, peppered only with a few lights actually turned on. It’s creepy as hell. Meanwhile, at home here in Seattle, the building is booming in a massive way. We actually see people using their downtown homes, and the bustling of the town doesn’t stop after 7 p.m. Seattle home prices surge past their 2007 peaks, and downtown now looks like a pin cushion with cranes peppering the view, making way for all the new high-rise developments going in. Here’s one difference… Nearly all new developments forbid the purchase as an “investment property,” and many limit the number of properties that can be sold as a “secondary residence,” meaning they must be purchased as primary residences only. This is a major step in the right direction compared to the free-for-all in the previous boom. Speaking of booms, Seattle is now the fastest growing U.S. city too, in terms of percentage growth. In terms of pure population, Seattle ranks #2, only beat by New York City (duh). The city is growing faster than it did in the Gold Rush era in terms of percentage population growth and pure population. Inventory is not keeping up with demand, creating the surge in prices. So, with less than 1.5 months inventory available (4-6 months is considered a market in equilibrium),prices are expected to continue upward. Here’s a kicker… there are JOBS here. REAL JOBS, and the job market is growing quickly too in the Seattle core. Newcomers to downtown include Amazon, a host of new marketing firms, bio research firms, tech firms, etc. Hell, even minimum wage jobs are guaranteed $15/hour, beginning next year, signed into law for Seattle. Point? There are fundamentals that support prices to be where they are in Seattle, even significantly less than Vancouver. What’s supporting Vancouver prices? Well, it’s pretty? So is San Diego, CA, Portland, OR, and Seattle, WA at half the price.

http://seattletimes.com/html/businesstechnology/2024256674_homesalesjulyxml.html

http://fivethirtyeight.com/datalab/why-the-chinese-are-snapping-up-real-estate-in-the-u-s/

#97 nubbers on 08.30.14 at 10:07 am

It may be that Jason’s sellers can’t accept a lower offer because they are already stretched to the limit to buy the new place.

Could it be worth looking for other houses where the sellers can afford to sell for a lower price and ideally who also have to sell? How would you obtain such information? It is possible to incentivise an agent to look for such properties?

#98 T.O. Bubble Boy on 08.30.14 at 10:33 am

I’m in a very similar situation to Jason… plenty of cash to buy an over-priced Toronto house, but renting because we just can’t get our “cheap” minds to justify the prices.

Let’s say Jason’s “executive rental house” is $4000/month = $48k per year. The $1.7M house he was bidding on is equal to OVER 35 YEARS of rent!

If someone was purchasing a house for investing purposes, they’d want that ratio to be maybe 10-15, not 35.

#99 maxx on 08.30.14 at 10:39 am

….”highly insulted”. Realtards and sellers…..idiots.

I don’t think that this cheap device of supercilious affectation works any longer.

Vultch the hell out of them Jason.

Morons.

#100 Retired Boomer - WI on 08.30.14 at 11:13 am

#85 Crossborderhopper #88 Herb and Garth…

I can’t say whether unions have a place in the 21st century. I was not represented by one for the last 30 years of work, but was prior to that for a decade.

Decent employers (there are some believe it or not) pay fair wages and benefits without need of a union. As employee’s prosper, so does the employer. Might sound like a radical, foreign concept, but it is out there. There are some employers’ who pay a little as they can get away with.

I like to view a corporation’s history in this regard before investing. I invest in unionized workforce Co’s swell as non-union. (I own no Wallmart, but do own Costco) for example.

My opinion, it is never a ‘perfect’ world, just work to improve it, huh?

#101 Piccaso on 08.30.14 at 11:32 am

#85 Crossbordershopper

I’m an old tech and I’ve seen first hand how technology has destroyed employment and wages.

I worked for Ed Tel/AGT/Telus and back in the mechanical era we would have 15 guys maintaining a switch, then we went Legacy and it was 5 guys, with LTE it’s 5 guys maintaining 50 switches.

I’m installing high speed switches the size of a microwave at Telus now upgrading the voice/data to gig speed. You go into these switch offices now and the lights are off, all you hear are fans. Nobody there.

Look at the automotive industry, it’s the same thing. Used to be workers instead of robots on an assembly line.

#102 Mike T. on 08.30.14 at 11:59 am

‘Unless the wife is bringing somewhere close to $2 million to the table too, she should not get a say in how the money is spent.’

I am sorry, I had to LOL at that.

Not married eh?

Rule #1: a happy wife is a happy life
also, all the my stuff your stuff goes out the window in wedlock – is your stuff more important than loved ones? sure hope not

#103 Panhead on 08.30.14 at 12:03 pm

#74 Ronaldo on 08.30.14 at 12:50 am
So the saying, ”happy wife, happy life”.

Yabut “unhappy life, get rid of the wife.”

#104 Macrath on 08.30.14 at 12:04 pm

The union makes you and your brothers strong because it keeps you as a person weak. — Garth
———————————————–

Pray tell us what power the Walmart greeter has over the Global corporations , central bankers and their ilk ?

#105 };-) aka Devil's Advocate on 08.30.14 at 12:14 pm

#21 juno on 08.29.14 at 7:11 pm
#12 Jay J on 08.29.14 at 6:58 pm

I would go for 20% or more. depending on what you think is the market future.

Now to play the game you have to ask yourself how much you want the place. If you go in desperate, thats not good.

Go in ask if you don’t give a damn, if you get it or not. Low ball and say you don’t care, you have the cash, I am interested, please make a counter offer.

This way you doing two things, You may piss off the owner, but they may have to rethink about the original offer.

If they are desperate or the Broker is desperated they may give you a counter to feel you out.

If the house has been on the market and housing starts trending downwards you may get a hit!

That’s a flawed plan as the market is what it is today. One or the other of you is wrong; the seller because they aren’t asking the right price for this market or you because you expect to get it for something less than a fair price in this market.

The market is what it is. The future could be different but neither you nor I nor Garth knows exactly what it will be. Could be up, could be down. If you think it will be down then wait it out and buy then. If you want to buy NOW then you’ll have to pay what the market value is NOW or someone else will.

#106 crowdedelevatorfartz on 08.30.14 at 12:22 pm

@#53 Ruthen Jensen

Sorry Lucy Armstren.

The feminist diatribe didnt work under thursdays pseudonym either……….Yawn………

Please come back when you have something pertinent to say OR if you wish to ride in an elevator with moi…….

#107 Son of Ponzi on 08.30.14 at 1:08 pm

Tales from the true BPOE. Austria.
———
I’m also enjoying seeing how this country is well-kept, attractive, stable and well-functioning, without relying on hyper-population growth to maintain its economy.
———–
http://blogs.vancouversun.com/2014/08/30/cycling-along-the-danube-river/

#108 NoName on 08.30.14 at 1:35 pm

#102 Son of Ponzi on 08.30.14 at 1:08 pm

Dude, you were so close, if you just moved your mouse one country over to real BPOE.
http://www.cyclingcroatia.com/
click on BIG COASTAL CYCLING TOUR and scroll all the way down to pic gallery.

ps you dont go to austria to cycle, you go there and learn about famous Austrians. just look at first 3, you can skip the rest.
http://www.biography.com/people/groups/austrian
1st died with the dog alone
2nd turn world upsidedown
3rd could cure smoky in a jiffy…

The great question that has never been answered, and which I have not yet been able to answer, despite my thirty years of research into the feminine soul, is ‘What does a woman want?’
Sigmund Freud

#109 Flawed on 08.30.14 at 2:41 pm

#97 Piccaso on 08.30.14 at 11:32 am
#85 Crossbordershopper

I’m an old tech and I’ve seen first hand how technology has destroyed employment and wages.

I worked for Ed Tel/AGT/Telus and back in the mechanical era we would have 15 guys maintaining a switch, then we went Legacy and it was 5 guys, with LTE it’s 5 guys maintaining 50 switches.

I’m installing high speed switches the size of a microwave at Telus now upgrading the voice/data to gig speed. You go into these switch offices now and the lights are off, all you hear are fans. Nobody there.

Look at the automotive industry, it’s the same thing. Used to be workers instead of robots on an assembly line.
************************************

Are you saying technology is bad? Seems to me less and smaller equipment is better, more efficient and has a better environmental footprint than giant switches maintained by 15 guys whose talents would be better put elsewhere.

#110 Herf on 08.30.14 at 2:44 pm

“So here’s his plan: Vultch hard and get a low price. Use a home inspection report to hammer it down further (“There’s always something wrong”).”

And if he really wants to “insult” them, insist on having a full electrical inspection performed as a condition of sale, especially if there’s any evidence of sloppy and/or do-it-yourself electrical modifications. According to a friend who’s a licensed electrical contractor in Ontario, regular home inspectors aren’t allowed to inspect electrical wiring, except for maybe removing switch/outlet face-plates for a look-see.

The Ontario Electricity Act states the following:

“Inspections

113.13 (1) The Authority or a person appointed as an inspector in writing by the Authority may conduct an inspection and may, as part of that inspection, enter and inspect at any reasonable time any land or premises, including the business premises of an authorization holder, for the purpose of,

(a) ensuring compliance with this Act and the regulations; or

(b) determining that the authorization holder remains entitled to the authorization. 2006, c. 34, s. 12 (6).”

In other words, find out who is authorized to inspect the electrical system, to what extent and what certification/authorization they require in order to do so.

The Ontario Electrical Safety Authority (ESA) web site states the following for home buyers and home owners:

http://www.esasafe.com/consumers/buying-a-home/

http://www.esasafe.com/consumers/renos-and-repairs/your-obligations

The other provinces/territories probably have similar or identical requirements.

#111 aaron on 08.30.14 at 2:51 pm

I’ll believe the 17% price on average when that also happens in the 600-800k sfh in toronto.

Believe what you want. Those are the stats. — Garth

#112 aaron on 08.30.14 at 3:08 pm

Believe what you want. Those are the stats. — Garth

Well doesn’t take much to move the average when so little inventory for stuff over 1M.

On mls for listings in Toronto within 50KM.
3835 for houses over 1M
14290 for houses under 1M

The average decline I referenced is for all detached houses in 416. So what does a 50-km radius have to do with it? — Garth

#113 Inglorious Investor on 08.30.14 at 3:47 pm

Unions…

First, public sector unions should NOT exist. The main problem with public sector unions is that they can exceed the historical mandate of a union and garner too much political power. Thus, they can accrue for themselves far more wealth than they deserve at the expense of the tax payers––the ones who actually pay their wages/salaries, benefits and pensions.

A good example is Teachers. They have FAR too much political clout due to their sheer numbers and collective financial power. Teachers have gotten WAY out of hand and MUST, MUST, MUST be reigned in. The Teachers union has destroyed public elementary education in Ontario, as they have taken virtually all available education funds for themselves, leaving the boards woefully underfunded and students are not getting the quality of education they should.

The Teachers union is quite frankly evil on a scale that few in Ontario can even begin to fathom.

Second, private sector unions.

Private sector unions can serve a real and beneficial function. In theory. That is, if you believe distorting labour markets by limiting supply is good. In point of fact, there is no absolute good or bad, just good for bad depending on who you are. Employers naturally seek the lowest cost of everything, including labour. Put the most diehard union brother in charge of a company for long enough and they too will seek the lowest costs. That’s just part of running a business. On the other side, the unions try to get the highest price for labour. Sometimes it can work, like in the 50s, 60s, and 70s. And sometimes it can’t work, like now. Because in a global market, supply and demand will rule. The unions as they currently exist are hanging on to an economic reality that died with the Reagan presidency.

The problem with even private sector unions is that in their zeal to maximize the price of labour they forgot about productivity and profits. Profits are the source of their jobs and productivity is needed to generate profits. Typical unions are incredibly unproductive and they protect lazy workers because the union does not exist to produce, but to gain membership fees at the expense of all else.

If private sector unions operated with a give and take philosophy, worked to increase productivity and maintained high standards for union members (and got rid of the poor performers), I’d be all for them. But that’s not how they work. Sid Ryan never say a pay hike he didn’t like. No matter how much people like cops and firefighters make, they always deserve more. Even if it kills the tax payer and destroys the city, like happened in Detroit and other American cities near you.

It should be about having a voice, not about taking, taking, taking until the well is dry and there is nothing left for anyone (no jobs, no company, no taxes, nothing). How often has this happened? How often have bad unions killed potentially good businesses? Now, in the end, a company gets the workforce it deserves, so both management and unions are to blame.

But generally speaking, unions were a good idea gone terribly wrong.

First thing: kill all the public sector unions. Then let the private sector take care of itself.

#114 Nemesis on 08.30.14 at 3:51 pm

“The union makes you and your brothers strong because it keeps you as a person weak.” — Garth

Hmmm… Let’s hop into the WayBackMachine, shall we?

http://socserv.mcmaster.ca/oldlabourstudies/onlinelearning/cawhistory/essays/essay5a.html

http://www.windsorstar.com/Gallery+historic+1945+Ford+Strike/1818112/story.html

And now for a rhetorical question, GT… When the dust settled, do you think the Ford workers and their supporters felt weaker or stronger?

Whether the battlefield… the boardroom… or a picket line – there is, after all, strength in numbers.

Solidarity, by definition, implies some loss of individual autonomy… That said, well – let’s give the last word to Aristotle, shall we?

“The whole is greater than the sum of its parts.” ― Aristotle

#115 saskatoon on 08.30.14 at 4:37 pm

#83 backwardsevolution

hopefully he is on vay-kay…and will be back!

miss you agg!!!

#116 Macrath on 08.30.14 at 5:14 pm

Getting a raise in China

In response to the suicides, Foxconn substantially increased wages for its Shenzhen factory workforce, installed suicide-prevention netting, and asked employees to sign no-suicide pledges. Workers were also forced to sign a legally binding document guaranteeing that they and their descendants would not sue the company as a result of unexpected death, self-injury, or suicide.

http://www.cnet.com/news/riots-suicides-and-other-issues-in-foxconns-iphone-factories/

#117 Stickler on 08.30.14 at 5:48 pm

#112 Inglorious Investor on 08.30.14 at 3:47 pm

Unions…

First, public sector unions should NOT exist. The main problem with public sector unions is that they can exceed the historical mandate of a union and garner too much political power. Thus, they can accrue for themselves far more wealth than they deserve at the expense of the tax payers––the ones who actually pay their wages/salaries, benefits and pensions.

A good example is Teachers. They have FAR too much political clout due to their sheer numbers and collective financial power. Teachers have gotten WAY out of hand and MUST, MUST, MUST be reigned in. The Teachers union has destroyed public elementary education in Ontario, as they have taken virtually all available education funds for themselves, leaving the boards woefully underfunded and students are not getting the quality of education they should.

———————–

Well said!

#118 NoName on 08.30.14 at 6:05 pm

#109 Herf on 08.30.14 at 2:44 pm

Herf tell me does you friend electrician have an x-ray eyes so he can see hidden wire splices and drywall covered el boxes?

To find defects and code noncompliance you don’t have to be an electrician, millwrong can do it, just as good. Its simple old house new el. panel, mix old and cables, and additions and obvious renovation (kitchen, bathrooms, additions, finished basement, etc) just ask does owner have ALL permits, it will be at least one missing. than laugh “Bwahaha”

#119 devore on 08.30.14 at 6:56 pm

#46 Kenchie

Investment expenses are deductible. Includes interest on borrowed money (if money is used for investment), trading fees, adviser fees, accounts expenses (annual fees, etc), safety deposit box.

#120 Son of Ponzi on 08.30.14 at 7:08 pm

#118
Investment expenses are deductible. Includes interest on borrowed money (if money is used for investment), trading fees, adviser fees, accounts expenses (annual fees, etc), safety deposit box.
—————
No wonder, no one wants to work any more.

#121 TakingResponsibility on 08.30.14 at 7:10 pm

RE: Unions

Always wanted to parse the difference between “Cartels”, “Monopolies”, “Parties” and “Unions.”

I don’t see any difference.

#122 Herf on 08.30.14 at 7:13 pm

#117 “Herf tell me does you friend electrician have an x-ray eyes so he can see hidden wire splices and drywall covered el boxes?”

He mentioned having seen junction box(es) that had been hidden behind drywall. How he found it/them, I don’t know. I have to assume the place was being renovated and/or he had traced wires from the panel or another electrical box/fixture and discovered the hidden junction box(es) in the process. Or, as you said, perhaps it was obvious there had been new renovations or electrical fixtures added when compared to the rest of the house and something along the way tipped him off.

Yes, as you said, ask the owner/seller to provide/show all permits and see what kind of reaction you get. If the documentation isn’t forthcoming or a permit appears to be missing, wonder/question why. The Ontario ESA web site states you can ask them for a record search of issued permits (for a fee) on a home you’re considering buying.

#123 Steve French on 08.30.14 at 7:24 pm

Don’t agree with Garth on the unions.

Track the decline in American middle class wages over the last 30 years. That is correlated very closely with the decline in union participation.

The basic issue- the basic problem America faces, is that the middle class and lower classes… the lower 80% of the population, simply do not have the economic means to purchase the goods and services that an economic recoverty would require.

A new American proletariat underlcass has emerged.

http://www.forbes.com/sites/joelkotkin/2014/02/16/the-u-s-middle-class-is-turning-proletarian/

Unless you find a way to redistribute more financial resources away from the pathological hoarding of the 0.001% mega-rich, and towards the good honest hard working people who could actually spend that money in their communities, and boost the economy, America will continue to stagnante or, at best, grow well below trend– i.e. secular stagnantion.

Face it- union organizing and collective bargaining of real working people, with their employers (i.e. mega rich corporations sitting on trillions of profits), provide a very important way in which income for the middle and lower classes can be protected and improved. Tax policy is another mechanism.

More economic equality is not only fair, it’s actually a pre-condition for sustainable capitalism.

#124 Smoking Man on 08.30.14 at 7:32 pm

Working sucks, you parents, your teachers will advise you its noble… “Get er Done” in a drep voice… Buy a pick up and work.

You bastards are so stupid to fall for that.

Never in the history of man kind has the population been so dumb down..

Get your slaves chasing carrots, for almost free. While you vacation every month while the idiots make you money.

Give them a yellow highlighter at Xmas. Tell them to take another course…

#125 Waterloo Resident on 08.30.14 at 7:51 pm

I AGREE: IT WOULD BE CHEAPER AND EASIER for him to JUST GET A NEW WIFE.

#126 Nemesis on 08.30.14 at 8:03 pm

#IllustratedHistoryLessons. #BackInTheDay…

http://youtu.be/DkyCu7ryu-w

#127 OttawaMike on 08.30.14 at 8:47 pm

The union makes you and your brothers strong because it keeps you as a person weak. — Garth
——————————————-

No.
The union is you the worker.
A weak union is made up of weak individuals. A strong union is made up of people who take the initiative to look after their interests and be heard.

#128 Obvious Truth on 08.30.14 at 9:19 pm

Great discussion on this one. This guy has a good head on his shoulders. He will forever be financially well to do. Let’s hope life goes just as well for him.

Like the union debate. I don’t think its a simple one. Teachers for one were forced to unionize. They are professionals. And have a college. And they are the education system. It may be the bureaucracy that’s the issue. But think that if a teacher could charge five grand for 25 kids that would be 125k. Someone good could ask for far more and it would only cost as much as daycare.

For private business I’m sure management at a place like GM have just as much blame as those pesky unionized workers.

But it would seem that if u are excellent at your craft you could do better on your own. The world allows for that though. Just like investing for yourself.

I wonder if Jason could propose an option that sees him at home more in a couple of years. 3 million would throw off big time spending money. Just don’t scare her into thinking you’ll always be around. And maybe volunteer at a local school.

Once you’ve got a pile of cash it’s only about counting more after that. Means nothing. There is much to do out there. Maybe there’s a local not for profit that could use a guy like him.

I still remember watching my dad one year march with his union.

#129 45north on 08.30.14 at 9:36 pm

Inglorious Investor : It may seem paradoxical, but today a rising stock market is a sign of declining aggregate wealth, and a moribund monetary system.

it does seem paradoxical but in the case of Nortel the stock was rising just as the company itself was collapsing. Management betrayed the shareholders and the employees.

goood news : that’s one o too many! Poloz the Dwarf Mind is going to get pressured to raise rates at some point…….towards the end of ’15…

sounds right

People with monster mortgages are really going to feel like they are being crushed

yeah they are

Jason….ditch the broad…..with 5 million you could be beating them off with a stick.

that doesn’t sound right

CrossBorderShopper : you should have discussed the current labour market and where young kids are today

it’s getting tough. a young man works in retail, the store gave him the award for best customer interaction but no raise. He doesn’t see any opportunity for advancement there. There are other stories but they’re not for public consumption.

Steve French : I interpreted Aretha Franklin to listen to Mark Knopfler. Here’s something I didn’t know about her:

The mother of four sons, her first two children, Clarence (born January 28, 1955), and Edward (born January 22, 1957), were born before her 13th and 15th birthdays.[34]

http://en.wikipedia.org/wiki/Aretha_Franklin#Personal_life

she shows a lot of personal courage and integrity

here’s her shoop shoop song – sounds like the sax solo is a baritone:

https://www.youtube.com/watch?v=6mmJW5ht_m0

#130 Son of Ponzi on 08.30.14 at 9:51 pm

In Austria all labour unions belong to a national union.
The president of that national union is a Minister in the national government.

#131 Smoking Man on 08.30.14 at 10:21 pm

Unions are for the unless, the sub tribe, the no confidenc.

It’s easy people, look in the mirror, and state, I’m perfect, I’m the best..

You would be so God damn surprised how you live turns around when you actually love your self before others.

But your programming makes you feel good only when your honest, hard worker, a server. Looking for an A and a pat on the head.

I so got to open up a smoking man education complex, void of the word school.

It’s like nails on a chock board when I here the word school.

#132 Smoking Man on 08.30.14 at 10:35 pm

We are all hunters, but the hunters at the top terrified of competition, have created a thing called education, it’s goal.

Keep the your individual spirit suppressed. It cons you into a felling of I’ve made it.

When in fact the masters balance sheet has a hell of a lot more zeros than yours.

MH17 the Russians did it.. 911 was Sadam

50k in debt, you’ve made it, now go find a cube to display your obeisance certificate.

Humans, thank god I’m from Nectonite.

#133 Setting the Record Straight on 08.30.14 at 10:38 pm

@122

Globalization. – transportation, communication, education including
English language training , capital mobility, and the opening of high levels of immigration all make capital more relatively scarce and labor more abundant.
North American living standards will decline. They will decline faster than necessary because of the pro immigration policies supported by many including our host. ( A liberal can’t take his own side in an argument.)

You want to reduce inequality– dismantle the government and eliminate the bureaucratic drones who protect the crony capitalists and tax the populace for their own benefit.

#134 Smoking Man on 08.30.14 at 10:45 pm

Staggaring at Seneca, I want to help humanity, but my mission is to take you vermon out. You have no right to interstellar space travel. Your not evolved enough

Chapter 7 needs a re write. I can’t do it.

I’ll find a way to save you bastards from yourselves.

#135 Johnny D on 08.30.14 at 11:21 pm

My take on unions and collective bargaining?…

Never enter into a serious financial agreement without a contract. To me, a job is a big one. Pro athletes, for example, backed by their respective unions, sign giant contracts based on their past performance and that’s how it should be done with Joe Shmoe.

We like to brag how much our favorite athlete’s contract is worth yet we crap on the little guy for wanting some assurance of wage and working conditions on paper.

And Garth you of all people should agree that having clarity and well defined terms is important in any major financial aspect of one’s life. Winging it and hoping for the best doesn’t seem to be your style, so why would one want to work under conditions like that under the mercy of your employer.

#136 Setting the Record Straight on 08.30.14 at 11:21 pm

Govt helping poor people

“You must first understand that if an exchange determines you are eligible for Medicaid, you have no other choice. Code for exchanges specifies that an applicant is not eligible for a subsidized plan to the extent that he or she is eligible for coverage under Medicaid.”

http://www.paulcraigroberts.org/2014/02/08/obamacare-final-payment-raiding-assets-low-income-poor-americans/

#137 Blacksheep on 08.31.14 at 1:28 am

“A weak union is made up of weak individuals.”
————————————————–
Disagree. Demand VS Supply applies to all things. A weak union, is one whom’s members have no leverage on their employers. Outsourcing, technology and automation is ending the unions rain.

Ones ability to generate revenue for said employer and the scarcity of his/her talents will determine compensation
going forward.

#138 Blacksheep on 08.31.14 at 2:06 am

Smoking man:

https://www.youtube.com/watch?v=_seKyGYlTHY

#139 Happy Renting on 08.31.14 at 2:45 am

Anyone here a divorce lawyer or family law specialist? Just like there is a running Greater Fool FAQ, we should have a permanent Ditch The House-Horny Spouse break-even spreadsheet. I would assume information about a dozen-or-so standard variables would produce an accurate recommendation for most of the population. Then people could say in their wedding vows, “’til death or unprofitable real estate opinions do us part.”

#140 Armand R. Dillhole on 08.31.14 at 2:45 am

My comment about the comments, Wow and what the hell did most of them have to do with the article Garth posted. There agan what is new I suppose but this one really seemed to go far a field.

Also who let that bunch out of the condo I sold them? It was almost peacefull for a few days.

#141 Ambien Lunesta on 08.31.14 at 5:19 am

unions are heavily masonic. Freemasons and union members played a large role in the made for TV movie called 911. the head of a fake ‘truth’ group called ‘pilots for 911 truth’ said he would never officially endorse ‘no plane theory’. masons are installed in city halls and governments globally, they facilitate British Imperialism, globalization, the NWO etc. they are part of the control grid. their temples, rites and activities are almost never mentioned in MSM (another 911 perp)

#142 maxx on 08.31.14 at 7:49 am

#35 Darth on 08.29.14 at 8:07 pm

“In 10-12 years, these condos built post 2010 will be worth 30 cents on the dollar and will be the rental housing of the future (they kind of already are now)… owners will be throwing away keys at all costs as they get crushed by special assessments to repair the very poor construction…..”

Walked into a new, “luxury”, river-view condo last week and could not believe how cheaply built it was. Hardwood floors the thickness of veneer that crackled when walked upon, the baseboards minuscule, the quarter rounds were rough, square sticks that looked horrid and the doors, builder hollow-core of the flimsiest sort.

What an embarrassing buy at about 400/sf. Just a step away from paper doors.

You are so on the money.

#143 Stumpy on 08.31.14 at 8:37 am

What I find interesting is the dip was most pronounced in the 416. Many people thought the 905 was most vulnerable to price drop yet many regions there have not dipped much or have even risen. E.g. Oakville, Richmond Hill, Markham – average detached price still hovering around a $1M.

In any case, ultimately it’s the year over year price change that’s most important and that is still up pretty much everywhere.

Disagree. The year/year number is a lagging indicator, while current monthly stats provide a more accurate view of where the market is heading. Any smart buyer wants to know what lies ahead, not behind. — Garth

#144 DreamingInTechniColour on 08.31.14 at 8:55 am

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/08/analyzing-cmhc-borrowers.html

#145 H&R Blockhead on 08.31.14 at 9:04 am

Devore et al:
New rule regarding safety deposit box fees.

According to CRA:

What is changing with respect to the deduction for safety deposit boxes?

Taxpayers are permitted to deduct certain carrying charges incurred to earn income from investments. These charges currently include the cost of renting a safety deposit box.

For taxation years beginning after March 20, 2013, the budget proposes that a deduction of an amount paid or payable in respect of the use of a safety deposit box of a financial institution will no longer be allowed.

#146 Ayn Rand Army on 08.31.14 at 10:33 am

#113 Inglorious Investor on 08.30.14 at 3:47 pm

Nailed it!

The solution to both education and healthcare is they need to be completely privatized, for profit, with competition. That’s how free markets innovate and find effervescence and improve quality and value over time. (just like improvements in technology and telephone switches)

As long as the government has the monopoly on healthcare and education the quality and cost situation will continue to decline.

Could you imagine if the government ran the food system and grocery stores too? Their regulations, tariffs and subsidies already do enough damage to our food supply and costs.

But try explaining the basic concept of for profit competition to the average idiot in Canada and you’ll be called an idiot.

Canadians are so stupid as a result of the horrendous education system controlled by government and union shills and the brainwashed curriculum reminds me of the old joke of the two Russian ladies standing in line day after day for their bread rations and discussing how lucky they are to only have to wait four hours a day to get their free bread from the government, while in America, their government doesn’t give out any bread at all!

Kinda like our free healthcare system.

Remember, next time you’re in a Canadian hospital.
You are an expense on the system and it’s cheaper for them if you just die already, since they already have your money and can likely save on CPP and OAS payments too.

#147 Ayn Rand Army on 08.31.14 at 10:38 am

Forgot to say, governments proper role is only for monopoly situations that are wanted in the country so a monopoly on force, law and order, dispute resolution, courts and national security/defense.

when it comes to economics, if a monopoly is a bad thing, as most people seem to agree, then it must be the free market to provide goods and services in all sectors including healthcare and education if your goals is a smart and healthy society. This is the easiest acid test for determining the dividing line for government functions.

This would keep gov. small and necessary and beneficial for it’s cost.

This is what America used to be, but not no more. Sadly.

#148 maxx on 08.31.14 at 10:53 am

#60 Andrew Woburn on 08.29.14 at 10:32 pm

Interesting. Market forces aren’t quite what they used to be.

However, greed is.

#149 The Goddess of Kamsack on 08.31.14 at 10:54 am

“Mouldy”? You’re kidding. It hasn’t rained here since April. P.S. Don’t dump the wife, she just believes the hype, so educate her.

#150 Ayn Rand Army on 08.31.14 at 11:00 am

#123 Steve French on 08.30.14 at 7:24 pm
Dude, you are clueless. Go start a business and take someones customers. Then come back and tell us how much the unions helped you by holding you hostage with government support while they squeeze both your wallet and will to live.

#127 OttawaMike on 08.30.14 at 8:47 pm

The union makes you and your brothers strong because it keeps you as a person weak. — Garth
——————————————-

No.
The union is you the worker.
A weak union is made up of weak individuals. A strong union is made up of people who take the initiative to look after their interests and be heard.

———

Union or no union, as a worker you are a necessary nobody and the sooner a business can obsolete you the better. The benefit of a union to a business tho is it can ease negotiations to one entity rather than each individual on their own. Problem is tho, they tend to have too much power and government backing of the workers far in excess of government backing of the employer since workers out number employers at the voting box, so hence companies are simply destroyed by union labour monopolies driving up input costs.

Let companies fire everyone and break unions at will, as that decision will be weighed against the cost of rehiring, retraining versus relocating, closing down etc… then unions could still be a benefit and globally competitive. Else, the businesses just will die, close down, move, whatever, as they will not and can not persist if costs are not competitive.

#151 maxx on 08.31.14 at 11:07 am

#77 CBC on 08.30.14 at 2:05 am

Bravo.

YOU are the one with the money. HE is the one who wants it.

Let him rot.

#152 Shawn on 08.31.14 at 12:26 pm

Your Mission, Should you choose to accept it…

Setting the record straight at 133 quotes someone saying:

English language training , capital mobility, and the opening of high levels of immigration all make capital more relatively scarce and labor more abundant.
North American living standards will decline.

**************************************
It’s hard to see how capital is scarce in a low growth world with record low interest rates.

But if it be true, your mission is clear, save and accumulate some capital and earn money from that.

Favor investing in equities… (include some preferred shares) eschew 2% style fixed income.

In most any future scenario, that will hold you in good stead.

Or, go ahead and be a victim, most will.

#153 crowdedelevatorfartz on 08.31.14 at 12:33 pm

@3145 Ann Rands Army

Your somewhat simplistic observations of the benefits of socialism vs capitalism remnds me of old Russian joke.

Capitalism is man exploiting man. Communism is exact opposite………….

#154 triplenet on 08.31.14 at 12:59 pm

Jason makes a verbal offer on a proposed real estate purchase.
Jason calculates his investment loss tolerance before purchasing his primary residence.
Jason must be inexperienced.

#155 Smoking Man on 08.31.14 at 1:23 pm

http://macedoniaonline.eu/content/view/25981/53/#.VANVhP2U7xM.twitter

Seams the Dutch intellectuals have a brain.

Where, other than here, where are Canadian Intellectuals?

#156 Daisy Mae on 08.31.14 at 2:01 pm

#145 Ayn: “Remember, next time you’re in a Canadian hospital. You are an expense on the system and it’s cheaper for them if you just die already…”

*********************

Oh, I dunno. I have a 92-year-old friend who just had a very successful hip replacement and she’s just doing fine, thank you very much.

#157 T.O. Bubble Boy on 08.31.14 at 2:04 pm

I think some people are missing the point about getting a HELOC and investing in non-house assets.

This is not done for the tax credit (the interest on the loan)… that is just a side benefit.

This is done to diversify. If “Jason” has $2M net worth, and puts $1.5M of it into a house, he now has 75% of his net worth invested in real estate.
(well beyond Garth’s Rule of 90, unless Jason is 15 years old)

#158 Flawed on 08.31.14 at 2:15 pm

Canadians are so stupid as a result of the horrendous education system controlled by government and union shills and the brainwashed curriculum reminds me of the old joke of the two Russian ladies standing in line day after day for their bread rations and discussing how lucky they are to only have to wait four hours a day to get their free bread from the government, while in America, their government doesn’t give out any bread at all!

Kinda like our free healthcare system.

Remember, next time you’re in a Canadian hospital.
You are an expense on the system and it’s cheaper for them if you just die already, since they already have your money and can likely save on CPP and OAS payments too.

*************************************

Agreed. Every hear of Rome? Rome fell from greedy govt and it’s unions (the army). Too big. Too fat. Then collapse. It happens everytime and this time is no different.

Enter Bitcoin…….which cannot be corrupted or co-opted by greedy govt and it’s employees who only look out for themselves. Keep telling yourself bitcoin is a scam just like those losers who said no one would buy anything from the internet or watch TV on the internet. Bitcoin is internet based. Full stop.

#159 crowdedelevatorfartz on 08.31.14 at 2:21 pm

@#154 Smoking Mensch

Smokey! Been hitting the JD a little too hard at the Seneca? I cant believe you forwarded that Russian propaganda drivel.
Next time just click on the “Shocking French Video” on the top right of your screen.
Seems more believable and more importantly, to your taste………

#160 Metrotownboom on 08.31.14 at 2:21 pm

Oh yah bust all the unions then we can all work for 10 bucks an hour with no pension , has Garth not been droning on how we are all screwed cause there is no more pensions? But then he blasts the only jobs left that still offer a decent pension. Great idea guys ban unions cause the corps give raises out of the goodness of their hearts ……fools

#161 crowdedelevatorfartz on 08.31.14 at 2:24 pm

@#157 Flawed

Bitcoin? Bitcoin? Bitcoin will survive the downfall of society? O…M….G

BWahahahahahahahahahahahahahaahha

Well at least you got your name right!

#162 Grantmi on 08.31.14 at 2:31 pm

#1 Bob on 08.29.14 at 6:27 pm

GET A NEW WIFE!

Agree! Be a Hero, dump the zero!!

#163 Flawed on 08.31.14 at 2:48 pm

#160 crowdedelevatorfartz on 08.31.14 at 2:24 pm
@#157 Flawed

Bitcoin? Bitcoin? Bitcoin will survive the downfall of society? O…M….G

BWahahahahahahahahahahahahahaahha

Well at least you got your name right!

*************************************
INTERNET PREDICTIONS – by Greater Fool Bloggers

The Internet will catastrophically collapse in 1996.’
– Robert Metcalfe, internet inventor

No one would ever buy a damn thing over the computer

The Internet won’t take off at home because there will be no home computers

“The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”
– Clifford Stoll, 1995

“The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”
– Clifford Stoll, 1995

And on and on and on…….Going to be lots of crow pie to go around in a few years. BAHAHAHAHAHAHHAHAHA

#164 Flawed on 08.31.14 at 2:51 pm

#159 Metrotownboom on 08.31.14 at 2:21 pm
Oh yah bust all the unions then we can all work for 10 bucks an hour with no pension , has Garth not been droning on how we are all screwed cause there is no more pensions? But then he blasts the only jobs left that still offer a decent pension. Great idea guys ban unions cause the corps give raises out of the goodness of their hearts ……fools

*****************************************

Or rather than cry boo hoo boo hoo boo hoo continually like most loser Cdn resource workers do when they lose their “antiquated board turning jobs at mills do”……do what the Germans do with ZERO RESOURCES….read a flipping book, learn a SKILLED trade and turn those resources into HIGH PRICED items. Geez….what a concept.

#165 Blacksheep on 08.31.14 at 2:55 pm

I found this article interesting and completely relevant to Garth’s incessant ramblings on the virtues of liquidity and its relationship to potential long term assets such as RE.

http://www.pieria.co.uk/articles/ultra-liquidity

He (Garth) may actually be on to something here.

#166 Nemesis on 08.31.14 at 3:05 pm

#IfThisCatchesOn… #Smokin’Man’sRecreationalPursuits… #CouldBeJeopardized.

[SCMP] – Macau casino workers start industrial action to push for higher pay

…”Macau casino croupiers yesterday began an unprecedented campaign of industrial action for better working conditions – the first such move in the former Portuguese enclave’s history.

It came as 200 people took to the streets to protest against soaring house prices, as an increasingly restive city prepared for Fernando Chui Sai-on’s re-election as leader running unopposed for a second term today.”…

http://www.scmp.com/news/hong-kong/article/1581960/macau-casino-workers-plan-industrial-action-push-higher-pay

#InOtherNews’RaceToTheBottom’

[LAT] – 1 in 6 California construction workers labors in shadows, study finds

…”In specialty trades such as drywall and flooring, a quarter of laborers are considered informal, according to the Economic Roundtable.

Construction in California is a $152-billion industry, one in which so-called gray employment has surged 400% since 1972. The upswing has been especially pronounced since the most recent recession because only two-thirds of the formal construction jobs that disappeared have since returned.

This year, for each construction job opening nationwide, there are seven unemployed workers, suggesting that some laborers may be shifting voluntarily into the shadow economy.

What results, according to lead researcher Yvonne Yen Liu, is an industry where highly skilled and well-paid workers are aging out of the system and being replaced by less-skilled laborers who are often transient because of steep turnover rates.

“The construction industry in California is sinking underground,” she said. “It hurts all of us, not just construction workers. It hurts high-road businesses who play by the rules and takes away much-needed public revenue that doesn’t get paid.”…

http://www.latimes.com/business/la-fi-california-construction-underground-economy-20140829-story.html

#167 crowdedelevatorfartz on 08.31.14 at 3:12 pm

@#163 Flawed
hmmmmm, Germany.
Quite an example. We bombed its factories to dust and then rebuilt the entire country through the Marshall Plan.
So their workers could start new industries with the latest and greatest technology and materials…..all paid for by the Allies tax dollars…..

Bitcoin…….bwahahahahahahahahahahahahahahahaaha

#168 NostyVlad the Snugglebombed on 08.31.14 at 3:36 pm

#157 Flawed on 08.31.14 at 2:15 pm — “Enter Bitcoin…….which cannot be corrupted or co-opted by greedy govt and it’s employees who only look out for themselves.”

Plus — Ecuador’s Own Digital Currency, starting shortly. No need for the petro-dollar anymore. Once this is up and running, there may be several other countries who follow suit with their own digital currencies.

#154 Smoking Man on 08.31.14 at 1:23 pm — “Seams the Dutch intellectuals have a brain.”

Hit the nail on the head again, SMan. Dutch govt., Smoking Gun and NWO without Russia It appears to be another inside job from the money-junkies (US and Ukraine).

#169 Flawed on 08.31.14 at 3:52 pm

#166 crowdedelevatorfartz on 08.31.14 at 3:12 pm
@#163 Flawed
hmmmmm, Germany.
Quite an example. We bombed its factories to dust and then rebuilt the entire country through the Marshall Plan.
So their workers could start new industries with the latest and greatest technology and materials…..all paid for…..

*************

What a stupid example from 70 years ago with everyone now dead. Yanks, limies and Canucks also blew away a million men, women and babies in the ME. How’s that working for ya professor? Not so sure the young men in ISIS whose parents your friends in the army wasted are so forgiving as the Germans.

FAIL

#170 Nuke on 08.31.14 at 4:02 pm

Hurray for workers. Unions for all. Government unions have kept the democratic workplace intact. The courage in the public workforce needs to be shown in the private sector. Private producers gave up all their gains over the past 30 years. First fight back to a balance and then take over the direction and control of the firm. Private enterprise directed by the producers created Silicon Valley. Let’s make it work world wide. That is what Labour Day is all about. It is a bright future. Anyone fighting for economic democracy should be in the parades tomorrow!

#171 Gainsaywhodare on 08.31.14 at 4:17 pm

“has a spouse who can’t understand why he’s so cheap.”

This tells me that the spouse doesn’t work. Anybody who does not have to bust their asses to work and make a living will never understand the value of money.

#172 Son of Ponzi on 08.31.14 at 4:35 pm

@#163 Flawed
hmmmmm, Germany.
Quite an example. We bombed its factories to dust and then rebuilt the entire country through the Marshall Plan.
So their workers could start new industries with the latest and greatest technology and materials…..all paid for by the Allies tax dollars…..
————-
Quite the misconception held by many North Americans who know history only from watching Hollywood movies.
In essence, the Marshall Plan was a make work project for returning soldiers, using empty war machine factories to flood the world with crap.
The Germans pretty much rebuild their own country.
See:
http://en.m.wikipedia.org/wiki/Trümmerfrau
Also, refer to Morgenthau Plan.

——————–
Quite the misconception held by many who know about history only from watching Hollywod movies.
The Marshall Plan was simply a make-work project for empty American War factories to provide work for all the soldiers coming back, and flood the world with crappy products.

#173 Son of Ponzi on 08.31.14 at 4:38 pm

Tomorrow is Labour Day.
See you at the barricades!

#174 Flawed on 08.31.14 at 4:39 pm

https://ca.news.yahoo.com/health-canada-pulling-last-citronella-090000570.html

Another of many reasons we are leaving Canada for SA. Poison good. Natural bad. Way to go Govt Workers of Health (Death) Canada

FAIL

#175 rosie "moving forward" in the knowledge that, "this won't end well" on 08.31.14 at 4:52 pm

Freedom of the road 21st century style. All you need is an R.V., a sunny disposition and a mailing address.

http://www.amazonfulfillmentcareers.com/opportunities/camper-force/

http://www.rawstory.com/rs/2014/08/30/permanent-temps-what-your-life-as-an-elderly-migrant-worker-will-be-like-when-you-cant-retire/

#176 Flawed on 08.31.14 at 4:59 pm

#167 NostyVlad the Snugglebombed on 08.31.14 at 3:36 pm
#157 Flawed on 08.31.14 at 2:15 pm — “Enter Bitcoin…….which cannot be corrupted or co-opted by greedy govt and it’s employees who only look out for themselves.”

Plus — Ecuador’s Own Digital Currency, starting shortly. No need for the petro-dollar anymore. Once this is up and running, there may be several other countries who follow suit with their own digital currencies.

*********************************

Not a great example in Ecuador. My partner actually knows people in govt who were recommending against this. Ecuador is not a very progressive country and trying to install its own digital currency will fail miserably as they lack the expertise and infrastructure required to make it a robust fail proof system. In the end they will end up embracing bitcoin like everyone else who is tired of a corrupted, co-opted hierarchical money system which we currently have in place around the world.

#177 Happy Renting on 08.31.14 at 5:36 pm

#174 rosie “moving forward” in the knowledge that, “this won’t end well” on 08.31.14 at 4:52 pm

Years ago I read a young reporter’s undercover experience working in an Amazon warehouse. If the work is punishing for someone young and healthy, it’s probably crippling for the elderly who, if poor, don’t have access to first-class health care or a diet of good quality food. Sad to hear of people scratching out a brutal subsistence living until they keel over (the Amazon job sounded high on rules and low on dignity, just what we all want for our golden years!)

#178 Nemesis on 08.31.14 at 5:43 pm

#ParablesForSaltierDogz…

http://youtu.be/iPDl9yKSnDE

[NoteToGT: Probably just a pipe dream {but not the RobFord kind}… that said, infinitely preferable to, “Bellum omnium contra omnes.” Wouldn’t you agree?]

#179 nonplused on 09.01.14 at 2:43 am

It’s never a bad idea to ditch the wife as soon as she starts arguing with you. You don’t owe her anything, even if you are wrong.