Greed is good1

Regardless of what anyone says on this riveting blog, people will continue to buy houses. Most of those people will do so for emotional reasons, since real estate’s the most emotional of assets (followed by gold, and lingerie).

Housing is even more irrational than purchasing, say, stocks. In that case, there’s only greed and fear to worry about. But with housing you also have the spouse, kids, dog, parents and peer pressure eating away at you. The illogic of it all is fascinating.

When house prices rise, people want one bad, but listings go down. This increases the imbalance between supply and demand, sending prices higher.

When prices fall, frightened buyers disappear, and listings mushroom. This also upsets market balance, as supply overwhelms demand, dropping values further.

Today, we have an interesting scenario in which rising prices are offset by low financing rates, motivating buyers who only months ago were scared stiff. But once again, sellers are pulling back, dropping inventories and in some places creating bidding wars for available listings.

It all means this: Buyers buying high in the hopes of selling higher. Sellers are demurring at a time when they could get the best price, because they believe they’ll get a better one later. If this isn’t risky behavior, I don’t know what is.

Oh, and did I mention we have a recession? With galloping unemployment, plunging manufacturing activity and our major trading partner more mired in historic debt and deficit?

But, like I said a few days ago, whadda I know?


When sales & prices rise, buyers flock & sellers retreat

So, let’s go to a smart young sparkplug who’s obviously got it figured out:

I have been an avid reader of your greaterfool blog for the past 6 months, and appreciate your contrarian approach.

What are on your thoughts on this investment property in an upscale Toronto neighbourhood, I purchased and improved 2 years ago? It is walking distance to the subway line, and all amenities.

Some Numbers:
Cost Including Improvements      $680,000
Current Market Value                $750,000 +- 10,000
Mortgages (25 year & HELOC)    $440,000
Net Equity                              $310,000
Annual Net Rent                       $48,400

I currently live in the building at no cost to me, with the rents covering all expenses, and positive cash flow of $200 per month.  If I were to rent my unit, the cash flow would be $26,400, or 8.5% cash on cash return.  The cap rate for the building is 6.4%, high for Toronto but low for any place but a major Canadian city.

I’m 30 with no auto or consumer debt, about 55,000 in RRSPs, and back in school, with a job paying $120,000 in 18 months when I complete the training.

Sell for profit? Pull out more equity via the HELOC to buy commodities? Collect the cash flow?  Enjoy a subsidised Place to live?  Pay down the loan as soon as possible? – Larry

My brief comment is this: Sell. You’ve made 29% on your money in two years. Greed is good, man.

Take your gains and buy a $300,000 property for cash, insulating yourself against future interest rate increases. Then, because you are a young genius, borrow against the equity and invest in a basket of companies which will do well as the recession finally ends – energy, health care, financials, industrial metals – since you have the luxury of time to weather market gyrations. You’ll also get tax-deductible interest, which will be handy in slicing your tax bill when the rich new job clicks in. And, you’ll have a piece of real estate which appeals to a greater universe of buyers than a $750,000 multi-family dwelling.

Or, you could hang on and wait for a million. It’s a sure thing by August. It’s all good.


#1 Nostradamus Jr's Analyst on 07.15.09 at 9:54 pm

Michael Douglas would not be pleased with that hideous photo you used.

Couldn’t you find a more dapper looking one from “Wall Street”?


#2 HJD on 07.15.09 at 9:57 pm

Wait for a million? Are you suggesting that by August prices will have increased by 33%?

#3 Ultraman on 07.15.09 at 10:20 pm

GB #102 on previous post,

You bring a valid point. As a Financial Planner I always thought that people worry too much about money. There are things that you cannot put in the bank, for example going to Disneyland with your kids. Orgasms come to mind as well, the one you don’t have today, you won’t have it twice tomorrow.

In my opinion, if you worry so much about paying down the mortgage fast, perhaps you should have made a more reasonable purchase in the first place.

#4 JET on 07.15.09 at 11:16 pm

For those interested, here are a couple of updated charts for the Greater Toronto real estate market: http://thenumberstheydontpublish.blogspot.com

(I have not been too active with that blog because being a real estate bear is not as fun as it was back in the winter of 08!).

#5 BBC on 07.15.09 at 11:57 pm

‘Most of those people will do so for emotional reasons, since real estate’s the most emotional of assets (followed by gold, and lingerie).’

– Okay, do tell, ‘most emotional of assets….lingerie’? I am sure you will be asked this more than once.

#6 Nostradamus jr. on 07.16.09 at 12:14 am

Dear Larry,

…You should consider getting married, then buy a real house, start collecting gold and lingerie.

Afterwhich you will no longer have to worry about postive cash flow or RRSP’s.

#7 Investx on 07.16.09 at 12:25 am

It’s often said that the Canadian economy follows two years behind the US’s.

What is this based on?

#8 Vince on 07.16.09 at 12:42 am

how did you bankroll the property? I’m trying to figure out how you got approved for such a massive mortgage at 28 without a financial head start.

not being argumentative, rather just an inquiring mind.

#9 Nostradamus Le Mad Vlad on 07.16.09 at 1:00 am

“. . . (followed by gold, and lingerie).” — I prefer Thin Silver Spaghetti Strips and a bottle of Pinot Blanc, thank you!

The only knock against buying at present is ever-increasing property taxes, combined with decreasing services.

So sell, invest the net proceeds, rent for 24-36 months and by then there will be some outstanding deals, i.e. buy a four-plex, rent three out (incoming cash flow to look after repairs, upgrades etc.) and live in one.

I like the idea of tax-deductible interest. There should be a way for a C.A. to legally work to putting everything in its place.
In an earlier post today, I mentioned the fateful word ‘derivatives’, and have also spoken about GS and JPMorgan. Well — http://emsnews.wordpress.com/2009/07/15/the-derivatives-beast-is-still-destroying-world-banking/
A spoof on hyperinflation! — http://cnews.canoe.ca/CNEWS/WeirdNews/2009/07/15/10141916-ap.html
The latest unemployment figures from Limeyland. A very plausible reason to reduce the UK’s population by 50% or more, which is why a pandemic fits the bill so nicely! — http://www.mirror.co.uk/advice/credit-crunch/2009/07/16/over-3-000-lose-their-jobs-every-day-in-recession-115875-21522798/
A para. from John Thompson’s column on Castanet.net today, although it is a real rumor . . .

“For the most part the rumours are true on whatever you hear about two of the largest homes that have every been built in the Okanagan. As the story goes the home on Clifton Road is estimated to be worth $60 million. Things like the window frames from Colorado cost $2 million and the limestone around the windows another $1 million. The 30,000 square foot home on the west side at Caesars Landing is something to behold. On the property there is a 4,000 square foot millwork shop for the builders to use, which will become the owners workshop after the home is completed. I understand we have an oilman building this one…”

#10 Canadian Army guy on 07.16.09 at 5:08 am

Like I’ve said before, one has to live under a roof somewhere… Unless a park bench suits you. (Lots of free squirrels!!!)

Objective view on the present economic situation:


#11 JO on 07.16.09 at 7:13 am

Sell the house asap

Invest in top quality assets in an investment account:
-20 % in gold bullion – if you are scared of a major drop in gold, you can look at hedging some of the position (puts on GLD?)
-20-30 % in TBills of no longer than 2/3 yr maturity, or a short term bond fund of very high quality
-consider the corporate class mutual fund shares and place some $ there – be sure to go with a low fee fund/program. These products should offer significant tax deferral and tax free switching
-after significant market corrections of at least 10 % or more, consider adding to a high quality global blue chip fund or basket of blue chip, high yield stocks…look for rock solid balance sheets
-look to add investment grade corp bonds or corp bond funds gradually on any panic phases in the stock markets..i think the best time to buy these will be in 2011 although you will likely have the time to make initial purchases before fall 2010
-consider agriculture and asian stocks to complete it and look at adding on major corrections – i would look at Taiwan / Singapore / China.
-max out RRSP and stuff all the interest earning stuff in there first
-just some ideas

#12 Samantha on 07.16.09 at 7:47 am

Larry –

This part of your letter stood out to me:

“I’m 30 with no auto or consumer debt, about 55,000 in RRSPs, and back in school, with a job paying $120,000 in 18 months when I complete the training.”

You don’t state what type of training you have undertaken, however you do sound very sure that you will not only have a job when you complete training, but also an exact income of $120,000.00.

This leaves me wondering if:

a) the job you are training for can possibly be impacted directly or indirectly by current domestic and/or international economic conditions;

b) the income you expect upon completion of your training can be impacted negatively for the same reasons as in a);

c) have you considered that in the process of establishing yourself in a new career, you may find it necessary to relocate?

Another consideration: Currently your tenants “with the rents covering all expenses” are present and able to pay the rent in this “upscale” neighborhood. However, what happens if one or all your tenants are impacted by job loss or reduced wages and are no longer able to rent from you? What if replacing them becomes difficult for the same reasons?

You have $55K in RRSP’s but no mention of other savings or an emergency fund.

Also without knowing your total monthly budget it would be difficult to determine how quickly you would decimate that $55K in RRSP’s if a job doesn’t materialize immediately after completing your studies, or if like many with post-secondary training, it becomes necessary to take a job in an entirely unrelated field just to survive.

If something happened to your job and/or income prospects and you lost a tenant, then you would be in trouble and in need of emergency funds. Those funds should be cash, accessible and these days at least 6 months to 1 year.

You know your numbers regarding the house, current market value, mortgage and HELOC, annual net rent, however, do you know your “bare bones budget” numbers?

You won’t know what to save in an emergency fund without this down on paper and some serious reflection as to what is absolutely necessary. If a crisis occurs things like cable TV and cell phones are a luxury.

I agree with sell. You are not “established” and are just embarking on a new job at a time when economic conditions are comparable to a day in a side show fun house: the floors move and throw a person off balance and what you see in those mirrors is distorted.

With cash safely tucked away, you can weather the years to come with a good nest egg for your future, and establish your “employed” self again.

I don’t agree with investing in the stock market because it is nothing more than Vegas without the show girls – the house is set to win and much information these days about the manipulation of that entity; and too many people play with money that they cannot afford to lose in the first place.

Maybe interest rates in secured products aren’t high,but you won’t lose your principal. If you invest your money into the stock market make sure you can afford to lose it, because there is no guarantee you won’t, and you may never again have an opportunity to realize the kind of profit on a house sale as with your current situation.

Good luck in your future endeavors.

#13 VOODOO on 07.16.09 at 8:16 am


“Economist says latest Bank of Canada report suggests economy could bounce back with several quarters of 10 per cent growth”
Are you kidding me?!?

#14 David Bakody on 07.16.09 at 8:24 am

Larry, Larry my dear young boy ….. you have entered the world of high finance and soon will be in the eyes of the real vultures who make real money by sucking in wannabe millionaires …… Know this Larry many if not most who live to be long time multi millionaires must loose their first fortune to fully understand just how to play the greedy game. You can take this from any
old poker player ….

Love has not struck you yet bye and that my dear young lad can cost you big time ask Paul McCartney or Donald Trump and list as high as the CN Tower. Bon Chance my friend. So take GT’s free advice and enjoy life …. there is a world outside of bank vaults or sitting home counting your money!

#15 613 Happy where I am on 07.16.09 at 8:32 am


Bad news south of the border…

Garth is right… people will buy even when there is doom and gloom everywhere and it has little to do with dollars and cents…

I have a friend (in his 20s) who just bought a new house here in Ottawa, much to my surprise. I really thought I had gotten through to him that it was not a good time to buy. I even talked to his girlfriend who wanted to move out of a really nice rental because she did not want to pay for somebody else’s mortgage…

Alot of people buy because they want more space… I long ago implemented the “In and Out” rule with stuff I bring into my little (1200 sq. ft) townhouse I own. Every time I buy something, I have to be prepared to let go of something I already have. This keeps clutter in check.

When I go to houses in the suburbs I am shocked at the size of these places and the amount of wasted space that needs to be heated and cleaned. Most of my friends are in their 50s and empty nesters and they don’t really need all that space and quite a few of them know they are living in white elephants. A few of them have sold their Mcmansions and are now living in condos with less square footage than their suburban garages.

I have always been a fan of smaller living quarters in a denser neighbourhood, with a wide selection of housing options available. You would never find me in a cookie cutter in the suburbs…

#16 City slicker on 07.16.09 at 8:40 am

Garth, love your blog and Howe Street appearances. I sold my uptown Toronto house for a 20% profit in 2008 thinking the the bottom was going to fall out. Anyway, I’m just waiting for the government to stop meddling so we can have some normal interest rates again and savers can start making money. Great job.

p.s. On your recent Howe Street podcast you berated Vancouver for diversifying its transportation mix by adding a single bike lane … tsk tsk Garth – with peak oil and gas coming, your highway days are numbered. Sell the car dependent suburban house you are in and come downtown where you are truly prepared for the “energy diet of the future”.

#17 MikeB on 07.16.09 at 8:58 am

Advice to sell …. maybe that one would work…. but buy for 300 grand… Can’t buy a thing in pickering with that kind of money…Right now too many buyers ….way too many because as stated many times … this is a false economy propped up by massive accumulations of debt.
The banks are the big winners in this for sure. Talk on the street is that the banks will still cut dividends this year which will have a big impact on the market and stock prices in general.

#18 Grantmi on 07.16.09 at 9:01 am


Hell! I thought that was Kirk!!!

#19 dd on 07.16.09 at 9:14 am

#1 Nostradamus Jr’s Analyst

“Michael Douglas would not be pleased with that hideous photo you used.”

True, that is before we got this face tightened.

#20 Uncertain on 07.16.09 at 9:23 am

To #2 HJD,

GT did not say that prices would be going up by 33% by August! Maybe you should read the post again. Garth correct me if I’m wrong but what I believe was your message was that Larry could wait until August to make his decision to sell. As far as the million, I think that was sarcasim or Larry will have to hold the property for a long time to get his million.

I have been reading this blog for about 9 months as well as many others. I am trying to determine when the best time to buy RE is for me and my family. Buying now is just a waste of money. I do not want to own a depreciating asset….

I’ll wait until such time that I am comfortable with the purchase price, interest rate and downpayment. For us it come down to affordability…. can we afford the house and enjoy life going on modest vacations, driving reasonable vehicles, going to movies and maintaing a sense of happiness with all that life has to offer while living within our own means and not competing with the “Jones’s”. It seeems to many people get caught in the hype. Whatever happened to meaningful and simple things?

Sarcasm is too high an art form for some. — Garth

#21 curious on 07.16.09 at 9:43 am

“Training for a $120000 job; a sure thing. ”

Well, could he have “pull”?

#22 Dan in Victoria on 07.16.09 at 9:57 am

You’ll never go broke taking a profit.Keep it simple.

#23 POL-CAN on 07.16.09 at 10:06 am

For those familiar with Karl Denninger this should not be news.

For those that think the economy will rebound late this year or early next year I think this is a must watch:


I watched CBS this morning and they had a guy on who was pumping the markets. No where to go but up. New bull market bla bla bla. This sucker is going to crash soon. Insiderers selling vs buying at 10:1 tells the story. Pump, get out, let the market dump. Rinse and repeat.

#24 PTDBD on 07.16.09 at 10:13 am

S&D ?????

#25 POL-CAN on 07.16.09 at 10:19 am

There go the green shoots

RealtyTrac: Q2 Foreclosure Activity Highest On Record

Look elsewhere for green shoots… and CNBC’s favorite commodity – hope. 1.9 Million foreclosure filings in the first half, 889,829 in the second quarter, with 336,173 in June alone, bringing the second quarter total to the highest number since RealtyTrac has been following these data. And this all is happening while various foreclosure moratoria and other national and state mitigation efforts are still in play. One can just imagine the bottom really falling out of the market once California and others stop pretending they can control this accelerating train wreck.


#26 POL-CAN on 07.16.09 at 10:20 am

So much for the green shoots…….

Look elsewhere for green shoots… and CNBC’s favorite commodity – hope. 1.9 Million foreclosure filings in the first half, 889,829 in the second quarter, with 336,173 in June alone, bringing the second quarter total to the highest number since RealtyTrac has been following these data. And this all is happening while various foreclosure moratoria and other national and state mitigation efforts are still in play. One can just imagine the bottom really falling out of the market once California and others stop pretending they can control this accelerating train wreck.


#27 Jim on 07.16.09 at 10:25 am

I wouldn’t call this blog riveting. Actually, I find myself visiting it less often as you continue to say essentially the same thing, and the predictions you have made are not materializing.


Lots of consequences await those short of patience. Use your noodle. Or go visit Ozzie. – Garth

#28 Confused and fed up on 07.16.09 at 10:31 am

How come other countries that are and have been going through “correction” period do not have this crazy hype of the on going RE situation like we do now given that interest rates are low for them too (some even lower than here in Canada)

Comment anyone ?

#29 Kelly McMae on 07.16.09 at 10:34 am

Sell, but remember an agent will be asking for 20-30K in exchange for stale perfume and faxing services.

#30 Pet on 07.16.09 at 10:40 am

I’m with Samantha on this one, I call BS. I’d love to hear exactly what job he’s “training” for that’s going to guarantee him $120k per year when he’s done in 18 months.

#31 RS on 07.16.09 at 11:04 am

Garth, I must admit I’m not as obsessed with this blog anymore due to the current conditions of the Market. I am completely discouraged! When do you think this current bubble will burst. I have been waiting for years to buy a house! Even though I was approved for a 658,000 mortgage! I don’t want to spend more than 400,000 for my 1st house, but for that your lucky to get a 2 bed bungalow. Any predictions? How long will I have to wait!


I have no idea. But I sure wouldn’t buy now. Current conditions are unsustainable. — Garth

#32 R on 07.16.09 at 11:22 am

Sheryl King should be fired for making dumb ass statements like that . I wonder how she manages her personal debt load . IMO the battery in her crystal ball needs to be recharged.

#33 TJ on 07.16.09 at 11:24 am

p.s. On your recent Howe Street podcast you berated Vancouver for diversifying its transportation mix by adding a single bike lane … tsk tsk Garth – with peak oil and gas coming, your highway days are numbered. Sell the car dependent suburban house you are in and come downtown where you are truly prepared for the “energy diet of the future”.

>The Burrard Street Bridge is a main route into the Vancouver City core. We are one of the few cities in the ‘developed’ world that doesn’t have a freeway across town. In short, this place is a joke.

The closing of one lane on Burrard has left cars idling, and backed up for miles – just to accommodate bikes.

The unintended consequence is more emissions and because traffic has to be re-routed, now business’ in the area are suffering.

You have to think things through – something Governments see to have trouble with.

Of course, what am I saying?
This is Vancouver in a Province that has decided to cut back elective surgeries by 20% during the Olympics….just to ‘cut costs’.

Lemme see – Olympics or saving people’s lives?
Let’s go with a two week steroid festival, destroy the ecology of West Vancouver to widen the highway to Whistler, close many streets for two weeks and ruin commerce – and stiff the taxpayer with City credit downgrades and soaring taxes.

These are the same bright lights that are saying “Now is a great time to buy”.

#34 Denis on 07.16.09 at 11:39 am

Brad Lamb says to buy, buy, buy! Prices are set to soar! Based on what? I have no idea?

From: @BradJLamb
Sent: Jul 16, 2009 11:55a

Buying more investment condo units around Central Toronto – get in now as prices are set to soar.

sent via web

#35 rory on 07.16.09 at 11:58 am

Hello CHMC …are you listening and watching …coming soon to Canada to screw over the taxpayers that ultimately fund this nonsense.


#36 Nostradamus jr. on 07.16.09 at 11:59 am

…Larry’s $120K job after his 18 months training will be…..easy to guess friends…..hint…Larry is 7 feet tall…..here it comes……He is the newly appointed Troll to collect the Burrard Bridge Bicycle Toll Fee.

#37 BoB on 07.16.09 at 12:15 pm

Any of you dopes ever work for a big company? I would guess he’s on a training program sponsored by his current employer with a guaranteed salary increase on completion. Maybe an executive MBA program? People here sure jump to conclusions to bolster their weak opinions.

#38 jussupow on 07.16.09 at 12:19 pm

That is a good question. Bears (canadian re variety) got completely bamboozled by it. To steal a phrase form our honorable minister of finance – nobody saw it coming. When the sentiment changed last year bears solemnly proclaimed we just jumped of the cliff so relax and enjoy the ride down. Do not believe us? Look sough, spring gonna be the real spoiler. It was so right and felt so good. Vindication, pay back, schadenfreude. Market back in the spring? so what, this is seasonal, a nuisance, just a dead cat bounce, wait for summer. Except the cat bounce does not qualify as such anymore. It pulverized all the records and made bears look goofy. Now july there is no end to this bacchanalia definitely not shortage of buyers (first time or otherwise). Some of the bears capitulate, some hide under a rock and some are asking us to be patient and wait for fall (winter, next year, 5 years, eventually, indefinite).

What happened? I think our bubble simply did not reach its zenith. Critical mass wasn’t there. It’s like the dinosaur population. Wiped out by a cataclysmic event but when that happened they were already on the decline. The dinosaurs were ready so to speak. The Canadian re market was not. This two years lag wasn’t enough to truly inflate the bubble to its potential. So when the credit crunch came and go everybody reacted in the most ridiculous way – easymoney, more debt (we also transferred the risk for mortgages from financial institutions onto the taxpayer). So buyers came back en masse (as their appetites were not satisfied) , not going to leave any time soon, and mr. Lamb has the best record as a forecaster.

#39 Nostradamus jr. on 07.16.09 at 12:33 pm

1/Top 10 islands
The following is a list of 10 top islands in the world according to the readers of Travel and Leisure magazine. Note that P.E.I. (nor the Toronto Islands) didn’t make the list.
– Bali
– Galapagos
– Cape Breton
– Kauai
– Mount Desert Island, Maine
– Maui
– Aeolian Islands, Italy
– Maldives
– Big Island
– Vancouver Island

#32 TJ

…The new Airport/Downtown Sky Train is huge…..Garth may actually enjoy visiting our fairy tale land then.

…Your kidding about the Sea to Sky Highway rebuild…the highway is now a safe thoroughfare.

…TJ, ever been to London England and witnessed their highway system?

Have I ever mentioned that Vancouver will become North America’s Financial, Trade, Cultural and Leisure Capital?

#40 Samantha on 07.16.09 at 12:38 pm

#36 BoB

1) Yes, several.
2) I’m not guessing which is why I raised this point.
3) Executive MBA? Really. Teflon coats you does it?
4) I didn’t jump to a conclusion. Try it. Perhaps you won’t label people “dopes” .

Suggest you go back and read the post again before offering your anemic opinion.

#41 Joseph on 07.16.09 at 12:47 pm

Regarding the current global crisis, I’ve been thoroughly scouring economic op-eds and interviews for quite some time now, and by and large there is really only confusion as to where are going from here. Jim Rogers says stop printing money, George Soros and Paul Krugman says print more, one US Fed official says deflation is here to stay for 10 years, another says the depreciation of the US currency will precipitate a currency crisis way before that leading to inflation, the Conference Board of Canada says the Canadian economy will contract 1.9% this year while Sheryl Cooper says we will likely experience 10% growth in the coming quarters for the Canadian economy. The blog entries here are just as confusing for one to decide on a course of action. So the fact is nobody really knows what’s ahead of us. Garth’s advice on real estate has at least been diligently researched and has taken the practical approach of reminding us as to how painful it can get for one’s finances if we make the wrong move in this state of market volatility. It’s easy to get into debt, but a heck of a lot harder to get out of it. Garth’s admonitiions on this blog are basically timeless, “The borrower is servant to the lender.” and “He who goes ‘a borrowin’, goes a sorrowin'”. The people on this blog would be well reminded that they (and I) are not of the caliber of a Rockefeller, a Morgan, or of a Soros. And if the crowds of folks like Soros and Rogers can’t agree on the fundamentals, any ventured advice by one of the bloggers here is nothing more than a roll of a dice. But I, for one, would pursue the course of being cautious and careful.

#42 pjwlk on 07.16.09 at 12:56 pm

A woman made a comment to my wife over the weekend about “getting rid of” her husband. When I asked what that was all about my wife told me that he’s not bringing home enough “bacon” for her liking. As it turns out, they need to bring in $8k/month just to keep their heads above water while paying off their debts.

About 6 years ago I helped them get pretty much get out of debt, but it seems that this woman just can not stop spending money they don’t have.

I’m thinking that perhaps it is him that needs to do some pruning… At least he’ll get rid of half his debt… Wonder how many others are in the same situation?

#43 Barb ... reader, Calgary on 07.16.09 at 1:12 pm


Up nearly 30%? Sell.

From many years of experience, take the decent profits whenever you can. And particularly when you have gained that much during uncertain times.

Buy & hold has proven to be of minimal gain when uncertain times strike like this. Just ask retired neighbours who suddenly do not have the money they thought they had. Ask friends who are now questioning retirement because their portfolios have shrunk so much. They thought they had it figured out yet many find themselves taking several steps back. They focused on making money and “putting it away” … but they did not pay enough attention to where they were ‘putting it away’. For instance, they trusted their company, and in the end their belief in “the system”, but especially their lack of surveillance, and lack of independent thinking, has hurt them.

Don’t act like the crowd, act different, by keeping yourself truly informed and protected. Build your wealth closer to yourself, bit by bit — and within quick reach. Don’t let it lay in other people’s hands, like, for instance, that you would have to actually sell that building before realizing any of that so-called profit. It’s not profit until it’s profit.

Like Garth says, build a bunker. And for those shy on sarcasm skills –> it’s a metaphorical bunker — one in which you control your own destiny, to the extent that you lessen your reliance on outside circumstances.

-Your job isn’t guaranteed (I know THAT from experience too — the company sold from under our feet).
-Your $200 per month is slim and tenuous.
-Your building value is not what you say it is . Instead, your ‘building value’ is only what you can GET for it at the time you sell.

My spouse and I forsake the temptation of greed and always take the profits. Having a regimen for taking profit works. Go figure.

#44 Keith in Calgary on 07.16.09 at 1:15 pm

This one is easy.

The guy in Garth’s post is a clown who got lucky once and now thinks he is smart. His net worth is over allocated in one asset, subject to numerous economic variances totally out of his control, and relatively illiquid from time to time. His safety cushion will get eaten up by withdrawl taxes and payments the moment the tenants stop paying, or rates rise. He’s got about 12 months of living expenses there before he loses it all, or most of it anyways.

My advice to him is to do nothing. Stay where you are, let nature run it’s course, and when you get clobbered by the market and the economy you will have learned a great big life lesson and wil be sure not to be so stupid next time around.

#45 Nostradamus Jr's Analyst on 07.16.09 at 1:17 pm


>>>How come other countries that are and have been going through “correction” period do not have this crazy hype of the on going RE situation like we do now given that interest rates are low for them too (some even lower than here in Canada)<<<

They're smarter than we are.

#46 Barb ... reader, Calgary on 07.16.09 at 1:27 pm

#36 BoB “guaranteed salary increase on completion”

Bob? Oh, come on now… “Guaranteed” ???? :)

I worked for a BIG company, have a degree, certificates, additional education and took many, many, many more courses with my employers, through my companies, etc. and even more on my own to improve my lot in life. But, contrasting to your point of ‘guaranteed’ .. it was just days after a long trip to the U.S. for a Company-provided series of courses that “the Company” sold from underneath us all.

What ‘guarantee’ would you talking about?

#47 rory on 07.16.09 at 1:32 pm

#38 Nostradamus jr. on 07.16.09

Hey dude …what the heck are you doing reading about the rest of the world…your not supposed to care …why go anywhere else when you have said:

“Have I ever mentioned that Vancouver will become North America’s Financial, Trade, Cultural and Leisure Capital?”

Sorry could not resist …this is a fun jab.

Moving on…

As to the Burrard bridge bike lane …for all the talk in the GVRD about being bike friendly they have not really committed to the idea and moved forward aggressively.

There has got to be a better way then removing one lane …oh yeah that would take money and commitment…and commitment sucks for a politician, taking your money – not so much…of course, always IMO.

As to, maybe, the guy getting an exec sponsored MBA at 30 …company is wasting their money ($50k+) …maybe if he was 40+ and committed to the company (had lots of years invested and was proven) …this guy will leave as soon as a better offers comes or he feels the call of entrepreneurship …oops must the the gov’t doing/paying for this …rofl …again, IMO.

MBA’s are a dime a dozen right now…excellent education, however, if you have experience to go with it.

Again, we are just speculating.

#48 smw on 07.16.09 at 1:54 pm

You don’t even have to read between the lines anymore, even the most financially ignorant Canadians should fear what the finance minister and prime minister are almost saying.


Always good to know that Canada isn’t in as bad of shape as Europe and USA. Yeah, so re-assuring, especially when those are our major export markets.

Yeah, the services sector will keep us going, just like it did in the USA.

#49 PTDBD on 07.16.09 at 1:58 pm

Winnah Winnah Chicken Dinnah
@Joseph..nice summary & caution
The DOW Quarterly Chart at the bottom of this page may help your analysis.
His weekly radio analysis & historic charts are worthwhile, & free.

The fact that the S&P bottomed at 666 (they have a twisted sense of humour) and stopped at the 50% Fib retracement level going from the 60’s to the top gives me faith that there are steady monied hands controlling this casino.

When you get right down to it, as in real Casinos it is a severe letdown that all they have to offer are the same old one-armed bandits, worn out crap tables and crap shoots. You would think with all that glitz and neon, that something more sizzling could be pulled from their bag of tricks.

But, I guess it works for them as long as the clients keep coming, and so it goes.

#50 DM in C on 07.16.09 at 2:09 pm

#41 – pjwlk

Honestly, as a woman I loathe that female mindset. Why rely on your husband to pay the bills? Add something to the account instead of just taking. That’s like most of the ‘housewives’ in my neighborhood who still stay at home even though the kids are in school and gone at least 6 hours a day. Stop expecting ppl to take care of you. Gah.

Personally I make over $90k, hubby makes about half that, and we don’t have those issues. Beyond him calling me his ‘sugar mama’. Heh.

Real estate? Remember those houses on our street, priced at $420k, $405k and $499,888? Guess which ones have sold (one conditionally) and which one sits there, sad and alone? Greedy owners still won’t reduce the price, thinking they deserve it. My house is much nicer but I wouldn’t pay $400k for it. Maybe $250k, but there’s no way Calgary is going to bust like that.

#51 DM in C on 07.16.09 at 2:19 pm

aka Dawn in Calgary — LOL

I’m with everyone as far as I’m so confused about the market these days — we’ve fallen through the rabbit hole — what’s good (saving) is bad, what’s bad (debt) is good. The irresponsible get bailed out, the prudent get screwed.

Politicians are scared of losing their jobs so they keep shoveling in our tax money — but nobody is paying attention!

These bailouts aren’t doing any good except propping up the market — just let it die already!

#52 PTDBD on 07.16.09 at 2:21 pm

H1N1 pandemic updates used to come every 2 days. this stopped July 6. Good news? Not.
WHO GENEVA (Reuters)

#53 Devil's Advocate on 07.16.09 at 2:38 pm

#27 Confused and fed up on 07.16.09 at 10:31 am “How come other countries that are and have been going through “correction” period do not have this crazy hype of the on going RE situation like we do now given that interest rates are low for them too (some even lower than here in Canada)

Comment anyone ?”

Canada lags behind the US by about two years. The copious quantities of stimulus dollars pumped into the system both North and South of the 49th have stalled the recessions decent. Certainly, I believe, had our governments not have stimulated the economy so we would have had a very hard landing by now. Even still “quantative easing” is not so much about easing the decent as reversing it. We should be no more than “easing” the decent as it is going to happen one way or another and we are only postponing the inevitable.

So being two years behind the curve that stimulus has had a far greater effect North than South as we have stimulated something that need not be quite yet. This is not good news for Canada as we have lulled the impatient Greater Fools into believing the SPIN as those “green shoots” serve only as further apparent evidence of their hopes.

Today’s real estate values are unsustainable in light of what lies ahead. Interest rates are bound to increase, taxes are bound to increase, commercial inefficiencies are bound to increase and unemployment is bound to increase. All that is a recipe for reduced demand for home ownership and falling rents which will result in falling real estate prices or at least stagnate real estate prices until the next upswing sometime 5 to 10 years hence.

Real estate will always enjoy a relative demand and consequently maintain a relative value to the current economic climate. It’s just that right now we are facing economic change. This is nothing more than a lull before the storm. That storm will be significant I think but still not likely so significant that it wipes out real estates relative worth. We will always require land upon which to do commerce and erect shelter from the elements. Of course some catastrophic event could negate that, but in such an event we “will” have a lot more to worry about than real estate. I use the word “will” on purpose as I do believe that North Americans have a false sense of security in terms of life and liberty. Historical cycles suggest we are due for a significant historical event just as so many other civilizations in history have lived through. Let’s just hope we live through it. In any event “life is what happens when you are planning for the future”.

#54 Devil's Advocate on 07.16.09 at 2:43 pm

#40 Joseph on 07.16.09 at 12:47 pm

Very well put! Good advice! Exxxxcellllllent…

#55 Nostradamus jr. on 07.16.09 at 2:51 pm

What would be the scenario for U.S. and Canada Real Estate should major wars break out in certain regions…such as Europe, Korea’s, the Middle East or….the Mexico/U.S. Border?

Garth has opined that Emerging Economy’s Industrial Smog/Pollution is the trigger for the U.S. to initiate its Protectionism policies.

…That would certainly make Vancouver the World’s premier city to live in…wouldn’t it.

#56 HJD on 07.16.09 at 2:53 pm

#19 Uncertain

Guess I deserved Garth’s unnecessary smart-ass remark.

My SARs are never unnecessary. — Garth

#57 BSDetector on 07.16.09 at 2:54 pm

“Guaranteed $120k salary after training after 18 months”

Does Larry even exist? If he does why does he need advice from GT? With what he has already accomplished at 30, he should be giving advice to others!

#58 e.lo on 07.16.09 at 3:17 pm

Don’t know who this guy is, but I think he sums up nicely why things south of the border aren’t quite as rosey from an unemployment perspective.


#59 Larry on 07.16.09 at 3:30 pm

Thanks to the blog dogs for all your advice. Finding a place for $300,000 within a reasonable commute is a stretch, and I’m not against renting. So if the for sale sign goes in, that’s likely what I’d do, as flashy as those un-built condo brochures are. Maybe I could be the new owner’s first tenant.

A few of you had questions and concerns.

#7 Vince

I started with a $10,000 down payment in the fall of ’05, and unloaded my AB condo in ’07 to a greater fool for an 86% price gain. Credit was easy back in the days of twenty odd seven, and the bank had no problem with financing the balance of the new property, considering the rental income.

#11 Samantha

#36 BoB is just about right on. I spent the previous 10 months unemployed, so I’m familiar with the need to have a secure income and some savings. When your income is zero due to unemployment, isn’t that a good time to withdraw from the RRSP? Even better, why have 6 months income stashed away earning 1%, when credit is available for under 5% for those times in need? I’ve also replaced 3 tenants in that time, all within less than a week of advertising. Nobody bites? Drop the price a hundred or 2; no big deal in the grand scheme. Rest assured, I had my bare bones budget for toothpaste, gummi worms, and sports equipment figured out at the ripe old age of 9, before I learned what cash-on-cash and cap rate meant.

#13 David

Great advice; right up there along with Trump’s “always get a pre-nup”, and Rogers’ “Never count your money, when you’re sittin’ at the table”

#29 Pet

I was going to write a sentence explaining why I don’t have to justify anything to you, but that would have been a waste of my time. D’OH!!


#60 TheFirstRick on 07.16.09 at 4:19 pm

#29 Pet on 07.16.09 at 10:40 am
I’m with Samantha on this one, I call BS. I’d love to hear exactly what job he’s “training” for that’s going to guarantee him $120k per year when he’s done in 18 months.


Final term of medical school? Too bad we can’t see the hand written letter, we’d know for sure.

#61 Downsized and Delighted on 07.16.09 at 4:28 pm

You advise the fellow to sell and buy another house for no more than 300,000 for cash to avoid future interest rate hikes; then you tell him to take out a loan on that home to invest in the stock market. How does that avoid future interest rate hikes? And it’s been my humble experience that interest rate hikes have a very bad effect on the stock market – not a great situation to be in having leveraged your house. But the interest IS deductible (so are the losses).

Just thought the guy might appreciate a balanced opinion.

Who cares what the interest rate is when it’s deductible from taxable income. Then it’s the government’s problem. — Garth

#62 jess on 07.16.09 at 4:44 pm

July 16 (Bloomberg) — Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.

“The economic situation is not getting better,” Verleger, 64, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”

#63 smw on 07.16.09 at 4:47 pm

#36 BoB

Isn’t that what you just did?

#64 David on 07.16.09 at 4:48 pm

Michael Douglas was terrific in the movie Falling Down, playing the unemployed and divorced engineer themed on the 1993 recession. Probably due for a remake anytime soon.


#65 MenWithHats on 07.16.09 at 4:52 pm

Not sure why Garth posts emails to his blog that can’t be authenticated .
Especially ones like Larry
the blow- hard,braggarts which is all sunshine and light and designed to anger those people less fortunate .
Sounds like a ,big,load of bollocks to me .

The email is legit. The facts are between him & God. — Garth

#66 Black on 07.16.09 at 4:54 pm

Larry if it’s cash positive and you’ll be getting a salary soon why sell. You seem to be doing well do you really want advice from a group of renters eating squirrels?

#67 timbo on 07.16.09 at 5:09 pm


Thought of the fire blog you had. I had no idea of the health issues and the cost of cleanup. I will be damn sure to inquire when renting or buying a previously lived in home. Will be also sniff en for smoke damage…

#68 ts harpoon on 07.16.09 at 5:14 pm

This is definitely the same place that Notradumus is from…

#69 Samantha on 07.16.09 at 5:59 pm

#57 Hi Larry,

Good to hear you found a career path after a long stretch of unemployment. You wouldn’t happen to be training for anything to fix this economic debacle by any chance?

I do understand zero income and withdrawing from the RRSP’s – got sick. It went fast, more like evaporation than withdrawal due to living in an expensive city at the time and a long wait for benefits.

The income stash works for me because I don’t trust that “credit is available for under 5% for those times in need” as you put it.

Creditors, especially in the USA, are already closing charge accounts, LOC’s and HELOC’s. We aren’t quite in the same stage as the USA yet, but it will take a miracle to avoid it, so the ease of acquiring credit (especially unsecured credit) is going to change.

Glad you have your bare bones budget in place – no fun at all trying to fashion a hockey stick out of an old plank. Now, if they only made gummi worm flavored toothpaste.

#70 ted on 07.16.09 at 9:12 pm

Something in this story doesn’t add up. I think the house is a good value and I would keep it. But I don’t believe the numbers. From what I got is he collects $48,000 in rent and lives there and if he were to rent his portion another $24000 roughly. If this is true keep the house.

#71 charliegosurf on 07.16.09 at 11:00 pm


now darth summons G O D in cyberspace for the beliefs of the 120k yr salaries, the doodlle cockdoodle vip of this

tickled a squirell up da tail in an apple tree in da orchard, i flew away but his shadow was left in awe.
the fools are screaming for mercy in the eye of da strorm.

the Burrard dilema is easely resolved with da eng of human logic but than again the bickering is da prefered dose.

keep on rockin

#72 charliegosurf on 07.16.09 at 11:03 pm


#73 Peter on 07.18.09 at 10:20 pm

Garth, you should just stop talking you are making a fool of yourself.

You have been on this housing rant, collapse, meltdown etc. etc. etc. forever! The thing is no one knows whats going to happen next, not you, not the real estate agents not the great Kreskin. I feel sorry for those waiting on the sidelines listening to your bs for the past 3 – 4 years. Waiting for the steal of the decade that will never come. The prices will not go back to those levels. The meltdown you have spoke of for the last year on this blog has not happened. In fact in my neighbourhood in east Toronto the prices have not dropped but increased, as have alot of other areas. Let me guess – Next year will be the great collapse – housing prices will fall 20 30 what 40% ??

Just stop talking you are the greatest fool !

Always nice to hear from the industry. — Garth

#74 Jmack on 07.19.09 at 11:50 am


Top 25 affordable places to live in the states….Last time I checked, we had more land. What would 100G get you in Canada??…

#75 Bottoms_Up on 07.19.09 at 8:35 pm

#62 David on 07.16.09 at 4:48 pm

Michael Douglas was terrific in the movie Falling Down, playing the unemployed and divorced engineer themed on the 1993 recession. Probably due for a remake anytime soon.
Ya, let’s hope he’s ‘rolling back the prices’ on real estate too! haha