So, you think being me is easy? OK, here ya go.
This letter was one of 42 I received Monday asking for advice. About normal.
But abnormal is this: You answer the guy. The response I most wish had been mine will be rewarded with a couple of my books. Signed. Priceless.
Over to you, blog dogs. Be kind. — Garth
I live in Thornhill and I have been trying to call the collapse of this frenzy for the last 4 years and have held off buying anything. Â For the last few years, I have been busy studying and travelling for work so I never needed a steady place to live. Â However, the time has come for me to get married and I am getting pressure from her – left and right – to buy a house, any house, rather than simply rent.
Here’s our situation.
– We are both 27 years old and live with our parents.
– Getting married in about 10 months so I’ll need to live somewhere before then.
– My current income is $150K and my wife’s will be about $150K when she starts working in June.
– Currently I have about $350k in liquid assets, no debts, no automobile, credit card, or student loans whatsoever.
We need a place to live, but only for about 3 years at most. Â The homes we are looking at would be in Thornhill and probably in the $400K-$475K range. Â The other alternative is obviously just renting something for $2k/month and saving (we have no problem with forced savings). Â We’re not looking at $900,000 McMansions but just want a normal place to live whether it’s rented or owned. Â The key is to minimize both cost and risk for the next 3 years. Â I have pretty much written off any prospect of home price appreciation so this is purely a question of what makes the most financial sense with a 3 year time horizon.
My questions are:
1. Â In this situation would you suggest buying or renting?
2. Â If you suggest buying, how much (if anything) should I put as a down payment? Fixed or variable mortgage?
Thank you very much for the wonderful public service you are providing through your blog!
Arnie
—————–
P.S. if posting my question on your blog, can you please not use my real name as some of my friends frequent your blog and I’d rather not have them know my financial situation :-) Â Many thanks for your help. — Arnie
Garth's suicidal political blog is here.
241 comments ↓
$350k in financial assets, $300k joint income.
Stay liquid, continue to save. Carnage in the markets, in realestate, and in commodities (including gold) is coming and you’ll be in a position to take advantage of the forced liquidation of assets as our credit bubble deflates. Stay at the folks or rent, every dollar you don’t spend now will be worth two in the world of real estate in 3 years time. On the flip side every dollar you invest in a home will evaporate to a fraction.
Cash will be continue to be king as it has been for 18 months.
Dude, buy whatever you want, you can clearly afford to make stupid mistakes at over 300k a year. If you want to make the correct financial one, then just rent for 3 years. It wont matter what you buy you’ll never recoup your expenses, closing, legal and realtor fees and don’t count on an increase in value to help bail you out. In fact, expect just the opposite, any down payment will vanish and you’ll quickly find yourself underwater and hence negative equity. Where do you people come from? Have you not been reading this blog? How could you have missed this very simple lesson. Quick, pull your pants up before you can’t claim to be wearing any, and please tell your friends to stop writing into the blog so we can cover something novel. Us dogs are getting hungry for some new meat, your kind are standard fair.
– 27 years old
– 350K +/- cash
– no debt
– 300k yr/house hold income
– THATS PRICELESS
Should I buy or rent? GO FLY A FRIGGIN KITE
Why even post this nonsense?
*sigh* so lame. agreed, go fly a frakkin kite
Arnie, there are going to be tons of people that are going to tear you apart or say you’re lying because you make a lot more than they do. Don’t worry about those idiots.
As far as renting or purchasing is concerned, I’d go with the renting. No kids, and a max 3 year stay, I can’t see it being worthwhile to buy. Prices are going to have to appreciate quite a lot to cover your costs and hassle to sell in 3 years. Anything is possible with the current insanity, but I just can’t imagine what kind of crazy stunts the government would have to pull to prolong the housing crazy for another 3 years.
Find a nice place to rent and spend that dough on toys that make you happy. In 3 years you’ll have a much better perspective on the market and provided you haven’t lost your job you’ll be rolling in it with nothing but options. Have fun.
You obviously need some hardship in your life, so buy a big house and impress the wifey. Why not make a small downpayment + 35 year am VRM. Buy some toys – a new cottage perhaps? With a boat of course. Also put $250k on the Leafs to win Lord Stanley’s cup. With your luck and fortune, you will probably win…
Err umm I think you should move to another country, after all Canada is ranked 4th…
Rent. With the short 3 year time frame that you need the house, your almost guaranteed to lose money when you go to sell it as by then rates will be up and the correction will have set in.
With the money your going to spend on land transfer taxes, property taxes, heat, hydro, water, maintenance, and of course the new kitchen the new wife is going to want you could cover most of your rent, without risking your nestegg.
Your nestegg in Bank Preferred shares paying 6-7% dividend will pay a good chunk of your rent anyhow, and at your income level you could chip in the extra and rent a nice house for 3 years.
Oh, and Garth, almost through Sheeple, you’ve definitely not had it easy! Unbelievable.
Why humiliate us mere mortals by letting us know of your wealth. Dude! R you for real or have a really good sense of humor!! Anyway 3 yrs is too short a time frame for house buying and selling. Go rent a luxury condo for the time and think about ways to blow your money.
You’re 27 and make 150k, have a third of a mill in assets? I want to be you.
Give your parents a break, move out, rent obviously. If you have enough marbles to be worth 150 a year to somebody you have enough marbles to figure out that buying is not a good idea at this time, especially since you’ve already outlined reasons why it’s a poor idea.
Pressure from the other half (stricken with the nesting urge) is hard to resist. If she’s really set on it then maybe you need to consider whether you two are really compatible. If she throws sense aside on this type of major purchase now, who knows what she’ll do once you’re married.
#3 – Go Fly A Kite
Why post this nonsense exactly.
It seems everyone on this blog earns six figures, lives at home with their parents, and post moot questions with no relevance to their financial situation.
If you are swimming in the money, who cares, go buy a house, go buy a jet, go buy an island, and go buy the services of a professional financial planner!
Seriously, what is with all these posts of individuals whose salaries and net worth far exceeds those the “average” buyer. According to Stats Canada, only 5% of Canadians make over $90,000.
So what is with the recent spate of high income, high net worth stories being posted here.
Three years is too short term.
Rent or all in, red, lucky 13
Considering your scenario, the best answers are:
Answer #1 Rent for three years
Answer # 2 Go to answer # 1
By the way did you just want to prove that you are one of those lucky young couples (probably both doctors), or was it a real question needing my specific answer?
Let me guess —Maybe both of you are working and going to work as a Realtor which could explain why you can making 150k per yr and know nothing about house market.
Don’t you just want to hunt these people down and slap them silly. Somehow this person has accumulated 350 large, is in a job that pays him 150K, found a woman to marry him that also makes 150K (when she STARTS working in June). And is unsure of buying a 500K home at 27 years old.
Oh yeah, lives with mom and dad.
mmmm, what things come to mind
Dude, get off the phone some legitimate person wants to use it.
Take up fly fishing and/or meditation (some might feel that they’re the same thing…) and learn how to enjoy life when you control the pace and not some loan officer or marketer.
Wow … good job man … you are well off your way.
At 27 – you are doing awesome. If you want to buy, just be ready to loose some on the RE … but then again, RE is relative so you should be able to upgrade at a lower price and you have the capital and cashflow to allow for this. So a $400K 50% down should be ok for you in any case. Should interest rates jump up be ready to pay it off so you avoid high interest costs.
But think of the following:
1. Consider why you want to buy – it surely is not to be priced out of the market – say Garth is wrong and price keeps going up. I’m sure both of you can save $100K a year and beat any RE market rise in cash savings only.
2. Get a good financial adviser who is not a broker – I.E he/she make money if you are happy with the advise and not by doing trades.
3. You guys have no kids and I would imagine aren’t planning any a few years. Rent a nice condo downtown – $2-3K a month with plenty of room, a gym, pool, and everything around you – enjoy city life while you are DINKS.
3. In 3+ years, the market will correct, you will have more cash, kids will become a discussion point, a pool, parkland in the back, parks, community center, bike paths, best schools, etc … this is when you want to plan your home purchase.
4. I personally was liquid until I had kids and bought a house in the Vancouver at the right time and sold it at the right time when the kids needed a good city, schools and parkland in the back where we can snow show and mountain bike anytime we want. My second house, I had 50% down on the house, doubling up, 10% yearly payments and just killing this mortgage so we can in 4 years focus on other investments …. And my wife never wants to upgrade – she love this place.
Good luck
I think most folks around here would agree that prices are going to be in the tank 3 years from now. Why on earth are you so eager to destroy that wealth you’ve worked so hard to acquire?
I vote #3 to be the best answer… HILARIOUS!
“Should I buy or rent .”
toooo funny
Another wannabe poser pretending to be a player.
Send us your bank statements and NOA’s and we may
begin to take take you seriously.
Garth, time for better screening procedures.
The best thing about this post, is the pic….awsome :lol:
This is probably what Garth would say:
At 27 years of age, with a combined family income of 300k and 350k sitting in the bank, likely meeting mortgage payments are not going to be a concern for you and you could probably weather a downturn in the economy so long as both you and the Mrs. keep your jobs. Kudos for being comfortable with a 450k house at your salary. If you are only looking to live somewhere for 3 years tops, then it is a no brainer to rent for $2,000/month. Three years down the line, when the housing market is in turmoil, you will be in a very good position to buy. With an aftertax income of say $170,000 combined, less your annual rent of $24,000, you will be left with $146,000. Lets say you spend $46,000 on living expenses, vacations, etc, you are still left with $100,000 in savings. Multiply this over 3 years and thats an extra $300,000 to add onto your savings of $650,000. Three years down the road, you’ll be able to buy yourself a nice properly for $500,000 cash, have no debt, and have $150,000 still to play with. In the meantime, your $350,000 should be in diversified in equities and bonds in order to diversify your portfolio.
Arnie – while you may not be the governator, you’re definitely in a position to say asta la vista to living with mom and dad. Fundamentally as a blog reader, my guess is that you know that most of the blog dogs here don’t perceive a house as a secure “investment” or an “asset” in these unpredictible times. Dumping equity in a house you may only be in for 3 years is most certainly akin to throwing your $ into the fire (which I don’t recommend). But if you want small, reasonable house, buy one, just do so STRATEGICALLY. Be sure you and the gal are comfortable living on only one income in case you decide to have kids or one of you loses your job. Make the mortgage tax deductible, and you must, MUST budget for a large rise in interest rates cause the $$$ on the cheap won’t last long. You may also find yourself an annoyed homeowner because as unemployment rises, you won’t be able to peddle the house for peanuts – better get comfortable, house repairs can be expensive!
Remember, there are many other things one can do with 350K, the least of which is that you can tell nearly anyone to go to hell. What I would do with that money even before entertaining the house idea is top up rrsps, exhaust your tfsas, and hire someone good to manage your investments which will consist of a broad range of dividend paying stocks as well investments in financials, health sectors, and certainly energy.
To be honest Arnie, it seems you are putting the cart before the horse – you and the gf can more than afford to rent a very nice place in these undertain times without sabbotaging your future. Let someone else worry about the roof caving in, pipes bursting and the like. What’s the rush to buy when you could wait for the 30% discount that’s forcasted and use your $$ to cash in on the rise of financials, energy (specifically oil), and pharmaceuticals?
It’s an easy choice to me, and even though it doesn’t seem like it, she’ll come around – living together should keep her happy temporarily!
VanKouver
Arnie, she’s nesting. Are you ready for kids and your less than 3 year time horizon (for adventure and travel I presume) becoming 15 to 20? Maybe you should buy but plan to live on one income :)
Wow, what a sad situation.
I’m sure the person who wrote you this email must have many a sleepless nights, wondering where they will sleep at night, as they lounge at their mom’s house while earning a meagre salary of only $150,000 a year… And his wife, $150,000 a year…
Of course, this person’s concerns and issues are much more important and pressing than those of us who aren’t earning a high 6 figure income.. I’m glad it made it to the front of the pile and on to the website. I can only imagine your anxiety, as I wipe my tears away, worrying about your fate and future of earning $300,000 a year and having almost $400k of liquid assets…. I just don’t know how you will survive this one.
If you’re comfortable losing $100k+ of your savings, then go ahead and buy.
If, instead, you can put aside the house envy for a while and wait until the market slides, then you’ll be another couple of years closer to retirement.
The money is yours to lose. Up to you. Just be careful: If you start looking at new homes, you’re doomed.
Now young man, whatever you do, be VERY VERY careful! Given your impecuniosity, you are very wise to have lived with your parents until age 27, and I would be in no rush to let that wild vixen you are marrying rush you away from your childhood books and action figures into sure financial ruin. I would put all of your joint earnings into 6 separate savings accounts with all six major CDN banks. But, BY NO MEANS exceed the CDIC deposit insurance limit. My stars, imagine if there was a bank run! Once the CDIC limit is reached, buy gold bars and get your parents to help hide some in the crawl space downstairs, and some in random spots around the yard. And I would stay right where you are, and if your new wife really loves you, she won’t mind living with mom and dad until you are at least 65 and can count on Canada Pension to help supplement your savings, which by then should be around $11 million dollars. $11 million dollars is the minimum threshold I would aim for before purchasing in your tenuous circumstances. And, for goodness sakes, whatever you do, BE CAREFUL!! I sense you have a wild, irresponsible streak about you which may be your undoing.
All these letters are the same. I make x dollars a year, should I buy or rent?
It doesn’t matter whether x=15,000 a year or 150k a year. RENT!
Why would anyone borrow money to buy a depreciating asset?
The problem is we a have two 27 year olds that have never suffered but I am suffering reading their problem. Is this the new norm? If only more people could have their problem.
Well Arnie, you look to be in great shape. Logic doesn’t always work, especially with a wedding in the air. Fortunately, with modest aims like a house at 1.5X your combined income you’ll probably survive even if you don’t make an optimal choice.
To try logic, you could explain to your fiancée that moving will cost you something like 7-10% of the price of your house in land transfer taxes, realtor fees, lawyer fees, painting, staging, etc. And that’s on top of the interest/opportunity cost, maintenance, and property taxes that make the money “thrown away” buying similar to that renting.
For a $450k house that would be what, $45k just to move out of it after 3 years — if you can find a place you’re happy with at $2k per month, that’s almost 2 years of rent covered just by the cost to unload the house later. Plus no risk of falling house prices, rising rates, or roof replacements. For such a short time frame, it’s a no-brainer to rent.
Whatever you end up doing, don’t forget to diversify that not-insignificant nest egg!
Since you’re apparently not good at math, you should look a bit closer to downtown, so I can sell you my place! The $150k/year is either in sales or some other form of professional BS-ing. Any kind of Banking, Engineering, or IT work would require math skills. You could be the Finance Minister, but he’s a bit further east.
Anyway – any plan that combines “buy a house” and “3 year time horizon” isn’t well thought out. You would need to see the Toronto housing bubble keep inflating at the current pace just to make back the closing costs/land transfer fees/etc. on your purchase and your sale in 3 years. So, best case scenario, bubble doesn’t pop, and you can almost make enough to pay off the realtors, the lawyers, the City, and the Province.
You could actually rent for free off of the interest of your investments ($350k * 6% = $21k/year = the $2k/month rent that you mentioned).
If you absolutely must give in to the future wife’s urge to splurge (and you’ve got enough assets and income and years to survive a mistake or two), just be sure to buy something where the mortgage principle is no more than say 2x your gross income (just your’s), because your wife may decide that you 2 need some kiddies, or one of you may lose your above-average job.
My best advice would be: instead of buying a house, buy your parents something nice — they are tolerating you living in their basement when you probably make more than they do.
Here come the rate increases…. Doing it downunder first.
Australia Unexpectedly Increases Key Interest Rate to 3.25%
Share | Email | Print | A A A
By Jacob Greber
Oct. 6 (Bloomberg) — Australia’s central bank unexpectedly raised its benchmark interest rate from a 49-year low by a quarter percentage point amid signs the nation’s economy is strengthening.
Reserve Bank Governor Glenn Stevens increased the overnight cash rate target to 3.25 percent from 3 percent in Sydney today. Only one of 20 economists surveyed by Bloomberg News forecast today’s decision. The rest predicted no change.
Australia is the first Group of 20 nation to raise borrowing costs since the start of the global financial crisis more than a year ago. Rising job vacancies, retail sales and house prices, plus surging business and consumer confidence support Stevens’ view the economy is accelerating enough to scrap the bank’s “emergency†rate setting.
“It makes sense for the Reserve Bank to start the tightening cycle at the earliest opportunity,†Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, said ahead of today’s increase, which he forecast. There has recently been “a near uninterrupted stream of healthy economic data.â€
Governor Stevens, who cut the benchmark lending rate by a record 4.25 percentage points between September 2008 and April to cushion the economy against fallout from the global credit squeeze, said on Sept. 28 that compared with past recessions, “this has been a good episode for Australia.â€
“In due course, both fiscal and monetary support will need to be unwound as private demand increases,†Stevens told a Senate committee in Sydney.
Arnie,contrary to what they say the world will not end in December 2012.
Do 3 years of volunteer work and live in a mud hut in Nepal. Then both you and your wife will actually be worth something when you get back.
Why is it always the case that the people who have no idea how to manage money end up earning it all?
This is what I would do.
If she isn’t going to make $150K next year (June), I wouldn’t put that into my calculations (ie I wouldn’t consider your household income to be $300K).
I would consider your household income to be $150K
Also keep in mind that June is 9 months away, and your wedding is 10 months away. Weddings aren’t cheap. Hopefully she will get started on her job and that will help with the wedding.
If she is dead set on a home, I would buy something simple in Thornhill. For example, this would be a home on the low end of your given range:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8762379
I would use the $350K in liquid assets + a mortgage to purchase the home. I would try and structure it so that the loan would give you $350K so that you could use it to repurchase your liquid assets back.
The interest payments on your loan would then become tax deductible (which you will need if you start making $350K per year).
At the end of this, you will have a home, your investments, and a mortgage that is tax deductable.
This has the unfortunate side effect of crystalizing your liquid assets, but I think at the stage in your life (age 27) it is a fair trade off.
With regards to the mortgage I would be loathe to go beyond a 25 year amortization.
Why is it that all the clueless people make so much money. Seriously. And how many times can you contradict yourself in 3 paragraphs.
Garth, did you see the Vancouver Sun article on housing price optimism
http://www.vancouversun.com/sports/Optimism+rising+among+home+sellers+buyers/2068562/story.html
Lately Garth, you have been posting some fairly reasonable arguments why the bubble will pop. But what if there are an unlimited supply of ‘Greater Fools’.
Kilt.
With that income and assets at 27 you are clearly never going to be content in Thornhill.
Every weekend for a year you and your new wife need to grunge yourselves up (as required) but still nicely recognizeable and go camp in front of a tony Yorkville condo building and beg for change. A nice “Homeless please help” sign on a pizza box should be prominently displayed. After the year is up and now prices have fallen you will pay cash for one of those desirable condos. Everyday in the elevator you will be able to thank those that tossed some change your way saying you never could have done it without them. Should make for some priceless faces…
Alternatively…read the past few days posts..already covered…all down, borrow the balance and the same again to invest. Fixed for as long as you can on the balance and investment capital.
In short (and long), I am suggesting a Smith Manoeuvre.
http://www.milliondollarjourney.com/the-smith-manoeuvre-a-wealth-strategy-part-1.htm
Only 3 years?
Rent.
Next question?
Look at you Arnie, 27 years old, 350K in the bank and making 300K joint with the fiance, it sounds like someone has life by the short and curlies. And yet you come to this blog asking questions that you already know the answers to. Come now, young jedi.
You can boil your question down to 2 questions:
1. Is this a good financial decision to purchase a house right now? The answer to this is OF COURSE NOT and you already know this based on every single reason posted by Garth ad nauseum that you, as a loyal reader, should be able to recite by memory.
2. Does keeping my fiancee/wife happy require that we purchase a house? This is a much more difficult question and it can only by answered by yourself. And it sounds to me that Mrs. 150K a year wants a house bad.
So it sounds to me that you’ve already identified the happy medium already: Purchase a house that is well within your affordability range. Given your assets and healthy yearly income I see no reason why you can’t purchase a house in the $400-475 range and still have money to burn. My recommendation would be to purchase something for $450K and put half down. Keep $125K on the side to be kept in half cash and half equities/bonds. Given your income, you should be able to pay the mortgage easily and also be saving lots on the side that should also be invested.
Of course, you already know that the house will probably depreciate in the next 3 years but it won’t matter to you. You’ll have a small mortgage, lots of cash in the bank and wife that still wants to have sex with you.
Boo-yah!!!
might be a double post
#3 My_view
Could be another one of these “pent up demand†posts that I have been suspicious of. Regardless,
Arnie,
If she is pressuring you left and right, and has no time for your 50% of the vote, you have to go to marriagebuilders.com and learn the rule that a successful married person does not no anything without both partners voting enthusiastically in favor. Not sure how to work this in real life, but maybe it involves negotiation. Also note it’s a Christian site, although they don’t emphasize this as much as you would think, but it gives them a slant.
Then go see Doc Love at AskMen.com, and realize that if she’s bossing you around, you have no hope of success. No religious affiliation there.
Then go see Savage Love at the AV Club of TheOnion.com to realize that what Doc Love said, you need to marry a giver and be one yourself, is true, although through the eyes of a total pervert.
Anyway you look at it, if she’s telling you what you are going to do and you don’t get a vote, DT** as Salvage Love would put it. (The first word is dump, the rest is classically uncultured.)
The point I am trying to make is this: If she is wiling to impose her will on you without regard for your inhibitions, you need a new girlfriend, and $150,000 a year ain’t enough to sell out. Maybe if she’s a super model you can’t help it, but then see more Doc Love. As he often says, “Beauty is only skin deep, but bitchy runs strait through to the bone. Get someone you can live with even when their looks decline.â€
Now to the decision. The first is whether to keep this girl, and I say never keep a girl that won’t let you vote and rigs the elections. You will be better off when she is someone else’s problem. But on to the house:
Why buy when you can rent at 2% and rents are falling? I’m renting. 4 acres, 3 car garage, 20 minutes from downtown, and reasonable rates. You can rent a McMansion. Cheep. Yes, my wife gives me grief and says she’d be more about hanging pictures and cleaning and whatnot if we owned, but you know what? We did own and she wasn’t. So now we have all this room at the same economic cost and the kids love it.
I’ll buy again one day but it will be when rent costs more than you get in treasuries minus tax.
PS did you follow the news today? Rents are falling hard, US and Canada. I posted this on the last Garth blog, and it is US numbers, but it’s already here in Calgary for commercial property big time:
http://www.howestreet.com/articles/index.php?article_id=11021
Garth,
I think your webmaster mixed up italics and regular font this posting. Delete this when you fix it, or if I am wrong.
“Here’s our situation.
– We are both 27 years old and live with our parents.”
“- My current income is $150K and my wife’s will be about $150K when she starts working in June.”
I call Bullshit on this one. Nobody makes $150K and lives at home! If you do then you are a Fricken loser who doesn’t deserve a wife! I also call Bullshit on your wife’s starting wage! Any chick who makes that much coin wouldn’t be caught dead with a LOSER like you!!
Arnie,
If you are under that much pressure from your wife, do you really have a choice? And to boot, you tell me you have already written off any prospect of home price appreciation. What are you waiting for? Buy a great, highly re-sellable location.
However, if you really want my advice, you already know I would tell you to continue renting, perhaps keeping an eye for vulture-buying in a year. Your plans dictate you’d be forced to sell in 3 years and that may be difficult to do. Your choice.
………………
Now, let’s see, Barb, can you send me your address as I’d like to mail you a couple of signed copies of my book.
If you plan on moving in 3 years, why would you buy? You should never buy anything you ALREADY know you’re going to sell in 3 years, unless it’s an investment – houses are built to be a home, not and investment. Renting never hurt anybody.
How?
I have an idea. Buy a place. It is such a waste to rent these days. While you are at it, buy another place and rent it out. Just have some sucker pay 50% of your costs and before you know it you will have 2 places!
Oh and light your cigars with $100 bills. I know it is cheaper to use the $20s, but the brown ink burns so much nicer. It is a worthy investment in your happiness.
I’m trying to figure out how someone could have the savvy and smarts to amass this type of wealth and income, and have little financial know-how.
Maybe you and your wife/partner are doctors just out of medical school – that’s possible by your age, isn’t it? I met lots of medical students while at university in the UK and other that being book smart, many (not all, not slagging all docs) did not appear that worldly.
I presume if they work in finance on Bay St then they must be financially smart. Please tell me it is so…
Anyhow, this “story” is so out of 99% of people’s realm that it IS a waste of time posting it. I suppose it’s done because:
a) Garth wants a reaction
b) Just how many variations of the “what should we do?” story are there left to print?
Yeah no kidding, $150k for a 27-year-old? “studying and travelling for work”? Where do people come up with this stuff? Dentists and doctors, pretty much the only professions that could accord such earnings power at such a young age, do not have a lot of travel and study associated with them once people are out and working.
Only need something for “3 years at the most”. I can’t believe this question is even being asked.
How the heck does anyone make “$150k/year”, and manage to not even be able to use common sense or arithmetic?
99.5% sure you’re being trolled here Garth. “friends frequent your blog”. Wow..
It’s a tough call when you have a broad pushing you to buy , regardless how ridiculous the market prices are. You may have to give in, or she’ll henpeck you to death.
Tough call.
Regardless of which road opens, there’s one inescapable conclusion: Real estate loses.
If inflation wins and rates rise, the market will correct. Has to. Affordability takes a big hit and an asset priced at the top of its cycle declines. Hundreds of thousands of people face the real potential of negative equity.
If deflation wins, and rates stagnate, the market will correct. Has to. Falling demand, consumer stress, rising unemployment and business failure dictate it. Hundreds of thousands of people in this scenario also face negative equity.
There is one consistent message on this blog. Whether you like it or not.
Having the bulk of your net worth in one asset is a very bad idea.”
Nice work Arnie, you and the future Mrs. Arnie seem to be set up just fine.
Like you really need my help; here goes:
Absolutely, rent, but appease your lady and get into a decent place – spend the extra couple hundred bucks a month. As for that modicum of capital you’ve acquired: tuck 15 percent of your loot in gold, 15 percent in a nice bond fund and 20 percent in a reverse ETF of the TSX – hold the rest ($175 large) in cash and wait. If you’re really risk averse/chicken shit just hold your funds in a money market account.
You two little vultures are going to feast in the months/years ahead. Now hurry up and get kicked out of the nest already!
27 years old, 6 figure salary and still living with the parents (in Thornhill no less). Chag Sukkot Sameach!
You should clearly buy Garth, your esteemed financial guru, a Porsche for his troubles.
Hi, i have 10 million in assets and earn $1 Million annually …. should i buy or rent?.
Blog Dog rory reporting for duty …
When the couple make this kind of money I am assuming they are being asked to give advice or apply expert knowledge to a problem but yet they can’t seem to find their way out of this mind boggling dilemma (rent or buy – good grief, life threatening it is) without asking for help …do these people still raise their hands to to go to the bathroom…I love self sufficient, self reliant professionals …be nice to find some.
P.S. – I would be embarrassed too if my friends found out what a dumbass I am.
Why would you want to buy a home if you already know that you will only live there for at most 3 years? What is wrong with renting? According to you, it will cost about $24000 per year to rent. If you buy a home there will be land transfer tax, interest, lawyers fees, home inspection, house insurance, maintenance, realtor commisions when you sell and the lost opportunity on the $350,000 that you have saved.
If you want to know what the best financial decision is, rent. If your hormones make your decision for you, well, at least you can afford to screw up.
Wow, talk about a ‘me’ generation guy. Are your parents nuts? Why do they let you live at home when you can clearly afford to be on your own?
How ’bout this? Start paying your folks about $2000/month room and board so they can enjoy your money because you obviously don’t know how to.
This is getting tiresome. I think the bulls are becoming bears and getting desperate. How does someone studying save $350K. come on Garth this is so transparent. The bulls figure they can create these stories to scare everyone else into buying.
Garth why don’t you start posting some questions from some “real people” who aren’t making 150k @27 years old, or aren’t full of B.S?
Geeesh!
Arnie, Arnie, Arnie, you came here for advice?
OK, here are your options:
a. (this is the right choice) Buy the love of your life any god damn thing that she wants. You’ve got lots of money, you can take the hit. The saying goes: Happy wife, happy life. Your happiness as a consideration is over. Sacrifice yourself on the alter of love and family.
Take one for the team. (it won’t be the last time that you do this, get used to it) Stop thinking so much, just jump!
or,
b. Download a little Paul Simon and do what most of us are thinking,
Just slip out the back, jack
Make a new plan, stan
You don’t need to be coy, roy
Just get yourself free
Hop on a bus, gus
You don’t need to discuss much
Just drop off the key, lee
And set yourself free
Run Forrest, RUN!
Garth’s answer, minus the humour.
-if you buy a house, know that you’re buying at the top. Renting makes more sense. You and your misses are in great financial shape though, you can afford to make this mistake unlike most people.
-buy commodities & energy stocks
-buy preferred bank shares
-buy real return bonds
-purchase a home in a few years after a roughly 15% drop in the market you’re looking at. (I’m being Garth. My opinion is a steeper fall than 15%).
How did I do? I already have a copy of ‘Greater Fool’ by the way :)
I think you got bearish way too early.
Most bubbles last longer than you would expect.
Housing is particularly tricky as there is so much government intervention.
As a financial decision, just run your rent vs own calculation.
Don’t get emotional. It’s always darkest just before the dawn.
When the last of the bears capitulate, that’s when you’ll know we’ve hit the turning point.
Don’t end up being one of those capitulating bears.
You’ve stuck it out for 4 years, what’s two more.
can anyone live in Thornhill without a car? No. Arnie is a put on
Dear Arnie
If you want to minimize risk then don’t buy property now, for crying in a bucket!
If she wants property SO badly, as to put you under pressure, then this is a great time to test the relationship and make yourself heard.
What is the RUSH for God’s sake?
Where is the LAW that says you have to buy a property when you are married?
Are you your OWN man or are you a “cookie cutter†copy of her stereotyped girly dreams? Is SHE a “cookie cutter” cutout of Barbie, and will you just be “a prop that eats” on the stage of her well scripted little marriage?
Stand UP for yourself, you pencil-necked wimp!
Fond regards
Munch
No WONDER our government can take a bigger deficit and throwing out more debts and bonds to make us and the world buy more of it, It seems like these 25 , 26, 27 years old are so RICH now that their tax receipts are helping the govt to pay down loads and loads of debt every month in Zimbabwean Terms… It shows that our money become toilet paper flushes down the toilet…I think I will soon be making $ 500,000 a year just cleaning floors for some banks or I will be making $ 3,000,000 a year in working in McD or Timmy’s soon..oops !!! If you guys are so rich and can easily ( I stressed EASILY in 3-5 years by beating the banks), why the heck are you still asking the SAME questions here like the previous dudes does ? Just buy it at (ROOF TOP) prices and hope your home at $ 700,000 will worth $ 1,400,000 next year and hope some asian boys bids for your home and you could retire for the rest of your life…!!!
Well Arnie good buddy, you must know the financial right answer to your question already if you’ve been reading any of these blog entries. 3 years at most? Given that it costs the average Canadian 7-10% of the price of a house to sell it, not to mention the HST that will be arriving soon and costing you even more on that upcoming sale, and add that you don’t see any price appreciation on the house, AND that higher interest rates are all but a given in the next couple of years possibly leading to a DEpreciation in value – how much more one sided can you make the argument? Find a nice rental that your fiance will be happy in (this is probably the most important factor) and watch as your financial profile improves. Then when it’s time to move in 3 years, no baggage!
With the money you’ve managed to acquire so far in your short 27 years, and all the savings you’ll be privy to by not getting tied into an overpriced asset, you’ll be able to go for a knock-your-socks-off honeymoon and still have a hefty chunk of cash to put down on the house that you REALLY want – once the market has cooled a little and Canadians have regained some of their sense. Besides, why tie yourself down to a house now when at the rate you’re going you’ll both be retired at 35 and looking for a nice little place in Florida…
If the key is to minimize the cost and the risk, but the pressure from her is to buy, obviously, you’ll never find that key. You can’t stand the pressure either, otherwise you wouldn’t be here.
At least be smart and get in debt before the wedding, so you can have a chance to win in court. After all, beside every great man is a great woman.
> this is purely a question of what makes the most financial sense with a 3 year time horizon.
Keep your job, don’t get her pregnant and you’ll become a millionaire. You have way too many things to look forward to so don’t get yourself killed, yet.
What kind of job is going to pay a talented 27 years old junior $150K… in June? Well, I might know one, but with that job the older you get, the less you make (in contrast with the present interest rates)… not to say that in Thornhill it’s illegal too.
Just don’t do itâ„¢. RTFB!
PS: Did I mention it’s too fake to be true?
Exzachery, what are u talking about..If you are dumb enough to be asking those kinds of questions what kind of work/environment do you live in?? Makes no sense…anybody who travels the world and makes six figures is not that dumb, that is just basic…so cut the bull..
If you were “typical” 27 year olds I could give you very good advice as “typical” 27 year olds do not make $300k a year while having $350k in the bank and still live with their parents.
As you are “a-typical” 27 year olds, rent vs buy to save $1500 a month is meaningless. You make $1500 in less than 2 days.
So here is my advice —(as I would love Garth’s book)
As you are looking for a place in up to 10 months away to live there 3 years at most (then?), I would wait till December/January to buy as it’s the worst time to sell a house and prices are “historically” lowest then to buy. Then I’d purchase a house that can easily sell. Ie. Starter home, 3bd, 2 bath, garage, finished basement, landscaping, average size lot, deck that has been reno’d for UNDER the average SFH price in your area in the suburbs where familes are on a cul-de-sac or other non-issue street with a park/school nearby. In 3 years put it up for sale 5 months BEFORE the school year starts.
Go for an OPEN morgage, one you can pay off within 3 years. In fact, I would pay 100% cash for the house and get NO mortgage. No debt is good debt.
The starter home (say 1,100 sq/ft), will be good for you both as you have never owned things you needed to take care of (car, house) and things like maintenance, responsibility (outside of work/financial) and house cleaning are new to you both.
Also, if you are not paying rent to your folks right now, you should be truly ashamed of yourselves!
Mike
there is no way someone this stupid can be making $150k/year
With that much money left for playing, buy the best bargain possible in Florida or somewhere that’s already gone bust and enjoy it as much as you can. The only other thing possibly missing in your equation is time away from work. If you have it, go play somewhere warm and enjoy yourself. Or just travel the world and stay where there are good discounts. There’s a time to accumulate wealth and a time to start enjoying some of it. Sounds like you can start that pretty young.
It is a real estate agent posing.
Dear Garth,
I made a billion dollars last year with my hedge fund, and I live with my parents in an underground James Bond villain lair. I was wondering, should I invest in Vancouver real estate? It seems I could buy almost two city blocks!
Elementary my dear turner…. this guy just gives his parents the rent money, moves his “new wife” in and tells the parents to go on a vacation all expenses paid for 2-3 years, simple really. they get to travel the world and daddies boy can support the works on the cash they make.
case closed.. next????
Come on Garth, it’s obvious your just playing with everyone here. This is ridiculous. I’m not even going to suggest what he should do other than tell his girlfriend to drop it and just hope she gets the job in June.
I’m guessing their parents are in their 50’s. Go ask them for advice.
BTW! I knew a guy years ago that had no Credit Card, but he had lots of cash and wanted to get a mortgage for a house. They wouldn’t give him one because he had no credit rating. You better go get a card and buy something with it.
Putting it off for 4 years… I can relate. The best time to buy into real estate was 2006 or prior. When 40 year nothing down came on the scene, affordability was priced in skyrocketing RE valuations. This gave way to 35/5 in time with the recession well before hand but I didn’t expect rates to drop in April the way they did. This, I had not forseen but once it arrived, its easy to see that Canada is now in debt expansion bubble II!
Where does it go from here…. ok. If interest rates stay at zero or near zero for another 2 years, I predict that the market will have expanded as much as it can with credit. It will rise for probably another year, year and a half and after that, credit expansion will inflate prices no further. It will reach saturation roughly a year, year and a half from now. If this is the governments plan, this RE bubble will be one of the largest the world has seen from any nation.
Theoretically, the Conservatives could try to inflate this bubble even moreso once debt saturation reaches its peak in Real estate from rock bottom rates. It could try to bring in a 50 year nothing down policy like Spain has. This, coupled with record low interest rates, could skyrocket real estate valuations another 40 or 50% above what they are today. Its would damage this nation badly if they tried it, but they have damaged this nation already with what they’ve done so they are used to this.
Would the Conservatives try it? To win an election, they would. They brought in 40 year nothing down regs to create a wealth effect to win a majority they are seeking right now… but if they win a majority, its doubtful that such policy would be tried if Real estate takes a serious downturn with rising rates into their first or second year of their majority term. If, however, I’m wrong and rates don’t rise for 2 or more years, I see the Conservatives trying this strategy to win a second majority.
Outside of theoreticals, I see real estate peaking next year, probably next spring or summer and stopped by rising interest rates later on in the year. Does it give flippers much time to get in and out? With approximately 6 months to work with, its too risky to buy for equity gains in most markets. Personally, its no money maker to buy into real estate, likely for 3 to 4 years, maybe longer now.
Nevertheless, buying real estate, although it is an equity investment the largest of which most will make in their lifetimes, is not always an investment with the motive of making money. Folks raise families in homes and you are a prime candidate.
The first question I would ask before advising someone in buying a home is… what can you afford? With 350 liquid and strong earnings, you can afford plenty and if there are setbacks in your career, you are young so you have that going for you. In other words… you pass the affordability test and what this means is that you can buy a home knowing that it might not appreciate in equity, but rather, depreciate. So right here, it it makes it hard for me to tell you not to buy a home even when the market is high because there is such a thing as quality of life and owning ones own home creates a more stable environment for a more stable family environment.
However… it is a bubble. When this bubble bursts, it will likely test early 2006 prices. The true bottom could be 4 years away and alot can happen in 4 years, so…
Lets try this. Ok… firstly, I would get a credit card and a car. Its a handy thing to have just to buy things and get around these days. Just don’t get reckless with them while cruising Thornhill in your new car and making sure your credit card works to buy the little nice things that help your car go louder and faster. The second thing I would do is see whats available to both rent and buy. This will take time. Make the time to learn the markets as you will, at your age, have to at some point anyway. This is especially critical if you are looking to buy. What this means and I urge this strongly is “buy Garths books!” Garth verses the reader well with buyer tactics that are necessary and will save you a great deal of stress, trouble and money.
Often as an investor of a home (one that we are looking to live in) or stock, we get too emotional, to punchy in our decision making process. Give it time. Don’t get caught in bidding wars. Be patient and learn the process before you engage in it. Always remember that when it comes to money and someone wanting to make a buck, there’s always an angle. Sellers, realtors, even yourselves, there’s always an angle so be aware of it. Look for the the truth and fairness in everything. Seek… and it will find you. ;-)
And finally, once you see whats available to both rent an buy, compare the values between the two. If its cheaper to rent the same home than it is to own it, chances are, being frugal and realistic, renting is a better option. This could very well be the case, by the way. Find out what rent is comparatively to owning with payments locked in at 5 years.
If renting is obviously cheaper than it is to own the same property with no risk of facing negative equity from falling RE prices, sweet talk your honey into the practicality of not owning an investment that is likely to shrink instead of grow.
If, lucky for you, renting is as expensive to own (renting will be cheaper but you never know), buy a home with 5% down and take advantage of cheap rates. Make sure to lock in for 5 years as soon as possible. You will likely sweat some equity, but your wife will be happier and you know the reasons why. Should there be a real estate bottom, remind yourself that things will have to return to affordability. Affordability was passed as you and I likely know, around early 2006 which is why you’ve waited 4 years for the insanity to end, so… if Canada experiences climbing interest rates, look for early 2006 Real estate valuations as a marker of where that bottom will be. Remind yourself that the bottom could be as long as 4 years away which is why cash is king. If rates rise, you can find investments to take advantage of rising rates with your liquid on hand while waiting for the bottom to hit. If rates stay the same, real estate shouldn’t depreciate. In fact, it will go higher until debt hits total market saturation (a year away, I would think). Whats wonderful in your situation is that is if interest rates go higher, you still have alot of liquid to capitalize on a market correction going forward which is why you should take the time to learn the markets now. The sales pitches, what gives homes their best value, where market values should be considering affordabilty and rationality enter the picture, all of it.
Take what you’ve learned from taking the time to learn the markets and buy another house or 2 as a revenue property or buy into equities in the stock market once a real estate bottom or near bottom is occuring. Most don’t realize the connection between real estate and equities, but there is one and its a big one and really important as an investor to know. If real estate does well, the markets do well. If real estate suffers, the markets suffer. So… predicting peaks and bottoms to real estate can make or save you a great deal in the markets should you decide to take the time to learn it as well.
Oh, and may random chance be kind to you and God bless you!
Did I misunderstand the Credit Card info. Does he mean no Card debt or no card at all?
timeline of 3 years, rent dumbass
First of all let’s get real 27 years old 150k salary?? Both of you? Come on man what are the odds. In this economy??
Ok but lets say both of you are lawyers or surgeons that are ready to practice, why would you ask such a question.
ha ha ha ha ……. First Arnie living at home making that kind of cash with all that savings and a wife wanting a home and talking to anyone ….. hello Dude the whole world knows who you are ….. 350K at age 27 ….. forget buying a home Run for a safe Conservative Seat and take over Flaherty’s job hell even Garth would be pleased having a smart Tory who could save that kinda cash in less than 5 years as opposed to a know it all finance minister who turned a $15B surplus + a $3B emergency fund into a -$56 Billion deficit in less than 3 years …. forget housing dude the CPC needs you, we need you, the world needs you . OBAMA could you use move the US of A …..
If you really have that much cash coming in every year (and I’m skeptical at your age) then who cares? Buy whatever you want.
Sheesh, I thought we were doing well at $185K per year at 33 years of age. We must be falling behind into abject poverty :( I’ll have to look at getting a second job…
Ok, so the thing that no one else mentioned here is: Is your new wife going to be so unhappy with not buying a house that she makes life miserable? Yes you SHOULD wait, but common in all fairness you can affford to lose a bit for happiness. Oh and by the way don’t take her to any open houses unless you want to buy. They get all those nesting instincts going. Take her on a trip or buy a dog or anything to distract.
For the sake of your upcoming marriage it sounds as if buying is the right decision. No sense making her unhappy right off the bat. Just realize that you are setting the expectation early on in the relationship that you will cave into her every want and desire.
Financially you can afford to buy the house, but houses are not considered a short term investment so it does not make financial sense to buy and expect a profit in just a few short years. It may happen, but very doubtful given the dramatic rise in values over the last several years. Be prepared to take a loss on the property when you need to sell. Judging buy your savings and future earning potential, you can afford to take a hit.
If home ownership brings stability to the new relationship, go for it. Renting for 3 years makes a lot more sense financially but I doubt that you are going to win that arguement.
Re my #30 post – only the last bit of my post was posted. Here it is again (hopefully in it’s entirety):
Hi Arnie:
If you have been travelling for work and will only need a place to live for “about 3 years at mostâ€, then why even consider purchasing now, when the real estate market, among other things, is in such a state of flux?
Perhaps it is pressure as indicated in this part of your letter:
“However, the time has come for me to get married and I am getting pressure from her – left and right – to buy a house, any house, rather than simply rent.â€
“…the time has come for me to get married†(I had to repeat that part)
Arnie, that wording could be used if you were talking about an execution, but to use it for your wedding? And further, why are you allowing yourself to be pressured by anyone, including the future Mrs. Arnie “to buy a house, any house, rather than simply rent�
Marriage is about compromise, but it’s also about a shared vision of your partnered future, including the timing of major decisions.
Frankly, you don’t sound too enthusiastic about marriage or buying a house.
So, disregarding that and looking at the three year requirement for a place to live, your stated financial status with a big nod to your future wife’s phantom wages as her job will not begin until next June. Here’s hoping it materializes in a skittish labor market and at the wage scale you predicted. There is also the possibility she could be pregnant by July (unplanned pregnancies happen and what will you do if it does happen?)
You have 350 large, no debt and need a place for a limited amount of time.
You may have “written off any prospect of home price appreciationâ€, but buying now could put you and the Mrs. at risk of negative equity faster than you can say “I doâ€.
“The key is to minimize both cost and risk for the next 3 years.â€
Your words, Arnie. Rent, and go back read this blog post Garth wrote on Sept 30/09 (One path).
You and the future Mrs. need to memorize this excerpt from it:
“Regardless of which road opens, there’s one inescapable conclusion: Real estate loses.
If inflation wins and rates rise, the market will correct. Has to. Affordability takes a big hit and an asset priced at the top of its cycle declines. Hundreds of thousands of people face the real potential of negative equity.
If deflation wins, and rates stagnate, the market will correct. Has to. Falling demand, consumer stress, rising unemployment and business failure dictate it. Hundreds of thousands of people in this scenario also face negative equity.
There is one consistent message on this blog. Whether you like it or not.
Having the bulk of your net worth in one asset is a very bad idea.â€
Oh crap – I need more coffee this morning. The partial post was originally #50.
If you are smart enough to have that much income and have that much money, you should be smart enough to know the answer. Just reading this blog for 5 minutes will give you the answer.
Thank your god(s) you are who you are.
http://pixdaus.com/pics/S3TqVYcNpN7E.jpg
http://www.moonbattery.com/archives/starvation.jpg
http://schools-wikipedia.org/2006/images/38/3856.jpg
http://www.uruknet.de/uruknet-images/20070625_deformed_child_corpse_radiation.jpg
http://www.bristol.ac.uk/poverty/Child%20poverty_files/UNICEF%20report%20stuff/CBBC%20Newsround%20%20WORLD%20%20Billion%20children%20live%20in%20poverty_files/_39477663_starvation300.jpe
$300K in family income /yr, no kids, no debts, and $300K in savings… Ermm.. Is that the cocaine business you are in, or Investment Advisement? Given you are asking for financial advice, I’m going to assume it’s not the latter.
Hey Garth, I like your blog, but how about sticking to the problems of the middle class?
In other news, somewhere in Latvia an entire population is about to experience a great depression not unlike the US 1930’s + political instability…
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6263039/Banks-brace-for-Latvias-collapse.html
1/2 Way around the world, the Arabic Nations, China and Russia are secretly planning the (controlled?!?) demise of the dollar via alternative currency oil trading…
http://www.marketwatch.com/story/potential-end-of-dollar-based-oil-deals-lifts-gold-2009-10-06
And yes Garth, I’m afraid gold *IS* heading to the moon…
http://www.kitco.com/LFgif/au00-pres.gif
Don’t be so surprised people… the script to this entire movie that is playing out before your eyes was written and made available to you since 1981! Check it:
http://www.youtube.com/watch?v=GPYLJoq_40Y
Got gold?
You make so much and have such a big chunk of savings it doesn’t really matter what you do. Just set a reasonable limit for your house.
I guess this is a exam from Teacher Garth to all his students-blog readers, most of you passed!
Wow Arnie, to be young and asking stupid questions again, dont think I want to be there again especially with the worlds bigger Ponzi Manipulative Great Global Reset going on!
I encourage any brain dead never had to suffer BRAT or any useless made money in spite of myself BOOMER to invite all friends especially relatives (who are the biggest enablers of this circus we call today economy) to read Big G’s Blog everyday to get your fix.
When the spiral hits you want that POWDER REALLY DRY so you can take part in the spoils!
$1M homes for $600K! The banks will want 30% down but who gives a flying @#$#! The banks are not going to have any business so by then you’ll be asking for 5 pts off 10 % prime rates or the bank will pay you 5-7% on your downpayment which they sting you for the 70%.
If I recall as well, back in the 80’s, my dad was making 16% interest on a savings account for one year.
CASH WILL BE KING!
But again, some of us will do better than others as we know how to put our money to work! You will still be 30-32 years old by then and mistakes will come your way. Just like the 55 year old boomer who has glided safely from one bubble to another.
MUNCH, always a pleasure to read your post Bokka!
Looks like you and your wife to be are in a pretty good situation.
I’d say that the best thing for you would be to do a quick analysis of buy vs. rent and see what’s best (and this might help you to convince her to rent).
Find a house that you’d be interested in buying (in your 450ish price range). Assume that you’d make a 20% down payment since you’d want to avoid the extra CHMC cost (that will leave you with a good 260k in liquid assets). Also, look at the interest rate of a 3yr fixed. Check to see how much it would cost for:
-mortgage payments
-property tax
-purchasing costs (lawyer etc)
-realtor’s cost to sell your house in year 3
-without speculation, assume that you can sell it for the same price as you buy it (if your wife says it’ll increase, just say that the potential cost of maintenance and repairs to the house will add up to the potential profit).
Now, check to see how much it would cost to rent a similar house for 3 years.
I’m not familiar with your area, but I would imagine that renting will end up being the cheaper option since you don’t build that much equity in the first 3 years.
If both end up being the same, renting might still be best in case Garth’s predictions come true. Depends how much risk you like. Also, make sure you follow Garth’s advice on how to invest your assets.
Do what I’m doing, rent a house or large condo in any area you (she) really want to live make sure its unfurnished, so you get to fill it with your own stuff (lots of shopping trips for her).
a 400k house won’t get you in a great area anyway.
If she wants to start getting her legs up the ‘property ladder’ then look south buy a place in Florida and sit on it for some years but wait till the 1 CAD buys you $1.10 USD (won’t be long)
#42 –
“I call Bullshit on this one. Nobody makes $150K and lives at home! If you do then you are a Fricken loser who doesn’t deserve a wife! I also call Bullshit on your wife’s starting wage.”
I completely agree and was going to post the same thing, almost verbatim.
Nobody earns that kind of cash at that age with so few encumbrances. Not even doctors or lawyers or Bay Street traders.
The only doctors that earn that kind of cash are specialists (like brain surgeons). And unless you’re Doogie Howser MD, you have to be in school at least until your early to mid 30’s to do that.
Lawyers? You have to make partner to be pulling that kind of salary, even at the big shops. Again, early to mid 30’s if you work your ass off and go directly from high school – university – law school – work.
Bay Street traders? Those guys, too. You don’t start there. Absolutely you can get there, probably much quicker than being a doctor or lawyer. But nobody gets out of school for that, especially in this economy. Go look at the starting salaries from any business school. They’re about 1/2 of what this clown is posting.
And if the answer is none of the above, then the dude could be independently wealthy from inherited wealth. But again, total BS that that’s the case, as someone that wealthy wouldn’t be worried about mortgages in the first place.
Believe me, if there were a way for a human being to earn that kind of cash that quickly at such a young age, while incurring no debt to get there, with apparently little effort on their part, and with such guaranteed future income streams…everyone would know about it because you would be reading about that amazing job over and over and over again in the press.
Those jobs don’t exist because basic economics (supply and demand) guarantee that the playing field would level out and would create downward pressure on salaries to come down to reality.
You are all very, very kind people to take this post seriously and make thoughtful recommendations to it, but the situation being real in any way defies logic.
Here’s my advice to the supposed poster: you and your girlfriend should both take one for the planet, quit your jobs and apply your mad moneymaking skills to fixing the world economy. That way, the rest of us can afford to eat and pay our rent/mortgage, Garth can stop posting and worrying about a coming real estate crash, and we can all live happily ever after in your magical world of ever-increasing real estate values and giant salaries.
Or, put down your bong, go get some fresh air, and please talk to us when you’ve come back to reality.
After spending 59 years on this planet, I have learned a few hard lessons. So here is what I would do.
1). Rent……….
2). Get a Prenup
3). Save Save Save
4). Retire early, play lots of golf, maybe even move to Arizona.
GOOD LUCK
where is Garth Turners reponse?
Mikey
Watching from above. — Garth
1. Rent.
2. Don’t get married.
Number two will save you the most money.
Its rarely the right answer to buy a house with a 3 year timeline – good times or bad there generally isn’t enough time for the property to grow in value to cover all your real estate fees. In this particular economic situation you are guaranteed to lose money when you sell in three years.
Next.
to Hal Smith, #80 Oct 5 “It has already been converted to a corporation and the dividend is safe.”
Hal, Sept 19 press release states “…financial outlook, regarding the possible conversion of Pembina to a corporate form prior to January 1, 2011 and the ability of Pembina to maintain its current level of cash distributions”
So hasn’t converted and the impact remains to be seen. If you have any further info, please advise, thx!
Let’s put the things in perspective.
The chance of 27 years old guy marrying 27 years old girl with each having 150 k income and assets of 350 k for the guy is …. negative in Toronto.
The only type of professionals making this money are doctors and lawyers. There is no way for a guy in financials to earn so much money at this age. period.
I know layers at age of 30, they make max 100 k and work 60-70 hours per week. not partners yet.
For a doctor you could barely start earning at this age. Have to pay the loans first, absolutely could not have 350 k in saving.
To summarize: this is most likely a scam (99.9 percents probability) by a real estate agent who is trying to convince himself that GTA is full of young rich professionals making 150 k having 350 k in savings that don’t’ have a car and are willing to put everything in real estate in Thornhill that is full of retirees living in ‘500 k+ ‘ old houses with 15 k of annual income (can not afford to pay the taxes on their homes).
Arnie:
Now this is a bit of an off the wall suggestion …. but …. I would strongly suggest that once you an your spouse to be leave the nest, you retain a third party fatherly presence. I humbly volunteer for to fill that void … in other words … would you care to adopt me ?
Congratulations on your financial planning so far. Regardless of rent or purchase you have the fundamentals of good financial planning well in hand.
respectfully,
This Is Just The Beginning……
Someone had to do it.
It’s about friggin time !
Australia first big economy to lift interest rates
http://news.yahoo.com/s/afp/20091006/bs_afp/australiaeconomybankrateforex_20091006084429
geez…150K per person at 27 years old
and you still ask question… are you sure you are worth the 150K??
The economy needs ppl like you to spend…coz you can afford and can even bear a falling market… you will be in the house long term..true that the market may fall but it will eventually rise too…
so unless you want to sell in few years, I fully understand your wifey’s wants!
families making less than 50K combined jumping to buy houses may be fools coz they are at risk if the market falls…not you
BE MAN enough …
Garth – what’s the point in presenting such weirdo cases to us? IS it to show that high income earners (?) are still cautious? We’d better be discussing cases of concern. btw GTA prices are up 10% in Sep09 compared to Sep 08…So how much decrease are we expecting and when?
wtf kid
Who’s next?
RBA raises rates.
http://www.dailytelegraph.com.au/news/rate-rise-takes-heat-out-of-home-market/story-e6freuy9-1225783531224
Let’s give this a try.
The first and most important step. Keep your bride under control! No to buying the McMansion, No to the high priced elite condo’s and no to keeping up with her debt beat friends.
Secondly, “when she starts working in June??” 2010?? That job is about as secure as Chrysler without the gov’t bailout. Plan on living on the $150 large only. If her job is there after she has finished school, bonus. Sock her paycheque away with bank preferred’s for the 3 year’s. That will add another $300,000 to your current $350,000. Don’t forget that when you move in 3 years she’ll turn 30 and that ticking clock will become louder. Nothing like big payments on E.I. Maternity along with nanny payments for the next 15 years.
If you can keep the bride to be’s emotions (and her family) in check… rent using only your $150,000 income.
If you cannot keep things in check, starter home, no more than $350,000 – $400,000 (3 times income) – 5 yr fixed, 30 yr am.
Finally, pre-nup Your bringing $350,000 to the table and she is bringing “a job in June and a I want a house attitude” Actually, this should have been # 1 on the list
Saving Cash for the Crash.
Gold at record high this am and house prices at record high….I’m beginning to question Garth’s logic.
Be my guest. Oh, you are. — Garth
Earning 150K per year each, with $350K in liquid assets AND STILL LIVING WITH YOUR PARENTS?!?!!?! WTF?!?!
Get out and do some growing up before you consider buying a house let alone getting married Dude.
Liquid income, eh? In Thornhill? Sounds like shack central in Calgary. Why are you asking Garth for advice when you make this kind of money? And you still live with the parents. Pretty funny. And your “wife” is putting pressure on you to buy in a market that is priced at double its true value. Yes you better stay liquid, you’ll need to be lubed well when you get screwed over.
You think any of the houses are really worth what they are priced at in Calgary? Seriously? No trees for the most part, people in your face, and horrible traffic? And you want to support this?
In this economy you are better off renting that way if you get canned you can get out of this God forsaken bald prairie.
Here’s the latest crap from the Herald: http://www.calgaryherald.com/life/Calgary+feeling+good+despite+bust/2069746/story.html#
I bet the writer wrote it so he wouldnt have to peddle his @ss to the local Taco Bell looking for a job. So he wouldnt have to have a job and then check in at the downtown shelter cause he cant afford a basic room in the northeast part of Calgary.
Seems to me you’re ahead of the game and you come whining to Garth cause you dont know what to do. Wait 10 years. You’ll get it all figured out.
to #59 Bruce Chase,
Excellent response! I’ll add two to your list:
3.b Invest some of your cash every year in solid companies, preferably with growing dividends, possibly even subscribe to a DRIP. Its painless and you’ll have a couple M$ by the time you’re in your 50’s
5. Get / Stay in top shape. Run, bike, work out, whatever you can do — but keep fit.
Ok Garth.
Bail on these tourist pups.
Time to get real time.
New post needed on the gold price and the Aussise CB
upping rates.
Let’s go Garth. Get back your stride and dump the trolls.
Arnie, I’m going to repeat some advice I’ve given here before. You and your wife are *young*, thanks to living with mom and dad. Screw the financial advice: you and your sweetie need time to learn how to *really* live with each other, especially if you have high-pressure jobs. Rent, let your landlord deal with the hassle of owning property, and spend three years fostering and growing your relationship. If after that you want to blow a ton of money on a house and maybe fill it with kids, by all means do. But until then, work on being with each other. The two of you will never regret it. Feel free to show this to your honey, I’d say exactly the same things to your faces. Congratulations and good luck!
ClaudiusEmperor – “There is no way for a guy in financials to earn so much money at this age. period.”
You’re quite wrong.
Paul – “Gold at record high this am”.
…in US dollars. Assuming you transact in Canadian dollars…who cares?
Buying House for short term = Land Transfer Taxes & diminished equity or at the very least no real payments of your principal. Renting is cheaper at this point!
Getting married: Nagging girlfriend = Nagging/Nesting Wife.
Nagging/Nesting Wife = Spending money on “fixing” up the house you’re going to sell soon to meet the specs of said wife.
You must resist the urge/nagging grasshopper. You won’t regret it in the end…
==========
I would be remiss if I didn’t post this link for you young bucks on “Staying Single”…
http://tinyurl.com/stay-single
Based on 2,000 per month rent for 3 years your total costs to rent are 73,000. Assuming low risk tolerance, put your 350,000 into a 3 year GIC and earn 3% for 31,500, after taxes is 17,000. Cost to rent after interest and taxes is 56,000.
Based on the lowest cost scenerio, you would buy a 350,000 house fully renovated, meaning no extra costs over the next 3 years, and the price stays the same when you sell. Make sure you spend a lot on inspection to ensure that there are no surprises later such as a new roof, new furnace, new deck, new fence, landscaping, termites, flooded basement due to a cracked foundation, renovated kitchen, etc etc…..
Based on all the costs you have- Insurance (5,250), maintenance (3,600), Property taxes (assume 10,000),Real Estate Commission (17,500), Lawyer Fees( 3,500). Total cost to buy this house for 3 year is 40,000.
Meaning it will cost you 16,000 over 3 years (450 a month) to rent versus buy assuming the cost of real estate stays the same. IF (and Garth will tell you when) real estate goes down, you will stand to lose much more than 16,000. (that’s not even a 5% drop in prices)
OR buy the house, borrow as much back as you want and play the stock market and write off the interest…if you are good at it you might make more than the potential drop in your value. (just remember to learn how to short stocks)
Garth,
My retort would be ‘Do your parents know about you?’
Hey,
First of all — good for you, despite the claims that you have no idea how to manage your money you’ve obviously done a great job so far.
Given your timeline here the obvious answer is “rent”. However, if you must absolutely give into the urge to ‘nest’ I would suggest buying a home that you can afford on your income alone, using all of your liquid assets to buy it and then take-out a large HELOC (say $200k) to be invested in high yielding dividend shares. The interest payments are deductible from your HELOC effectively giving you a tax-free mortgage on the home. Properly invested you will be able to carry the mortgage and HELOC from your investment returns (no need to given your income) and can maintain your lifestyle.
That being said — you’re young, as someone in a similar position to yourself (though not income wise anymore) I can tell you that my biggest regret is becoming a homeowner too early in my life. You do not want to lose the unbelievable freedom that you and wifey have to do quite literally whatever you want.
Take some time and enjoy all the trappings that being young and wealthy can have — eat out, go on vacation, invest wisely and whatever you do do not buy a house. Given your financial situation if you were to rent and save for 3 more years you could buy a nice house in say leaside mortgage free in 3-4 years without the hassles in the meantime.
Cheers,
Alright hombre,
I am also getting married next July to a lovely woman who, inevitably, wants a house so that she can “build a home”. She pleads, begs, reasons etc and guess what? You need to be a man and put your foot down! You have all this money (lord knows what you two do for a living), you must not be a complete moron so why are you playing dumb. You’ve waited this long, you only need to wait a little while longer and yet, here, right at the top of the hill, you capitulate. We must be getting near the top because then and only then do so called RE bears throw in the towel. RENT. RENT a huge damn house. Or you can buy a house and wipe your tuckus with a couple hundred thou. Because, sir, that is what is going to happen when you’re forced to sell into the rivers of RE blood in 3 years. Do yourself a favour, rent a place and shower your fiance with spa treatments and trips to Mexico but don’t buy because watching your equity drop before your very eyes isn’t as delicious as sipping away in margaritaville.
cheerio
Arnie,
Since you’re soliciting advice, here goes:
i) If you have no problem saving, just keep renting for three (or more) years, and just buy a reasonably modest home for 100% cash, once prices do come down (by however much).
ii) If you are “getting pressure left and right” from your fiancee to make extremely large and potentially unwise purchases before you have even gotten married, this does not seem to bode well for your future financial and/or maritial happiness. Tread carefully, and perhaps consider pre-marital counselling that specifically addresses (among other things) how the two of you will make financial decisions, what values you share and don’t share, what’s important to you in life (besides money), etc.
iii) As per above, many marriage counsellors do not recommend getting married before age 30, for maturity/life experience reasons. You may want to carefully consider how quickly you wish to get married, particularly since since you are still both living with your parents. While it’s fun to stay and live with your parents to save buckets of money, the life experience and maturity you gain living on your own for a while may be very valuable if and when you decide to get married.
iv) While it’s fun to have buckets of money in your mid to late 20’s, you will discover in time that money can be very transitory and in no ways guarantees happiness. What would it be like to do something radical like move out of home, donate a large sum ($100,000) to an important charity, develop a spiritual path, and/or volunteer at a soup kitchen or pediatric oncology unit? Remember, all your well-laid financial plans seem a bit trivial the moment you’re diagnosed with serious cancer or get crippled in an accident.
Good luck! Kind regards,
Brad
p.s. Donating large amount of money to a charity may also help your guilt about your friends knowing how much money you have! Worth a try at least :)
RENT or live with your inlaws, turn up the music when necessary. Live at work , no rent, no car, no hydro bills no heat bills everything at your door. Maybe the caveman had it right afterall. Go buy a “porch”
13 warrior
Considering that mortgage rates key off the bond market:
http://ca.reuters.com/article/businessNews/idCATRE5944A020091005
“In the latest sign of the low-rate environment brought on by the global financial crisis, Canada’s finance department said a version of the government-backed bonds that can be cashed at any time will pay an annual interest rate of 0.4 percent.”
Hello Garth .
You certainly have a lot of superlifers posting here earning 6 figure incomes and bragging about it.
I wonder if any of them could survive living in the real world for 5 years.
Conditions of the test:
1. Get the wife or girl friend to quit her job.
2. The contestant quits or takes leave of absense with out pay from his ivory tower job and gets a tradesmans/labourer job, must be non union and then start work and try to survive according to what the labour market sees fit to pay.
3. Set aside all savings and negotiable assets in a trust so that during the duration of the contest the contestants cannot subsidize their existance.
Frankly Garth I doubt that many could survive the contest and really get started in life. Just imagine the $150,000 ayear 27 year old scrapping by on $20,000 with a wife and kids while putting his body at risk for his meager earnings. Plus the bloated cost of real estate , vehicals, insurance and the sundries of life. Most of those fat cats would wimp out and try to get back to their ivory towers.
The grand prize for sucess in lasting 5 years is a sense of humility and understanding of the real world.
Steven
Gold $1040/ounce!
Garth is this inflation or deflation? :P
New poll suggests the Conservatives would win a majority Gov in a new election.
Poll does not add in the turn in the housing market!
My advice, take your 350K in “liquid cash” you got from your vintage star war figure collection; take the wife to vagas for a cheap wedding and hit the casino.
#110 dondiego
I concure, this blog is losing its relevance quicker than the Liberals losing cofidence in competance, again.
O.K. … On review I guess I may have crossed into the territory of violation re: bullet #3 … I assume the cap’s .. my apoligies for “yelling” … no disrespect intended … please attribute it of the “agonized empathy type”. I truly don’t know where you get your patience – and respect your truly generous spirit.
Now … bact to it …
Man ‘m up .. and pleeeeeze kick it up a notch!
… home and native land … disfunctional and free … please allow us just one last refuge of denial. I’ze beggin ya … :-)
Best and respectful regards
B.
Thirston Arnie the 3rd, Your job is going Gilligan’s Island on you as is your Mrs. Howell. Give 30% to Garth’s election campaign. Never hurts to have a politician in your pocket. (See country directly South). 30% to Jesus – that’s Heyzoos (Phonetic) Your Paraguayan Crashstead Hunker Bunker Realtor. 30% precious metals. And a 10 percent reserve for future hair transplants, teeth whitening and lipo suction. Garth let me know when I can anticipate book delivery. You’re on your own now.
You think any of the houses are really worth what they are priced at in Calgary? Seriously? No trees for the most part, people in your face, and horrible traffic? And you want to support this?
There are plenty of trees in Calgary. Too bad Alberta is the only place that pays someone like you 6 figures to drive an ambulance around.
To those unemployed Ontarians, come to Calgary and learn how to drive an ambulance. Maybe you can send this ungrateful whinner home to the great BC where homes are so much more affordable.
why do people think you have to be a doctor/lawyer to earn 150k ayear? there are many trades that pay that sort of money.time served heavy duty mechanics make that in fortmc,for a 14 day on 14 day off work cycle.his wife to be could be in trade school/college doing her final study period to gain inter provincial qualifations.
work for 3to 4 years commuting to fort mc,14 days off
plenty of time for renos!.house paid for,time to start family and get local job/s for quality family life
Rent you fool…
Australia leads with rate hike
First nation in G20 to tighten monetary policy; attention turns to Canada, New Zealand to follow suit
7:32 AM
On another note…. Canwest files for bankruptcy… good! IMO – these puppets are in part responsible for the false run up in RE prices. Every BS article about how great RE is and how it will only ever go up is followed on the next page with full page condo ad…. hmmm…. And what about the “journalist” that was very quietly dismissed for taking kickbacks from developers for positive RE articles?? I believe this is what is called come-up-its.
Go on a shopping spree in the US – particularly in a depressed area like Michigan. Then take a long vacation in Vegas.
Seriously – hoarding money is terrible for the economy – go spend it!
Jewellers are seriously hurting – sales at Zales, etc. are down something like 75% over two years ago. Whenever your new wife bugs you to buy a house – any house – just bribe her with something large and glittery.
Just curious though – what DO you and your fiance do for a living and on top of that, what do your parents do for a living that enables you by 27 to not only have a high salary but also 350K in savings?
Because really, there do seem to be a disproportionate number of people who come to this blog with questions who are in your exact financial position. And really, if there are so many of you out there, then sure, sit out until the bubble bursts, rent a luxury condo in the meantime but for heaven’s sake, get out there and spend!
There’s not going to be an economic recovery until people are more willing to part with their cash and aren’t expecting every last dime to return 10% or more. There are still manufacturers in Canada and the US that make things – buy from them – you’re the ones who can afford to!
I think Bissell still makes vacuum cleaners in Canada – buy one for every room! Get whatever top end model car that is built in Alliston or Brampton or Oshawa. Go to Queen Street in Toronto and do a shopping spree of the local designer boutiques like Kingly toys or Peach Beserk.
And Toronto, particularly compared to Chicago, has ghastly architecture. Surely your parents and their friends must be pretty well off if they’ve set you up in life so well – wouldn’t one of them love to leave some form of legacy in the form of a grandiose edifice dedicated to them? Something gothic or art deco would suffice. CanWest is in deep trouble – maybe the lot of you could pool your cash, buy out the Toronto Sun & erect a building similar to the Hearst building somewhere around Lakeshore/Cherry Beach or knock down that God-awful Citifinancial at the foot of University Ave (they’ll be broke soon anyway) and put it there?
Maybe the problem in Canada isn’t a housing bubble or easy credit but people who aren’t willing to part with a dime unless it’s cheap crap from China, status items from Europe or over-priced but unimaginative real estate.
My advice:
1) Forget thornhill. You too young to live in the boonies. RENT a nice 2bed+den condo with terrace in downtown toronto where you and your wife likely work. Budget 3k/month and you’ll get great views. Walk to work. Enjoy life without kids while you can. Enjoy the downtown lifestyle. On a sleepy sunday morning you can waltz down the middle of Yonge st!
2) buy investment property now, while young and debt free. Buy a cottage if you are into that. Or, even better, buy a vacation home somewhere warm. You can get a nice townhouse for 150k in Miami, and use it for vacation rentals when you aren’t there. Pay cash for it and use it once a year, rentals for the rest. Get a least 4 bedrooms and invite the rest of the family down during winter…
3) Max out RRSP, TSFA, etc if not done already.
4) Plan on on 30% down for your 600k mcmansion 3-5 years from now.
If all these letters from people making huge incomes are for real, it says one thing clearly to me: real estate is already well passed it’s peak, when desperate wealthy people have to write to Garth to justify their extravagant hopes.
You would think everyone in Canada makes a minimum of $100K each, has no debt, and will be a millionaire by 30 or 35 (the laggers). Sure. Everyone in Canada is rich, so rich they can’t count it all. Yep.
Sadly, statistics compiled by StatsCan do not match with this rosy picture. The actual number of people who have this kind of income in Canada is small, and they do not muster enough numbers to keep the real estate/consumption party rolling all on their own.
So they have to write to Blogs (like ‘Enemy’) in a rather pathetic attempt to defend their world view. They assume because they are doing well, everyone out there is in the same circumstance, and those stories in the paper about layoffs, poor people, bad economy etc are just leftists exaggerating the negative.
If I had to pick one motivator, it would be fear. Fear that their gold-plated lifestyle is not sustainable going forward. Fear that that $900K McMansion might drop in value. Fear that the “poor” who so terrify them might move in next door as their formerly upscale neighborhood goes downhill. Fear of having to live like normal Canadians, on a family income of $70K or so per year -“I just don’t know how they manage! Pass the Krug’s, please.”
They need to suck ordinary citizens into the game, and keep them there, to keep the wheels turning. Which they have been successful at so far. But when consumer spending undergoes a secular change to “new frugality” as is happening now, the entire “lavish lifestyle” strata is threatened. They are on top of a sinking pyramid, and as the bottom layers descend so does the top.
We are witness to a generational ratcheting down of lifestyle and expectations, which is poisonous to the old orders dependent on consumers continuing to spend way beyond their means forever. So there is a backlash, no one is more righteous in their misplaced fury than an “elite” who sees their former prestigious status threatened. This is most apparent in dinosaur consumption industries like “real estate”, where if prices do not continue to rise forever, the whole palace of cards collapses. Misplaced pride always comes before the fall.
Do not be fooled. Their “wealth” requires your support, as bagholder/taxpayer of last resort, and as fresh meat entering the grinder. All you have to do is go with the times, live responsibly within your means, and their hollow pyramid will crumble quickly from the inside.
Why would you even consider buying in an “iffy” market with a real possibility of a downside, and this for a three-year short term?
Considering your starting position, you and your bride should be smart enough to spot that bear trap. Add up the real costs of ownership, including selling, and then rent someone’s McMansion and prepare for life after your three year hiatus.
Hmmmmm….
…Our dear friend Arnie owns >$350K in assets.
…His betrothed owns $0.00.
Although I am a 500 year old virgin, and if I were Arnie, I would trust her completely.
One relevant question…with one relevant suggestion.
1/
Have you had se/ I mean made love to each other?
(…since you both live with ur parents)
…I you haven’t yet, get a prenup…If you have, get a prenup…
Nostradamus jr.
Here is my answer to this couple’s predicament.
Ever read the life story of Ed Mirvish (A.K.A Honest Ed)?
He had become extremely successful in the procurement of prime real properties and subsequent passive revenue generating activities of such real estate properties by buying them at distressed price levels.
You can buy prime real estate at really low prices if you time your acquisition phase with a deflationary movement in the economic cycle. In plain English, when things get really, really, really bad, and everyone else is saving their money under the mattress, you go out (against popular opinion) and snap up as many distress real properties as possible at bargain basement prices leveraging your banker’s money and under the protection of a corporate entity.
Real estate is all about timing. Your entering, your current and exit strategy timings are crucial if you want to make money in real estate. If you try to do this at the top of the real estate cycle (it is always hard to call the top but you can tell when things are getting really ridiculous) or whenever the current market value rent that your can receive from tenants fails to return an acceptable net profit level after your expenses from your income generating properties then it would not be a good time to invest heavily in the real estate market. In plain English, if you can’t make money on a property after extensive crunching in Excel then do not buy that property at that moment in time but rather wait for the next down cycle in the real estate market. Look to the U.S. to see very clearly of what I mean by a down (deflationary) cycle. Real properties in the U.S., compared to the nonsense that is going on in the Canadian housing market, are correcting themselves from their blown up asset price values of the past (Greenspan years – ultra low interest rates).
This couple should consider this:
1) With $300,000.00 per year income before tax and $350,000.00 in liquid assets save as much as possible of their after tax money (85-95%!). Invest in secure and realively safe securities (in the business world there is always risk, nothing fully secure, only various levels of risk). Stop purchasing all unnecessary toys, doo dads and extraneous expenses. Start studying everything there is to know about real estate. Get some books on the topic, take a drive, talk to RE brokers, talk to bankers, best of all talk to homeowners that you meet. Master the subject. No excuses. Work hard and smart or you may get hoodwinked.
2) Continue to stay with your parents until the time that you are ready to kill each other or rent as cheaply as possible until the next down cycle in the real estate market. Have the lowest cost wedding possible as I still believe that there is a soft depression on the horizon if not one right now.
3) If you only want to live in the house for no more than 3 years then RENT (or see suggestion #2 above)! A house is NOT an income generating asset unless you rent all or a portion of it out OR realize a capital gain in a very strong, favorable upswing in RE asset values on a re-sale profit taking into account all expenses that your had originally incurred.
4) You will have so much available, liquid cash available that by the time this overpriced market in various parts of Canada stalls or levels off to more reasonable levels, you will be able to buy almost whatever your hearts’ so desire.
5) When the next deflationary cycle hits, purchase whatever real property (s) that they so desire.
6) You may want to consider a RE play in certain parts of the U.S. but be really, really careful about this. Stick with Canadian properties at the right time (i.e; not right now!). Only buy investment properties with your excess cash in you desire and have the will power to want to learn how to make your excess cash on hand and the bankers money work for you.
7) Get both prenuptial and post nuptial contracts scripted by a lawyer and signed by both of you and stick with your deal with each other for better or worse. Divorce is a costly expense and can hurt your ability to play around in the real estate market. Many of the properties that I zero in on are the result of desperate, divorced couples that have to sell at any cost. Ever see a RE sign on you street pop up one day. There are rumours of “moving on upâ€, “moving awayâ€, job transfer, or most likely, “DIVORCEâ€!
8) Use some serious birth control (unless you want to have kids sooner rather than later). Kids are great but they can be expensive. Get your finances in order, then have kids. If you do this other way around you may enter the “Rat Race†which is very hard to get out of and may force you into an economic situation that you would be best to avoid in the first place.
9) How are you so sure RE properties will not continue to go up in value (most would agree that it is high time the bond markets punish the central bankers for their “not on my watch†will a depression occur and their extreme Keynesian economic platform. We all know that their valuations are ridiculous but no one knows the future, especially when central bankers play games with the currency. The bond market will force their hands but when this will happen is hard to call at what point in time over the next 3 years. There are some people, so it would appear, buying with more money than brains today.
10) Homes are can be very expensive to buy, finance, maintain, repair, insure, heat, light, pay property tax on, furnish, landscape etc. They can also be a wealth destroyer.
11) Play it smart and buy if you feel you have nothing to lose and do not care about negative equity. Rent if you like your money and value it above a commodity like a home.
12) A home is not an investment but rather a place to live. A rental property can be a smart investment if it makes you money. Real estate can be a wealth builder or wealth destroyer. It all depends on how you play the game. You would be best advised to educate yourself on the ins and outs of real estate in all of its facets before making any rash decisions.
What is it with the grown adults who frequent this site.. earn over 100k a year.. but STILL live with their folks?
Is this lack of independence a general canadian thing?
Canwest files for bankruptcy and today the TSX is at +200 (so far) something isn’t right in denmark. Hence todays question of should I buy or rent….
CanWest files for court protection, Aspers set to lose bulk of stake
http://www.theglobeandmail.com/report-on-business/canwest-files-for-court-protection-aspers-set-to-lose-bulk-of-stake/article1313418/
Arnie, If I were you I would buy a house in LEASIDE home prices there only are going up up and up!
great investment only 15 minutes from the heart of the city close to hospital. House prices in general might come down a bit but in the long run they will allways be higher
Most Canadians can only dream of being in your situation. A double income family equally splitting 300k yearly? Sitting on a cash reserve of 350k? Appreciate that you are on the mountain top looking down.
You also appear to have your head well set on your shoulders, you make a top 5% income but are focusing on “average” housing. Good for you! This bodes well for your financial future that you resist the “I’m rich and should be able to live the rich lifestyle” trap.
If you have set yourself a hard limit of 450k for a house your looking at a sweet 1.5 times income for your abode. Combine this with your ability to drop 80% down on the home and things look pretty sweet. You;d have a mortgage you could pay off in 2 years.
However you need to look at the big picture. Do you think housing prices are going to drop? I do, and this blog has documented exactly why it *will* eventually happen. They can’t hold their fingers in the dyke forever, eventually they will run out of fingers. That would mean it makes no financial sense to spend money on an asset you know will depreciate.
IMO, renting and waiting for the downturn would be the move of choice. Your noted $2000 rental would cost you $24k yearly, only 20% of one income, 10% of your combined. More importantly you have 350k sitting around. Even modestly investing this should cover at least half your yearly rental! It’s like living for free!
Meanwhile your combined income is further pooling your nestegg reserve while you await the coming storm. This leaves you ready to jump in and pay CASH to scoop up the house of your dreams when the market turns.
However you note its the pressure from the spouse that is generating the “buy” urge. Is renting beneath her? It sounds to me like that could be only the start of the upgrade-itis mindset that young “well-off” couples can get trapped in.
After the house comes the granite and stainless, then the Lexus, then the million dollar mansion. For your income level that is going to be an easy trap to fall into. I’ve seen and lived it, the sense of need to live the lifestyle you feel your income level should be able to afford.
In the end you have to make the choice that will work for you as a couple. Buying a home now will certainly not financially ruin you, you simply make too much income and have too large a cash reserve for that to happen. While it might not make the best financial sense given what we all suspect *must* happen to housing prices in the coming years, if living in rent will only lead to spousal issues and disagreement that could potentially affect your relationship buying now might be the most amiable solution.
Obviously there is no hurry here. Go buy a lot in an area you would like to live in. You be the contractor. Hire a builder and have your home custom built with an approximate 600k budget. Get a variable at prime minus, a 1 year term for 95% LTV 15 year amortisation. Keep 155k cash in 90 day T bills. Keep 75k in cash in an account. Your payment is 4k per month for 15 years and you are also able to handle the interest rate `RISK`. Now for the wifes 150k income, buy your cars, furniture etc, and pay cash. Any money left over, accumulate some real money such as gold and silver. The rest invest in short term AA + corporate bonds. 1st year asset allocation is 50% RE because you need a home. 50% in relatively liquid assets to cover systematic risk. Equities maybe over valued at this point and wait for the opportunity next year. Find a good IA.
I’m not reading this blog anymore if the scenarios are going to continue to be from stupid people with too much money that live with their parents. This site is no longer educational, it has slipped to the level of pure entertainment. Too bad your not selling subscriptions, Garth, because you have B.C.-level media hype down pat.
“Calgary Rocks”
Dude. I dont drive ambulance. Already said that MANY TIMES.
So you support people that are responsible for saving people during heart attacks to leave the province? Id gladly do that, but unfortunately, like there arent many jobs in Quebec, the same is for B.C.
You think Im whining? So you like Calgary’s traffic, plastic people and rip off properties? You are just like the enema, waiting to be evacuated.
Save your pathetic sob story of how great Calgary is for someone who cares. Or, join the pimps at the Herald where all the garbage comes from.
:)
# 99
I totally agree with your assumption. T.O is full of BS these days! If you are making less than 60k, and you are young, for some groups it seems that you’re afraid to admit it, as you would be labeled a loser…
I think realtors may be behind this, pushing this high income misnomer as the normal median income.
Get 5 to 50 acres where you can grow your own food.
Build a cabin, get entirely off grid. Drill a well.
Store food and medicine.
Get some guns and ammo and get ready for the collapse of the economy and society. And while you’re waiting for the collaspe you might as well rent a condo in Thornhill.
Keep your money in cash and barterable goods.
Hire some body guards.
Good Luck
Arnie. You obviously are not a dummy to get to the point you’re at. What’s the big dilemna? Do the math, compare the costs of renting to buying. Make the final choice based on what will make you happy within your means. Nobody here can predict the future, so stop passing the buck and live your own life.
Oh, and get the hell out of your parent’s house. They don’t want you there, even if they claim they do.
Hi Arnie,
Two ways to approach this:
The first calls for you to grow a pair and do the right thing. You’ve held off buying for four years, so why would you jump into the market while it’s at its highest point, during a recession no less? And if you buy now and sell in three years, as you plan to do, you risk losing a portion of your principle if the market goes belly up. Rent a nice place that will keep the wife happy for three years (and don’t you dare forget any anniversaries, birthdays, valentines, etc. during this period or your life will become a nightmare) and invest your money in a conservative portfolio of fixed-income, equity securities, and cash equivalents that match your low tolerance for risk. Then wait for the market drop and enjoy the stares of amazement your wife will give you the rest of your life.
The second calls for you to give in and buy a house and possibly watch your principle wither along with your cajones.
Good luck (you’ll need it!)
Ditch her, she’s obvious a gold digger.
Oh, and what’s her name? ;)
Do what your future wife wants because you’ll never hear the end of it. I’d say buy a cheaper place with the cash you have saved and live rent or mortgage free. The money you’ll be able to save will make-up for any potential downturn or loses.
I would rent 2 or 3 places for traveling and enjoying. I’m in Mississauga so one here, a condo downtown T.O. and maybe one in L.A. Why tie yourself down to one place?
LINKS FOR GARTH
(Bank of Canada May Raise Rates to combat Real Estate Bubble)
http://www.financialpost.com/story.html?id=2071732
Canadians adding to personal debt at record clip
http://www.theglobeandmail.com/globe-investor/personal-finance/household-credit-defying-gravity/article1313505/
The US had their debt fuelled collapse. Soon we’ll have ours.
Hey man, the wife to be is saying “I don’t want to live with my parents”. Make sure you truly understand her needs. Rent a place you/wife can show off to friends (this is critical)…2-3k/mth sounds about right. :)
This blog and the people who write letters to Garth seem to represent a very small niche of the population: people who earn well over the median income, working in overpaid professions (finance, legal etc) and with more options than most. In general, their best option is so obvious it’s a wonder they managed to get their fancy qualifications in the first place. So, as much as I have little in common with the circumstances of the very the wealthy people who write in, Garth’s writing is entertaining and his perspectives on the economy illuminating.
rent dont buy- put 10% of your savings into physical gold for safety. After gold hits $1200 it will pull back, and the S&P500 will tank hard, thats the time to load up on gold stocks, 2 safer ones i recommend, CPQ and EPZ on the TSX venture exchange, even at todays prices you will get minimum 300% gain on those 2 takeover targets within 18 months. buy some speculative gold explorers as well, despite having no gold, many will go up 1000%
Dude,
27, 150K per year, 300K cash, trophy fiancée and spitting image of a young Fabio.
If I were you- (in my dreams)
I would buy a huge Lego collection.
Oh wait, There is a huge Lego collection under my bunk bed decked out with Star Wars blankets and a Cabbage Patch Doll wearing matching Hot Wheel’s pajamas.
I would have my mom read me bed time stories after she’s made my favorite meat loaf.
Life would be perfect….
Oh SNAP!! How would I fit that much money in a Bob the Builder piggy bank?
Maybe you should just start smoking crack recreationally.
Next Caller please-
You aren’t currently living together, or even on your own, separately? Here’s my advice:
Run, dude. Run!
Go for an Open Marriage(as opposed to an open mortgage)
What careers are these people doing? 350K in savings with an after tax income of 90K doesn’t add up. Unless he’s earned 150K for many years and saved every penny. How likely is that at 28? There’s more to this occupation than he’s letting on.
I’m going to tell him to just buy a place – who cares about 100K in losses when your doing so well. Suck it up you spoiled baby and next time give us some more deets… this is a sharing forum, not a bragging forum!
#132 Got a Watch: interesting comment. What’s on your recommended reading list?
#129 Jonas: “…And what about the “journalist†that was very quietly dismissed for taking kickbacks from developers for positive RE articles??…”
Care to post a link to the story? I haven’t heard anything about this, but would honestly expect these sort of things to happen more often especially in the current environment.
Arnie, my friend…
Stop bragging long enough to realize that there is a severe recession going on… you seem too wrapped up in your own little world to care about much other than your new bride pushing you to spend the cash you have saved so she can brag to her friends about the granite countertops/stainless steel appliances/soaker tub…
Here’s a novel idea… sit down with your fiance and tell her that buying a place for only three years doesn’t make sense (when you factor in the realtors commission plus closing costs, it really doesn’t…) and ask her to raise her half of the downpayment by living on one salary. Once you both have 350 K each, go knock yourselves silly buying the house of your dreams with a 700k downpayment. In the meantime, rent a nice condo downtown and enjoy yourselves with shopping and restaurants and cultural events and live it up!!!! In three years time, you guys should know where your careers are headed and be better able to make a good decision as to where you want to live and how much you are prepared to spend, based on your lifestyle…
Use common sense and you’ll be much happier and more successful than you ever imagined… You are lucky to be as good a financial shape as you are right now.
Or you can be a greater fool.
Arnie; keep living with your parents but buy them a trailer in Arizona for 20k with airfare, you’ll save tons of cash and for six months of the year you and your wife can have sex on the kitchen table.
R-E-N-T
I’m a 44 year old musician, earn about $20K a year, owe $2500 on my Visa, and have no savings or assets. Should I buy now or wait it out?
Think I’m joking? Unfortunately I’m not. Except for the part about buying of course. :)
Why I even read this blog is beyond me.
P.S. Arnie is a troll. I may be a loser, but at least I’m for real. He’s just a figment of someone’s imagination. :)
Into the Blog room the wealthy young come and go
each eagerly talking of all their dough.
Should I buy? At what rate? Should I spend? Should I rent?
None hears the voice…”Repent, Repent!”
The Blog dog rolls over in his Boomer bloomer..
“I feel cold, I feel so cold.
Did the season turn? Is that my urn?
“Yes, yes, you are growing old, so old.”
Do I dare? Do I dare?
Today do I buy gold for my lair.
Why is everyone posting here so rich?
Why is The Garth such a sour bitch?
He hath no gold. He groweth old.
His talents have been left behind.
By young Harper, now tone blind.
Who on the world stage, at piano pretends
howls about getting high…
With “a little help from his friends”.
With a little help from his polling friends.
I’ve mentioned this before on the effect of lowest interest rates + herd mentality:
“In many ways, we are stealing activity from 2010 and 2011.”
Read more: http://www.financialpost.com/news-sectors/story.html?id=2071527#ixzz0TAznKmP1
This came through amidst of the Australian rate announcement:
The possibility exists that the Bank of Canada may have to break its conditional pledge on interest rates should the housing market continue its red-hot performance, economists at Toronto-Dominion Bank said Tuesday.
Read more: http://www.financialpost.com/story.html?id=2071732#ixzz0TB1KDfSs
This is definitely doable. I have seen people in a certain non-financial industry make this amount. That being said, how did you get 350K in LIQUID assets? Is this after tax or pre-tax?
You are 27 years old, which means that if you started at 18 years old, and doing simple math, you would have had to save 350K/9 -> 38K (assuming rate of return to be zero) per year. That is one heck of a savings rate, especially after tax, and that would imply that you were very disciplined or had amazing luck (especially with the market crash).
Hey,Arnie (not real name ) this blog is not a dick measuring contest .
No one gives a fat rats patootie how much dough you make .
Adequate finances covers the waterfront .
You are either a, very, dim bulb or retarded .
These questions have been answered umpteen times on this blog . Pay attention .
No one cares what you do . Rent,buy blow your was in Vegas .
Catch my drift ?
So the Ausies blinked first and now the stampede starts.
Hot housing market could trigger rate hikes: TD
OTTAWA — The possibility exists that the Bank of Canada may have to break its conditional pledge on interest rates should the housing market continue its red-hot performance, economists at Toronto-Dominion Bank said Tuesday.
“The Bank of Canada will likely be watching developments in Canadian real estate quite closely,†say economists Craig Alexander and Grant Bishop. “If surging existing home sales do not cool, the bank may be inclined to respond.â€
The Bank of Canada, in its effort to revive the economy, has pledged to keep its policy rate at a historic low, 0.25%, until June 2010. This has drawn homebuyers into the housing market, as there is the belief that this will be as good as it will get in terms of borrowing costs.
http://www.canada.com/business/fp/housing+market+could+trigger+rate+hikes/2071732/story.html
I understand that everyone wants free advice, but I think that Arnie can afford to get a financial advisor. Leave it at that.
So errrrrr did I WIN the PRIZES, already?
Eh?
Did I?
KarMON Garth, I gotta know, before I go to sleep!
I THINK I DID win, eh?
THAT’S why you haven’t TOLD me yet!
I am waiting, manana!
There is one job where kids make tonnes of money at a young age that requires no education. I don’t want to post it because there will be tonnes of letters from people that do this. But here it goes Air traffic controllers. But the letter this guy and the other guys sent are bogus. this kid claimed to be studying while amassing his fortune.
So let me write Garth’s next email asking advice. Me and my fiance are both Air traffic Controller in are mid 20’s. We make a combined income of 300K. We bought an apartment building as an investment. It was bought for 800k and it is now worth 1.2million. We have read your blog for years and are not investment savvy. Given your prognosis on the housing market do you think multi unit suites will also crash in price too. I am so worried about what to do. Please Garth give me advice.
Hi Arnie,
In all seriousness, my advice is to stay in your parents’ basement.
If you are earning $150,000 and you are unable to answer your own question, you will inevitably be an easy lay-off target to your employer.
#106 Paul
“Gold at record high this am and house prices at record high….I’m beginning to question Garth’s logic”
Gold is a tough one to figure out. However houses prices…. come on. How high can prices go? Easy call.
Well……what a waste of good advice and valuable time.
Excuse me but …could we discuss some REAL LIFE housing choices that the average person or even so called lower class Canadians face in this economy ….. who find themselves living on …. oh pick a number, say …. $20,000 to $30,000 a year! Oh, and no partner with a second income either. Oh, and no parents to live with or inheritance to bail them out. Maybe savings of $100,000 or so……..maybe! Can you help them out here? Should they like ….buy or rent??
This is so like ….stupid!!
Wow Garth I know you are sick of explaining how the bond market will in the end raise rates, but it seems like now the housing bubble is so bad and messed up that greater fools themselves could be the reason that interest rates go up…
“The Bank of Canada’s conditional commitment not to raise rates until the middle of next year hinges on a well-behaved housing market, Toronto-Dominion Bank economists Craig Alexander and Grant Bishop wrote in a report published Tuesday.
The key risk for tighter monetary policy is not an unexpected jump in consumer prices, but excessive strength in real estate prices, they argue.”
http://www.theglobeandmail.com/globe-investor/personal-finance/household-credit-defying-gravity/article1313505/
Exactly. An asset bubble of the BoC’s own creating proves the path we are on. — Garth
didnt see this comin’.
Workers, employers to face large EI premium hikes to balance budget: report
They are gonna scalp our asses every which way to sunday.
http://ca.news.yahoo.com/s/capress/091006/national/ei_premiums_hike
And GOLD hits $1,038.75 at the time of this writing.
Garth, we know your opinion on GOLD and we know your forecast on the probable future of housing and I agree with you. BUT… there is no logic in human behaviour and when things go bad economically people seek a currency which has no liability an no boarders… That’d be GOLD.
I see good reason to believe GOLD will break $1,300.00US per ounce with the CDN dollar having then achieved par. The CDN dollar at par is going to bring forward it’s own problems but that will not affect the accent of GOLD as that will be a flight from Fiat Currency to something “perceived†more secure. Just as “Bricks and Mortar†after the Dot-Com crash and ensuing cheap money policies.
No logic just history repeating itself through a different medium.
“Arnie”, why don’t you take your parents and fiance on a one month Mediterranean cruise and be sure to step off the boat and check out the locals at each port. Some may even invite you to their home for some wine and appetizers. You’d see that they don’t have much but what they do have they’ll offer it to you with pleasure and want to hear how life is over here. Soon you’ll realize that they seem happier than most people you know and wonder why they are so interested in life in Canada, but interested very little with money.
But make sure your “friends” don’t catch wind of this trip because that will tip them off as to how much money you have. You see, that is also why a Mediterranean cruise is just what you need while you think about your decision and that is because you won’t have to worry about “friends” getting jealous over your money because the Spaniards, Greeks and Italians you meet will assume you have lots but could care less.
Hi Garth,
Rather than provide “Arnie” with any advice, I’ll make you an offer:
I’ll buy your books. Really. I’ll actually take the time to read them, understand them and learn from them, and only email you if there’s something that I honestly feel requires a little more clarity.
In return, you promise not to torture us with tales of rich kids living in their parent’s basement, attempting to placate their future in-laws, hiding their net worth from friends, and looking for free housing/investment advice. Instead, you simply delete their emails, possibly saving us all being driven to poke our own eyes out with a spoon.
Deal?
#137 kc on 10.06.09 at 10:51 am
If Can West would have ever actually printed news instead of spin, they wouldn’t be in the mess they are today. Canada will be much better off without Can Wests propaganda and non reporting of real stories of merit. I have absolutely no sympathy for their demise.
DA #142
Rule #1 at The Greater Fool Club: Never tell Garth Gold is money.
Rule #2 at The Greater Fool Club: Reread rule #1.
129 Jonas and kc
you are correct watch out for those lbo private equity which loads em up with debt collects their 2 and 20 and or special dividends and then walk….do you remember the bond crash of 1994?
.#86 frank pasquale thanks for the reset!!!!
The global clock of reality goes forward as the greedy ,self motivated try to cover their asses with some golden cloth.
Hi Garth.
Here’s the latest on why buying a shack in Calgary is not all great as some of the “pro” Calgary posters have decided.
The zoning for a $400K property doesnt give you enough space between you and your neighbor, so you cant raise animals.
http://www.calgaryherald.com/Woman+fights+right+raise+chickens/2072391/story.html#
Why bother paying $400K for a detached house if you cant do what you want on it? What’s the point of owning in Calgary? So the bylaw officer and the neighbors can tell you when and where to wipe?
The market is about to recover! We missed out! Now we are priced out forever!
http://www.theglobeandmail.com/globe-investor/real-estate-markets-on-the-mend/article1307997/
After briefly getting a feeling for the article peruse the comments for a giggle. I wonder how long the Globe can continue to publish articles, have absolutely no one believe them, and continue in business. I predict they will be joining Canwest shortly. It’s justice. They have been lying to us for years, so now that we know, we should stop buying their papers and watching their shows.
Arnie –
Most of the blog dogs here would probably like to shred you to pieces (and some have)- some of them undoubtedly will say that you have been freeloading off of mum and pop for far to long and that before considering marriage you should really spend some time on your own navigating the world without any assistance. I’m going to refrain from accusing you of being a parental lamprey, as it has likely been a situation of mutual convenience, with your parents enjoying your company and their continued involvement in your life and you enjoying the low-cost of living over the past 9 years since finishing high-school. Your living circumstance to date has been a mutual choice and your parents are equally responsible for its length of tenure. That being said, my first piece of advice is to truly thank your parents in some significant and meaningful way and don’t be afraid of spending some dough to do so! Because of your parents, your savings are about $202,000 more (not including the earned interest) than they would have been otherwise including the parental gifts of food and accommodation ($18,000 per year for 9 years = $162,000), probably a car ($10,000), and probably 6 or more years of education ($30,000). In deed if it weren’t for the folks, your letter would read that you are 27 with $148,000 in savings, which most of the blog dogs could agree is possible with some diligence.
On the rent vs. own question, given that you’d be giving up any first time buyer advantages, the exposure to asset depreciation (even a modest $450,000 place going down 15% over the next 3 years would cost you $67,500), the commission costs ($20,000), property transfer taxes, property taxes, maintenance, etc., you are almost certainly better off to rent, even at $2,000 per month ($72,000) over the next three years. You could even go a little higher and still come out ahead.
My next piece of advice is to have a sit down with your sweetie and lay out what your lives will be post marriage. Specifically, determine where you are presently at (financially) and your longer term family goals (kids, retirement, place to live, etc.). How much does a house that can accommodate your long-run needs (room for you, home office, kids rooms, guest room etc.) cost in the area you want to live in now and what would it cost if property values drop 15% over the next 3 years. How long do you want to have a mortgage for, what size of monthly payments are you comfortable with (at 6%) while still meeting your other goals? How does that compare with the house you eventually want to buy and what you will be able to save for a downpayment over the next three years? How big of a financial safety net do you need (I would assume at least 9 months living expenses in an easy to access, liquid format)? How much per month do you see yourselves spending on life (food, entertainment and travel), how much on taxes (taxtips.ca has a handy calculator) and what is left over after taxes for savings. Once you’ve got all the basics together I would then go see a financial expert (ie: accountant) as a couple – to come up with a realistic plan for the next 3 years (particularly given the huge amount of RRSP room you’ve likely accumalated). Also set yourselves up one of those tax free savings account (TFSA) – here again the money grows sheltered from taxes. Any money you may need in the next 3 years should be in fairly low risk investments (Garth has some good suggestions in recent posts). Once the accountant has determined what you should be saving and how – you can know how much you can expect to have left over or what changes you need to make to meet your goals (or conversely change your goals).
Oh and lastly – try to avoid divorce. Figure out what you need as a couple to keep your marriage strong. Don’t get so caught up in making a living that you forget to make a life. Remember that in 90% of cases the wife gets the kids more than 60% of the time, and childsupport at $150k per year will run you $1254 per month for 1 kid, $1992 per month for 2 kids, $2581 per month for 3 kids – AFTER TAX….oh and it will continue until the kiddies are done getting their post-secondary education oh and on top of that you’ll be paying your income proportionate share of ‘extrordinary’ expenses. Maybe write up a quick agreement pre-marriage that you are bringing x$ into the relationship, that you’ll share any gains in equity 50/50 after the marriage, and that the starting place for custody and care will be 50/50 (one week on, one week off)….here again the advice given is worth what you have paid for it…go see a lawyer (maybe as a couple, and get your wills done at the same time).
Best of luck.
We’re talking about the pros and cons about buying real estate in the current high cycle and someone recommends buying gold. Same high cycle for gold. Fools leading fools.
Arnie is most likely a ruse or he could just be the most ridiculous rube ever. Either way I won’t comment.
However the interest rate hike in Australia today and the signal from the TD Bank should give us pause.
Here it comes…
The beginning of the real estate bubble burst in Canada.
watch out !!!!!!!!!!!!!!!the predators are out there pushing these loans
gov. on the hook into the future since they are the insurer. all of them no private banks are into this. If the house doesn’t generate enough to pay back the loan then the gov. has to pay the balance …private market has no risk …. Good grief I hope our GOV. doesn’t do this!!!!!!!!!!!!!
http://www.consumerlaw.org/
Subprime Revisited: How Reverse Mortgage Lenders Put Older Homeowners’ Equity at Risk, Oct. 2009
Report Warns that Reverse Mortgage Market Exposes Seniors and their Equity to Abuses and Abusers from the Subprime Market, Oct. 2009 WARNING IN THE REVERSE MORTGAGE INDUSTRY aggressive and deceptive
same players -predatory secrutization disassociated risk
@ 172 glen o
Hi Arnie,
In all seriousness, my advice is to stay in your parents’ basement.
If you are earning $150,000 and you are unable to answer your own question, you will inevitably be an easy lay-off target to your employer.
Not if the employer is daddy or a friend of daddy’s who owes him big time.
People are forgetting, when going on about how rare it is for kids in their twenties to make over six figures, that such kids are often beneficiaries of nepotism.
Being well-connected can easily take one several rungs up the career ladder fresh out of school. You don’t have to be smart in Canada if you have parents or ‘family friends’ who can hook you up.
As for ‘savings’ they could very well have come from grandma or grandpa and they just didn’t spend it. I’ve known several people in their 20s who’ve been the recipients of such largesse.
But I do question the sanity of parents who aren’t willing to cut the umbilical cord and as one earlier poster pointed out, the kid can’t even make a ‘no-brainer’ decision, preferring to pass the buck where possible (if I buy at the wrong time it’s because of pressure from the wife, etc.).
I mean, did parents like these keep their kids in strollers until they were ten? Were they ever allowed to play sports or ride a bike?
What will happen to a kid like this when he has kids himself and has to be the grownup finally?
I find this strange. As someone who is just a bit older and also makes six figures and have a six figure net worth, these days I’m looking for a good financial planner, not advice on the Internet.
Somehow I think the wifey will get her way and he’ll cave and buy a house, never underestimate a woman’s nesting instinct.
Arnie, if nothing else you’ve given some of us the opportunity to either vent some spleen, or get creative with our advice for you!
Firstly, I have no problem believing that a 27 year old is earning $150.00 a year. One of my sons is just a bit older than you, and is earning considerably more…offshore, tax-free.
Consider the suggestions here that you would be wise to delay buying that house at this time.
If you rent a ritzy apartment for a couple of years, you’ll be able to concentrate on your profession, and you’ll free up precious time to enjoy your new married life. Just think, no house repairs, no outside chores,
no nagging repairs, insurance, taxes, etc.,
These could be some of the best years of your life together, you’ll be free to travel without worrying about leaving an empty house, and meantime your bank accounts will continue to grow.
You’re getting some good advice from older and (sometimes!) wiser heads. Delaying this huge purchase could mean huge savings down the road….when in doubt, no nought!
Arnie, if nothing else you’ve given some of us the opportunity to either vent some spleen, or get creative with our advice for you!
Firstly, I have no problem believing that a 27 year old is earning $150.00 a year. One of my sons is just a bit older than you, and is earning considerably more…offshore, tax-free.
Consider the suggestions here that you would be wise to delay buying that house at this time.
If you rent a ritzy apartment for a couple of years, you’ll be able to concentrate on your profession, and you’ll free up precious time to enjoy your new married life. Just think, no house repairs, no outside chores,
no nagging repairs, insurance, taxes, etc.,
These could be some of the best years of your life together, you’ll be free to travel without worrying about leaving an empty house, and meantime your bank accounts will continue to grow.
You’re getting some good advice from older and (sometimes!) wiser heads. Delaying this huge purchase could mean huge savings down the road….when in doubt, do nought!
Garth,
You answer the guy. – call them and they will come :-) Close to 200 advices so far. Keep it up!
Arnie or whatever your name is,
We are both 27 years old – Did I tell you that with your valuable ‘knowledge’ you can get a fresher one? It doesn’t matter much now, but it will, later… just ask your father.
please not use my real name as some of my friends frequent your blog and I’d rather not have them know my financial situation – Definitely you don’t know what ‘friend’ means, and this is even more touching than not understanding why your sweetheart wants to have a house with you.
We live with our parents. Getting married in about 10 months so I’ll need to live somewhere before then. So what you tell us is that you decided you’re perfect for each other without sharing the same bathroom, bedroom and breakfast? Not good! It’s just like launching a new product without stress testing it. Love is in the air, money too, yuhuuu!
Got milk?
#175 The Great Gazoo
Seems like a lot of people found this article today.
But anyway, I’d just like to make a quick prognostication that news like this will actually further the frenzy and drive real estate even higher! If there’s one thing that herds of sheep do well; it is panic. Real estate agents and mortgage brokers bronze this new bit of news and spin it with the proverbial line:
You’ll have to buy now!! The interest rates will be rising!!!
Not to mention:
HST is coming!!! ALL HOME PRICES WILL RISE!! (the general public will just assume that HST will add 8% on resale homes as well. i dont know how many times i’ve had people mention that as some big factor in home resales when its not)
And we all know how long it takes for the feds to actually come up with a decision so I’d say that the peak of the market will be in the April March time period.
This is the period where new home owners will be sitting in their recently acquired home with lawn furniture in their living rooms, dwiddling their thumbs waiting for the prices to skyrocket. As months go by they’ll see home demand/price drop precipitously while taxes, gas costs, food costs, unemployment goes up up up.
#185 ..Dear Abby y y…whoops! I get so carried away……I thought it was her…. come back again!
Soju talking about the high cycle for gold.
Give yer head a shake.
We don’t even have the lessor fools in the gold game yet
never mind the greater fools.
Do better research before commenting next time. You’re comments are flippant and glib.
180 Daystar on 10.06.09 at 3:00 pm
full heartedly agree with you !!!! M$M has sold out years ago… they just parrot what they are told to parrot.
Arnie
You are 27, make $300k a year and live with your parents….do the math. You shouldn’t typically spend more than 30 to 35% of your income on housing so as long as you are ok to take a huge loss when the housing market crashes, by all means, by a house – and make your fiance pay for it if she wants it that badly. I think the real question is how your parents can justify having you live with them when you make $150k a year. Greater fool indeed.
I have to agree with you here Jeannie. There are lots of young people out there who are now making very decent income. My cousins is in his early 30s and pulls in close to $150K when he got his bonus, he works for one of the Canadian banks. Another cousin from that same family pulls in roughly $100K. They aren’t all that brighter than me academically, just that they are in the right industry. They both have business degrees.
I have to almost hide myself under the table when we have a family get together and the topic of salary comes up as I am too embarrassed to discuss my salary. I think the trend is that there are those who are making humongous salary while the other half struggle from day to day.
Better get used to it. When I see these letters Garth are printing, it didn’t surprise me even a bit. And do
#191 Jeannie on 10.06.09 at 3:58 pm
Arnie, if nothing else you’ve given some of us the opportunity to either vent some spleen, or get creative with our advice for you!
Firstly, I have no problem believing that a 27 year old is earning $150.00 a year. One of my sons is just a bit older than you, and is earning considerably more…offshore, tax-free.
Re 106,
Yes you are right and I appreciate the site.
182 jess…. what about raiding the pension funds? It is all a racket, some times they win others times they still win, however, it is a win on the backs of the people who made them who they are…. my guess… anyone who has retired and draws a pension is in trouble…. the 90’s were full of these take overs and raids of corporations. I am talking state side, however, it is still the same game here under different “shells”
How can you earn 150,000$ each and between the two of you not be smart enough to figure out what to do with the giant pile of money you are sitting on.
Listen fella – don’t buy the house. You will put your 350 in the house, she will throw you out in 3 years and try to keep the damn house.
HAHAHAHAHA
Put your foot down and tell her as long as youre wearing the pants in the family, there will be no house.
With this strategy you with get to test the strength of the marriage before getting hitched.
HAHAHAHAH
garth has said in the past to rent anything that will depreciate in value. since you are looking at having this house for 3 years and the market may sour then renting makes the most sense. Put your money in a afe ivestment where you can get 6-8%. after 3 years use that money for a down payment and buy a home.
Arnie, if you read this blog on a regular basis you know what the answer should be without even asking. But obviously your in this predicament for a reason. Your fiance wouldn’t be making the demands from you if you hadn’t made her have sex with you in your parents basement for years. For god sakes learn about some romance. There is more to life than money.
Let’s see,
27 yrs old, live with mama and papa and so does she.
Just give her half your money now and save yourself a lot of grief. Then with the cushion you have get out there and see if you can make anything of yourself on your own, that is if the folks will let you. Check her out in a few years and if your still hot for her good for you.
This is such a disappointing blog topic. After being a faithful reader for many months I’m so blown away by this silliness that i had to post.
Give me a break. There is no doubt this is a false post that should have been screened. Do you think we are stupid?
Nothing false about it. — Garth
Dear Arnie, Part #2…
Before u follow my advice of getting a Prenup…for scientific purposes, would you kindly post a pic of the future happy couple.
…Since a picture speaks a 1000 words I’m confidant the pic of you two will easily convince everyone here you wont be needing that prenup agreement.
Nostradamus jr.
The case is People v. Raymond Harding, 09-04271, New York State Supreme Court (Manhattan).
Placement agents for the well connected
these fee assembly lines should have been shut down and left the more productive side of the economy left WORKING.
“This is a fatally flawed system and it is a corrupted system,†Cuomo said in a teleconference, adding that the abuses have gone on for 30 years under a number of controllers. “The old adage is, ‘Follow the money.’ If you’re looking for corruption, follow the money. It will lead you to the New York state Comptroller’s office.â€
http://www.bloomberg.com/apps/news?pid=20601109&sid=al99TfVXwmNI
#13 Asad on 10.05.09 at 10:32 pm
Smart man!!
I hope they take your advice because the second round and foreclosures and the bubble in commercial real estate is in the near future in America. Canada is just experiencing a short term suckers’ bounce caused by a sucker’s bounce rally in the stock markets. When things get back to normal and the stock markets drop another two thirds then you’ll see the true implosion of the Canadian real estate market.
Financial panic heads up… just 6 of thousands of articles. Your mileage may vary.
1
2
3
4
And a couple of links for those into metaphysical financial predictions:
5
6
And of course gold broke through the $1000 resistance level today for good at $1045 USD.
And this is just a handful of thousands of similar articles. Got this group off a Victoria real estate blog.
#171 Ted the “controller”. Hope I’m not on any flight you “folks” are talking down. http://www.catca.ca/coll_agree/coll_agree_appe.html
is a link to the current collective agreement. Lucrative but certainly not going to have any mid 20’s ATC’s with 7 years experience and max grade. Clearly tongue in cheek :>). On the other hand, a lot of priceless forest land here in BC has been trashed by illiterate hockey players with too much cash and too few scruples. eg.. http://www.nationalpost.com/news/canada/story.html?id=2061530
Canada, the land where high school dropouts can skate their way into urban planning. Gotta love it..
Baby Boomer lifestyles “are coming home to roost” as defaults on credit payments rise,says credit information provider Veda Advantage.
Boomer credit defaults rose by almost 20 per cent in September from the same month a year ago, while overall defaults were up by less than 7 per cent.
Credit defaults by those aged between 44 and 62 were up 19.4 per cent from September 2008, while defaults by Generation X (aged 28-42) rose 3.6 per cent and Generation Y (under 28) defaults fell 2.3 per cent in September, Veda said.
“The statistics show the lifestyles of the Baby Boomers are coming home to roost – they are defaulting on debts mounted up over the years which they can now no longer service – the recession has seen many Baby Boomers lose their jobs while others have had their wealth eroded,” Veda Managing Director John Roberts said.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10601798
Garth, this is truly a stupid thing to even comment on. Here were are, in the middle of a recession with people losing their jobs….and this clown wants advice?
300K houshold income? 350K liquid assets? 27 years old?
What on earth is he worried about anyway? Why on earth do you care? Why on earth do we care? In fact….this young punk should be ashamed. Go pay for some finincial advice nitwit. I think you can afford it( that’s my advice by the way)
YA…I’ve got some advice for this guy…( eyes rolling).
Anyway, it seems all the “question” you post on here are unbelievable situations.
How about posting some questions from real families…with real( normal) houshold incomes….with kids to provide for….who don’t blood suck off their parents…who can’t afford to save 20K + per year….
Geesh…
hey arnie, wanna go a cup of coffee sometime? if it works out, i promise not to pressure you to buy a place (at least not until a correction happens :P) i’m 26 and 5’6 and 120lbs and while we’re waiting for the crash to happen, you can give me access to your money and ill put them in various ventures and investments to make some more money, and then we’ll hit up the mcmansions ! win-win!!
i have no problem with you living with your parents, as long as i don’t have to see you on friday and saturday nights.
Holla!
Just keeps getting better and better…
From Business Week, no less:
End of the US Petrodollar by 2018
And read what the Chinese propose as the “interim” currency, Garth. 6th paragraph.
213.robert i have no problems with hockey players making that money. It really is the people who pay too much for hockey seats that are to blame. I have more of a problem with unionised jobs like ATC’s who operate outside of the free market. Anyways its funny watch that you mentioned hockey players the next post will be from a couple one hockey player the other a female figure skater who don’t know how to invest their millions.
Garth you got to screen these better. Yes their are rich people out there but they are not trolling this blog.
She starts at 150K ……
Yeah right.
Hey let’s make a deal. First you tell us how to get a job that pays $150k per year for a 20something. Then we will give you some useful advise.
I feel so inadequate compared to this guys financial situation. Here’s my 2 cents to invest with:
1) rent and I would rent a house. When it comes time to buy in a couple years (when the market is more realistic) then you’ll have a better idea of what you want from a home as well.
2) Invest and let the money grow for an even bigger down payment. How sweet would it be to have no mortgage at all? Keep your eye on that prize buddy.
3) Get a vasectomy. If you want kids later, well, Im sure you can rent them too. You’ll be loaded, probably zero debt, a nice house, and cash to enjoy life. Man, the world is your oyster.
cheers!
Arnie, Arnie, Arnie… R U Nuts ?
Keeping things constant, lets assume a monthly mortgage payment of $2000 just to keep external factors equal to renting.
Buying, using the current 3 year fixed rate of 4.45% and $2000 a month in payment and a maximum downpayment of $350,000 on a $450,000 home ($100,000 financed), at the end of three years you would have an additional $57,000 in equity (assuming the home retains it value).
So you would have $407,000 in equity… but you must deduct other costs of ownership. The realtors commission on the sale would be $20,000… initial closing costs and taxes over the three years would probably be another $10,000. So, you’re initial $350,000 would be worth about $377,000, again, assuming the home retains it’s value.
Now figure renting, again for $2000. Lets assume all utilities are the same as owning for the sake of simplicity. At the end of three years you will have no equity, but you will have earnings off your current $350,000… figuring in even a very conservative 3% compounded annually, you would have over $382,000 after three years that way… about $394,000 at 4%… or $405,000 at 5%.
Even earning a measly 3% on your money you’d be better off renting then buying… and avoid the risk of the market tanking.
Is this guy for real? Is he bragging or complaining? If he were to ask what to do, I’d say you are asking the wrong person.
Re 6
….”Also put $250k on the Leafs to win Lord Stanley’s cup”
Winner winner chicken dinner.
Its funny though so many people advising diligently to a guy who probably does not need any advise and just kidding on this blog.
Re: Arnie’s question, my answer:
Rent a townhome for three years. When RE is close to a 35-50% drop (based on Vancouver and Toronto prices), then look at buying a nice, two-or three-year-old home (no GST) and set up a RRSP-type mortgage (Garth has details) and enjoy life.
Might as well get the most bang for your buck.
Volunteer doing something for those less fortunate (homeless shelter, hospice, foodbank…). Come home to your wife and tell her you love her…
You answer the guy. The response I most wish had been mine will be rewarded with a couple of my books. Signed. Priceless.
Garth, who gets the reward you offered?
Garth, PLS STOP bringing these CORPORATE HIGH LEVEL CORPSES to your site…I really do not like how ARROGANT they are and seriously, they are just a bunch of selfish fresh grads who is making GREAT DEAL of MONEY (Sucks out from each and everyone of us ) who wants to buy luxury homes (to show off to their friends how great he/she did), get tips from everyone of us (free advices) and take advantage of us all (loading up cheap so they can make more money and selfishly pursuing his/her retirement dream)… If you all are that rich and famous, why WAIT ? Just buy it and pay it off in 3-5 years and thats it…Take those 350K out from the bank (who pays you merely no interest) and shove it into your Mansion !!! With that, your loss would probably be your Waterhouse/Imperial ATM card status….
Buy a big white house. Then paint it orange.
Then buy a manatee or two.
Nothing smacks of class more than orange and marine mammals.
Wow … 231 responses. I wonder who won? :p
Hey Arnie….
With all that extra cash you happen to have laying around…wanna pay some of my bills? Fool…you need a punch.
def not an average joe. shd already know the answer. wonder y asking.
No brainer, never buy if you only plan to live in it for less than five years, the closing costs, fees, and taxes fare outway any appreciation you might recieve. All your payments will go to interest, and will be 20% higher than renting. Manage your risk by renting… keep your cash vested in a long term investement strategy. This bubble has run its course, there will be other opportunitys.
I’d vote for the guy who recommended a manatee…he should get the books.
This is the most ludicrous blog question you have ever posted Garth
My advice is simple to this nitwit:
1. Go get some advice from a well researched financial planner as you can clearly afford it and stop trolling around blogs with dumb, pointless questions.
2. Take the advice from the guy who suggested a manatee….
3. Go visit some workers who have recenly lost their jobs….gain some perspective young man.
I feel great, listed my house last Friday at 5:00 PM and received a non conditional offer above my asking price the next day at 6:00 PM which we accepted and I’m moving out to rent in a smaller city on January 8th. Yippee!!!
Here is my advice for “Arnie”.
Rent a modest place for a reasonable price, save your money, and continue to read Garth’s blogs.
In addition, after you read Garth’s books, also read the book “Boom, Bust and Echo” to understand demographics and how they will change the face of the economy regardless of what happens with financial markets.
Then, you will understand how your patience will pay off in several more years (3 years is not quite long enough) and you will be able to pay CASH out of your savings for your nice house of choice (what’s a mortgage ?…never had one) and your five star motorhome of choice (used car lots will be full of them) and probably even a nice little cottage somewhere, all at well below current market value. This will probably leave you a little bit of remaining liquidity, if you continue your current plan of saving and continue to add to your savings until the other shoe has finished dropping and the dust has settled so that you can see clearly.
You have a once-in-a-lifetime opportunity that most people will never get. You will have huge liquidity in a time when everyone and everything is insolvent. In other words (so George W. Bush types can understand), you will have all the gold, in a time when nobody else has any. Doesn’t that make you King of something ?
So, don’t blow your excellent performance thus far, by laying the whole egg on a crap shoot. The odds are stacked against you, and the HOUSE always wins.
You are young newlyweds, so hunker down and take the new wife to bed and stay there for the next 5 years or so. You have to get all you can before she gets older and gets tired of that stuff, at which point, you can then entertain yourself by buying all the things that nobody else can afford anymore, making everything a fire sale.
At this point in time in your life, the wife will have kicked you out of bed and you will have copious amounts of time to enjoy and maintain your newly acquired auction items, as well as stewing over whether you should bother continuing to work or if your remaining liquidity will carry you through from mid-30’s to retirement.
I wish I had your opportunity, and I know exactly what I would do with it if I could take it from you.
Good luck, grasshopper. Do the right thing, and don’t be fooled.
Do I get the books ?
Dude, you make $150K a year and got $350K in assets, but you can’t figure out if to rent or buy a place?
This is the simplest of financial calculations.
What do you do?