Too often people on this site accuse me of having a hate on for real estate. You should tell my wife (who once read this blog and was appalled. At me.). She knows better, and doesn’t mind. It’s my mistress.

In fact, the most recent property I sold was last week. Multiple bids. Over asking. No conditions. The next property I’m buying closes in eight weeks. And it won’t be the last this year. By the way, I sold a residential unit and am buying a commercial one. This is progress.

Why I’d sell is obvious. But why would I buy given my dark outlook for house values? For starters, because I didn’t buy a house, and wouldn’t consider it. The marketplace is w-a-y too emotional right now, populated with greedy, uninformed vendors, wet-eared speculators posing as investors, ravenous realtors, and hormonal buyers doped up on credit crack. A year from now, everything will be different.

Second, as eroded as conditions will get later, there are lots of depressed markets and distressed sellers right now. You might be amazed at the power-of-sale deals in, say, the GTA over the past four months. In the Okanagan and Fraser Valley, London and Halifax, properties change hands every day at substantially below list. And some weeks ago I gave you listings of income-generating multi-unit residential buildings in a few Ontario centres with affordable prices and plump cash flow.

And a tidal wave of opportunity is about to wash over us. All you need to play is cash.

Our world is breaking into two pieces. On one hand we have legions of quasi-bankrupt families owning billions in real estate, all mortgaged, and on the other a swelling group of people who prefer liquidity and eschew debt.

Jeez, the latest Conference Board numbers spell this out with alacrity. The poorer are a little better off. The wealthy are making out. The middle’s dying. Dig this: Between 1976 and 2009 the median income in Canada rose an imperceptible 5.5% – from $45,800 to just $48,300. Yikes. This isn’t exactly the picture of middle-class nirvana.

And yet during that time, home ownership levels rose to their highest point in history. House prices ascended to unprecedented levels. All because of an explosion not in income, but in debt.

The Conference Board also says this: Between 1976 and 2009 the earnings gap between the lowest 20 per cent and the top 20 per cent of Canadians grew from $92,300 to $117,500. That’s right. Up 20%. Why? Because people who actually have wealth don’t make a habit of buying stuff they can’t afford and must borrow to pay for. A far higher percentage of their net worth is invested in liquid assets which pay them, not in illiquid ones sucking cash flow.

So a basic premise of mine is that real estate bargains will be everywhere before you know it, once it becomes clear this asset class is stalled. But most people will be in no position to buy, given a tough economy, swampy incomes, rising rates, debt overload and the simple fact they don’t have cash.

As I said, it’s already happening. I’m lovin’ it.

Now, I promised this California babe I’d give her some advice. You go first:

Hi Garth,

I recently found your website and you dole out wise advice. My husband and I are relocating back to Toronto from the equally expensive city of Los Angeles where we never quite managed to buy a house. Yes, despite the recession and free-fall in the housing market, the prices here in Venice Beach still are high after 5 years. So we have not bought as the price to income ratio still has not hit the 33% mark. Our combined income is $160K.

I’ve been checking the RE and rental markets in Toronto and to rent a nice 2 BR, 2 bath condo in downtown would run around $1800 to $2100. We currently own a mortgage free 1200 sq. ft house in the city which needs remodeling and which is rented out for $1600/month, less 10% management fees. The house is detached 2-storey in the St. Clair/Oakwood area and is probably worth around $300k. I am not so keen to live in the house as it is old and needs work but renting a place of similar size would run around $2500 or more.

My dilemma is whether to sell now and rent (while prices are still high), to hold and collect income and rent a nice place for ourselves, move back into old house but be rent-free, or to sell, rent and then wait for big drop and then buy a nicer, renovated place later? Unfortunately, like most of the herd, I’ve been brainwashed to feel the need to own a house. Selling now before the predicted crash makes me worry that we will be “house-less”. We could move back into house and try to save $200k or more to fix and renovate in 4-5 years (I would like to live in a nice, non knob & tube, open concept house). What advice would you give? Please try not to berate me for my “herd mentality”! My biggest fear is to “house-less”. *sigh*

Confused & indecisive

Dear C&I, time for group therapy. You have come to the touchiest and feelyest collection of oversexed real estate addicts on the continent. Let’s hear what they have to say…


#1 Love this Blog on 07.14.11 at 9:04 pm

People are catching on??–canadian-spending-habits-changing

#2 Into the Sunset on 07.14.11 at 9:07 pm

Sell, invest the proceeds, rent what you really need, not what you want, save and invest in the time honoured diversification that is gospel to survive……….repeat the above !
Look for what you “want” in 2-3 years and you will be able to low ball and purchase, live happy, and still have a great deal invested.

#3 Dave on 07.14.11 at 9:08 pm

Come to Windsor where house values are low but the city taxes are some of the highest in Canada!

King Eddie Francis (mayor of Windsor) is really screwing things up bad here.

The coming depression is on its way.

#4 ballingsford on 07.14.11 at 9:09 pm

Confused and Indecisive,

Get the hell out and find a rental. The shack you describe that you own should probably be demolished. Sell it to one of the last greater fools.

They will not inherit the earth!

#5 Sheila on 07.14.11 at 9:11 pm

You don’t like the house, so I’d sell it now while you can still get top dollar for it. Rent until you find a place you’d like to buy …..could be this year or 5 years from now….you’ll know when the time is right and the location appeals.

#6 Alex on 07.14.11 at 9:15 pm

I am now “house-less.” For the previous 13 years, I was an owner.

It took me maybe a half year to mentally unload the ownership craving. It felt dark at first. Then a bit darker. Then BLAMMO…no regrets, no craving. No repairs, no renos, no property taxes, no purchase tax, no realtor blood money. Only the happy knowledge that once the real estate bubble deflation that’s already gripping much of this country sinks its icy tentacles into the major population centers, I won’t be hit.

#7 Smoking Man on 07.14.11 at 9:15 pm

St. Clair/Oakwood Hum?


#8 Fort McSwain on 07.14.11 at 9:15 pm

things first…
I want to thank Garth for this site. It’s a good day when I can get a laugh and some insight and the occasional grammar lesson.
Blog dawgs keep up the good work!
Congrats to me are in order- Wifey and I are selling our house in Ft. McMurray and moving back to the Fraser Valley in B.C. That is great in itself but she has seen the light that brightens my day and has agreed NOT to buy a house right away.
Yes, we will join the 30%, the lowly renters.
Is the term vulch or vultch?
Anyway, we are going to invest and watch and you better believe I’ll be reading this blog.
Thanks all.

#9 Scalgary on 07.14.11 at 9:20 pm


Sell high buy low…!

There is no meaning of holding beaten up property, as you are responsible for fixing stuffs…

Hope you keep yourself liquid for being a smart ‘vulture’ soon…


#10 Devore on 07.14.11 at 9:22 pm

What’s wrong with the “old” house? Someone lives there, so presumably it’s not a death trap. Is it not good enough for you? Kick the renter out, clean up, move in, renovate the place from all the money you’re saving living rent- and mortgage-free.

#11 be still, my beating heart!!! on 07.14.11 at 9:23 pm

could it be that I lucked out and am first?????

Did I really beat Hoof Hearted?

Wow that would be amazing!

#12 Greg on 07.14.11 at 9:23 pm

What I’ve learned from Garth is that you should:
1. Sell
2. Rent
3. Buy when prices come down, but only if you can afford it and it makes financial sense to own again.

#13 vatodeth on 07.14.11 at 9:23 pm

Sell the house! It’s old and will drain you of cash, regardless of what the tenants are paying!


Cash out high, while you still can! Take the $300k and invest it! Get an investor if you need to! ETF’s and bonds are what Garth is preaching these days.


Live for free on the investments and sock away as much as you can. It may be years before you invest in Real Estate. It will be a poor investment for years to come, so maximize your revenue elsewhere for the next 3-5 years.


When the time is right and you still want to consider RE, then buy a multi-tenant complex for the long haul. This could be your retirement income and something to give to your kids….



#14 Love this Blog on 07.14.11 at 9:24 pm

I hate to say this, but based on my above post, I AM, unintentionally, first!

#15 Hi Rez Jack on 07.14.11 at 9:24 pm

” House prices ascended to unprecedented levels. All because of an explosion not in income, but in debt.”

Nice and succinct.

#16 rosie on 07.14.11 at 9:26 pm

Sell and wait.

#17 TaxHaven on 07.14.11 at 9:28 pm

$160K a year?? This woman should OWN L.A. by now. WTH to they do with their money?

How about questions from more normal people – debt-free (renting?) couples in the 60-90K per year range? Or are they NOT normal?

“…people who actually have wealth don’t make a habit of buying stuff they can’t afford and must borrow to pay for. A far higher percentage of their net worth is invested in liquid assets which pay them, not in illiquid ones sucking cash flow.”

That would be my gold…

#18 Jon B on 07.14.11 at 9:37 pm

Great post GT. The comment about a coming split among the general population is very interesting. Could a group of debt-free people and another of indebted individuals redefine the middle class or even the class system altogether? I think this theory deserves its own blog post.

#19 Timing is Everything on 07.14.11 at 9:39 pm

#18 Timing is Everything

Not 20%…Should read $117,500 not $177,500 (I don’t know the percentage. You figure it out.)

#20 mid-Ontario on 07.14.11 at 9:40 pm

Keep the old house.
Adjust to living upstairs.

Fortify the basement.
Fill the fortifications with PM’s.

Sleep well knowing that your assets are very liquid and will rise with folly of the banks and politicians.

The dream we all live in is changing big time and not for the better. It has started.

Best advice that you will read tonight.

#21 Patz on 07.14.11 at 9:42 pm

Well that is a hard one. Let me see, sell the paid for house. for argument’s sake you clear $300K (doubtful now but go with it). Invested at 8% you’ll be making $24,000/year. With your income of $160K/year you can easily afford the nice condo at $2100/mo or $25,200/year. Hell, you should be able to even put a little of the remainder away as well.

Then buy back in after the drop. But there’s the rub. How will you know when prices have fully corrected or hit bottom? You won’t of course but from the sounds of what you say, you will probably buy too early. Or you may see the carnage around you and rethink home ownership–Nah!

BTW, the great majority of Canadians would kill to have your problems.

#22 Sleepless in Sycamouse on 07.14.11 at 9:45 pm

One additional thing to consider if you’re thinking of moving in:

Big Tax Hit

If you purchased the house for $200,000, rented it to someone for 5 years, and then moved into it, if the place is currently worth $300,000, then you likely will have to pay capital gains tax on the gain of $100,000 just by moving in.

While you’d have to pay the same amount of tax by selling it, when you switch from a rental to a residence, since the “purpose” of the property changes, you still have to pay out the tax hit, even though no transaction is taking place.

Good luck :)

#23 UD on 07.14.11 at 9:47 pm

Sell and rent and enjoy life without the worry of house ownership. High taxes, maintenance,grass cutting and snow removal.300k invested in bank preferred shares gives +6% return or 18,000 per year which pays your rent. So says we over sexed blog dogs.

#24 squidly77 on 07.14.11 at 9:48 pm

#8 Fort McSwain

Thats not an easy market to sell into, you need a greater fool.

#25 Willa on 07.14.11 at 9:49 pm

I’d say sell — because you don’t like the house anyway. If it were a car (or a spouse), you’d get rid of it.

Besides, the revenue from renting out the house won’t cover your condo rent anyway. But the $300K from the sale of the house, if invested at just 5%, would get you the same revenue but without the downside risk.

You didn’t mention a commute. Part of the cost of buying a house is committing hours of your life to sitting in rush-hour traffic. If it’s not in a desirable neighbourhood in a house you like, then why pay for it in hours of your life?

Rent somewhere convenient in the city. There will always be houses for sale. It’s not a good time to buy.

(Okay, Garth, we’re all waiting for you to stick a gold star on one of our foreheads for a good answer. Me? Me? Me?)

#26 sam on 07.14.11 at 9:54 pm


Sell and rent

#27 Lisa on 07.14.11 at 9:54 pm

Sell & cash out while you still can! You know it won’t be worth more next year. Why wait? With old houses, anything expensive can happen at any time.

#28 Joe Q. on 07.14.11 at 9:55 pm

The house is detached 2-storey in the St. Clair/Oakwood area and is probably worth around $300k. I am not so keen to live in the house as it is old and needs work but renting a place of similar size would run around $2500 or more.

I live in the St Clair / Oakwood area and am familiar with the market here. The neighbourhood is not particularly nice (at least north of St Clair), but things are slowly getting better, and due to the lack of listings in the local market, even fixer-upper semis are going for $400k minimum in bidding wars. Unless it is a total dump or on St Clair or Oakwood itself, I have a hard time seeing a detached two-story SFH in this neighbourhood going for less than $450k. This is based on going to lots of open houses and later tracking the sales prices.

I also think that the comments about local rents are overstated. $2,500 is the very top end of the rent scale for this neighbourhood. For that money I would expect four bedrooms, three baths, a finished basement, and parking. You could easily rent a nice three-bedroom on a side-street (even closer to Christie or Bathurst) for $2,000 or less, especially if you’re okay with a place that has a separate basement tenant. Keep looking!

#29 Lisa on 07.14.11 at 9:57 pm

Sell & cash out now while you still can! You know it won’t be worth more next year. Why wait? With old houses, anything expensive can happen at any time.

#30 garrulous squirrel on 07.14.11 at 10:06 pm

Think about buying in Knightsbridge London for 1.5 mill.

At least you get to live in a great area of London though……truly world class.

Has the world gone insane? 1.5 mill for a parking space with a toilet?

#31 nonplused on 07.14.11 at 10:08 pm

I say sell the house and stay in LA. Toronto sucks.

#32 Utopia on 07.14.11 at 10:10 pm

To Devore:

Good comments yesterday. I was biting my tongue (working on being peaceful and easier to get along with). Glad you spoke up and just stated the obvious.

#33 Timing is Everything on 07.14.11 at 10:11 pm

G…Here is the article from the ‘horse’s mouth’

“However, the gap between the real average income of the richest group (the top quintile) of Canadians and the poorest group (the lowest quintile) grew from $92,300 in 1976 to $117,500 in 2009. ”

Mr/Ms Moderator…just turf this if Garth wants. $117,500 is the correct figure.

#34 kimi on 07.14.11 at 10:12 pm

Sell and rent. You hate the house and it needs renovations which will definately make your relationship harder. Rent and invest your money and wait.
While you are waiting indulge yourself in house porn, find exactly where you want to buy, why style you like, furniture you’ll love. Then in a few years you will have your pick of ‘turn key’ houses… already perfect, painted, fresh and new… but best of all, you will have tons of left over money for living life.

Or you could renovate the old house, watch it decrease in value, argue with your husband daily, get extremely stressed, pay more to fix stuff than you orginally though and perhaps ever consider divorce.

Up to you California babe, what shall it be? Bankruptcy of purse, or bankruptcy of life?

#35 kimi on 07.14.11 at 10:15 pm

#22 Willa … You get three Gold Stars … and extra two for the commute part! Good job!

#36 Fort McSwain on 07.14.11 at 10:23 pm

#8 Fort McSwain

Thats not an easy market to sell into, you need a greater fool.

True enough Sqidly
I like to think that Ft mac is a bubble within the greater bubble. Rental prices are ridiculous. Most feel that 4-5k per month is bettter spent on mortgage…

Oh and Confused in Cali:
for what it’s worth, I agree with some others here- sell while you can, if you can. You obviously don’t want to live in the old place and reno’s can be very spendy!

#37 Raj on 07.14.11 at 10:30 pm

Mark Carney we are watching you.

Should the Bank of Canada raise interest rates?

89 % Yes

23 % No

#38 vyw on 07.14.11 at 10:30 pm

St Clair/Oakwood 2 storey detached houses are priced above 400K at this time. Check out

The house is still less than 3X income if Toronto income is the same as LA income.

Best to rent a condo on the subway line – can rent 2 bd condo or 2 bd (house) apt outside of d/t area for $1600.

Then decide on long-term plan – is the move ‘permanent’?

If so, then you can move in and renovate, or sell and buy in a more preferred area/updated home. Maybe sell and buy in the correction as all homes are falling.

If you have the guts, you can re-mortgage the house and invest. The mortgage interest is deductible. But get professional financial advice first.

#39 Randis on 07.14.11 at 10:32 pm

First off, thanks Garth for showing those numbers on income level. Numbers don’t lie and speak itself, people obviously got strucked with some RE frenzy over the last couple of decades and injected themselves with steroid (debt) … Speechless indeed …

As for C&I, please sell now. Sell and invest the proceed to better your net worth. Rent you receive now probably is not enough to cover all the maintenace cost and utilities etc., not to mention its taxable as earned income, hence at whatever your tax rate it.

On the other hand, sell and invest the proceed into something tax efficient can save you tax PLUS generate decent return. As Garth mentioned before, a nice balanced portfolio can easily generate 6%+ income … I believe if you invest into something like corporate class funds, you can save more on tax as well.

In short, yes sell now and invest the proceeds.

#40 cata on 07.14.11 at 10:36 pm


#41 Andrew on 07.14.11 at 10:38 pm

Any house in St. Clair/Oakwood that costs $300K is probably a teardown. That sounds extremely cheap to me by Toronto standards, even in a not-so-desirable neighborhood like that. Sell it and rent a much nicer condo, probably almost as large as the tiny house you’re selling, in a decent neighbourhood. (I tend to recommend neighborhoods slightly north of downtown along the Yonge subway line because they are a bit cheaper than downtown, and much nicer.)

#42 Not 1st on 07.14.11 at 10:40 pm

Garth, this might come as a surprise to you, but many people start out from scratch in this life and few of them have a couple hundred grand laying around after taxes and expenses each year to invest in debt free investments. If people were born that wealthy, they wouldn’t have to worry about investing in anything.

Same goes for debt. People aren’t horny for it or delusional about it, but if you are middle class and want to reach a level of income and assets that would be deemed wealthy, then you have to ladder in and using other people’s money (i.e the banks) is the only way to do it. The average joe can’t get funding for an apartment block or a spot in commercial strip mall because thats business lending and it has a very high standard, so they start with houses and condos which are the easiest to get lending for.

#43 yogi on 07.14.11 at 10:42 pm

I am not sure but I think you can only sell your primary residence tax-free. So, assuming this is true, I would do the following:

1. Kick out the tenants, and move into the old house (not sure how long you have to live in it to be considered “primary residence”)
2. Since you say it looks old, renovate to flip it while you live in it for the prescribed time frame.
3. Find a nice rental
4. Sell in the Spring (hopefully it won’t have crashed by then). I still think the tax hit would be worse – Garth am I wrong here?

#44 Elmer on 07.14.11 at 10:48 pm

Median income in 1976 was NOT 45k, not even close. You need to check your facts better.

Not according to the Conference Board. — Garth

#45 wes_coast on 07.14.11 at 10:50 pm

Garth you make great points on commercial real estate. As we are all learning good ideas can become not so good when leveraged. This may be personal and please feel free to answer in general terms: what would you say is your average down payment vs. Financed portion of these commercial properties or if less personal what would you recommend as a target from your experience in commercial property?

#46 BC Bring Cash on 07.14.11 at 10:54 pm

Check out the decline of the Middle Class American style. In the debt ceiling debate in the US no one in Congress is considering touching the sacred cow of military spending. Cuts to virtually every thing else is on the table. Military spending on endless wars is what the BIG TICKET ITEM is. Check the link below.

#47 JohnnyBravo on 07.14.11 at 11:00 pm

OK, hang on a second.

Topics such as income distribution are hot-button issues, so people should take care to understand the numbers. You can read the Conference Board report here:

So, between “…1976 and 2009 the median income in Canada rose… 5.5% – from $45,800 to… $48,300…” Keep in mind that these figures are in 2009 dollars. This means they are adjusted for inflation. The actual median income in 1976 was not $45,800; it was much, much lower in 1976 dollars.

So, after you factor in inflation, the median income rose 5.5%. This means, in real terms, the median income earner (who ever that person may actually be) makes 5.5% more, in real terms, than he/she did in 1976.

All things being equal, I don’t think this is so bad. For example, if you assume the economy contains a comparable mix of similar high and low-skilled jobs today as it did 1976, the median income earner is farther ahead than their 1976 counterpart.

I have always opined to my wife (who used to be the national compensation manager for a Fortune 500 company) that an employee’s compensation should not rise faster than inflation, unless there is a material change in that person’s duties/responsibilities (e.g promotion, number of staff reports, etc.) that warrants a higher salary. If the employer’s earnings increased markedly, or the employee performed exceptionally well that year, they should get a one-time bonus commensurate with their contribution/performance. That said, an employee’s pay should not fall behind inflation either.

Of course, all things are not equal…

Back to the Conference Board:
The troubling part of the report is the rising inequality. In 1990, the top 20% took home 36.5% of the national, adjusted, after-tax income. In 2000, their share increased to 39.1%, and has remained at about that level until at least 2009.

So, what this means is that the pie is getting bigger for just about everyone, but the richest Canadians are taking a bigger piece than before.

Why are the rich richer?
I was surprised to find the answer was not assets. Check this out: “The phenomenal growth in incomes of the super-rich is not due to the assets they own. …while it is true that historically the super-rich relied mostly on unearned income from assets, “the income of the richest 1 per cent is due mostly to the lavish sums they are paid for the work they do.”

Other reasons? “…national policies that favour the wealthy”, and …”falling top marginal tax rates…”

So, it’s not that the average person is falling behind per se. It’s that the wealthy are pulling ahead at a faster pace, seeing their incomes rise faster, partly because they are paying less tax on a percentage basis.

But, hey, we already knew that.

#48 Chris on 07.14.11 at 11:03 pm

Garth, I have a question that I hope you can answer seriously. Why do you always assume the USA won’t default? I’ve heard you say, “Never bet against uncle Sam”. So why not? The soviets said, never bet against uncle Boris. It didn’t turn out, did it? An entire way of life fell apart for the citizens of numerous nations. So why can’t the same thing happen to the USA? Because it’s different here? Because it would mean the capitalist world fell apart, and that includes most of the wealth most of us own? I’m hoping for a serious reply. Why not? None of this, fiat economy, no way they’ll let it happen babble.

#49 Tim the toolman on 07.14.11 at 11:06 pm

@23, is that $18,000 taxed?

#50 the_apocalyptic_one on 07.14.11 at 11:17 pm

SELL – RENT for as long as you live! Travel, buy a boat or a motorcycle or both! With the amount of oversupply in GTA, you will be able to rent all the stainless and granite you want for as long as you live for a fraction of the cost, and without the headaches. Just go on Kijiji and see how many brand new homes are coming up for rent, not condos, SFH’s.

On the subject of motorcycles, I went riding today in York region and between Major Mac and Bloomington I saw many a SOLD sign. Seems like Kool-Aid being served is still potent. BTW I heard someone say the other day that the Chinese are all moving to Markham, so it’ll never go down, it’s different here – LOL!

But N of Bloomington and E of 48 around Musselman Lake, a ton of listings and not a single SOLD sign! Seems like the noose is tightening around the periphery as Garth noted a few posts back.

#51 mousey on 07.14.11 at 11:17 pm

Is the rental a “cash cow” or “beast of burden”? One blogger from the area suggested that the selling price might be $450,000 for a detached beater. Probably a good idea to take a good hard look at an updated value as a $150,000 increase in valuation may make the decision easier for you. It is difficult not to own after being a part of the owner scene for so long and it does take a paradigm shift. Sounds like a good change up though as prices do seem destined to flat line, then melt. I would like the regular income as well, but if the place is a beater, then think drainage, roof, carpenter ants, rot and other wierd and expensive stuff. You never know when these operating costs are going to hit, but there are certain probabilities at play. Do up a chart and then compare the pros and cons about selling. Put it away for a day and then look at it again. Make a decision and then live with it. I put myself into your shoes (hopefully Stuart Weitzman) and decided to sell based on the following: a)don’t really like the place; b) it’s old and is probably going to cost me a lot to maintain real soon; c) I’m going to get good value for it now and may not get such a good value later; d) I could use the proceeds to accumulate additional assets; e) I can easily afford and live in a place I like to drive up to.

Re: Utopia,
I got a peaceful easy feeling reading your blog entry.

#52 Tim on 07.14.11 at 11:18 pm

“despite the recession and free-fall in the housing market, the prices here in Venice Beach still are high after 5 years. So we have not bought as the price to income ratio still has not hit the 33% mark.”

This is in a nearly bankrupt state in a dysfunctional country where real estate has been falling for five years, ground zero for the foreclosure crises, yet it is still too expensive to buy. Based on this, what is the likelihood of Vancouver prices falling to where they are actually affordable or make sense to buy? Probably pretty unlikely

#53 terces on 07.14.11 at 11:22 pm

I’m not too sure your commercial investment is wise. The risk to it is in the cap rate. Cap rates have recently compressed, meaning that values have in turn risen because investors are expecting / getting a lower return. When cap rates return to normal, the values of properties will decline. You might be getting a reasonable cash flow from the property now, but it is not worth the risk of cap rates reverting to their mean.

For example – a property with $100,000 net annual income. At a cap rate of 5% (I am guessing but likely what you are buying a small apartment at in TO) the property is worth $2million.

If the cap rates return to a more normal value of 7.5% the same property will be worth $1,333,333.

Your cash flow will not even come close to covering this loss in value.

#54 Jane on 07.14.11 at 11:23 pm

Sell, invest, rent, make money on your proceeds. Your walls will become your home,if you make it into a home. We did this, and every time I am frustrated by the slumlord, I look at my hefty investments and smile! I owe nothing, no one owns me.

#55 bill on 07.14.11 at 11:27 pm

sell that puppy already……leave the city of the walking dead and hie ye to a crisper climate but not toronto…….

#56 more normal on 07.14.11 at 11:29 pm

#17 and #30:

We are a couple in our lower thirties (with two children) who make about what #17 mentions, and we are both professionals (but only a few years in after lengthy education and some time abroad making real dough). We haven’t broken the $100k mark yet, but will in the next few years and it will hopefully keep going up for a decade or so for each of us. Out of ~10 other couples we know (college/high school friends) with similar stories (some with less education but one partner on a cushy union job, some with no kids, some with 3 kids, etc etc) we have probably the second-highest combined income. A few friends of mine own businesses and make more, some are in construction and make a lot during boom years and move on during bust years, a few are deadbeat drunks. I would say the (shrinking) middle class looks like #17, and this is pretty good compared to median family income. Here is the kicker… every one of these couples with combined incomes between $60k and $120k (all 30-36 years old), ALL, have bought in the last 2 or 3 years for well over $500, $600, $700 and even $800k. And yes, I live in Raincouver. These are mostly boxes in the sky, or crappy 25-yr-old townhomes in the suburbs. We are the sole renters. Anyway, if anything the coming crunch will hurt our income class the most, squeezing out the middle class yet again. Thank God I did not buy a house.

#30: that all sounds awesome but you are not describing the average Canadian and DEFINITELY not the average “young” family under ~36 years of age. My brother is a surgeon and he makes about $160k and is 39… he would barely be able to buy a box in the sky in Raincouver.

#57 jas on 07.14.11 at 11:34 pm

So Garth, what kind of commercial RE and roughly where are you buying?
Do you care to share?

#58 waterloo Resident on 07.14.11 at 11:35 pm

C&I: There are 550,000 new immigrants coming into Canada each and every year, and the federal government has plans to increase this to well over 1 million new immigrants each year by the year 2015. More than 60% of them settle in the Toronto area, so there you have it; a government-fed housing market. Even if the job market crumbles, the housing prices will continue to skyrocket in Toronto simply because of the ever-increasing demand from all those millions and millions of new immigrants.

So what ever yo do, DON’T sell !
Try to buy more houses when ever you are able to, the prices will only go up from here.

#59 Dan M. on 07.14.11 at 11:36 pm

Garth, I think you were somewhat simplistic in your reasoning for the widening income gap. You ignored the fact that despite enormous gains in productivity during the past 30 years, the proceeds of those gains have all gone to the top several percent. That has less to do with debt and more to do with the structure of our economy. You may argue that debt levels among the lower socioeconomic classes is part of that, but to give it too much ahem…credit…is disingenuous.
The main reason behind soaring debt levels is because of stagnant or falling real wages. I believe this situation is well researched and documented. If I am to enjoy many of the things my parents enjoyed, I might need to borrow a lot more money than they had to borrow. My parents most expensive house was 80k. Unless I move to Moose Factory after the real estate explosion that is likely to happen, I’ll have to accept that a house will cost me a lot more, even in real dollars.

#60 Dan M. on 07.14.11 at 11:48 pm

Damn…forgot the apostrophe at the end of parents. I hate grammar lessons…..

#61 Mandelbrott on 07.15.11 at 12:00 am


Commercial real estate comes in many flavours, care to share which subset has attracted your interest/dollars?

#62 Get Real on 07.15.11 at 12:09 am

Yeah, Sure!!

Follow the Scotia Bank advice. “Borrow to get ahead”. What if I really did? Can I sue them afterwards?

#63 Utopia on 07.15.11 at 12:09 am

#99 Brad in Cowtown on 07.14.11 to Utopia

“I quoted the optimism. QUOTED it. Maybe you should just read the report. They see no crash coming for Alberta. But no mention of that here because it contradicts the holy host. Yet, he plucks out the 2 worst predictions from the report? That is textbook cherry picking”.

A text book case of Cherry Picking is it? The two worst examples? I am going to go out on a limb and guess that you have never studied statistics and do not understand the concept of a sample size.

Bet I guessed right, Brad.

#64 Thetruth on 07.15.11 at 12:17 am

TD says overnight rates won’t go up until January 2012.

I Predicted over and over again on this blog a year and a half ago!! Was ridiculed saying the end is near.

As I always said, the vast majority of mortgages in the US will have reset by Jan 2012. Then onwards, the majority of Americans will welcome sustained inflation.

Again, Canada will follow with a token raise here or there in the new year. In the end, it will let its currency suffer. Remember this.

#65 DML on 07.15.11 at 12:22 am

Scott Simon, a portfolio manager who heads real estate analysis for bond giant Pimco, says because this housing bust is so much worse than previous ones, it’s hard to tell when it will end. “There are all these things going on that we have never seen before,” he says. “No one knows how or what to model.”

Thats comforting,here is the full article:

#66 Kitchener1 on 07.15.11 at 12:25 am

#28 Joe Q

What?? St Clair and Oakwood detached homes are going for 450k min?

dont believe it man, unless your talking about regal heights, i can see, but not St Clair and Oakwood.

That particular intersection is very run down, had a buddy that used to live right there in one of those crappy low rise buildings.

To the california babe, that area is not “up and coming” if you want out sell it now. like today.

#67 What now?? on 07.15.11 at 12:38 am

“Between 1976 and 2009 the median income in Canada rose an imperceptible 5.5% – from $45,800 to just $48,300. Yikes. Factor in inflation and higher taxes and this isn’t exactly the picture of middle-class nirvana.”

This is with inflation factored in.. Otherwise we’re talking about a wage cut, through wage stagnation, of over 300 percent in purchasing power between 76 and 09..

#68 reality guy on 07.15.11 at 12:42 am

I drove home today and notice 3 new signs in the Vancouver region

“NEW PRICE”, instead of reduced price they now call it new price.

I can feel the panic meter starting to rise. I think the next TSN turning point will be in september

#69 The Phantom on 07.15.11 at 12:46 am

Morning Garth and fellow blog dawgs

Were I to find myself on a $300,000 windfall couched within the frame of a rental property, currently in the GTA, I think that I would sell it, go to Harvard and write serpentine meanderings riddled with miscues and grammatical errors!!!

I’m kidding! What I would do is invest that money into a balanced portfolio consisting of income producing assets like corporate bonds. Some of the ones I own pay fairly reasonable rates of return. Nova Scotia Hydro pays 8.4% and Fronterra Copper (FCC.NT on the TSX, I think) pays 10%. The latter is sensitive to the vagaries of the world rumblings however and that sensitivity is reflected in the value which tends to fluctuate with the market but if one holds them to maturity, they mature at face value and your original capital is returned to you. Since I don’t know a whit about REIT, I would hire Mr. Turner and have him allocate a portion of that into those for me as well…

Notwithstanding the distaste many have with respect to PM or their fear or dislike of them, I would investigate further placing some of that cash into some of the stocks that are devoted to Rare Earth Metals and conduct some research into why they are poised for some impressive gains as a long term hold. Companies like Ucore are mining dysprosium which has quadrupled in value since China began restricting their exports of it last year. This metal is used for magnets, defense and hybrid cars so the demand for it is only beginning in some ways.

And with some of that money (which I wouldn’t be afraid to lose) I’d begin writing put options on companies like Saskatchewan Potash (which I wouldn’t mind owning anyway if I was forced to purchase the stock). Options trading isn’t for everyone but if one is cautious, there can be some decent payouts…you just have to be careful and not be afraid to lose part of your money. Anyway, that is my humble contribution for the evening.

‘night all
The Phantom

#70 Romeo Jordan on 07.15.11 at 12:56 am

Vancouver is quickly falling apart.

Prices are in a deathspiral.

#71 TJ on 07.15.11 at 1:13 am

I agree with #32. Stay in LA. Better traffic. Better weather.

You only live once. What’s the point of spending 7-8 months of the year in crap weather and 6-7 hours a week commuting to work? Let’s not mention the wait times at the emergency rooms.

#72 wicked as it seems on 07.15.11 at 1:28 am

Just for 12 months feel the freedom of being 100% liquid in investments and cash, knowing you may never get a more perfect storm in time again to experience the detachment.
Perhaps it will change your life forever and you will never look back!

#73 Mr Buyer on 07.15.11 at 1:50 am

A comment on the last post had a kind person suggest authoritative literature related to investing. I am wondering if anyone else has suggestions. I am beginning my financial education so very basic to very advanced would be appropriate. In all honesty I would prefer to spend my time reading about molecular biology, programming, animation, teaching and editing but I acknowledge that the current lay of the land requires a more than surface understanding of investing and investment instruments. I will say this going in that I feel stocks, bonds, and whatever other instruments there may be, are highly suspect in my estimation and have/will be subject to manipulation (just another gamble really based often times on vapor and rigged by insider trading). I prefer production and service any day. Again, the present lay of the land requires an intimate understanding of the system, even if it brings me back to my original position. Any suggested readings?

#74 Golden Girls on 07.15.11 at 1:53 am

$160K isn’t normal. It’s probably top 5% of all Canadian families.
$240K is probably just outside the top 1%.
Stop bragging and pretending that you’re not.

#75 Never walk away fom free money on 07.15.11 at 2:29 am

Why sell? Rental income is not dirty money. I don’t know the area, but if it’s ‘dated’ it will appreciate more than any new construct. In my town West End has risen higher and faster than any other part of town. If you are already renting in California, renting in Toronto will only be different by the amount of heating you pay for. Upkeep on the property is tax deductible against the income, it’s an insurable investment to protect you from loss, you have a management company already in between you and the warm bodies which go out into the world to bring you money on a regular basis. Where’s the down side?

#76 Michelle on 07.15.11 at 2:32 am

@#18 Jon B.
“Could a group of debt-free people and another of indebted individuals redefine the middle class or even the class system altogether?”

Hi Jon,
I believe HG Wells described this exact scenario in his novel “The Time Machine”. Note the descriptions of the Eloi and the Morlocks below:

“In the new narrative, the Time Traveller tests his device with a journey that takes him to the year 802,701 A.D., where he meets the Eloi, a society of small, elegant, childlike adults. They live in small communities within large and futuristic yet slowly deteriorating buildings, doing no work and having a frugivorous diet.
His efforts to communicate with them are hampered by their lack of curiosity or discipline, and he speculates that they are a peaceful communist society, the result of humanity conquering nature with technology, and subsequently evolving to adapt to an environment in which strength and intellect are no longer advantageous to survival.”

“He eventually alters his theory, speculating that the human race has evolved into two species: the leisured classes have become the ineffectual Eloi, and the downtrodden working classes have become the brutish light-fearing Morlocks (renters).
Learning that the Morlocks feed on the Eloi, his revised analysis is that their relationship is not one of lords and servants but of livestock and ranchers (aka Vultures).”

Hope that answers your question Jon :)

#77 Cato on 07.15.11 at 2:37 am

The Conference Board is providing a glimpse into what the future will look like. The wage disparity wasn’t felt as harshly thanks to China propping up the western middle class. But that free ride is about to end, expectations need to be reset.

The disparity is just going to continue. The real shocker will be the fact the economy cannot support the myriad of social programs most Canadians view as a right. Top of that list is medicare.

CI – Houses are depreciating assets, old houses rarely make good long term income properties. Dump it and cash out your gains and take advantage of other opportunities. A personal residence should never be an investment but rather a lifestyle choice . Earned income is simply a monetary reflection of the time we give up from our incredibly short lives. Some value things, others value experiences. Key is striking a balance, but there is nothing wrong with wanting a home. Plan to sit on the fence a little longer, but don’t try to time the bottom. Its going to be a very long time before housing finds a bottom, and those are years you’ll never get back.

#78 Be careful what you wish for on 07.15.11 at 2:45 am

If you sell – you will pay the tax man, the realtor, the lawyer, etc., and pay on the inflated value in today’s market. It will not be free of capital gains tax, unless you first move in and live a minimum amount of time there. No matter what you invest the left over money into, will it deliver $1440 monthly (17,000 + yrly), with someone else managing it? Consider where you might live if you had 2 or 3 or 4?

#79 Canuck Abroad on 07.15.11 at 2:57 am

Agree with what 28 / Joe Q said.

For $2650 you can get a four bedroom renovated house in Wychwood. If you check out Google Streetview it looks like a pretty nice street. Totally renovated with a finished basement and loft and parking for two cars. You might be able to negotiate this down to $2500 which is your budget.

Here is the house:

If you take the $300k proceeds of your sale this will give you $24000 per year (ignoring taxes on sale and investment income). But basically ignoring taxes your investment gains pay your rent. You can then save from your salary and buy later when there is more choice and better prices, with an even bigger down payment.

Otherwise you are looking at spending a lot of money to renovate a house you don’t really like. Who needs that?

#80 Sumadartson jr. on 07.15.11 at 3:52 am

#148 Junius

“I see Nosty is back. What a ridiculous statement to make. I see your time away hasn’t been used on an education.”

Who is Nosty?

I stand by my earlier posting.

“But the Canadian Dollar keeps climbing higher vs US Dollar.
No way Mortgage Interest rates going up.
TD sent out this scare tactic trying to slow R E Market in TO and Vancouver because in fact, MTGE INTEREST RATES GOING BACK DOWN, WILL WEAKEN CANADIAN DOLLAR.”

#81 Steven Rowlandson on 07.15.11 at 4:31 am

Market manipulation, insatiable greed, delusion, political correctness and real estate prices are protected, go too far for too long and die hard.
But perish they must or there will be no renewal of society or the economy. Only debt slavery, corruption and hell. How is that for being a doomer Garth?

#82 Jody on 07.15.11 at 5:05 am

Dear C&T,

Sweety, honey, dear, toots, you need to sell love, sell now. If you get all hot and wet then buy property that has positive cash flow that you and your man slave can live in as well. I’ve always thought some apartments above a commercial unit. Rent out the commercial unit and some of the residential units and live in another. Otherwise sell and invest in, go 25% in physical metals, 25% in bonds, 25% in stocks/funds, 25% in cash. With the coming depression booze and smokes will do well, maybe you could run a shop selling those items in your unit. Just don’t try to grow vegetables that you can eat on the front lawn or you will go to jail.

#83 Tripp on 07.15.11 at 6:22 am

#31 garrulous squirrel

The house is close to Hyde Park, a highly desirable area of one of the top capitals of the world. I still believe that the price is ridiculous.

Since I had the chance to live and work in a couple of European capitals and visited some others, I am sure that people paying a lot to live in Montmartre or K’damm are not crazy. The amount of interesting things to see and do would be a surprise for most Canadians. Fantastic stores, restaurants serving real food, coffee shops with real coffee, theatres, festivals, museums etc. London, Paris and Berlin are true world class cities, nothing in Canada comes close.

#84 Dr.NickRiviera on 07.15.11 at 7:12 am

Garth wrote “Between 1976 and 2009, the median income in Canada rose 5.5% – from $45,800 to just $48,300.”

Whereas, something that would cost you $48,500 to purchase in 1979 would today cost you $140,124.

#85 led on 07.15.11 at 7:18 am

nothing feels better than selling at the top of the market.


#86 TurnerNation on 07.15.11 at 7:30 am

BofC & the “Harper government”. What happend to the Canadian Government for Canadians?

Bank of Canada Eliminates 54 More In Ottawa
Canada’s private central bank has decided to eliminate dozens more employees in the nation’s Capital Region in a bid to meet government cost-cutting directives. “The Bank of Canada told employees this week it is axing 55 positions in corporate administration as it strives to meet cost-cutting targets set by the Harper government,” the Ottawa Citizen reports. The staff reductions were all in corporate administration. None of those losing their jobs were union members, and all but one was headquartered in Ottawa, the Citizen reported. The corporate administration cuts will reportedly include some communications officials.
Read more…

#87 Aussie Roy on 07.15.11 at 7:43 am

Aussie Update

More Aussie mega mortgage mugs awake from their delusional slumber. But still 42% of those surveyed appearing comatosed chanting such lines as, house prices only ever go up, house prices double every few years, can’t lose with bricks and mortar, China will save us, everyone wants to live here and my lifestyle is funded by equity maaaate.

“More homeowners are worried about a decline in the value of their house following a drop in home prices since the start of 2011, says a new survey.

The data showed 26 per cent of respondents expected prices to fall in the year to next July, up from 17 per cent when the last survey was done in April.

But the number of (delusional) optimists still outweighed (realists) pessimists, with 42 per cent of respondents expecting prices to rise” – as long as the coma persists.

An Aussie “mug” a very gullible person who usually isnt the sharpest tool in the shed.

#88 TurnerNation on 07.15.11 at 7:49 am

Who is purchasing an $800,000 condo in Toronto?

This month’s Toronto Life magazine has a thirty something couple (an insurance agent and realtor!) buying an 800k condo. They really want a house and plan on selling the condo within a few years.

This foray will require paying two land transfer taxes, closing costs, high condo fees, and interest, and possibly CMHC fees.

I bet they can rent a simily unit for 3 or 3.5k/month and pocket all the costs and keep downpayment.

#89 arctodus on 07.15.11 at 8:04 am

Why we are truly screwed……

In this “eyes wide open” analysis the true reason for collapse becomes clear….given the likely political responses to said analysis……rapid and systemic collapse is likely…..

and you folks are worried about real estate?…..

#90 bigrider on 07.15.11 at 8:07 am

Garth your recomended 40/60 % ratio in real estate assets to financial ones. Does this include commercial RE.?

Would you place your commercial RE purchases on the 40% side or do you not include it at all.?

Residential real estate recommended weighting as a % of net worth = 90 less your age. Commercial RE forms part of fixed income in a balanced portfolio, which constitutes the remainder of net worth. — Garth

#91 fancy_pants on 07.15.11 at 8:45 am

Between 1976 and 2009 the earnings gap between the lowest 20 per cent and the top 20 per cent of Canadians grew from $92,300 to $117,500.

That is quite a large increase considering what the difference could buy you back in 76 – a house or two.

#92 Mr Lee on 07.15.11 at 8:49 am

Its different here.

The above is all we seem to be hearing for realtors and MSM. In a world where the #1 economic powere is mired in debt and anemic recovery, where Europe is contemplating the default of some of it constituent members, Japan is mired in bad news after bad news and China is experiencing some troubling signs with inflation and asset bubbles. Our resource based, over leveraged country finds itself in a unique position of being one of the last players to feel the effects of reality.

Mortgages that no resonable person would have assumed even a decade ago are common because people talk themselves into justifying the largest mistake that they are about to make.

Just because a bank lends me a million dollars does not make me a millionaire, yet people’s logic logic some how got perverted into thinking exactly that because of being sold on the idea that the home they bought will raise in value in perpetuity. Sadly, we will see a lot of brken families and relationship, coupled by recessed consumer spending and growth when the reality sets in.

A generation ago, perople were measured by what they owned, now people have fooled into believing that they are measured by what they owe.

#93 John on 07.15.11 at 8:55 am

If Garth were a rapper they would ask, “How do you spit such hot fire everyday?” :)

#94 Tom from Mississauga on 07.15.11 at 8:56 am

Well Confused & Indecisive, probably the best thing to do would move into the house you have, do a project every 2 to 4 months on it out of your income if it’s a fixer upper. Then take out a 200,000 variable LOC against the house at 2.8% and open TFSA, RRSP, RESP and non-registered account and fill up on assets that pay you. Get an investment advisor if you don’t know what to buy. Easy!

#95 brainsail on 07.15.11 at 9:03 am

Confused & indecisive

If you owned a residence in Canada while working in the US for a number of years tells me that you may have some tax liabilities when you return to Canada especially if you not been filing income tax in both countries.

“When making the transition to the US , you must ensure you properly sever your ties with Canada so you are not taxed in both countries. If done improperly, you have the potential of creating untold complexities, paperwork and the potential for double taxation.”

“The Revenue Agency agrees to cease taxing you when you leave, but takes its “pound of flesh” beforehand because all taxable property you own worldwide is “deemed” sold and repurchased again (whether you actually do it or not). ”

#96 AG Sage on 07.15.11 at 9:17 am

I think you are confused because you are mixing distinctive decisions into one messy pile. Take each thing on its own and it will get easier.

Is the rental unit you own cash flow positive? Is it so trashed that to sell it in a down market will require expensive repairs upfront? Frothy markets have a tendency to overlook house condition. Since you seem to have no appetite for overhauling the house, maybe you should consider timing the sale partially on this point. Is the rental cash flow positive enough to cover the heavy discount you’ll have to put on it to offload it later? The rental unit needs either an overhaul plan to retain the investment value or an exit plan to cash out. Decide, then move to the next issue.

Finding shelter in Toronto should be its own task. If you like buying at the top of a market, by all means, buy a house. Getting into this market is like marrying someone you know you will be divorcing in two years . . . she will take half your money when she walks out.

#97 BrianT on 07.15.11 at 9:21 am

#65The-Nobody welcomes inflation (no matter how many times that stupid claim is made)-what they welcome is higher wages. Inflation doesn’t magically pay off a mortgage. Explain how the average American is going to get higher wages.

#98 squidly77 on 07.15.11 at 9:25 am

#37 Fort McSwain

$4-5k a month. Gimme a break, the going rate for a fully finished house is about $3k.

#99 The American on 07.15.11 at 9:29 am

Dear Confused & indecisive,

First, why are you moving back from Venice Beach, CA for Toronto? That speaks volumes in itself. You’ve found, for all intensive purposes, paradise in weather, recreation, topography, and “coolness” factor. Now you’re trading it in from whence you came? Oh well. I do wish you luck with your move.

Second, sell that mother f*ckin’ house in Toronto as quickly as possible and get as liquid as possible. I have no idea what you paid for the home to understand what your “gain” on it would be if you sold today, but I’m willing to bet it was far less than the estimated $300K you’ve indicated it is now worth. Take the proceeds and reinvest in another asset class (not bonds, but stocks). I bet this is your BEST route for sanity’s sake, and you can live in a downtown condo and be happy. Or, live in the house you already own and have no payment and get over not liking it very much (we’re talking about saving money in times that are going to get a lot tougher in the very near future in Canada). This option would probably be the most financially sound, but your happiness factor would be lower than having that downtown condo. We’re only talking a few hundred a month difference anyway.

In any case, maybe you haven’t heard, living in California and all, renting is now quite en vogue. Soon enough, it will be en vogue in Canada too. Are you a trend setter or a follower? I must admit, though, $1,600/month sounds VERY light for rent on an entire house. Can I ask what your rent is right now in Venice Beach and for what type of property in which you’re living? Also, are you sure you can rent a 2 bedroom/2 batch condo in downtown Toronto for only $1,800-$2,100/month? I have no idea, but I’m only asking because that sounds extremely light also. A “nice” 2/2 would easily run anywhere from $3,200/month-$7,000+/month in downtown Seattle, not including parking. Maybe I should move to Toronto if rent truly is what you’ve indicated…

#100 jess on 07.15.11 at 9:31 am

Definition — Well-being

In the context of the Indicators of Well-being in Canada website, well-being refers to quality of life and development at both the individual and societal level.

See the About this Site section for a general description of the well-being framework.

Individual well-being is defined as a person’s quality of life. This is influenced by a range of factors, including work, family, community, health, personal values, personal freedom, and a person’s financial situation.

Societal well-being refers to both the collective well-being of individuals and the quality of interactions between and among individuals and social institutions (e.g., communities, the labour market, the health care system, the education system and the social security system).
The well-being of Canadian families depends on both their level of income and the distribution of income within the population. Differences in the distribution of income, or ‘income disparities’, are often considered a measure of a society’s fairness. High income disparities are often associated with high unemployment but may also indicate that large numbers of people are trapped in low-paid and low-skilled jobs.


•National Picture — Income disparities increased after 1995. There was a rise in the after-tax income of the top income group and very little change for other income groups over the period 1995 and 2007.
•Regions — In 2007, the highest income disparities between the top 20% and the bottom 20% income groups were in British Columbia and Ontario, and the lowest in Prince Edward Island.
•International Picture — The extent of income disparity in Canada was comparable to that of many G7 and OECD member countries in 2004 and 2005.
•Family-adjusted after-tax income — Adjusting income for family size and composition reveals smaller income disparities among income groups than for unadjusted after-tax income, although trends were similar over time.

National Picture
In 2007, the average after-tax income in Canada for the bottom 20% of incomes (after-tax income of $22,700 or less) was $13,900, and for the top 20% (after-tax income of $83,400 or more) was $126,700. The difference between these two groups has increased in recent years.

Income disparities (expressed in 2007 constant dollars) rose between 1995 and 2007. Average after-tax incomes remained roughly the same for families with incomes in the bottom 20% and the middle 60% between 1976 and 2007 but rose for those in the top income group after 1995. The difference between the top 20% income group and the bottom 20% rose by 37%. The difference in 1995 was $82,100, increasing to $112,800 in 2007. Similarly, the difference between the average income of the top 20% and the middle 60% increased from $54,067 to $77,900, or by 44% over the same period

The average debt per insolvency increased substantially in the late 1980s and early 1990s, peaking in 1993 at $65,796 (2008 constant dollars). It then declined to stabilize at about $59,000 from 1995 until 2004. The average debt per insolvency has increased steadily since. In 2008, the average amount owed was $81,896.

Types of Debt
In 2008, some 91% of individuals who filed a proposal or bankruptcy cited having some of their debt in a credit card, making it the most frequent type of debt reported. The next most frequent was loans from banks or finance companies. Mortgages were reported by only 23% of insolvent persons as a debt source.

In 2008, about 54% of insolvent persons were between 30 and 49 years old. In contrast, this age group accounts for only 37% of Canadian adults. The proportion of insolvent persons aged 50 to 59 was the same as the proportion of Canadian adults that age. Seniors and young adults aged 18 to 29 represented much smaller proportions of insolvent persons than their proportion of Canadian adults.[email protected]?iid=24

#101 Ottawa S on 07.15.11 at 9:34 am

Rent a condo for youself for a year and a bit

As for the income property, if you like the area, renovate it while the renovations are still tax deductible, and then rent it out for another year. Then you can move back in and have the renovated place for you are craving. Your capital gains tax will be reduced by the capital expenses you still haven’t deducted, plus if the market went down again it will be further reduced.

#102 kimi on 07.15.11 at 9:38 am

Not First comment #43 … some people weren’t born rich. ————————————————
I was born muck poor. I didn’t have parents who paid for my education either. I had alot of average paying jobs. I always saved, and now voila, I have more than you mentioned. And I think it is because, I knew the difference between a need and a want. My sister is doing better than me. And we both make under 60 a year.
So I don’t feel sorry for the average smuck. I can’t even go there, because this entry would be too long.
In short as you explained, your brother makes 160/yr, and is unfortunate, your brother must have marshmallows for a brain. Toasted ones.

#103 Joe Q. on 07.15.11 at 9:44 am

#67 Kitchener1 on 07.15.11 at 12:25 am writes:

What?? St Clair and Oakwood detached homes are going for 450k min? dont believe it man, unless your talking about regal heights, i can see, but not St Clair and Oakwood.

That particular intersection is very run down, had a buddy that used to live right there in one of those crappy low rise buildings.

Your info might be a bit out of date — I am talking about 2011 prices.

For starters, any decent detached home in Regal Heights is going to go for at least $700k. You can check MLS if you like (the market is crazy and anything listed there will sell at or above asking).

North of St Clair, a semi on Robina at Glenhurst recently sold for $510k. Other houses on Robina (farther north) sold in the spring for high-$400s, low-$500s range. Back in March or April, a house on Conway at Glenholme sold for above $500k. There is one listed on Conway now for about $550k. The same trend holds for Appleton, Crang, Robina or Atlas Ave.

As you get up to Rogers Road things get cheaper, but not by much (until you get right to the Oakwood-Vaughan Road area).

I notice that right on Oakwood itself there are a number of houses for sale, all listed in the mid-high $400s.

The neighbourhood is still a bit rough (not horrible) but things are changing. The endless saga of the streetcar ROW ended up cleaning out some of the marginal businesses, and new ones are moving in. A couple of new restaurants have opened just in the last couple of years. People buying in the area are predominantly young families that are priced out of areas farther east.

#104 homeinboca on 07.15.11 at 10:35 am

Real Agents turn to fraud and take advantage of owners who are underwater on their homes. They present low-ball offers to the lender in the hopes of securing a short sale, and already have a higher bid in their pockets, turning an instant profit. Who said RE agents are slimeballs…For shame!

#105 jess on 07.15.11 at 11:03 am

The not so different

I see that the straw buyers, fake doc s, kickbacks, data base hacking etc of the real estate model can be applied to the medical industry both in the usa and canada.

Shady clinics bilk $1.3 billion in bogus car insurance claims scam
toronto star

FBI site: You will find tons of pages regarding these schemes

To concealment – recruited nominee owners for each company, and paid them large sums of cash to sign the corporate records, bank records, and other business documents.
Armenian-American organized crime ring that engaged in an extensive range of criminal offenses including the operation of a $100 million dollar Medicare fraud billing ring.
Grana managed the day-to-day operations of Careplus LLC, a medical clinic in Livonia, Mich. paid patient recruiters were expected to find and transport Medicare beneficiaries to Careplus and were paid $100 and $150 per patient referral, and instructed the recruiters to pay the patients $50 from that amount.
Grana further admitted that in exchange for the payments, he and his co-conspirators expected the Medicare beneficiaries who received kickbacks to subject themselves to medical examinations and to medically unnecessary diagnostic tests. Grana told the recruiters to instruct the patients to feign certain symptoms when they arrived at Careplus, which led to the patients’ medical records containing information about false symptoms. The falsified records then helped Careplus deceive Medicare about the legitimacy and medical necessity of the tests it performed. Between approximately February 2008 and October 2009, Grana and his co-conspirators at Careplus submitted approximately $2.2 million in claims to the Medicare program for unnecessary medical and testing services that were procured through the payment of kickbacks. Medicare paid approximately $2 million of those claims.

#106 Mr Buyer on 07.15.11 at 11:16 am

#78 Cato … Medicare must be maintained. We all get sick eventually and it can be very very costly. I live outside of Canada and have actually had to pay to take my child to the doctor in Canada ($68 for a 3 to 5 minute peek at him). My wife not knowing the horrendous wait involved at emergency wards asked me to take her to the hospital on another visit to Canada. The nurse took her temperature and blood pressure got her credit card and billed her $300 then asked her to sit down in the waiting room. 3 hours later we left having not moved from our seats let alone see a doctor. These are relatively minor consultations with the doctor for sure but could be potentially deadly without medical attention being readily available. A very strong 27 year old beautiful friend of mine decided not to go to the hospital one night (even though she was feeling not quite right) due to the hours of waiting involved. She decided to lie down and when she finally elected to go to the hospital her husband drove and she fell asleep in the car and NEVER woke up. A simple bacterial infection overcame her because she was pregnant. What ever the economic types try to sell us do not buy into decreased medical care. Very very few will be able to financially weather a serious illness. There are many that think they could but do the math. Everyone dies and for many it is a very messy affair on many levels not the least of which is the financial level. This is a good place to start to battle back. DO NOT ACCEPT ANY RATIONAL that advocates abolishment of public medical coverage. Simply do not accept it. Do the math and tell your friends. This is a good place to start. Not only that, I think we need many many more doctors in Canada. Not medical professionals, but actual doctors. The strangle hold the college of physicians has on quotas of doctors being trained must be addressed. We should be paying for our doctors training as well. We did not have public health care not so long ago. We must stand up on this front. It is not a right but rather a necessity that must be fought for, over and over again. Many even on this blog may not understand how essential our health care system is. Last I looked (it was some time ago) we were providing health care a around half the cost per person relative to the US. I would to see our medical system be considered a strategic. There are many extraordinary measures that we could undertake. My wife’s father said very clearly that if he needed treatment that was too expensive and required too many times that he did not want the family to continue with treatment. They are not poor at all but everyone here in Japan know user fees very well. I pay over $350 Canadian a month here in Japan for my family’s coverage and 30% every time I go to the hospital or doctor’s office (there are cash registers at the hospital). It cost me around $200 to finally recover from a simple ear infection when all was said and done. Fight for health care. Do not accept the huge extraneous expenses currently associated with our health care system for sure but do not sleepily walk into the abyss of private health care. IT IS TOO EXPENSIVE ON MANY LEVELS.

#107 AK on 07.15.11 at 11:20 am

Hi Garth,

You mentioned that “You might be amazed at the power-of-sale deals in, say, the GTA over the past four months.” Where can I find “power-of-sale” list? I didn’t see many from MLS.


#108 Bobo on 07.15.11 at 11:26 am

You’re probably getting a 5% yield on the $300k house, after taxes etc… not bad at all in this environment. Keep the house, collect the cheques and use them to pay your rent and live the good life downtown.

#109 JohnnyBravo on 07.15.11 at 11:28 am

#45 Elmer on 07.14.11 at 10:48 pm

The 1976 median income figure quoted in the CB report is in 2009 dollars. For more details, see my comment #48.

#110 disciple on 07.15.11 at 11:43 am

This is for all those who think we’ll have only a mild correction in RE prices:

#111 Ben Rabidoux on 07.15.11 at 11:53 am

Hey Garth…

We often discuss the role of changing consumer psychology in driving/deflating bubbles. This one will be no different. And I can’t help but note the recent surge in ‘bubble’ articles lately. It’s coming to the forefront of the public consciousness.

I thought I might highlight an excellent article coming out in the next Canadian Business magazine as it thoroughly trashes the notion that home ownership is the best move:

Keep speaking the message. People are listening….now more than ever.

Ben: Nice site but try to get the self-promotion under control. You use this blog as a traffic-builder. If you like me so much, at least link here, dude. — Garth

#112 Devore on 07.15.11 at 12:11 pm

Honestly, we don’t have nearly enough information to make any realistic recommendations.

Take the paid off house… all we know is that it is old, and needs some remodeling. How old is old? What does “remodeling” mean? Does it just need some granite, hardwood and new paint, or is it a gut job? Is the couple willing to do any work to renovate? For non-TO residents, we have no idea what the neighbourhood is like. Do they not like it? Is it too rough? Is it too far from amenities? Too far from work? Too far from family and friends?

All we know is they don’t want to live in the house, and the decision is sell or keep renting. To keep renting, the condition of the house and area is important (expected capital input, potential income).

The easy answer, and the one that is “correct” on this blog is to sell and invest, but as Garth has demonstrated many times, each case has to be looked at separately. If it is a decrepit house in a crappy neighbourhood with little income and even less potential, then take the money and run while multiple offers are still pouring in. But all we can realistically do for C&I is make a bunch of assumptions and project our own biases.

#113 Bill Gable on 07.15.11 at 12:17 pm

This is from an article on US Housing – but here’s what about to unfold here – ?

Doug Ramsey of Minneapolis investment firm Leuthold Group is a student of asset bubbles, from tech stocks in the late ’90s to commodities in the late ’70s and railroads in the 19th century.

Ramsey calculates that single-family housing starts would have to soar an unprecedented 60 percent to 70 percent from their current half-century low of a 419,000 annual rate just to hit the average low of the past six housing busts since 1960 (650,000 to 700,000).

Ramsey says every housing statistic he tracks, including new and existing home prices and the performance of homebuilding stocks, has so far matched the pattern of prices after the bursting of other bubbles, including the Dow Jones industrial average following the crash of 1929 and Japan’s Nikkei after its 1989 peak.

It starts with a steep decline lasting three or four years, followed by a brief rally that ends in years of stagnation. The Dow took 35 years to return to pre-crash levels. The Nikkei trades at less than a third of where it peaked 22 years ago. “The housing decline,” he says, “will be a long, multiyear process, and the multiplier effect across the economy will be enormous.”

#114 Devore on 07.15.11 at 12:25 pm

#33 Utopia

As do I usually, but the whole thing smelled too convenient to me. People are often very willing to believe and accept information merely because it confirms their beliefs and lines up with their view of things, instead of being skeptical or critical. We’re more likely to take such anecdotes at face value, while discounting the ones presenting the opposing view, but the same can even apply to apparently cold hard data. Data is often not objective, because for you to see it, it has to make it through multiple gatekeepers, filters, transforms, adjustments, correlations, and finally presentation, each of which has the potential to add bias and spin.

Regardless, there was too much backpatting happening there, so I’m naturally suspicious ;)

#115 garrulous squirrel on 07.15.11 at 12:52 pm

Canada…the politically correct capital of the universe. While Canadians are starving the good folks at UBC bring in favorite ‘feel good’ foriegn nationals and ask the taxpayer to fund their very expensive mediacal biills. Why?????? The woman is Bangladeshi….her accident occured in Bangladesh… her husband!!

Now the politically correct ivory tower dwellers decide to push for a fell good campaign against the best interests of the taxpayer while millions of Canadians are waiting for the same services…sometimes for years….sometimes dying before they get the life saving surgeries they need.

Yet UBC bumps a foriegn national eye patient to the front of the line…..and…….lobbies to bring her entire family to Canada at huge expense to the already beaten taxpayer.

Sure …the case is tragic…but what has this womans issues have to do with Canadian taxpayers footing the bill. Are there no benevolent societies in Bangladesh? The woman was obviously rich enough to come to Cananda to study for several years in a luxury accomadation on the UBC campus. These are very expensive lodgings.

This is not an immigration case…just a bunch of louts handing out taxpayers money to make themselves feel better about not having been born in Bangladesh.

#116 HSC on 07.15.11 at 1:10 pm

As some others here have noted, St Clair and Oakwood is a bit rough around the edges. At 1200 square feet the house is quite small and from what you’ve described, it sounds a little run down. After the 10% management fee, your rental income is 1440 a month. But how much of that remains after you factor in property tax, repairs and utilities (I’m not sure to what extent these are covered by the mangement fee). Houses built in that era can become a money pit. How long is it until you need a new roof or some other major work?

If it were my decision, I would sell while the Toronto market is still pretty strong. I think when you have a less desirable property you need to sell into strength because a tiny fixer-upper can be near impossible to sell in a weak market.

#117 Devore on 07.15.11 at 1:22 pm

I think a lot of people here are confused about the income figures Garth provided from the Conference Board. They are inflation-adjusted, as has been pointed out once I believe. That is to say they are “constant dollars”.

This shows us that over the last 30 years, incomes have grown just 5%, despite the tremendous gains in productivity during this time.

Where has the money gone? Well, apparently the rich have gotten richer. Ok, but WHY and HOW?

I think the debt issue is a major factor, but obviously just one factor. When you’re already wealthy, you have lots of capital available to invest and grow it further. You are also less sensitive to price shocks, and don’t need to result to outrageous borrowing to purchase basics like housing, or to pay regular bills.

Secondly, through globalization we must increasingly compete with much lower priced labor elsewhere in the world. This puts pressure on local wages. The effects of globalization are now felt further and further up the “value chain”, where now upper middle class segments are affected, such as what we think of as professionals: lawyers, architects, doctors, accountants, engineers. This is part of why the middle class is shrinking: incomes stall, while costs keep growing, half-price iPads notwithstanding.

But also debt, public and private, has been growing steadily, actually accelerating, over this period of time, and here we have to remind that debt is not wealth. Debt represents a claim on future income. Thus debt, unless it is put to productive use that results in growth and pays for itself, actually makes you poorer. The effect is not visible until years later, once debt repayment begins to make a dent. Debt servicing costs are putting a serious drag on the growth of middle class wealth. Just like taxation saps money away from productive uses and increases overhead, interest payments suck money from savings, investments, education, and other productive uses, which limit wealth growth. You can’t get rich borrowing money for consumption. This applies equally to individuals, as well as government, which represents the broader society. People are impoverishing themselves through debt, and government borrowing is impoverishing all of us.

Finally, I think the situation is actually much worse. Inflation-adjusted numbers rely on CPI, which is hardly ideal, and potentially very misleading. It is the best measure we have, but that does not mean we simply have to accept it and get on with life. In the US, we have alternative metrics available from the effort behind Shadow Stats, which show incomes, and thus standard of living, have been dropping precipitously. Consumer and public debt have filled in the difference, but only serve to lead is deeper into the abyss due to servicing costs.

#118 disciple on 07.15.11 at 1:23 pm

I know a lady in her 60’s, husband in 70’s, own a house in Thornhill, ON, that had been on the market since spring. They just took it off the market, a couple of offers but not what they wanted.

I explained to her that by reducing the price just 8%, perhaps more, she might have more success, and that we are likely to have a downturn in demand and prices anyway and she would be very lucky to sell the big lot now and cash out, live rent-free, etc… She explained to me that if she doesn’t get the price she wants, (read: needs), she would not be able to pay off all her debts. She is currently working in a cafeteria.

She also said that she would have nowhere to put her furniture if she rented. Hmmm, reminds me of George Carlin whenever anyone says this to me:

#119 bigrider on 07.15.11 at 1:24 pm

Garth says in #91 reply to Bigrider- ” Residential real estate as a % of your net worth = 90 minus your age. Commercial real estate forms part of fixed income in a balanced portfolio, which constitutes remainder of net worth”.

I guess then by default it is what I though. The net worth of an individual would have to be extremely high if commercial RE forms only a part of fixed income portion in a balanced portfolio. I mean assuming you find any commercial RE for 1million and even assuming fixed income component was 50% or 60% of balanced porfolio and assuming commercial only a part , say 30% of that, then net worth would have to be somewhere between roughly 6million and 10 million dollars estimated.

Good for you Garth ,but impractical for most to own commercial RE based on your advice.

I recently provided examples of cash flow-positive multi-unit residential investment properties for well under $500K. — Garth

#120 vyw on 07.15.11 at 1:27 pm

Canadian home sales jumped in June for the first time in three months, according to figures released Friday.

CREA news release here:

YOY increases still around 8-9% nationally:

Need to look at listings inventory numbers and sales to listings ratios (during 2008 correction, inventory was high, ratio was low):

#121 abc on 07.15.11 at 1:48 pm


I hope you could attached better email for advise than this, if someone/together smart enough to make 160+/yr, shouldn’t be easy enough to make decision on 300K house, buy or rent??, It looks like no brainer.

#122 Randis on 07.15.11 at 1:49 pm

LOL’ed at #63 Get Real, good one there my friend.

#123 Live Under Your Means on 07.15.11 at 2:04 pm

#84 Tripp on 07.15.11 at 6:22 am
#31 garrulous squirrel

The house is close to Hyde Park, a highly desirable area of one of the top capitals of the world. I still believe that the price is ridiculous.

Since I had the chance to live and work in a couple of European capitals and visited some others, I am sure that people paying a lot to live in Montmartre or K’damm are not crazy. The amount of interesting agrthings to see and do would be a surprise for most Canadians. Fantastic stores, restaurants serving real food, coffee shops with real coffee, theatres, festivals, museums etc. London, Paris and Berlin are true world class cities, nothing in Canada comes close.
Agree, have spent time in many of Europe’s capital cities (10 actually) and they are fantastic. However, could not afford to live in them now. Would rather live in a couple of small towns/villages in southern France where we have also spent time over many years.


#124 Bells on 07.15.11 at 2:15 pm

Move into the old home on St. Clair. The SELL it as your primary residence and pay no capital gains tax. More money for you. Then rent something till the market cools and buy something you actually like with the money you’ve made…

#125 Soylent Green is People on 07.15.11 at 2:26 pm


#126 Timing is Everything on 07.15.11 at 2:36 pm

#86 led

…or buying at the bottom.

#127 spaceman on 07.15.11 at 2:40 pm

Do your own math, if you had a mortgage on the old house no brainer, get out near the top. But because you own it out right, it is actually paying you a dividend, as the money you save on rent, you can invest in a balanced portfolio. But you will never get this chance to dump the place for a substantial sum, if you don’t like it anyway. Take your cash off the table, reduce your expectations, and rent a small place for 1-2 years, i expect deals will be had a year from now, and if not, buy then anyway. You will have a great down payment, and the downside risk will be exposed by then.

#128 Live Under Your Means on 07.15.11 at 2:46 pm

I don’t like to give advice to anyone. IMHO, each person’s situation is different and he/she alone should do their own research and decide what is best for them.

#129 jess on 07.15.11 at 3:13 pm

sin bonds

Minnesota would be the 16th state to issue tobacco bonds,
Tobacco companies agreed in 1998 to reimburse states $246 billion for treating smoking-related illnesses. States have more than $106.8 billion of outstanding bonds backed by the payments, made annually in April, according to data compiled by Bloomberg.

Minnesota Governor Mark Dayton agreed to a bond issue instead of higher taxes, and Republican legislative leaders endorsed higher spending

#130 disciple on 07.15.11 at 3:14 pm

Why are you so fat?
Aspartame was approved by the FDA in 1993 for inclusion in all foodstuffs with no restrictions. This chemical changes to formaldehyde, phenylalanine and methanol in the human body, or when a product containing it is heated to more than 30 degrees C. Formaldehyde is typically used to preserve dead bodies, and methanol is a deadly neurotoxin, commonly known as wood alcohol. The Food and Drug Administration acknowledges over 90 known side-effects of Aspartame including anxiety attacks and tinnitus (ringing in the ears) and death but still approves its usage.

Bio warfare:
Nitrates and nitrites are also used as flavor enhancers and colorants as well as a preservative which prevents botulism. Nitrate can be converted by bacteria in human saliva and in the intestine into nitrite, and nitrite can chemically react with certain other chemicals normally present in the body (amines and amides) to produce compounds called nitrosamines. Nitrosamine varieties number around 300 and roughly 90 percent of these have been found to be carcinogenic. I’ll bet the discovery of their use as a preservative was an accident in a biological warfare facility like MSG and Aspartame were.

That’s all folks! Have a great weekend. Beach awaits…

#131 JoshL on 07.15.11 at 3:46 pm

#118 Devore,
You hit on a number of very valid points as to why the rich are getting richer and the poor are getting poorer. Here are a few that you missed.

The gap between CEO (and upper management) compensation and worker compensation is growing at an alarming rate. They get away with this because there is little control over such things and CEO compensation is set by members of the board … who are often good old pals from way back. Also, there seems to be no price to failure. Grow the company quick in 5 years and cash out big. Fail to grow the company and cash out medium and try again.

Same with the bail outs on wall street. Gamble and win, cash out. Gamble and lose, get bailed out, try again. It’s the old privatize gains and socialize losses routine.

#132 Sue on 07.15.11 at 3:52 pm

So, if real estate is headed for a correction followed by a loooooong multi-year melt, why the heck would anyone wait a year or 2 and pick up a “bargain”??

Sure, it’s a bargain compared to 2011 but it costs roughly double to own vs to rent and your investment will leak value every year, you are throwing away money owning yes?

I think renting and having a conservative diversified portfolio makes sense for the next 10 years at least.

#133 Davyd on 07.15.11 at 4:07 pm


#134 Devore on 07.15.11 at 4:16 pm

#132 JoshL

Only a miniscule percentage of the population, even if you only count the wealthy as the population, are CEOs, or in a position like CEOs. Ultimately, their compensation is set by the Board and at the leisure of shareholders.

And if you look at the wealthy as being mostly rent-seekers, you can easily argue senior executives do actually produce and provide value, even if they are overpaid. They can make or break a company that provides employment for 100s of thousands.

I too think they are grossly overpaid, but lets not lose sight of the big picture.

#135 Patsan on 07.15.11 at 4:25 pm

Dear waterloo Resident,

You might want to check the numbers about immigration inflow and the recent news from CIC about capping yearly immigration by 10,000 for independent class and 700 (seven hundered) for investor class.

CIC web site also implies that the new cap is for all applications that were submitted after Feb 27,2008.

I would say that these measures effectively stopped immigration to Canada that was in the range of 250-270,000 for over last ten years.

If one assumes that there were about 250-270,000 applications submitted each year since Feb 27, 2008, there is a possibility of close to 1,000,000 aplications sitting in CIC backlog. With the new cap of 10,000+, the CIC employees would have a steady workload for 100 years.

#136 BrianT on 07.15.11 at 4:55 pm

#135Devore-IMO there is no complaint with the renumeration of CEOs who actually add sustained value. However, this is the notable exception to the rule in this pseudoguv corporate scenario we have right now. Last I heard the visionary chick they had as the grand poobah at Ontario Hydro was performing wedding ceremonies (probably just as well).

#137 Mr. Reality on 07.15.11 at 5:02 pm

Read this you blog dogs. Learn about bonds and real estate.

Mr. R.

#138 Peakoilist on 07.15.11 at 5:08 pm

#61 Dan
the penalty is 5 days of not posting..sorry :)

#139 Ben Rabidoux on 07.15.11 at 5:18 pm

“Ben: Nice site but try to get the self-promotion under control. You use this blog as a traffic-builder. If you like me so much, at least link here, dude. — Garth”

Sheesh, Garth…I think I post here maybe once a week, far less frequently than others linking back to their sites. And I’ve referenced your work plenty of times over at my site. This site has become a discussion board where the latest and most relevant articles are posted for people to discuss. If you don’t want me adding to that discussion for whatever reason, let me know and you won’t see another post from me here.

Man up. Not what I asked. — Garth

#140 bigrider on 07.15.11 at 5:28 pm

Garth replies to Bigrider at #120- ” I recently provided examples of cash flow positive multi residential properties for well under 500K”

Yes you did. I was the one who asked you too do so if you recall back then and much appreciated.

The error I made today was interpreting your use of “commercial RE” example by you to mean exactly that literally. I know that multi unit residential can be had for much less and suffice as income tool for those less ‘well heeled’.I also know that such properties would fit your allocation principles.

However, I stand by the fact that if one truly wants to own a commercial piece of RE in the literal sense, with all it’s inherent advantages from a legal perspective as a landlord, then sticking to your recommended formula for relevant exposure means investor must have considerable big 7 or possibly even 8 figure net worth.

True commercial RE is not for the average upper middle class guy.

#141 Trailer Park Boys on 07.15.11 at 5:36 pm

#126 Soylent Green is People

We don’t get it…whats your F’n point ?

Even Bubbles cats don’t get it.

#142 Trailer Park Boys on 07.15.11 at 5:40 pm

#140 Ben Rabidoux on 07.15.11 at 5:18 pm

“Ben: Nice site but try to get the self-promotion under control. You use this blog as a traffic-builder. If you like me so much, at least link here, dude. — Garth”

Yeah ya cheap SOB.

PS Hey..we got a lot of Dope to Unload….can you link us ?

#143 need a mortgage on 07.15.11 at 5:42 pm

Just finished financing a new house. 20% down, no CMHC ins. perfect credit and yet we had all kinds of hoops to jump. Income from every source had to be verified and backed up with paper,house required an appraisal and potential rental income independently verified.

I guess once they don’t have CMHC to back them, bankers take loans seriously.

#144 Cato on 07.15.11 at 5:52 pm

#107 Mr Buyer – I agree universal healthcare should be a fundamental right, society is better for it on many levels.

The problem is we are going to be facing constraints on what sort of social programs our economy can support. All these worthwhile services still need to be paid for, and the days of all western governments financing social programs via deficit spending are coming to an end.

Sure, as Canadians we may feel entitled to free medical, a social safety net and all the other programs big brother provides but if the economy can’t support the social infrastructure then it simply won’t survive. It didn’t have to be this way, but we allowed gov’t to bet big and plan our economy around favourable US trade continuing forever. The bureaucrats bet wrong, the relationship between Canada and the US is changing and now we all pay the price.

This was the danger of the housing bubble, it created a false economy and we built our social infrastructure around it. Now we get to experience an economic reset, we will need to live within our economic reality and it will trump alot of social idealism.

#145 Hoof - Hearted on 07.15.11 at 5:56 pm

#131 disciple

IMHO…Modern Medicine .post natural ..has been simply nothing but a vector for create a problem/BS a cure.

The founding of the AMA is quite a Frankensteinian revelation

The Rockefeller Drug Empire

Eustace Mullins – Murder by Injection (Full Length)

Michael Crichton on the Unproven Dangers of Secondhand Smoke


States of Fear: Science or Politics? with Michael Crichton


One of Mullins comments was he quotes an MD who stated that he(MD) never saw a cancer patient that had not been vaccinated.

Anyway…have a look

#146 confused and a little crazed on 07.15.11 at 6:05 pm

here: house prices rise

#147 Sumadartson jr. on 07.15.11 at 6:09 pm

Friends, With the Canadian Dollar at near $1.05 US, MTGE Rates will not go up.

A rising rate will shoot our Dollar to $1.10

Canada is an exporting country, it needs a competitive currency, not an expensive one.

TD Analysts are attempting to”Influence (Scare) the R E Market into a Buying and Selling Equilibrium” for both Toronto and Vancouver.

I predict rates will remain where they are or even drop if the Canadian Dollar gains value against the US Greenback.

It’s all covered in Garth’s Books.

Long term rates are set by the bond market, not the central bank. There is no direct influence on currency valuations. — Garth

#148 Toronto Disaster In Full Progress on 07.15.11 at 6:14 pm

Most homes sit unsold, as they are posted above sane means. New postings popup as mushrooms on the map, even it is FULL VACATION schedule. Why?
Most of the multiple offer properties, are still there days and days after their botched attempt to foolish some suckers. Why?
It become a rule for agents calling back asking buyer (me) to bring any offer at less than asking. Why?
(It’s not even funny to tell them to shove it)
The descent has plentifully started all over Central and North MLS districts.
It will be a full disaster by SEPT 1st when markets will be in massive red over year start.

#149 45north on 07.15.11 at 6:21 pm

My husband and I are relocating back to Toronto from the equally expensive city of Los Angeles where we never quite managed to buy a house.

To sell in LA today, people bring money to the table. You know that. You know them.

#150 Bottoms_Up on 07.15.11 at 7:10 pm

May have been said already (sorry, I haven’t read all the comments):

Your real estate portfolio is throwing off ~5%/yr (or less, after factoring in property taxes and depreciation).

So, your 300k is basically tied up in a very risky asset and you’re making about what a blue chip company throws off in dividends every year.

Seems to be a no-brainer to me: sell your house now, and invest the proceeds. Rent, save money, and wait.

Gloat at the fact that you are now liquid, and no longer exposed to the real estate market.

#151 Ben Rabidoux on 07.15.11 at 7:45 pm

Bite me!

And here I thought you were erudite. — Garth

#152 Herb on 07.15.11 at 8:10 pm

Soylent Green @ #126,

Now I’m confused and indecisive: do you sell love, or do you love to sell?

#153 Stanley on 07.15.11 at 8:11 pm

I think 10 – 15% reduction in price is unlikely.
They have been going up in the 10% per year for quite a while.

Prices are now bizarre.

My prediction – Houses will be 50% less than the “peak value”. It will take over 10 years (The worse in the first 2 years). The only question is when it starts.
If the Fed did not intervene in 2008, these reductions would already be happening.

#154 Smokin' Jane on 07.15.11 at 8:16 pm

“Unfortunately, like most of the herd, I’ve been brainwashed to feel the need to own a house..” “..makes me worry that we will be “house-less””

Oh boy oh boy oh boy!! FEAR being “house-less” . When you suppress a Need bad things happen. You’ll get the cold sweat at night… the nightmares, extreme thirst… and during the day you’ll be depressed and tired. You’ll see things that aren’t really there. The idea of paying someone else’s mortgage will eat you alive (literally). The social pressure will crush you, and your self-esteem will die. If you’re “house-less” you’ll gain weight, you’ll get pimples on your butt, your significant other will leave you, your pet will escape… there’s even the risk of a poltergeist moving in with you (which usually happens in the third or fourth week). You’ll be miserable, you’ll be… a renter. It’s the scariest thing in the world… for real ! 7 out of 10 Canadians are not “house-less”. That should be enough proof for you. Look, I have a friend who rented a boardwalk apartment and got her girl pregnant (both of them caucasian). The baby was born chinese. See what happens ?? DO NOT RENT.

#155 Mr Buyer on 07.15.11 at 8:19 pm

#145 Cato … slash spending certainly (recoup cash from the benefactors of this bubble for one). do not slash universal health care spending (slash spending on certain extraneous health care professionals and spending, but not doctors, pharmacists and even dentists). Education should be fully supported at the expense of other social programs such as biz subsidies. The amount spent on traditional social programs is dwarfed buy other expenditures that benefit few. All the same social spending must be re-adjusted (contracted in some areas and expanded in other areas strategically).

#156 garrulous squirrel on 07.15.11 at 8:28 pm

RAISES ALL ‘ROUND……..the fee’s for services and property taxes are scheduled to increase another 40% according to an article in the Van(RAT)couver Sun quoting several local mayors.

Being a homeowner is going to become more like a hangover after the greedy civic servants gouge even more out of the citizen so that they can pad fat raises and bigger pensions…….geez I hate being right about these things.

#157 jess on 07.15.11 at 8:47 pm

oil companies are able to disguise foreign royalty payments as taxes, in order to reduce their tax liability.

#158 Helga on 07.15.11 at 9:10 pm

155 Smokin’ Jane,
I am soooo with you!

#159 Utopia on 07.15.11 at 9:21 pm

#45 Elmer on 07.14.11 at 10:48 pm

“Median income in 1976 was NOT 45k, not even close. You need to check your facts better”.
I am way behind today. This is the first time since “not sure when” that I have not been able to get at the days posts.

I will bet one of the the other Dawgs has already responded to your comment Elmer but I will throw this out anyway.

What is being referred to in the Conference Board report is called “constant dollars” and that is why the numbers used are so high and don’t seem to make sense.

You are correct that the median income in 1976 was not 45k. What you are reading are numbers that are relative once adjustments have been made over time.

In this way, any two years can be compared to judge the relative gain or loss in real income once inflation (or deflation) has been accounted for. Constant dollars equalizes variables over decades,…even centuries.

It is a fascinating way to peer into the past or to make projections into the future.

Just keep in mind that there are disagreements in how the various measures are arrived at so it is not is all sweet as a dill in the strange world of accounting for inflation data.

Here, take a look at this Wiki. It will explain the idea better than I can.

And somewhat related….try this simple calculator that will give you an indication of the change in buying power over time. It also compares any two recent years and is kind of fun to use (if you are dull like me).

I did have a really good constant dollar calculator in my favourites list at one time but cannot seem to find it now for this post. That is just the sad result of having too many laptops blow-up on me I guess.

I will look again later.

#160 Mr Buyer on 07.15.11 at 9:28 pm

#145 Cato … It is amazing to me that people can easily accept that the ‘reality’ of housing can be so thoroughly corrupted through political action in collusion with financial interests yet balk at the idea that political action can flip traditional financial ideas upside down. The reality is that very few are insulated from a leaner meaner existence espoused by the powers that be based upon rationalizations rooted in presently pervasive financial ‘realities’. Even a large majority that profited from this obscenity of a housing bubble will not ultimately prevail over medical costs (not too far down the road for many). Rip apart reality and people have a chance of a lifetime to see just how liquid reality truly is. People may now have the chance to see that the passive word ‘rights’ must be swept away and replaced by the word necessity and be prepared to roll up our sleeves and jump into the fist fight that life is and ensure our necessities are met. Leaner and meaner is fine, gouge the bloat and fat (including the bloated costs for equipment finances and the like) but hands off access to medical care, and lets restore services lost yet necessary.

#161 don't worry about it Ben on 07.15.11 at 9:45 pm

to #152 Ben Rabidoux…..Garth is an equal opportunity bully. He has outright killed my last couple of posts and edited others.

Let’s see if he approves this one…..probably not.

I think he’ll post it with some snotty reply.

Hey Garth, bite me too!


Clean up your language or don’t get published. Simple choice. — Garth

#162 Utopia on 07.15.11 at 9:50 pm

Today I was out visiting a friend who has a small prairie farm (less than a section). For those who are not farm people, a section of land is one square mile and it is equal to 640 acres.

This is considered to be a very small prairie farm.

Anyway, he was telling me this is probably his last year in business and he may be forced to sell his land or get a job in town to make ends meet.

I was surprised. I already knew he had contracted to sell his grains at top dollar prices and that he was expecting a good crop despite all the rain. “So what’s up”, I asked.

“Well yeah, he said bitterly, prices are up for everything I grow, but so are all the input costs. It just never works out. When I get ahead on grain sales I fall behind on fertilizer, fuel and machine parts”

“I just can’t win at this business anymore” he added.

And so his story is similar to the experience of many of the remaining small holding farmers who teeter on the edge while their bigger neighbors buy up any quarter section that comes to market in a heartbeat and don’t consider themselves safe until they have at least 10 sections of good land.

His problem is that he never had the capacity to store and save grains during low priced periods that could be sold into the market as seasonal prices increased.

As a hand-to-mouth farmer he must sell whatever he produces in the same year the crop comes off. Storage is not an issue really, it is volumes. In essence he must sell right off the truck at harvest time to pay his bills and make ends meet. That always yields the lowest prices.

All is not well in the grain belt.

#163 what is clean language? on 07.15.11 at 10:08 pm

Clean up your language or don’t get published. Simple choice. — Garth

Here is the dilemma; you talk about horny and STD’s and wet and virgins and then you tell me to clean up my language.

The language you censored is less offensive than the language you use, IMO.

#164 Utopia on 07.15.11 at 10:09 pm

#119 disciple wrote…..

“She also said that she would have nowhere to put her furniture if she rented”.

Great point Disciple. She needs storage or a monthly locker. That reminds me of how well storage companies have done through the recession in the US as business for units boomed. Space is still at a premium in some cities so this is one form of real estate that has actually done very well despite the hard times. I expect that business will be very good in Canada too over the coming years. Something to keep in mind.

#165 disciple on 07.15.11 at 10:33 pm

Hey Ben,
Not sure why Garth wanted to pick a fight with you today, but obviously many do indeed appreciate your insightful website. I noticed that you didn’t link to any other blog sites either, or am I mistaken?
I was surprised by your response, but hey, it is Friday, and it’s been a long week…

#166 Killer Chicken or Imploding Boomer? on 07.16.11 at 12:57 am

163 Utopia – check this out

France is just slightly larger than Sask, they cram 65M people into it, and yet they produce more wheat than the whole of Canada.

IIRC they get 4 times the area yield.

Vive le tour!

#167 Ben Rabidoux on 07.16.11 at 10:12 am

Garth….please check the URL from comment #152 and compare it to mine. You will see that this was not me posting, but rather someone else posting under my name.

I’m a little surprised by your comments, but I’m not a jerk. I wouldn’t write that.

#168 echo on 07.16.11 at 12:11 pm

My broom got so much exercise in the early 90’s sweeping up guys like you I had to toss it out and get a bulldozer. Wise up sunshine.