Extremes

GO modified

If you lack a life and come here often you’ll notice something. So many people live in extremes. Homeowners dis renters. Maples hate Yanks. Metalheads trash stocks. Renters mock the mortgaged. Millennials envy/loathe Boomers. And the poor Asians get whipped.

Realtors, it seems, are the worst. Either business is getting harder, or their brains have been Re-Maxed. Or both. When it comes to extreme thinking, they’re the champions. Here’s an example, from a poster who calls himself ‘I Love Real Estate’, a realtor in the tony middle of Toronto.

Yesterday he submitted this:

“People find so many ways to rationalize all the terrible negatives that come with renting. There are so many, many pains in the neck that come with renting:
Privacy breaches during background checks.
Maintenance delays.
Hidden charges for water and garbage/recycling services.
Owners who lie and kick you out so they can flip.
Amateur landlords who don’t have a clue.
Legal fees if you have to go to landlord tenant board (much more common than anyone realizes)
No pride of ownership.
Being a second class citizen looked down upon by homeowners.
Constant financial insecurity.
Stupid no pet rules that hurt your quality of life.
Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth.
Craigslist scams.
How’s that for a dirty dozen?”

Initially, I decided not to publish the list, which is handed out at Realtor University, and often tat’d on the lower backs of realtresses (trust me on this). Then I thought I’d share it with you, along with my own observations.

In this same hood of Toronto, I live in a $2 million house. It’s a short walk to the Yonge subway, a 20-minute drive to the financial core, where my day job happens, and sits on a leafy, quiet street where every driveway has a Mercedes parked outside of two-story brick houses on substantial lots. To buy a house on this street costs at least $60,000 in land transfer tax alone. To sell costs about $100,000 in commission. The property taxes average $700 a month.

So, I rent, although I’m fortunate enough to be able to buy this house with cash. That costs me $3,800 a month. Last year the cash I did not spend buying the house generated a return of 10.3%, or just over $206,000. In the last 24 months there has been zero appreciation in the price of houses in this area. You do the math. I rent this house (granite, stainless, three bedrooms, two baths, garage, three levels, fireplace, hardwood etc.) for 2.2% of its value annually. My investments make five times that. I pay no property tax, building insurance or maintenance. And the guy a few doors away, who lost his executive job just before Christmas, envies me deeply. He will be trying to sell into an uncertain market. He has no choice.

So, on my street, I’m no second-class citizen. I have freedom, mobility and choice and yet live in an equal home, with less financial exposure and obligation. I have a dog. Big. Hairy. He has a backyard, and never asks me if we rent. I pay no city levy, nothing for water and no Toronto garbage tax. I do not insure the house, just my contents. If mortgage rates rise, I care not. If the local housing market stagnates or declines, there’s no impact. When I decide to leave, there’ll be no listing agent, no open houses, no showings, no sign, no waiting for an elusive buyer, no negotiation or sign-backs, no delay, no commission, no lawyer, no stress.

Of course, I know my choices are not reasonable for everyone. But they are for me. The significant amount of money I save not owning this inflated Toronto house has allowed me to buy, maintain and enjoy a piece of paradise in a far cheaper, more peaceful and bucolic place, while still building my net worth, and future.

There is a time to own, and a time not to. It’s determined not just by the market, interest rates, debt levels and macroeconomics, but also by your own life, family and choices. Society isn’t divided into owners and renters. Those who would have you believe such a thing are weak, challenged, myopic people, or bottom-feeders seeking to profit from the emotional confusion they churn up in others.

You are best protected in this world by being diversified and flexible. Make the choices that are correct for you. Think, don’t just feel. Turn off the noise and come to your own conclusion. Do not be bullied by a salesguy. Your parents. Peers. Media. Strangers. It’s your life, not theirs.

Well, I just revealed more than I intended. Couldn’t help it. We renters, man – such undisciplined losers.

275 comments ↓

#1 unbalanced on 01.11.15 at 3:03 pm

Keep up the great contributions you do. Alot of people envey you for telling the truth.

#2 nubbers on 01.11.15 at 3:11 pm

Go Renters!

#3 RealistvsExtremist on 01.11.15 at 3:13 pm

Govt Bail-ins approved at G20 (except Canada – that exception is in invisible ink somewhere

https://www.youtube.com/watch?feature=player_embedded&v=_8sd6gFt-Lc

#4 waiting on the westcoast on 01.11.15 at 3:13 pm

Smart guy! Love that he has real estate where it makes more economic sense.

Of course the average person has not done what Garth has suggested and they have captured (at least on paper) the benefit of the extraordinary buildup in this sector. But try to get them to sell at the peak… Their answer is… What if it keeps going up… Still don’t get it.

My parents own an acreage in Fraser Valley. Worth ~$1.2M and fully paid for. I told them to sell and put monies in etfs and move around globally in furnished place to furnished place. They could spend a couple of months with family in Phoenix. A couple of months in Vancouver, a few months in the motherland (Italy) and off to a some other locales s well (likely south america). This would be for funded by their portfolio.

The answer… No – because we would use up your inheritance. ;-)

I said – watch my inheritance decrease over the next few years… :-(

#5 I'm Stupid on 01.11.15 at 3:18 pm

I wrote about being screwed by insurance companies because of my 2 minor at fault accidents last year. I found a solution that I think will work.

I need a vehicle for work. I drive about 30-35k a year. The cheapest quote I got was for 6k a year.

I contacted a rental car company, in desperation, to see what it would cost me to rent a car for a month. A small car is $650 a month and a mid size one was $750.

So I did the math…
Buying the same car about $25k value of the car after 8 years of 35k a year driving 0

25k/8= $3125
Oil changes/tires/maintenance per year = $1500
Insurance if I was in the regular market with a clean driving record= $1600
Total to own a vehicle $6250 best case scenario
I’m in the worst case so my cost would be over $10k

To rent a the same car for the entire year
$650×12= $7800 tax included and insurance is free with my credit card. I have 2 credit cards to get around the 48 day rental maximum

No need to pay for anything and I didn’t include interest for financing a car or the cost for using cash to buy a car.

My wife gave me the look like I’ll be a second class citizen. Even though renting the exact same deprecating asset would be cheaper. Guess what… I’m going to rent my car until the time comes when owning is cheaper.

#6 kommykim on 01.11.15 at 3:19 pm

RE: The significant amount of money I save not owning this inflated Toronto house has allowed me to buy, maintain and enjoy a piece of paradise in a far cheaper, more peaceful and bucolic place, while still building my net worth, and future.

Just curious. In what city/district is this “far cheaper, more peaceful and bucolic place” that you speak of located?

#7 I'm Stupid on 01.11.15 at 3:19 pm

If anyone can see a hole in my math please let me know.

#8 lynda on 01.11.15 at 3:24 pm

sold our house in n van without even listing. our realtor brought in a buyer looking to build ( they did not even go in the house before the purchase!) the neigbourhood lost it’s apeal with all those huge fancy (mostly vacant) homes going up on every block for 2.5mil. 1st time renting in 25yrs & yes we struggled with the stigma. after 4 months renting i have days i am good with it & other days i want to run out & purchase. hopefully the market will correct, born & raised in nvan & the prices here are laughable.

#9 honeybooboo on 01.11.15 at 3:25 pm

#7 I’m Stupid on 01.11.15 at 3:19 pm
If anyone can see a hole in my math please let me know.

==================================
double check the insurance coverages

#10 honeybooboo on 01.11.15 at 3:27 pm

Garth, I’m not knocking your math but admit that $3800 a month for a 2M house in nowhere near typical in Toronto

I had the choice of at least 20. — Garth

#11 IM in C on 01.11.15 at 3:27 pm

Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth.

Sorry Garth, that one is the truth !!

My neighbours are not building equity or future financial freedom. I am, though. I have it now. Is the goal in life to be like ‘most people’? — Garth

#12 Rexx Rock on 01.11.15 at 3:32 pm

Great blog today for renters and non renters.Here’s another example.My friend bought a condo a little over 5 years ago.His living expenses today are about $2000 a month to own this condo.He was paying $700 to rent a small 1 bedroom included utilities.Now he has also lost over $35,000 at least in equity.I tried to warn him but his girlfriend at the time made the decision.An extra $1300 a month invested over 5 years is gone.Do the math,it always tells the truth.

#13 Nemesis on 01.11.15 at 3:35 pm

#AnotherGoodReasonToRent:

http://youtu.be/VKrj1ymJzmo

#14 kommykim on 01.11.15 at 3:36 pm

RE: #7 I’m Stupid on 01.11.15 at 3:19 pm
If anyone can see a hole in my math please let me know.

What about 3rd party liability? Some credit cards just cover the basic insurance and not 3rd party.

#15 crowdedelevatorfartz on 01.11.15 at 3:38 pm

@#3 Reality vs Paranoia

YAWN.
Another link to the paranoid ramblings of internet conspiracy theorists…….

Oh and I see you were Deleted again………

How’s your blood pressure these days?

#16 James In Kitchener on 01.11.15 at 3:42 pm

There is a time to own, and a time not to. It’s determined not just by the market, interest rates, debt levels and macroeconomics, but also by your own life, family and choices

Well Said

#17 For those about to flop... on 01.11.15 at 3:48 pm

I wish I was a “loser”like you Garth!

#18 Deb on 01.11.15 at 3:52 pm

We are social animals. I think Aristotle was the first to write about that, many years ago. As we live our lives, we just can’t help comparing ourselves to those around us, whether that comparison be physical, intellectual, financial, owning vs renting, ect. This is where reason and emotion become intertwined, since we are comparing our situation to one where we may have very few hard facts concerning the other person’s unique situation.

I thought about this as I read how ‘I Love Real Estate’ suggests that 95% of people who rent never save or invest the way Garth suggests. How did he ever arrive at this conclusion? He says it is the truth, but I don’t believe it at all. I sure would like to know his source.

#19 West Coast on 01.11.15 at 3:59 pm

Nothing wrong with a bit of disclosure! – especially if exposing one’s ‘common sense’. I too rent – happily – a luxurious apartment in downtown Vancouver. Given my single person’s salary, I would never have been able to buy this apartment. As it is, I pay less than 1/3 of my net on rent.
As I write this I have ‘my’ building’s depreciation report on hand. I know exactly what repairs are due for this year (and how much they are going to cost). I also know that my landlords will be footing the bill.
When I go into the hall, stand by the elevators (which will be ‘modernized at the cost of over a million dollars in 2016) and look at holes in the ceiling drilled for the ‘exploratory work’ for the piping, I know that replacing piping and valves in this building will also cost the owners over one million dollars in 2015.
As a tenant I have mild feelings of concern. If I were an owner, I would be apoplectic.
Very few suites have been sold recently in this building which is now over 20 years old. Like our modern household appliances, today’s residential buildings are not built to last.
If you are planning to buy a condo insist on obtaining the depreciation report. Read it carefully – do the math – and think seriously about whether this is really an ‘investment’ that’s worth your money.

#20 YoungBuck on 01.11.15 at 4:11 pm

“It is not the intelligent who survive, but rather the ones who best adapt to change”

I love that fact that renting does not inhibit me nor my imagination for the future. It provides flexibility to adapt to change, and like Garth mentioned; is a low stress alternative to maintaining ones own illiquid asset.

#21 Bill Gable on 01.11.15 at 4:12 pm

A friend just lost his Hi tec job. He phoned and was sounding stressed. ” I’ve got to sell”. I wished him the best, and told him to be aggressive on the price. There was silence for a second and then he dropped the bomb – he had made an offer on a lake proprty, and he was down to a few thousand. He then said ” Well I can walk away from the Mortgage”. Since we live in BC – you can’t. When I told him, I was hoping he wasn’t going to fall apart. Stress in the Vancouver market, is building and I bet it’s going to get a lot messier before this peaks.
Yikes.

#22 No Canada, No on 01.11.15 at 4:12 pm

I guess the last 10 years houses in that area appreciated 2x, more or less in line with portfolio.

The difference is that 2 mln average houses in “prestigious” Toronto neighbourhood is very much a joke, which 2 mln portfolio is a real thing.

PS Are there “brick” houses? No way.

#23 Financial Freedom at 40 on 01.11.15 at 4:23 pm

#10 Honeybooboo
———-
This lovely classic Georgian in the ‘hood is within hobbling distance to Sunnybrook if any TO blog dog takes out an ankle slipping on ice
http://www.realtor.ca/propertyDetails.aspx?PropertyId=15169413
I think it was purchased for $1.8M in 2008… rental $4K.

#24 West Coast on 01.11.15 at 4:25 pm

oops gotta bit carried away with numbers ….looking again at the depreciation report…the numbers listed above are the charges over a cycle not an immediate cost….Garth can you delete my last post and I will re post…hate to be so inaccurate….

#25 espressobob on 01.11.15 at 4:36 pm

Another great post Garth! Renting rocks if one invests in a balanced & diversified portfolio. And all that profit!

Life is good with no debt and several income streams. Thanks for all the help.

#26 SWL1976 on 01.11.15 at 4:37 pm

The interweb has a way of sometimes letting us reveal more than we intend to a first. However, it also brings out the human behind the words

#27 OttawaMike on 01.11.15 at 4:38 pm

Bet you wish you were renting your NS place as well.

#28 happity on 01.11.15 at 4:42 pm

“with less financial exposure”

Yah, you gave your mojo to bankers who have paid billions in fines for rigging markets, and, when it all falls apart when trillion in derivatives crash they have a bailin plan waiting for you

#29 Shawn Allen on 01.11.15 at 4:42 pm

Societal Divisions

Society isn’t divided into owners and renters.

****************************************
Agreed. Financially speaking one might divide society into winners and loses. Harsh, but I think true.

One can move from one camp to the other. Good choices (not luck) will tend to keep you in the winners camp. Good and bad luck can determine where you are but a winning attitude and winning choices will soon move someone who appears to be losing into the winners camp.

At one time house buying might be the winning choice for most, at other times not. At almost any time and certainly today house buying can be part of a winning choice. It can most certainly also be part of a losing choice. Renting can most certainly be a winning choice for many people today.

In the long haul we mostly determine our own financial futures or at least whether it will improve or deteriorate. Our choices determine life outcomes. Choose wisely.

#30 Shawn Allen on 01.11.15 at 4:45 pm

The Life of Garth

Smarter Dogs and millennials will be lining up to see if they can be adopted.

#31 saskatoon on 01.11.15 at 4:48 pm

thanks for this sincere, open post garth.

refreshing honesty, in the midst of a sociopathic selfie-driven culture.

#32 HDJ on 01.11.15 at 4:49 pm

I own a 1.5 million house in Saanich BC. It’s an ocean view (panoramic) property a block away from the beach and a ten minute ride from downtown Victoria. I’m retired with pension. At my age I’m not concerned with investing in order to guarantee a prosperous existence far off into the future. With some luck I probably have another 15-20 years left on this earth. I love my environment and enjoy every day with my wife, two children, grand children and friends. The last thing I’d do is sell my beautiful home (and rent) in order to generate a housing profit that could be invested – I currently have a few hundred thousand in very conservative investments that generate about 4-5%. Life is good and I have little concern for what happens each day to the stock market, the price of oil, the value of the dollar, or how the housing market is doing. I’m just an undisciplined home owning loser who, like Garth, probably revealed more than I should have.

#33 Shawn Allen on 01.11.15 at 5:00 pm

House Math Rent versus Buy

Perhaps we can think of the rent minus those costs that would occur if the house was owned for cash as the house “free rent” dividend foregone by renting.

Rent is stated at 2.2%. After deducting property tax and insurance major maintenance (the kind the landlord pays for) the value of “free” rent that the house would provide might be say 1.5%. ($2600 per month)

Now if investments give a lumpy but average 6% return (after tax) we would need the house value to grow at 4.5% to compete with the rent-and-invest alternative.

How likely is the 4.5% compounded growth rate going forward from today? Will the house be worth $3.1 million in ten years? I’d give the investments a higher chance of doing at least 6% after tax as opposed to the house increasing by 4.5% annually from today’s starting point.

Still, if I had say $8 million or more invested I might be tempted to take $2 million and buy the house if I loved the area for the long term. I’d still have $6 million invested. With budgeting one CAN get by on that much, without dipping into principal, even without working.

#34 waiting on the westcoast on 01.11.15 at 5:03 pm

My neighbours are not building equity or future financial freedom. I am, though. I have it now. Is the goal in life to be like ‘most people’? — Garth

Garth – go forward you are totally correct.

But many of these people have benefitted by the irrational exuberance around real estate. The sad part is they don’t want to imagine that the game is up so they will hold stubbornly on the way down. Similar to how many of us have been stubborn not to enter the market while it climbed up against real value.

I would say that our math had been more accurate but their intuition or luck has helped them during this cycle. There will be some stunned faces over the next year or two…

#35 Smartalox on 01.11.15 at 5:04 pm

Hey Stupid,

Most credit card rental insurance policies are limited to rentals of 60 days or less. You may need to flip flop back and forth between two cards, renewing your rental every month to make it work.

Some ‘corporate’ cards for small business people waive this, if the vehicle is rented for business purposes only.

Don’t forget to claim the rental fees on your taxes!

#36 Gulf Breeze on 01.11.15 at 5:09 pm

Owning a home used to represent financial security, a roof over one’s head and in that respect alone, was always a sound investment. At some point, it crossed that threshold and became a fetish. Now, as this article points out, at least some are avoiding purchasing homes.

I’ve co-owned prime commercial property in Seattle for many years. The building, though hard to price, is probably worth between 2 and 3 million, depending on current bank yields. In a low yield environment, probably worth closer to 3.

I can’t imagine buying a house in Vancouver that might fetch 6,000.00 per month in rent when I could own the property I co-own (in a commercially and technologically vibrant American city, that fetches over $200,000.00 in rent per year–after taxes, insurance and maintenance) for the same price.

I don’t get it. It’s like prospective owners are gripped by mass hypnosis that robs them of the ability to properly forecast, use basic intuition … and stranger still, destroys their ability to do basic math.

#37 Retired Boomer - WI on 01.11.15 at 5:12 pm

Garth, you are a wise man in a sea of stupidity. As you say “there is a time to own, and a time to rent.”

Could not agree with you more. The freedom to move, in these uncertain times is worth a bunch!

I would never tell another how to live their life, only to weigh options, commitments, and opportunity.

That’s why I would never trust the financial planner who leases his cars, but that is another story.

#38 Extremes | Realties.ca on 01.11.15 at 5:12 pm

[…] Source: http://www.greaterfool.ca/2015/01/11/extremes-2/ […]

#39 KAC on 01.11.15 at 5:18 pm

“I’m stupid #5”

Be careful, make sure that your credit card insurance includes 3rd party liability and is not just for damage to the rental car.

It would be unfortunate if you caused the accidental death of a 30 year old, highly successful heart surgeon and the insurance company would only pay to replace your broken headlight, thus leaving with millions in potential liability.

#40 Ben on 01.11.15 at 5:18 pm

Met a woman today out sledging in Montreal. Her and her husband were landlords for a living. They are fully mortgaged up. They own condos in Ontario and Quebec. As a concerned fellow human I asked how business was. She told me not so bad. Then she said in Ontario you could increase rents $10 and they just took it, “but here in Montreal – forget it”.

She seemed pretty clueless but I’m thinking she’ll get a crash course soon enough.

#41 Debtfree on 01.11.15 at 5:19 pm

I am so envious .not of your choice of location but your freedom . Not a hole but a sideline . Have you considered open sourcing a scan of yourself and bandit ? Perhaps in a Jedi uniform ,so even the fan boys , would be able to 3D print a copy for their hero collection . Or sell bobble heads ala rob ford . I’m sure every realtar would love to get their hands on one . Thanks for the early post . You crack me up .

#42 KAC on 01.11.15 at 5:19 pm

Ooops, somebody else just beat me to it.

#43 Mike T. on 01.11.15 at 5:22 pm

oh man favorite post in a while

I love people like “I love real estate’ because they remind me what I am not.

#6 Kommie Kim

it’s somewhere on the east coast

#44 I'm stupid on 01.11.15 at 5:22 pm

I checked and my credit cards cover the comprehensive part of the policy and legally the rental car company has to provide liability coverage.

#45 I'm stupid on 01.11.15 at 5:28 pm

Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth.

Does anyone else see a problem with this statement? When the numbers don’t add up to making your point, just say you don’t have the discipline to do it. Well how about I spent the money from the house on the lottery and won. That’s a good strategy too.

#46 David on 01.11.15 at 5:32 pm

I like how ‘constant financial insecurity’ is explicitly tied to renting.

I do find that after I get someone to agree that investing the difference is a better financial decision I always get the same response, ‘95% of people aren’t going to do that though’.

#47 PeanutBunner on 01.11.15 at 5:33 pm

Great post!

We have to keep in mind, realtors are commission based sales with no base. So they have to say and do what ever brings them bread to the table… especially since there is no real governing body who will punish them if they lie/stretch too far the truth.

#48 Mark on 01.11.15 at 5:39 pm

Indeed, this is how I look at it. The average Canadian house is $400k. At a P/E of 35, this represents an asset with a net return of approximately $11,500/year.

One can take their money, and buy stocks with a market average P/E of 15 (ie: the TSX) right now. The same $400k will yield a net return of approximately $26,700/year.

Hence families who own, versus rent, are leaving at least $15,000 per year in after-tax income on the table.

A big deal is often made of Canadians not properly contributing to their RRSPs/TFSAs/RESPs/etc. Well geez, I wonder why, when there’s a $15,000/year after-tax drag on the average Canadian homeowner simply by owning such an inflated asset class.

Of course, we know that stocks have long-term earnings growth typically higher than houses, so as time goes on, the situation becomes even worse for the homeowner versus the person who takes a proper and rational look at the buy vs. rent decision and acts accordingly.

#49 Dwilly on 01.11.15 at 5:39 pm

100%. My family owns. But I’m 32 and have only 40% of our net worth in home equity, and a mid 5 figure mortgage left. Owning is no heaven. Had to fix a roof a while ago. Appliances. The crapper. For now owning is right for us and our two small kids, given the rest of our situation. But won’t always be.

#50 Mark on 01.11.15 at 5:50 pm

“If anyone can see a hole in my math please let me know.”

Your ‘math’ looks pretty solid. Actually, there is a problem with your math that makes the renting option look even more favourable, and that is, you aren’t assuming a return on your $25k of capital invested up-front that you now have available to invest since you’re renting. So this makes the renting option look even better in comparison. If we assume even Garth’s modest 7% “balanced ETF portfolio” return, that’s an extra $1750 in your pocket per year.

One thing that I would point out is that it is possible that the rental company has on and off-season rates. And the credit card insurance generally only covers damage to the vehicle, not comprehensive liability. Hence, to have an equivalent amount of insurance as you had with a policy that covered your owned vehicle, you would need to purchase additional insurance. You may not end up avoiding the same issue. Read the policy terms of your credit card carefully.

Also, technically, you should include the value of any frequent flyer points, cash back, or whatever you receive from your credit card in your calculation. As well, you may have the opportunity to not rent the car for a few weeks during your vacations — so score some additional points for renting.

#51 Mark on 01.11.15 at 5:56 pm

““If anyone can see a hole in my math please let me know.””

Oh one more comment… One thing that I found out not having a car registered to me for a few years, is that future insurance companies do not look kindly upon a ‘black hole’ existing in your records. Some just keep the rate high, even if you can produce a perfectly clean drivers license abstract. And some actually draw a negative inference against you, as though the lack of insurance during that period was an attempt to avoid paying premiums for past misdeeds.

I know in my case, even to this day, I am penalized insurance-rate-wise (with literally decades of incident/accident/ticket-free driving) because for 2 years approximately 10 years ago, I was not named on anybody’s insurance policy. Even though I drove the vehicles of others and my employer without incident.

#52 earthboundmisfit on 01.11.15 at 5:58 pm

“Credit card insurance coverage” may protect you from responsibility for damage to the car you rent. Read the fine print, there’s lots of it. Under no circumstances whatsoever will it afford you protection from third party property damage or personal injury claims. Be careful my friend, be very, very careful.

#53 rentin on 01.11.15 at 6:00 pm

Typically when I get to read your blog daily, (I guess I don’t have a life, or a TV or a house), I do see the careful words you choose to make your point.

Today, there are only 14 comments in 3 hours since your posting. Either its Sunday afternoon, or many blog-dogs are now stumped by your clarity; they don’t know what to say.

For those who haven’t been listening, the message is still the same since 2007, but much easier to read today.

To anyone that “owns a house” and ready to challenge Garth’s honesty and pick apart his words, focus on the one line:

“So, I rent, although I’m fortunate enough to buy this house with cash.”

So he has the capital and you may not…

And then think about borrowing your house’s value as a loan from the bank and sinking it all into ONE SINGLE paper investment, where the principal investment, or what you have borrowed, is not guaranteed Kind of feel exposed and naked now huh?

Well, as a homeowner, you have just done that and are exposed. To those great gains since 2001, and whatever is coming next. I feel a breeze…..

Way to go Garth!

#54 waiting on the westcoast on 01.11.15 at 6:24 pm

#5 Stupid… re: car rental

One other thing to consider is variability in pricing. It might be $650 per month during the winter but $900 in the summer…

#55 Mark on 01.11.15 at 6:27 pm

“And then think about borrowing your house’s value as a loan from the bank and sinking it all into ONE SINGLE paper investment, where the principal investment, or what you have borrowed, is not guaranteed Kind of feel exposed and naked now huh?”

The way most people become wealthy is to borrow or short a low-returning asset, and to invest in a higher returning asset.

For instance, a business owner borrows peoples’ time at $15/hour, and invests their time at $25/hour. Hence, profiting from the spread.

All that Garth appears to be advocating, is that if we have someone, for instance, a landlord, willing to rent us capital (ie: a house) for less than we can invest, on a relatively safe and balanced basis elsewhere, that capital — then we’d be silly not to take advantage. And in the long term, investing in better performing assets should allocate capital towards, not away from us.

#56 Derek R on 01.11.15 at 6:35 pm

#10 honeybooboo on 01.11.15 at 3:27 pm wrote:
Garth, I’m not knocking your math but admit that $3800 a month for a 2M house in nowhere near typical in Toronto

I had the choice of at least 20. — Garth

And I’ve had a similar experience in Calgary. I’m an income bracket or two below Garth, so it’s a $1M house for $2.2K, just north of the city centre. But like him, I found plenty of choice in that price range.

If I’d been looking for a rental at $1500, it would have been a lot more difficult to get a bargain but for the higher priced rentals, there’s less competition from your fellow renters so it’s much easier to find value for money.

#57 Mark on 01.11.15 at 6:41 pm

A 1 br condo in downtown Vancouver can be rented for about 1250/mth, and is on the market for around 350-400k. The owner would need to pay about 100 in tax, 300 in maintenance fees, + other misc fees. Assuming a net 800 cashflow per month from the property, this equates to a gross 2.4% yield on 400k. Of course, mortgage rates are higher than this, so if you borrowed, the property is negative cashflow. On the other hand, you have REITs in the stockmarket trading at 8-9% yields. hmmm

#58 rower on 01.11.15 at 6:54 pm

Love this post! Thanks for telling it like it is and letting your life be an example to others.

#59 crossbordershopper on 01.11.15 at 6:59 pm

unfortunately Garth portrayal is completely wrong, 95% of all the people i see in hamilton who rent, rent for a reason, they cant buy or dont want to buy. they rent, their parents rent, their children rent, their frends rent, why? because their poor. its not complicated, they have no money, never had any money, many dont have a job, if so its no more than 15 bucks an hour. your rent and invest the difference is completely inappropriate for most people.
that being said, wealthy seniors do have a rent and invest theory because they can free up cash and most of their asset is one. that is correct. in hamilton that is a very small percentage of seniors. most seniors own their home some have a pension and some dont but they owned.
the people who rent will never buy. i asked people and they say, you want me to spend every single penny i make on a mortgage for what? these people dont care if they live a basement or a castle.
you financial guys dont fully take lifestyle, family and goals as the principal reason why people do what they do.

#60 Rosholt on 01.11.15 at 7:03 pm

Garth,

Do you pay for any of the utilities at your rental (heat, water, gas, cable, internet…)?

Utilities on a big place can be really high if the renter has to pay them.

#61 Linda on 01.11.15 at 7:07 pm

#18 Deb – while I find the list of reasons to buy rather pathetic I can’t totally disagree with the statement about how most people will never set money aside like Garth suggests. I do think 95% is too high – I’d say more like 70-75% – & while I do not have access to detailed information about people’s financials, I do have years of observation of my fellow man. Add in the widely reported (don’t know how accurate, though) figures on the number of people who are 1 paycheque away from being homeless; or the number of people who have no pension other than CPP/OAS/GIS to look forward to & have not opened an RRSP/TFSA/saved anything for their future whatsoever. They are not all of them the disadvantaged low income earners. I work with plenty of well paid individuals who constantly complain about being broke. One wants to retire this year or next year, has no pension partner but has a mortgage in excess of $250,000. Plans to sell the house to finance the retirement – good luck with that, especially now. Frankly, doubt that this person will realize much in the way of equity & doubt even more that they will be able to live on their pension when their working income isn’t sufficient for their needs now.

#62 Happy Renting on 01.11.15 at 7:10 pm

The most telling part of this post is the bit about the neighbour. The unemployed executive who has to sell because of a recent job loss. Sounds like he has no access to emergency funds (LOC space, financial assets, HISA) sufficient to ride out a bout of joblessness. Owning certainly didn’t give him financial stability. Assuming he’s got a family, he should talk about his money problems when the kids are out of earshot. Hearing stuff like “we’re going to lose the house” doesn’t make children feel all that secure.

Wonder how many more owners of $2M houses are just a few missed paycheques away from needing to sell. Society views owners of $2M houses as having “made it”. Well… Maybe they haven’t.

#63 devore on 01.11.15 at 7:14 pm

People ascribe such magical qualities to home ownership. Life is exactly what you make it. If you’re a crappy renter, you won’t become a pillar of the community when you buy a house. If you are unhappy as a renter, buying a house will not change that.

Life change and 99% of your quality of life (after needs are met) comes from within. That material things, including houses, can fundamentally change your life for the better, is a fallacy spewed by salesmen and marketing. Why would you buy into that nonsense?

Are the problems with renting? Sure. Home ownership is hardly utopia either. Almost all the points on that misguided realtor’s list are, frankly, poor people problems. People who can afford to buy, but do not, can easily afford a rental of at least comparable quality as they would buy. Poor people have no choices. They get and put up with crap. That’s what being poor means. Money gives you choices. It gives you the power to say no. If you’re poor, and manage to buy a house, your life isn’t magically getting better.

People who are not poor, have options. Like living above ground. Living in a nice place, without mold and bugs. Living in security. Most home buyers spend lots of time before they buy a house. Weeks. Months. Testing their realtor’s patience. And why not, the guy stands to make 10s of thousands of dollars on a single transaction.

But so many renters pick a random place out of Craigslist, and go with that. Well, they’re poor, they have no options. Or they’re poorly informed (information poor, if you will), then come here and complain their amateur landlord is a nuisance. They never say how much time they spent looking for a place, or evaluating their potential landlord.

When I sold my condo and looked for a rental, I walked away from showings knowing far more about the landlord and the building than the other way around. I took my time. Why wouldn’t I, I plan to live there several years. I stopped looking when I was impressed. The place wasn’t the nicest I’ve seen (still very nice though) and wasn’t the cheapest (buy still reasonable). There’s that thing again. Money. People with money can say no and move on in search of a better deal.

Maybe, just maybe, hmm? the world isn’t divided into owners and renters. That’s a materialistic distinction, that says zero about you as a person. That’s marketing talking, and like a well trained seal you respond to get that tasty boost that makes you feel better about your crappy life.

#64 Washed Up Lawyer on 01.11.15 at 7:16 pm

The math on the issue of owning versus renting is (given the assumptions or a particular market) is unassailable. Sometimes quality of life has to be purchased. When I bought my current house in 2004, did I expect it to double in value? No. The five minute walk to an elementary, junior high and high school for the kids was worth a lot. The 12 minute walk to a top notch hospital has paid off. The 22 minute commute to the parkade in downtown Calgary had value.

The harsh vagaries of the Calgary rental market could have forced me into a soulless subdivision at the south end of Deerfoot Trail with the consequent hair raising NASCAR commute twice a day. I would not live there. No schools there. Not facing the prospects of a landlord forcing you out half way through a school year was worth money.

There is no slot on an Excel spreadsheet for quality of life.

Will my house appreciate in value? Probably not but maybe. Will it drop? I’ll check the futures on West Texas Intermediate tomorrow. Don’t know, don’t care. Can’t rent the same quality of life in Calgary for what I pay each month.

In any event, I am adapting my way of thinking somewhat. My children do not face the same easy prosperous future I did when I hit my twenties. They will need shelter. I am arriving at the conclusion that perhaps the purchase of shelter in this country may become an inter-generational prospect.

#65 Victor V on 01.11.15 at 7:18 pm

So, I rent, although I’m fortunate enough to buy this house with cash. That costs me $3,800 a month. Last year the cash I did not spend buying the house generated a return of 10.3%, or just over $206,000. In the last 24 months there has been zero appreciation in the price of houses in this area. You do the math. I rent this house (granite, stainless, three bedrooms, two baths, garage, three levels, fireplace, hardwood etc.) for 2.2% of its value annually.

I shared my story once before on this blog and find it satisfying to see that we have somewhat similar circumstances, Garth. Here it is again:

– $1.75 million detached home on a 50 x 150 lot which we rent for $4,000/month + utilities
– 4 bedrooms, 4 bathrooms, 2 levels
– Stainless, modern kitchen
– 2 fireplaces + 2 skylights
– Hardwood
– Garage + driveway that fits 4 cars
– Swimming pool + professional landscaped garden
– Close to great schools
– Easy walk to Yonge subway
– 20 minute drive to city core
– Great neighbours and quiet street
– Landlord pays for landscaping, leaf collection, snow removal and maintenance

No debts (other than deductible investment margin) and the portfolio keeps growing.

Life of a renter…indeed.

#66 Henry Rearden on 01.11.15 at 7:20 pm

My fellow commentators give me fits of laughter. Everyone is trying to fit in and follow the herd. Live your own life, be liquid and free!

Oh, and read this book, the best I ever read.

How to Live Free in an Unfree World by Harry Browne.
http://eiiiforum.com/picsfromusers/howifoundfreedom.pdf

#67 TurnerNation on 01.11.15 at 7:23 pm

Up with the Bourgeoisie?

Party at Gartho’s this weekend.

#68 Victor V on 01.11.15 at 7:24 pm

#6 kommykim on 01.11.15 at 3:19 pm

Just curious. In what city/district is this “far cheaper, more peaceful and bucolic place” that you speak of located?

Garth couldn’t have been more clear. He said he lives close to Yonge subway and 20 minutes to city core.

Doesn’t take a genius to figure he’s likely close to the Yonge/York Mills/Lawrence area where multi-million dollar homes exist on great lots, and where owners routinely subsidize quality renters.

#69 Lillooet, BC on 01.11.15 at 7:27 pm

Sure, Garth, using your extreme example of a $2 million dollar house in one of the most expensive cities in Canada and North America, of course renting makes more sense.

Use my example; I live in a $150,000 2 bedroom house with fruit trees in the yard, which I bought and don’t pay any mortgage and don’t pay any rent of course. I pay about $5000/year for property tax, insurance and maintenance. The money I save by not paying rent or a mortage can earn money on the stock market or wherever. I have pride of ownership, have a pet, don’t have to answer to a landlord, don’t have to worry about the landlord selling or renovating when I don’t want to.

So it’s nonsense to make generalizations like “renting is bad” or “buying a house is bad”. Everything depends on the individual circumstances, where you live, how much houses cost in that area, renting availability, jobs, income, credit rating …

I made no generalization, and took pains to point out that each person much find the correct choices. That includes learning how to read and trying not to be a dink. — Garth

#70 Victor V on 01.11.15 at 7:28 pm

#10 honeybooboo on 01.11.15 at 3:27 pm

Garth, I’m not knocking your math but admit that $3800 a month for a 2M house in nowhere near typical in Toronto

Garth is right; there are many. Just a matter of personal preference as to style of home and then doing due diligence patiently and properly.

#71 james on 01.11.15 at 7:35 pm

The pets part was one of the reasons I purchased. It was very difficult to find a house to rent with my dogs. Owners took one look and said ‘nope’. A small dog can be a hassle, but two 150+ pounders brimming with muscle and looking scary, forget it. I even had trouble with home insurance, as the insurers wanted proof that they aren’t Presa Canarios. Now that it is all sorted out, I only have to worry about them escaping, and for repairing any damage (e.g., chewed things). I’d rather not deal with a landlord.

Having said that, my place was 1.4x income, so I wasn’t reaching. It is nicely cash flow positive for rentals.

Having a house entails a lot of maintenance, and it does limit one’s mobility.

#72 W Ables on 01.11.15 at 7:35 pm

House prices are going down in Winnipeg. Any house priced above its 2012
Market Value Assessment is sitting. inventory is way up.

Sellers are hoping for a better spring market and Real Estate agents are lamenting the fact they’re not making any money as neither buy or seller is willing to compromise on price.

Listen to you agent, they know what is best for you (oh and them as well)

http://www.winnipegrealtors.ca/Resources/Article/?sysid=2384

#73 Victor V on 01.11.15 at 7:36 pm

#6 kommykim on 01.11.15 at 3:19 pm

My bad; disregard my last reply as I thought you were referencing Garth’s rental not his separate owned property.

#74 Cow Man on 01.11.15 at 7:38 pm

Sir Garth:

My family resides in a house, we own, assessed at $743,000, in Owen Sound Ontario. Our property taxes are more than those on your residence in Toronto that you value at $2 million. Is there a mismatch in assessment in Toronto versus the rest of Ontario? Hmm!

#75 TurnerNation on 01.11.15 at 7:40 pm

Car sharing programa like Zipcar’s (Avis bought) offer an insurance experience letter service. Annually, membership fee around $70. In this case I can prove 6 yrs claim-free driving. And my credit card coverage takes care of damage coverage for all rentals. I’m living a moral hazard!

Sometimes I win the Uber lottery, like a Lexus or Bmw 7 series or big Mercedes on tap. Other times they arrive in an econobox.

It it flys, floats or flaunts. ..

#76 Smoking Man on 01.11.15 at 7:42 pm

#67 TurnerNation on 01.11.15 at 7:23 pm
Up with the Bourgeoisie?

Party at Gartho’s this weekend.
………
Bourgeoisie, impressive choice of word.

#77 not 1st on 01.11.15 at 7:48 pm

Hope people can still remember the 90s…

http://business.financialpost.com/2015/01/10/the-shifting-sands-of-canadas-economy-i-think-it-will-look-more-like-the-1990s/

#78 Cow Man on 01.11.15 at 7:52 pm

# 3 RealistvsExtremist

Our bank just raised the amount of money required on deposit in order to avoid monthly fees. Does that cover an increase in capital on deposit to meet IMF rules? Helps with the bail in invisible ink.

#79 Kevin Unfortunately in Winnipeg on 01.11.15 at 7:56 pm

This sums up everything.

http://www.winnipegrealtors.ca/Resources/Article/?sysid=2384

#80 Barry Obama on 01.11.15 at 8:00 pm

So everbuddy’s asking why I wasn’t in Paris today.

http://www.cnn.com/

Truth is, I’ve buried my head in the sand on this one. Or at least a sandtrap :)

Seriously, I am golfing today, which I plan to do twice weekly until January 2017. No biggie if you ask me.

Terrorism? There’s no hope, folks. The Big Stupid ideas like Iraq and Afghanistan don’t work and we can’t afford another (even Mitt won’t try that if he gets in) and the Intelligence State approaches piss off everybody and cost a fortune too. We’d have to have about one cop for every hundred Americans to have a secure state. You wanna talk debt? Taxes? Be my guest.

So I’ll spend my time to get my game ready for Augusta in 2017 where I hope to lower my handicap to 10.

And hanging out on this lovely and civilized Canadian blog by your future Liberal Prime Minister. (Lose the beard though, fella)

By the way, you readers might want to take a look at our real estate bubble that burst a few years back. Your real estate and debt numbers are ridiculous! You all look like you’re heading for a doozy of the same kind, but then what the hell do I know about igloos, ay? (Is that how you spell it?)

#81 Happy Renting on 01.11.15 at 8:01 pm

#5 I’m Stupid on 01.11.15 at 3:18 pm

For insurance, it would be helpful to know which province you’re in.

For your credit cards, I would ask detailed questions about coverage (make sure it’s someone with the authority to give a binding answer; document dates and names of who you spoke to.) If you have to make a claim, what happens? Do they charge the entire cost of the damages to your credit card (so you pay up front or you get dinged with interest) and only reimburse you when they settle the claim? Do you lose all further rental car coverage on that card for a period, since you have made a claim? Does a claim end up on your insurance history?

I think the credit card insurance may be a big headache if you actually need to use it. Personally, I’d buy a modest, gently-used car, and forego collision coverage to reduce your premium.

#82 Entrepreneur on 01.11.15 at 8:01 pm

People have houses only through credit, not the way the economy should be running. Now people are in so much credit/debt that the spending is tight. This type of bubble system has been going on since the seventies (or even in the 50’s/60’s). Will we correct or carry on as if no one at fault?

#182 Waterloo Resident in “Careful what you wish for”…printed it out (page 39-40) for my better half. Thanks.

#184 Entrepreneur should have read “Mark Carney should (not “just”) be saving the youth…” Straggling the youth is not healthy for the economy and the environment. Hard to understand this concept but look at it in the whole picture.

Stupid, when I rented a car I’m pretty sure I had to show my vehicle insurance to them. If I was running a rental I would make sure that person is responsible. The least third liability should be at least a million dollars.

Know a few people from Ireland and would not buy in this bubbly housing market.

#83 BlorgDorg on 01.11.15 at 8:06 pm

Garth, I’ve been reading your blog since it started. Bought your book (pre-ordered and signed), and witnessed all the personal things that you’ve shared here. Kudos to you on this “admission” — it’s a sad reflection of our society that being a renter is considered so much more personal and embarrassing than so many other things you’ve shared (your unfortunate accident comes to mind).

For every hater who spews uninformed Realtor-fed dogma at you, there’s someone like me: patiently building equity, getting married, starting a family, reading your financial advice, and yes, renting. Your consistent humour helps us through the constant barrage of pressure to join the herd.

Thanks for the constant reminder that the goal in life is so clearly NOT to be like “most people”.

#84 Spaccone on 01.11.15 at 8:12 pm

You have to be pretty harebrained to think you can pull one over on insurance companies.

#85 Duncan Donut on 01.11.15 at 8:35 pm

Sold out in a ritzy area of Calgary years ago. Oil patch refugee. Still consult part time but not a big deal anymore. Rent a newer fancier, house on the Island for about 1/3 of what it would cost us in Calgary. My wife and I walked on the waterfront today. Try that at -30 in Calgary. Pocketed the $$$$ and now am not worried what the price of oil does.

Oh, and we now own a sailboat instead of dreaming about one, and have a garage full of of enough bikes, trucks and tools and toys to keep us entertained. We also have the time to enjoy them. All paid for.

Will we buy a house again? Absolutely. But only when a house again becomes just a house.

#86 BlackDog on 01.11.15 at 8:36 pm

@I’m Stupid,

I feel for you. I really do. When my husband and I were young, poor(er), and as yet unmarried, he got into a situation where a $50 accident claim through his insurance ended up costing us $3k per year for 6 years. There was no internet back then, and we were hungry – that is our excuse. Sigh…my kids know the story well.

Just before the holidays, the very next day after my eldest got her G license, she backed out my car, onto the street in front of our rented house, directly into the neighbour’s daughter-in-law’s car parked on the road. Total damage to the neighbour’s daugher-in-law’s car was 1600 bucks. My car has a few scratches that I will live with. I split the cost 50/50 to repair the neighbour’s daugher-in-law’s car with my daughter, and did not involve the insurance company.

My daughter learned two lessons: first, look up before you back up, and second, insurance companies are not your friends.

#87 Biker222 on 01.11.15 at 8:40 pm

Reply to Mark #51:

Good point. Here’s a trick: one buys a used scooter and insures it. Will cost nickels and dimes only and it’ll give one credit for an actively insured policy. And who knows, one might be able to use it for some (casual) business and will save a ton of gas and parking costs. Best of all it’s fun.

But “I’m Stupid” needs to be extremely cautious about renting a car long term. Suggest talking to an insurance agent.

#88 80'sKid604 on 01.11.15 at 8:43 pm

#69 Lillooet, BC
Yah, but you have to live in Lillooet.

#89 crowdedelevatorfartz on 01.11.15 at 8:46 pm

@#85 Blackdog.
I never, ever “back out” onto a potentially busy street. I will “back in” to a driveway.
I also “back in” to parking stalls.
Boring life but accident free.

Yo ! R vs E !
How dat blood pressure doin’?
Be thinkin of ya next time I’m ridin da elevator………

#90 Tony on 01.11.15 at 8:46 pm

DELETED

#91 kommykim on 01.11.15 at 8:48 pm

RE: #33 Shawn Allen on 01.11.15 at 5:00 pm
I’d still have $6 million invested. With budgeting one CAN get by on that much, without dipping into principal, even without working.

At a 4% return above inflation that would be 240K of income per annum! If you need to work at budgeting with that kind of income then you have issues.

#92 Ray Skunk on 01.11.15 at 8:52 pm

#75 TurnerNation

Car sharing programa like Zipcar’s (Avis bought) offer an insurance experience letter service. Annually, membership fee around $70. In this case I can prove 6 yrs claim-free driving.

Yeah… no. I had an Autoshare membership for six months. I got itchy feet and wanted my own car again. When calling around for insurance quotes, every single company I talked so shrugged and didn’t have any idea about Autoshare’s “experience letter” that they promised.

In order to prove six years claim-free driving as you state, wouldn’t you need a policy in your own name, with you as the principal driver? I don’t think an industry as strict, risk-managing and finance-savvy as insurance would allow such a massive loophole.

#93 Nemesis on 01.11.15 at 8:56 pm

#DevoreKnowsTheScore… #EveryThingIsBorrowed… #JustAskGarp…

http://youtu.be/FBGrTbbV_aQ

#94 Cici on 01.11.15 at 9:00 pm

Loved the post Garth, and thanks again for all of your fabulous advice. Had come to the same conclusions before I found you and your blog, but you and some of the blog dawgs gave me the courage and insight to take my investing efforts to the next level. I’m still learning, of course, but I’m way ahead of where I was before I found you, and have a lot more hope and faith in my financial future.

We’re renting too right now; not because we have to, but because it makes financial sense for us to do so right now (if we bought the same place, we’d have to burn through all of our savings and be burdened with a higher monthly).

The place is great for our present needs, and so far (two years of leasing) the landlord is proactive and pleasant to deal with.

Anyways, here’s our take on it:

Privacy breaches during background checks – NOPE
Maintenance delays – ONCE, but it was only a four-day delay.
Hidden charges for water and garbage/recycling services – NOPE
Owners who lie and kick you out so they can flip – Hasn’t happened yet
Amateur landlords who don’t have a clue – ONCE, but it was no biggy. We got to leave with little effort and found a better place.
Legal fees if you have to go to landlord tenant board (much more common than anyone realizes) – TWICE, total cost for both situations: $120. No biggy.
No pride of ownership – NOPE, we have pride of rentership ;-)
Being a second class citizen looked down upon by homeowners – ? Most of my friends are homeowners, and none of them care. As for anyone else, I really don’t care how they view me ;-)
Constant financial insecurity – Nope, exact opposite. We can set more aside to monthly savings and investment efforts.
Stupid no pet rules that hurt your quality of life – Nope, we have a cat, and she enjoys the house and yard.
Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth – NOPE, we do save, so I guess we must be part of the 5% elite, LOL?
Craigslist scams – We just don’t fall for them.

#95 lala on 01.11.15 at 9:09 pm

@HDJ

Get a life dude, in Canaduhhh

#96 takla on 01.11.15 at 9:12 pm

The math doesn’t lie,we to are enjoying the fruits of our landlords labour{and risk}and are grateful to not suffer the financial stress of home ownership.
Too buy the home we are in on acreage would cost in excess off 800 tho.
Sooo nice to have $$ left over at the end of every month.
The full shop and 2600 sq ft man cave helps as well :}

#97 Timmy on 01.11.15 at 9:17 pm

Of course the landlord could decide to sell the house you rent at any time or give you the boot after the yearly lease is up and bring back uncle Ned. Basically, you can’t count on getting established in a neighborhood when you have no guarantee for how long you will rent a house.

And a crackhead can move next door to your kiddies. Get serious. — Garth

#98 BlackDog on 01.11.15 at 9:18 pm

Weird. I made two posts, but only one got through. They were both in good taste.

Anyway, I was just wondering if I am the only one who has experienced ‘renters discrimination’ when dealing with insurance companies and ‘contents insurance’. It has cost me more to insure the exact same contents I had when I owned a house (including the actual house) as it is now to insure just the contents as a renter.

Get a new insurer. Tenants’ packages cost far less. — Garth

#99 bob on 01.11.15 at 9:18 pm

10% return on investments? Who is his financial advidor. Mine collects 1% in fees and returned about 2%.

#100 A Yank in BC on 01.11.15 at 9:23 pm

But Garth.. what do you do when your Landlord decides to move back in, and you and the Mrs. have 60 days in which to leave. It hugely upsetting to one’s life, and it recently happened to me.

Be smarter about what you lease, and how. — Garth

#101 BlackDog on 01.11.15 at 9:26 pm

@crowdedelevatorfartz, After the ‘incident’, I tried to convince my daughter that maybe backing IN to the driveway, as opposed to backing OUT would be the more sensible thing for her to do in future, but she prefers the latter. Oh well, she says she is going to be rich after VET school, and take care of mom and dad…yeah right…I will be dead by then. Thank God for RESPs. In the meantime, two more of them are following in her footsteps.

#102 Mr. Reality on 01.11.15 at 9:28 pm

“#88 80’sKid604 on 01.11.15 at 8:43 pm

#69 Lillooet, BC
Yah, but you have to live in Lillooet”

grab a napkin, you just got served

Mr. R.

#103 BlackDog on 01.11.15 at 9:30 pm

Garth, I called around. Insurance companies are sneaky. Yes, you can find one that quotes you less, but when you compare the coverages, it becomes apparent why the lower quotes are lower. It all depends what you want to buy. And you get what you pay for. Renters are charged more on an apple to apple comparative basis.

Now, maybe, your experience has been different because you live in a higher expense class than I do. At that point, renters are no longer ‘low-class’ from a risk perspective, perhaps?? I don’t know, and am just guessing as to why our experiences might have been different.

#104 Ian on 01.11.15 at 9:38 pm

We owned our various homes for the past 34 years. We downsized and sold our large home in Calgary two years ago.

But we did not buy. Decided to rent for a while. Then we took a hard look at the numbers. Buying did not make sense for us and it still does not. Our landlord is getting a 1.5 percent return on her investment however this is before her recent 35k condo assessment.

We are much happier renting and we are enjoying a much higher after tax return on our equity. The adjustment is harder I’m my wife who hails from a small Ontario city. It was the norm in our generation that you buy a house. Renting was a sing of instability. How silly is/was that?

#105 Mark on 01.11.15 at 9:43 pm

“Hope people can still remember the 90s…”

The 1990s were great times in Canada. The tech sector was exciting. Garth Drabinsky et al were touring across the nation with various live shows. Homeowners were put in their place, not captive to the delusion that houses were supposed to make them money. The TSX tripled despite being in a natural resources depression. And all the tradesmen you could ever want to employ were available at less than $20/hour.

Doubtful we’ll have the weaker CAD$ this time around, as Canada’s economy is far stronger than the US’s is this time around. And Canada has solid leadership in the industry which is likely to explode in value, the precious metals miners, compared to being a mere sideshow in the technology sector like it was in the 90s.

#106 Retired Boomer - WI on 01.11.15 at 9:46 pm

Interesting discussion on the longer term auto rental.

What if you live in a metro area, and do NOT own a personal auto?

What does the car rental place do with you?
To suggest they will let you rent one of their vehicles without public liability coverage is nonsense. Since you don’t carry any, they by law, must provide it.

I know of nobody who carriers any type of liability insurance -except homeowners- unless they also own a vehicle.

I also have never seen the jurisdiction where the “owner” of a vehicle that caused damages property, or personal injury, was not liable.

They might be ‘jointly’ liable with the operator who had the owners’ permission to use/lease/rent the vehicle.

Canadian laws may vary, my comment based on US tort law. No fault ideas clearly muck up the picture as well.

#107 Timmy on 01.11.15 at 9:47 pm

Re# 64
How is a souless subdivision any different than any other area of Calgary? lol

#108 Sheik Yerbouti on 01.11.15 at 9:48 pm

Garth,

Based on the wording of your text, “every driveway has a Mercedes parked outside”, it sounds like you drive a Mercedes……I was hoping you drove a Porsche or Ferrari. This would have really been a true rallying call and victory for the renters, and might have catapulted you to Che Guevara in yer face tenant status!

BTW, it would have been even more impressive, if you had sub-let out some rooms, and were generating positive cash flow from this, although I am not sure if your lease permits that…maybe some of the blog dogs need rooms, although I am not sure if you fancy spending all your nights drinking JD with the likes of Smoking Man….

#109 BlackDog on 01.11.15 at 9:49 pm

Garth, FYI, I have been dealing with the same insurance company for decades, have been ‘claims free’ for almost as long (and regularly compare with other insurance companies to be sure I am not being ripped off). I kid you not that Tenants Insurance costs more than Home Insurance (apple to apple) for many of us, even if that has not been your experience. Be careful, re: ‘apple to apple’ comparisons, because although it is nice to think you are getting a good deal paying less for your insurance, it is not so nice, when you go make a claim and find out that you are not covered for damage to your contents from the tree that fell onto the house you rented because that was not part of the included perils of your tenants insurance policy. When comparison shopping, always ask for a quote for their ‘best coverage’, and do your comparisons based on that.

#110 omg the original on 01.11.15 at 9:51 pm

Having OWNED several houses and RENTED several times over the past 25 years – yes owning is better but not at these price levels.

I sold out in Victoria in 2007 and since have tripled the equity I took out of the house. Not to mention the savings from renting a house in one of the nicer parts of Victoria for about 2/3 what it would cost to own.

Now I am thinking to moving to another area of Victoria for business reasons. Cost to move – about $2k for professional movers versus $40 to $50K if I had to sell a house and rebut.

Owning a house in Victoria will make sense again some day and I will own again, but not until the price of real estate corrects (like it always does).

#111 nonplused on 01.11.15 at 9:52 pm

Wow Garth that sounds like a good deal. When I was renting I was paying about $2500 a month for a $1 million dollar house. It was nice and it served it’s purpose but we’ve bought now, at kind of the low between 2008 and now. (Followed your rule of 90).

But it’s not all roses. Now when the furnace breaks I have to pay to get it fixed myself.

#112 Waldo on 01.11.15 at 9:54 pm

Can’t we all just get along?

#113 Victor V on 01.11.15 at 9:54 pm

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/2015/01/10/how-a-woman-who-flipped-6-properties-in-2-years-fell-afoul-of-the-taxman&pubdate=2015-01-11

With the economy in turbulence, some Canadians have openly started to wonder whether our housing market may be next. Despite that possible scenario, the temptation to buy, renovate and then sell real estate at a profit is still irresistible for many. And, if you don’t know how to get started, a number of U.S. TV shows have debuted in the past couple of years with names such as Flip or Flop, Flip it Forward and, most recently, Flip Addict that will walk you through the process.

You should be aware, however, that if you are indeed successful in making a profit from your real estate activities, the taxman will be watching and will want a piece of the action. Of course, just how big a piece he’ll want depends on whether your profitable sale is treated as a capital gain, in which case only 50% is taxable, or business income, in which case 100% is subject to tax.

#114 Blue77 on 01.11.15 at 9:59 pm

Buying RE right now may not be a good investment but neither is investing in paper assets. This blog preaches investing in financial instruments for a 6-8% annual return. This may have been true until year 2000 but now the financial markets are completely manipulated and low growth, volatile, risky global financial system makes things worse.

Buying and holding paper assets long term in a diversified manner has NOT returned and will NOT return 6-8% post year 2000. S&P Jan 2000-Jan2015 has returned 2.2% annually, or NEGATIVE post inflation. Real estate, however after Canada’s upcoming correction as this blog predicts should be a better investment.

I’m holding cash right now and waiting for a RE crash

The S&P gained 13% in the last 12 months and the TSX 7.7%. — Garth

#115 Andrew Woburn on 01.11.15 at 10:00 pm

#74 Cow Man on 01.11.15 at 7:38 pm

My family resides in a house, we own, assessed at $743,000, in Owen Sound Ontario. Our property taxes are more than those on your residence in Toronto that you value at $2 million. Is there a mismatch in assessment in Toronto versus the rest of Ontario? Hmm!
================

Our property tax in Nanaimo is the same as on the house we sold in West Van assessed at 3X as much. Higher assessed values do not drive your taxes higher. The municipality has a figure that it needs to raise. Your share of that is essentially your assessment divided by the total of all assessments. If every assessment doubled next year, your relative percent of the total would stay the same.

have nothing to do with how much your p

The only thingAll assessed values do is give you

#116 BlackDog on 01.11.15 at 10:02 pm

@I’m Stupid,

The whole rental idea, sounds like it will come back to bite you. I think you just have to suck it up, pay the high risk insurance rates, and have patience. Call around of course, and see if you can get better rates, and do this on a yearly basis at least.

Unfortunately, you cannot just get your wife to drive you around, since you are part of the household and therefore part of the insurance policy. Don’t worry. Six years will go by fast.

#117 I love real estate on 01.11.15 at 10:03 pm

Glad my thoughts have helped to promote discussion here, Garth. I respect your points as well, but I think we disagree about what is realistic given the nature of most human beings.

I have refrained from posting so far to see what others would say tonight. It is interesting and reaffirming that after over 100 posts quite a few people here offer their own points that support some of mine.

I did not realize fully how renting in Ontario is even much easier than other areas, and it does occur that renting where there is not good rental protections (like Alberta) can truly be a nightmare dealing with scarce property and unpredictable price increases.

And I still think that the ‘rent and invest the rest’ idea really applies to about 1-5% of the population who can pull it off. For the same reasons so many have underinvested or ill-invested their TFSAs and RSPs and why forced savings is the only hope for so many lucky ones with pensions. It’s all tied up in complex human nature, too deep for me most days.

Buyers also have the benefit of professionals to help them – realtors, lawyers and bankers. Renters tend to operate in isolation and are more susceptible to scams. My original message to you included this all too common news story about renters being scammed:

http://www.cbc.ca/news/canada/british-columbia/craigslist-luxury-rental-scam-leaves-vancouver-tenants-on-the-sidewalk-1.2896233

I am happy for you that your landlord did not reject Bandit and has not dinged you for hidden costs and taken forever to fix things or forced you to take them to the LTB. But there are WAY too many bad landlords out there that so many other people have told me about, so maybe your experience is not the norm?

By the way, a recent buyer told me of taking his landlord to the board over an eviction scam. The landlord said they were moving in, but it turned out they only wanted to flip the property. The board awarded about ten thousand in costs. The judge told them they are being deluged with cases like this now, as amateur house flippers try to get out of real estate they cannot afford or have not selected well to optimize rental incomes (this is another area that good realtors can help buyers with, by the way)

I will sit back and enjoy the rest of the discussions here.

#118 le sui charlie on 01.11.15 at 10:13 pm

Agreed.
We need more sane articles like this one in this beautiful but somewhat crooked country.

#119 Smoking Man on 01.11.15 at 10:16 pm

Dementia is setting in people.

Watching golden globes.. Pissed off.

It’s all about the monkeys, the actors..

I want to see the writers… They are everything…

#120 OttawaMike on 01.11.15 at 10:17 pm

#105 Mark on 01.11.15 at 9:43 pm

“And all the tradesmen you could ever want to employ were available at less than $20/hour. ”

————————————————–
Where are you located Mark? Not many trades could be hired as independent contractors during the 90’s for 20$.
As full time trade employees maybe in the early 90’s for 20$ but then you would have to factor in payroll taxes and benefits which generally add another 30% to that hourly rate.

You should quite your copious essays while you are ahead.

#121 Finally.Bought! on 01.11.15 at 10:19 pm

I rented my whole life – until a few months ago. We bought a house, probably at the height of the market.

The only good thing about owning is you know you won’t get kicked out by a landlord. You may, however, get kicked out by your bank because you can’t pay your mortgage. It’s called forclosure, man.

In every other way, renting is better and it’s not even close. Let’s see:

1. Financial insecurity – if mortgage rates go up by 2% in the next few years, we’re toast.
2. Everything costs more – probably double the monthly payment to keep/maintain a house.
3. If we have terrible neighbours, we can’t move because it costs so damn much to move.
4. Our insurance more than doubled.
5. Contractor hell.
6. House prices could definitely fall in 10-20 years, in which case we’re toast. Really, is the 22 year old basement dwelling unemployed grad really gonna pay me what I paid for my house in 15 years?
7. If I get transferred or find a better job opportunity somewhere far away, I’m screwed. I can’t go.
8. I cant get fired. So I gotta be the yes man even though it kills me because not having a job will kill me in a worse way. If I was renting and got canned, whatever.
10. With renting, I had my pride because I still had my dignity st work. Pride of dignity trumps so called pride of ownership every time.
11. Who’s fooling who? Pride of ownership? We don’t own the house – the bank does. And therefore the bank owns us. We own a mortgage. There is no pride of ownership.
12. Zero pressure and zero stress with renting. One cheque. That’s it.
13. I used to walk to work. Now it takes me over twice as long – on the GO.

Honestly, renting is so much better than owning. It’s not even close.

#122 palebird on 01.11.15 at 10:22 pm

#11 maybe something being missed is that, essentially, this is a zero sum game. Everyone who buys a home is not going to reap a windfall. In effect winning the lottery is how it is often laid out for the unsuspecting. That is just one huge ponzi scheme. But your average Canadian believes this, just like Santa and the tooth fairy.

#123 Washed Up Lawyer on 01.11.15 at 10:24 pm

#107 Timmy

Good one. I guess the ones with soul have Cottonwood Poplars with roots into the shallow aquifers. Ooops. Flood plain. Been there. Saw that.

Besides, cowboy soul is a different kind.

Cheers.

#124 kommykim on 01.11.15 at 10:24 pm

RE:#103 BlackDog on 01.11.15 at 9:30 pm
Renters are charged more on an apple to apple comparative basis.

I have to agree. Renters are charged more to insure the same $ value of contents as a homeowner. It is probably due to two factors. One is that renters are usually considered to be a higher risk because they are perceived to have less skin in the game. The other could be due to bundling with the building insurance that owners have. I know my insurance company is willing to give me a discount if I also have my car insurance with them.

#125 Sean on 01.11.15 at 10:29 pm

Nicely, nicely stated! While some of your readers are those unfortunate types you mentioned.. many of us are surprisingly like you! We have been successful… yes, we can afford to buy the damn house, cash… but we are this way because we are not stupid! We can do the math, as you point out. And yet, there is an inkling of truth to what the slimy realtor says… renting can be challenge, and I certainly look forward to a sane market, where the choice to buy or rent is more “six of one, half dozen the other”. At that point, you do buy – if it suits – but not based on emotion or delusion.

#126 Mark on 01.11.15 at 10:31 pm

“Where are you located Mark? Not many trades could be hired as independent contractors during the 90’s for 20$.”

Western Canada, although my comments are equally applicable to Ontario. And when/where did I say “independent contractors”?

Incidentally, poor compensation of tradesmen in the 1990s was why we have been facing such a shortage of them in the 2000s. Practically nobody went into the trades in the 1990s, and to go into trades was, in the words of many high school guidance counsellors, essentially the equivalent of committing “career suicide”.

#127 Shawn Allen on 01.11.15 at 10:32 pm

Utility Costs and Budgeting while living on a $6 million portfolio

Rosholt at 60 said:

Utilities on a big place can be really high if the renter has to pay them.

*****************************
Really high but exactly the sae as an owner of the same place would pay…

KommyKim quoted me and responded to me (and by the way, more people should quote and then response so we know what they are talking about without having to scroll back)

RE: #33 Shawn Allen on 01.11.15 at 5:00 pm
I’d still have $6 million invested. With budgeting one CAN get by on that much, without dipping into principal, even without working.

At a 4% return above inflation that would be 240K of income per annum! If you need to work at budgeting with that kind of income then you have issues.

*****************************************
Getting by on a $6 million portfolio with budgeting was of course meant as a funny comment.

However, I suspect that all those people who are lucky enough to be able to spend say $240k after tax per year wonder quite seriously how any family gets by on less than $200k.

Those few who spend a million per year will swear they could no longer get by on only $500k

People in darkest Africa would think even the poorest people in North America are insane to ever complain about money. It’s all relative.

Spending $240k per year would not be having issues. It would be having a good life. You’d get used to it too, trust me.

#128 AnalysisParalysis on 01.11.15 at 10:32 pm

Great post,

Garth, can you advise how much a young family should spend on rent as a percentage of income? We are a couple and rent and have $150k invested/diversified and have a gross income of $180k – wish to continue renting and investing,but need a new place in Toronto – most likely a house

How much is too much?

$3k would get something upgraded, desirable, with privacy. At $2k compromises need to be made

Thanks

#129 BlackDog on 01.11.15 at 10:35 pm

@kommykin,
I have dealt with a well known insurer for over 30 years, for auto, home, and most recently tenants insurance. With both a 5 star drivers rating, and no home claims for over 20 years, we are still paying double for renters contents than we were paying as home owners (including contents). The agents keep saying the same things: “renters are higher risk….do more damage, make more claims”, etc/

#130 Mark on 01.11.15 at 10:35 pm

“You should be aware, however, that if you are indeed successful in making a profit from your real estate activities, the taxman will be watching and will want a piece of the action. Of course, just how big a piece he’ll want depends on whether your profitable sale is treated as a capital gain, in which case only 50% is taxable, or business income, in which case 100% is subject to tax.”

The CRA occasionally goes after day-traders in stocks, or even the recent batch of people who have done extraordinarily well in their TFSA’s. What’s the big difference?

The problem for flippers is usually that the people who get in early do well. The people who come lately to the game are usually unable to unload their investments before the tide turns, and are stuck with huge losses. Flipping over the long term is a zero-sum game, and I think a lot of people forget this.

#131 Sheik Yerbouti on 01.11.15 at 10:39 pm

#85 Duncan Donut on 01.11.15 at 8:35 pm

Not sure I would be bragging too much about walking on the waterfront when its between 2-6 degrees in Duncan, kind of like a defrosted version of Siberia…….would have been more impressed if you said Mexico, Brazil, Cabarete or somewhere warm…

#132 Jordy on 01.11.15 at 10:42 pm

My dog ate the molding right off the wall, I mean it is gone, chewed off and consumed. I can see why some land lords are reluctant to allow pets. bad dog :-)

#133 45north on 01.11.15 at 10:43 pm

Of course, I know my choices are not reasonable for everyone. But they are for me.

Most of your post, I had guessed. I own my own house in Ottawa. The reasons and factors are not for public consumption but I don’t see owning as a brilliant financial strategy. Maybe it’s an okay strategy.

Bill Gable: A friend just lost his Hi tec job. He phoned and was sounding stressed. ” I’ve got to sell”.

you told him the right thing but I guess it very much depends on how much equity he has.

Gulf Breeze: I can’t imagine buying a house in Vancouver that might fetch 6,000.00 per month in rent when I could own the property I co-own (in a commercially and technologically vibrant American city, that fetches over $200,000.00 in rent per year–after taxes, insurance and maintenance) for the same price.

yeah why would you?

#134 rule911 on 01.11.15 at 10:56 pm

#7. A friend of mine rented for ~25 years with no issues. The one problem was when he went to buy a car, he was considered a new driver from the Insurance perspective, even though he had a perfect driving record. (this is in B.C. and Nova Scotia).

My 2 cents, add yourself as a casual driver to someone’s insurance (parents/kid/friend). Never drive their car…. but you will get credit for that time.

Happy renting, we have been renting a second car as needed for a long time and its saved huge over having a second car,

#135 Washed Up Lawyer on 01.11.15 at 10:56 pm

Re# 64
How is a souless subdivision any different than any other area of Calgary? lol

Timmy:

You have triggered a thought that my wife and I have discussed for many years. My kids (on their mother’s side) are fourth generation Calgarians. That is very rare. Her great grandfather rode out here from Kingston with the Northwest Mounted Police in 1874 to quell the whisky trade. Thank goodness they failed.

So our debate is about whether Calgary is a city that has gained a momentum as a desirable place to live and one that will survive beyond the one industry that built it or whether it is a glorified work camp where prospects of employment are better than say Kapuskasing. Our home town bias tends to show through.

The pessimistic side of me comes through from time to time. Alberta was blessed with the greatest complement of natural resources anywhere and perhaps we sold our birthright for a mess of pottage.

Just another mining town perhaps.

#136 Smoking Man on 01.11.15 at 10:56 pm

Damn, should have went to Hollywood as a kid, but I started out as a rivet bucker. I had a choice, go to Hollywood and become a movie star.. Or.. Become the best rivet bucker in the world, I chose rivets.. Rick who was the best when I started, ego maniac, I had to beat him. The demon of competitiveness, and addiction. Held me back..

If you all go to West Toronto secondary school, you will see, three years in a row, my name on the tennis drama award, my name… Best actor of the year. 75 to 78.

God damn rivets.. Then, the best window and door, mfg.. Then the best code smith.

Now.. The best writer…thats a though one, I have a few disabilities in that category… But, having an obsessive personality, we will see.

#137 Alpine credit praising home-owners on 01.11.15 at 10:58 pm

Every third commercial on Global is alpine credit……..IF YOU OWN YOUR HOME YOU’RE APPROVED.
NEED 30,000, 60,000 OR EVEN 600,000 DOLLARs….if you own your home you’re approved…….
Vancouver is BOMBARDED by this R.E crap 24/7.

Thefe you have it.
25% of the economy want this bubble to continue, obviously.

#138 BlackDog on 01.11.15 at 10:59 pm

@I’m Stupid,

Oh yeah, and think carefully about having kids. And if it’s too late, enroll them in drivers education. And, if you have girls, count your blessings, because they cost WAY less to insure on your auto policy!

#139 Setting the Record Straight on 01.11.15 at 10:59 pm

#179 kommykim on 01.10.15 at 9:16 pm
RE #130 Capital One on 01.10.15 at 3:07 am
Let me rephrase – how do you account for defined benefit pensions in the n60/40 split?

Since you can’t “sell” some of the actuarial value of your “fixed income CPP fund” to buy equities when the market tanks, then it can hardy be considered as part of your portfolio’s fixed income.
Think of CPP as a separate retirement income stream and not part of your investment portfolio at all.

******
I do not quite understand your logic. Is the goal to have a portion of your income as fixed? Or is the goal to have a portion of your portfolio fixed?
Should a person with defined benefit pensions (private and public) have te same allocation between fixed and variable assets as a person without same or with a lower amount?

#140 I'm Still Around on 01.11.15 at 10:59 pm

Bravo Garth!! Well said! I love reading your blog. Thank you for all your hard work and sharing your wisdom.

#141 MGTOW on 01.11.15 at 11:02 pm

The wonderful joy of freedom by not having a house hanging around your neck like a ball and chain dragging you down is a very stress-free existence, because you are living a life knowing that you won’t be in big trouble should you decide to dump your house and move on with your life in a new place, very similar to the wonderful joy and freedom and stress-free life a single man enjoys when he goes MGTOW, by not having to worry about the restrains placed upon him and knowing that he won’t be in big trouble if his wife should decide to dump him for Billy the pool boy and move on with her life without you: No splitting of accumulated assets, no ruinous spousal support payments, nothing to drag you down; only the happiness and freedom to do whatever you want, whenever you want, and however you want.

Yes, renting a house is a wonderful thing. It is the freedom that comes with the knowledge that you are footloose and free to do as you wish, no ball and chain around your neck keeping you trapped, and no financial repercussions should you decide that the grass is greener somewhere else.

#142 BlackDog on 01.11.15 at 11:05 pm

@Jordy re: ” My dog ate the molding right off the wall, I mean it is gone, chewed off and consumed. I can see why some land lords are reluctant to allow pets. bad dog :-)”

Yeah, being a landlord has its disadvantages. Is your dog a puppy? They all go through a teething/chewing stage. I hope yours is done soon.

#143 BlackDog on 01.11.15 at 11:10 pm

@FinallyBought,

I was you, in 1989.

#144 jrochest on 01.11.15 at 11:12 pm

Well, renting tales depend on where you are and what the market is like: I was a tenant for 30 years, only bought two years ago (I paid cash, and bought a house; I had been renting the top two floors of an old house). If you are independently wealthy, then yes, you can rent a high-end property for much more than ownership costs. But if you’re paying rent out of a salary — even a very very good one — it’s tough to find a place that will take kids, or pets, or let you garden. And you can always be evicted if the property sells, or if the landlord decides they can get twice as much money from a new person. I’ve had horrible landlords (of the “hidden cameras in the bathrooms” kind) and merely neglectful ones (the kind who expect the tenant to buy the property a new fridge, for example). I’ve also had wonderful landlords who I would have rented from for decades, if necessary. But while owning is expensive — I have no mortgage, but between the taxes, insurance and utilities, I’m paying close to what I was paying for rent — it’s also comfortable and stable, restful, even, to know what my cost are and will be. And I have way, way more space. I’d pay two and a half to three times the amount that I’m spending to rent a comparable house, and I’ve seen what rental housing stock looks like in this town.

#145 Lloyd Jensen on 01.11.15 at 11:19 pm

#100 A Yank in BC

But Yank, what do you do as a house owner when the city says it’s not their fault that your finished basement has flooded, and the insurance company won’t cover it either? Remember the Alberta floods of 2013? Property values were dragged down even if your house wasn’t directly affected. Sucks to be an owner in certain parts of the province, even today.

#146 BlackDog on 01.11.15 at 11:29 pm

No one will notice, and no one will care, but:

“So many people live in extremes.”
Is this a sentence?

Is this?
“Or both.”

WTF? And I have barely started….

#147 Cici on 01.11.15 at 11:31 pm

#32 HDJ

Good on you ;-) In your situation it makes sense to own your home and you definintely benefit in terms of quality of life by being close to family and nature.

However, many homeowners are not in such an ideal place; in other words, they have little savings, no pensions, and too much home and/or housing debt.

Those are the people that should be cashing in to generate a profit stream, hence improving their financial security and quality of life.

#148 RealistvsExtremist on 01.11.15 at 11:37 pm

#15 crowdedelevatorfartz on 01.11.15 at 3:38 pm
@#3 Reality vs Paranoia

YAWN.
Another link to the paranoid ramblings of internet conspiracy theorists…….

Oh and I see you were Deleted again………

How’s your blood pressure these days?
===============================

I was deleted because I can’t use a certain someone’s name when talking stats. Unlike you…..you believes everything they read from the Govt. Good luck to you slave……

#149 BlackDog on 01.11.15 at 11:37 pm

OMG, SM, shut up already! And for those who reply and get annoyed, please also ‘shut up already’. You do all realize that he will, when you do, don’t you?

#150 Shawn Allen on 01.11.15 at 11:44 pm

House Gains are Zero Sum Game?

Palebird at 122 argues:

maybe something being missed is that, essentially, this is a zero sum game. Everyone who buys a home is not going to reap a windfall. In effect winning the lottery is how it is often laid out for the unsuspecting. That is just one huge ponzi scheme. But your average Canadian believes this, just like Santa and the tooth fairy.

****************************************
That is an interesting argument and a bit of a brain puzzler. It’s a good argument or question, but I think it is wrong.

Imagine that the market value of all houses rises 10%. Only a very tiny percentage of houses will have actually changed hands. Yet it may be that the value of ALL houses has risen 10%.

ALL home owners feel wealthier.

Where did all that extra wealth and money come from?

First it is NOT money, it is wealth. It is potential money. But it is not money as such. Money is the paper stuff AND bank accounts. Houses like stocks are not money but are wealth. Stock and house wealth is measured in money and can be at just as good as money, but it is not money as such.

But anyhow the wealth basically came from out of thin air. Exactly the same thing happens when a relatively few shares of a company trade hands at a higher price yet the value of EVERY share goes up.

In the case of shares the instant from-thin-air value gain is based on an increase in the present value of expected future cash flows being basically profits from customers. The present value goes up when 1. The expected profits rise or 2. The discount rate (based on interest rates and risk) declines.

With houses the value could instantly rise based on an expectation that people in the future will pay more for houses. That could be based on higher costs of materials to build houses, higher cost and value of the land due to the City expanding or based on lower interest rates in the future (lol).

For both stocks and houses, this wealth-from-thin-air phenomenon is only a Ponzi scheme if it is not based on rational expectations. If someone artificially pushes up house or stock prices in a pump and dump scheme that would be a bad thing a sort of Ponzi scheme.

But house prices can indeed rise over time and it can be quite legitimate and not be any kind of Ponzi scheme. Every home owner can in fact win the lottery. In fact this has been happening albeit with periodic reversals for at least a hundred years and regarding land since probably forever. Every home buyer in the 70’s basically won the lottery. To be sure, it is very unlikely that will happen for today’s home buyers. But it is mathematically possible.

(I can just see Mark leaping to his keyboard to criticize my logic, have at it dude…)

#151 Blacksheep on 01.11.15 at 11:53 pm

“Well, I just revealed more than I intended.”
—————————————————–
Clearly, Garth’s getting all touchy-feely today, after reading the awesome personal tale I shared to help poor upset, “Box-in-sky-renter” Dude @ #199 yesterday.

That’s OK, glad to be a source of inspiration.

#152 North Burnaby on 01.11.15 at 11:58 pm

If you have a dog, you are basically screwed as a renter. Not a lot of landlords allow their tenants to have pets. When they do allow, its usually either really old crappy house or located in shitty neigborhoods in Surrey.

#153 Bad example, really on 01.12.15 at 12:07 am

Bad example, who has $4000 to pay rent alone, who pays the GAS and HYDRO and WATER?

why don’t you look at average rents like 1200 for an apartment? Toronto is full of apartment buildings. many are listed under bed bug registry web site….by the way. Tell readers when was the last time you lived in an apartment building where cockroaches were running wildly in your kitchen? hahaha

Garth, you are in total disconnect with Toronto’s realities. Get off the ivory tower or keep your advise for the richer ones. Do you think a 550000 semi in ‘Sauga is not a good solution for those folks paying 1400 in rent and cramped in half of the space? you do the math.

#154 Rainmaker on 01.12.15 at 12:08 am

Sold Toronto home over a year ago and currently rent a nice 2 storey, 4 bedroom, 3 washroom home in a nice area of the City for $3k/month. Figure it’s worth around $1.1- 1.2 million, so not as good a deal/value as Garth, but within budget. Did take a bit of effort to find a nice place at that price, saw some not so nice homes asking more.

In any event, enjoy the financial freedom, but need to get with the program of a well balanced and diversified portfolio – still too many bone headed investments.

#155 Rexx Rock on 01.12.15 at 12:08 am

I think there will come a time when single men and woman in their 30’s and 40’s sell their condo or houses and give up on the Canadian rat race and live on a fixed income and live in places like Mexico and Thailand.For under $800 you can live a decent life and not worry about all the lies and propaganda of a fascist police state like Canada.

#156 BlackDog on 01.12.15 at 12:18 am

@RealistvsExtremist,
There is no reason for you to explain why you were deleted. Do not take it personally. I don’t.

#157 SWL1976 on 01.12.15 at 12:18 am

#126 Mark

Incidentally, poor compensation of tradesmen in the 1990s was why we have been facing such a shortage of them in the 2000s. Practically nobody went into the trades in the 1990s, and to go into trades was, in the words of many high school guidance counsellors, essentially the equivalent of committing “career suicide”.

—————————————–

I graduated in 94 and started my apprenticeship immediately and was by far the youngest in trade school and laughed at by many of my peers from high school. Turns out I got my journeymen ticket in prime time for the trades and it has served me well and given me great financial freedoms despite one bad business plan.

Oh and I remember when I got my ticket in 98 and thinking 20$ an hour was good pay. Those days are long gone though and that ship has sailed

Anyways the point I really wanted to make here is that I think the good times and easy money are over for the trades now and they will be much like IT departments that were the subject of recent conversation. Poorly and average skilled people driving down wages and fighting for a smaller scraps while highly skilled will still be able to command a premium.

One best stay on top of their game in any career these days, and always be diversified with your skill set

#99 bob on 01.11.15 at 9:18 pm

10% return on investments? Who is his financial advidor. Mine collects 1% in fees and returned about 2%.

————————————–

Who do you think? As for your deal… Buzz kill. Figure it out for yourself it’s not that hard and besides you’ve already found the right place for great free advice

#158 crowdedelevatorfartz on 01.12.15 at 12:24 am

@#148 Reality vs Extremities
“you believes everything they read from the Govt. Good luck to you slave……”
+++++++++++++++++++++++++++++++++

nah, I just dont believe everything I read on the internet.

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=12&cad=rja&uact=8&sqi=2&ved=0CE8QFjAL&url=http%3A%2F%2Fcontent.time.com%2Ftime%2Fspecials%2Fpackages%2Fcompletelist%2F0%2C29569%2C1860871%2C00.html&ei=XkyzVPWUKcWuogSq5oGwDA&usg=AFQjCNERgfy44D-_AgOp0_CBMX1PABMieQ&bvm=bv.83339334,d.cGU

#159 BlackDog on 01.12.15 at 12:28 am

@NorthBurnaby, You are correct. Landlords, do not like renters who have pets. And this is true whether you are renting a home or a vacation property. Of course it helps to be ‘good renters’ (great references, etc), but really can you blame the owners for not wanting animals as tenants?

Hint: if you are really desperate, and have a very good pet (not prone to accidents, etc), consider not telling the landlord you have pets, move in, make sure you clean up after Rover, and you will have nothing to worry about because they cannot kick you out for having pets unless there is damage involved. Of course, this is somewhat of a misrepresentation, and ONLY works if you are a VERY RESPONSIBLE pet owner, and I feel bad even suggesting it. But reality is that they can deny you all they want, but if you move in with a pet, which is NOT causing any problems, they cannot kick you out.

#160 Capital One on 01.12.15 at 12:32 am

#117 I Love Real Estate

OK – I’ll take a shot a rebuffing:

Privacy breaches during background checks.
CO: Minor issue., IMO. Not sure I would have led with that one.

Maintenance delays.
CO: That would be a breach of the LTA.

Hidden charges for water and garbage/recycling services.
CO: Not sure what this means. I’ve never heard of it in our years of renting. Regardless, your contract should clearly state what the renter is responsible for.

Owners who lie and kick you out so they can flip.
CO: Also against the LTA.

Amateur landlords who don’t have a clue.
CO: ?? The might also be an advantage! :)

Legal fees if you have to go to landlord tenant board (much more common than anyone realizes)
CO: What % of renters ever have to do this?

No pride of ownership.
CO: Yeah – I’ll give you this one. But the $$ saved by renting help me get over it.

Being a second class citizen looked down upon by homeowners.
CO: Don’t care.

Constant financial insecurity.
CO: OK – this is the one that made be reply. Really?? The biggest risk we all have until retirement is loss of income. Compare and contrast the effect of this on a renter and an owner.
I’d have to say that financial SECURITY is one of the main benefits of renting. You KNOW what next month is going to cost. Home ownership – no way.

Stupid no pet rules that hurt your quality of life.
CO: Also against the LTA. The LTA is really, really skewed in favour of the renter.

Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth.
CO: You have very limited financial freedom when you’re house poor. And you may, or may not build equity – depends on the market

Craigslist scams.
CO: Not sure what this is. But go through a realtor if this is a concern.

How’s that for a dirty dozen?
CO: Not so good. And you missed the only one that I’d consider – and it’s been mentioned by others. With renting, there is a much higher risk that you’ll need to move when your lease is up.

CO

#161 Nomad on 01.12.15 at 12:37 am

SunLife, Manulife, Industrielle Alliance are all pulling back. The stock market is smelling the Bank of Canada’s interest rates in 2015: on hold.

Technology is not rate sensitive. They have pricing power. In a day where rates could go up, down, or stay on hold, own a fair size of tech in your portfolio. Cam use ZQQ. US tech ETF in Canadian dollars. Add some OpenText and CGI into the mix for Canadian tech.

Next few months will be… entertaining.

#162 kommykim on 01.12.15 at 12:42 am

RE:#117 I love real estate on 01.11.15 at 10:03 pm
Buyers also have the benefit of professionals to help them – realtors, lawyers and bankers.

Realtors are hardly professionals in the same league as lawyers and bankers.

#163 Blair Witch on 01.12.15 at 12:48 am

Rent or own it is a roof over your head. Personally, the time will be coming to own again. Our first home we sold as we had terrible neighbors, it was 3 years of hell. So we rented for 14 years, and our experience with landlord’s has not been a good one. Very frustrating in all. Next time we will be looking at buying land, no neighbor in sight, no barking dogs all night, no pot head neighbor and no freeway in front. Am I dreaming or is there a place in BC that fits our request. Oh well, I am still looking, heading into 15 years of renting. Hey, and the price has to be right. Kudos on the day we fine our haven in all this turmoil.

One good thing we saved, and no debt before we head out to the RE unknown.

Cheers

#164 RealistvsExtremist on 01.12.15 at 12:48 am

#131 Sheik Yerbouti on 01.11.15 at 10:39 pm
#85 Duncan Donut on 01.11.15 at 8:35 pm

Not sure I would be bragging too much about walking on the waterfront when its between 2-6 degrees in Duncan, kind of like a defrosted version of Siberia…….would have been more impressed if you said Mexico, Brazil, Cabarete or somewhere warm…
+++++++++++++++++++++++++++++++++++

Yes well there is a new type of “ism” now. It’s called Bankism. Bank’s control everything. That is why the province of Bring Cash brought in this phoney Carbon Tax. They need the money. That is why they ignore HAM. They need the money. That is why they are having a vote this spring to bring in 0.5% in the PST. They need the money. NO….it’s not for transit. If it really were for transit they would CUT COSTS FIRST. Ask for money second. They are not. Govt just “takes money”. That is all they know how to do…… every empire has collapsed for debt ridden bloated govt. Go look it up…..

Bankism controls Govt. And govt does not know how to reduce it’s size and “save money” it only knows how to spend it. That is just fine for Bankism as the banks only make more money from taxpayers.

Welcome to the new reality of Bankism.

Why should we listen to someone who thinks the plural of ‘bank’ is ‘bank’s’? — Garth

#165 hickster on 01.12.15 at 12:58 am

Good points Garth. But as you say, not for everyone. That’s an amazing rent/buy ratio, but that doesn’t exist many places. If it did, probably far more would rent.

The other thing you need to understand is that it’s great for a single guy with a dog. Not as great for a family that needs stability. The kids can’t just be expected to move schools when the market is right or the mood hits. Moving is a huge hassle, and costly, and when you rent its an ever present possibility. You are paying 2% of the cost annually. In Regina we rented briefly, the best deal we could find was about $1650 for something that eventually got listed for $314,000 and did not sell.

So firstly, that’s 6.3%, and pretty much the best deal I would find. Secondly that was just the asking price, which the real selling price in unknown and that number is in reality worst. Thirdly, the reason I know this is because the owner was trying to sell and renewed us on month to month to do so – which means weeks of disrupting your life for showings, and lots of time lost looking for other places in anticipation of beng kicked out. Fourthly, the rent increased. And fiftly, finally having to move.

As a single that may be not a big deal. With a family and young kids, it’s a BIG deal. We also has a bedded scare, which the landlord dragged her feet on (turned out to befallen alarm). We also had other problems which likewise took forever. Landlords in the real world are largely unresponsive to concerns of they can all avoid it.

We are much happier owning now. Bought within our means, and our mortgage, utilities and taxes are less than renting would be for an equivalent places.

#166 kommykim on 01.12.15 at 1:15 am

RE: #139 Setting the Record Straight on 01.11.15 at 10:59 pm
#179 kommykim on 01.10.15 at 9:16 pm
RE #130 Capital One on 01.10.15 at 3:07 am
Let me rephrase – how do you account for defined benefit pensions in the n60/40 split?

Since you can’t “sell” some of the actuarial value of your “fixed income CPP fund” to buy equities when the market tanks, then it can hardy be considered as part of your portfolio’s fixed income.
Think of CPP as a separate retirement income stream and not part of your investment portfolio at all.

******
I do not quite understand your logic. Is the goal to have a portion of your income as fixed? Or is the goal to have a portion of your portfolio fixed?
Should a person with defined benefit pensions (private and public) have te same allocation between fixed and variable assets as a person without same or with a lower amount

I would say that the goal should be to have a portion of your portfolio as fixed income (bonds) based on your risk profile. Both for re-balancing and lower volatility. Bonds are not in a portfolio for the income stream they generate, but rather because they have a negative correlation to equities.
Someone with a defined benefit pension plan can definitely have a lower percentage of bonds in their investment portfolio vs someone who relies entirely on their investment portfolio for their retirement income if they can handle the volatility. But to forgo bonds entirely in a portfolio due to having a defined benefit pension plan worth 40% of your total “investments” would be crazy IMHO.

#167 Carousel on 01.12.15 at 1:19 am

Renting going 15 years, will be looking to own at a fair price. Still over valued and quite laughable. Had it with noisy neighbors, barking dogs and freeway in front of the place we rent. Have to purchase enough land, no neighbor or barking dog in sight. Could be a pipe dream, but will keep looking. Saved with no debt, but, sanity is another issue. Landlord’s have been a nightmare over the years, really what is their problem? Rent or own is a personal thing. Like Garth said listen to your self, you are in control of your selfworth.

Cheers

#168 seeker on 01.12.15 at 1:21 am

Renters are not poor, at least many are not. My neighbours in our housing coop are teachers, gpvernment workers, lawyers, and other profesionals. None of us own, at least not in canada. Rent is fair, includes all utilities. I am able to save a lot. It could be a lot of people who have a house owned by the bank are poor. Happily renting in Calgary across the street from the million dollar homes, close to downtown. Oh, and pets are allowed.

#169 palebird on 01.12.15 at 1:30 am

150

The whole capitalist system is laid out as a ponzi scheme. Not saying there are any better ones out there but..We, as humans, create nothing. We only change the state of certain commodities that we mine the earth for. The western economies are all fighting to reach unobtainable heights. That is because, in the end, we are going nowhere. Markets cannot rise forever. For every winner there is a loser. That is a vicious fact. It is dog eat dog. I am not a doomer and, in fact, I have bought and sold houses and shares and made lot’s more than I lost. And I am still heavily in the market. But it is all just a game. If I can take whatever wealth I have accumulated, hold it in some form of currency that will not magically evaporate come some unknown crisis and go back to enjoy South America again leaving this North American rat race behind I will be happy. But that is a tall order. One thing that is certain is that life is uncertain.

#170 Pulp Faction on 01.12.15 at 1:32 am

Fantastic article !

#171 Obvious Truth on 01.12.15 at 1:33 am

“you financial guys dont fully take lifestyle, family and goals as the principal reason why people do what they do”

The opposite is true. The fact that 95% of people won’t do it is why a small percentage of people have all the wealth. And why the 95% hold all the debt. They have been told by so called professionals that a houseful of debt would give them the lifestyle they want.

It doesn’t. And ontario losing 18000 manufacturing jobs last month won’t help either. We clearly have some structural problems. Thus the constant selling of cad.

Let’s face that most people, 95% didn’t even know why their home price was going up because they don’t take the time to find out how money works.

No worries. Markets always make everything prove their worth.

#172 Mister Obvious on 01.12.15 at 1:34 am

“There is a time to own, and a time not to. It’s determined not just by the market, interest rates, debt levels and macroeconomics, but also by your own life, family and choices.”
———————————

That about says it all, doesn’t it? My time for owning has come and gone. For me it’s probably all rental from here on in. So what? That’s me, not you.

This blog provides data and insight that might help people decide on a suitable path at the correct time for them as individuals.

The endless arguments about renting versus owning never fail to drift away from specific underlying rationale into cat calling and jeers. Tiresome.

#173 Peter on 01.12.15 at 1:45 am

#60 devore

Very well put post.

#174 april on 01.12.15 at 2:51 am

A friend just phoned me and said she was going to invest in Mutual Funds- fixed fees – no risk involved. I’m doubtful. Anyone know anything about this type of investment

#175 RayofLight on 01.12.15 at 3:07 am

#155 Rexx Rock
“I think there will come a time when single men and woman in their 30’s and 40’s sell their condo or houses and give up on the Canadian rat race and live on a fixed income and live in places like Mexico and Thailand. For under $800 you can live a decent life and not worry about all the lies and propaganda of a fascist police state like Canada.”

Why would you think Thailand or Mexico is the nirvana of tranquility, fairness and prosperity? Sure you could get an isolated cottage somewhere on the cheap, but if you live and function with the locals, you are exposing yourself to the politics. The people are great, their politics suck. Your rant is just about “The Grass is always greener”!

#176 BREAKING - No Rate Hike in 2015 on 01.12.15 at 3:20 am

http://www.marketwatch.com/story/so-much-for-midyear-bond-market-now-expects-2016-fed-rate-hike-2015-01-09

The Trillion Dollar Bond market says so….and CDN dollar rising as Oil falls.

#177 Still learning on 01.12.15 at 3:54 am

Garth, I think you’re right, but I also think folks either worry too much about money or not enough. Human beings don’t seem to take to moderation that much, in my opinion… (I fall into the latter category which is why I’m drawn here…)

#178 Mark on 01.12.15 at 3:59 am

“(I can just see Mark leaping to his keyboard to criticize my logic, have at it dude…)”

I don’t have much, if anything to criticize there. However, past results are not an indication of future performance. Homeowners should not expect to receive a windfall as they have for the past 30-50 years. And if you really sit down, and do the ‘math’, home ownership is historically a relatively poor ‘investment’ relative to allocating capital elsewhere.

And pretty much, logically, home ownership, or any sort of broad based investment, must never, on average, outperform. Why? Because not everyone can be rich relative to each other. The only way that someone can really get ahead is by being different, and better than the “crowd”.

Your description of the process by which price discovery in relatively illiquid asset classes takes place is quite eloquent I must say. People need only be reminded of the fact that just as easily as it works in price rises, it also works in price declines. At first, Realtors may be able to brush the first few transactions at reduced prices down to ‘distress’. They might even make outlandish claims such as, “the sellers of 666 Evergreen Terrace sold their house below market value“. As we saw in the US, they may even seek to alter the methodology of collecting transactional statistics to deliberately exclude foreclosures, in an effort to stall the perception of price discovery. Smart people will see right through the ruse. Bankers will see through the ruse and start clamouring for higher risk premia. But occasionally, a sucker will fall for it and over-pay.

#179 Westcoast renter on 01.12.15 at 4:04 am

Thanks, Garth! Though I sometimes yearn for home ownership, you never fail to remind me why I rent. Not being weighed down with a huge mortgage means way more options, a much lower cost of living, and far less stress, especially during these uncertain times.

#180 My Life is a Pile of Shit on 01.12.15 at 5:40 am

Garth, you picked an extreme example to support renting. A new house that rents for $3800 per month can be bought for half a million outside of big cities. If you buy such a house without financing, you are guaranteed to save $45,600 in rent per year. (Don’t give me that mortgage interest crap. There is no mortgage cost, because there is no financing. If you have to buy with financing, you are better off renting.) You would have to get 9.1% in after-tax investment return (on the half a million) to equal the guaranteed rent savings. We are so far into a bull market that investors think getting at least 7% return is a certainty. XIU (iShares S&P/TSX 60 Index ETF) has returned less than 3% per year since mid-2008. How’s that for certainty?

#181 CalgaryRocks on 01.12.15 at 7:53 am

#145 Lloyd Jensen on 01.11.15 at 11:19 pm
#100 A Yank in BC

But Yank, what do you do as a house owner when the city says it’s not their fault that your finished basement has flooded, and the insurance company won’t cover it either? Remember the Alberta floods of 2013?

You fix it. Take 10Gs out of the 300K equity that you are sitting on and build yourself a better basement.

It’s just drywall and wood in there nothing magic. Everything you need can be found at Home Depot and put together with a screw driver and some basic tools.

#182 ANON on 01.12.15 at 7:57 am

http://i.imgur.com/PbHBA.jpg
Mortgages not pictured :)

#183 Oil is going to $20 on 01.12.15 at 7:58 am

With oil going to $20 or lower Alberta is finished. $50 oil over the long term Alberta is toast but $20 oil will leave everyone in economic ruin. Financial pain is coming to RE in Alberta which could see minimum 50% drop with an outside chance of a Detroit style crash. BTW oil is down again today 2-3% . Ouch

#184 Realtors hurting for a sale on 01.12.15 at 8:11 am

You can see and smell the desperation from the high school drop out shyster realtors. Realtors have no education and offer zero value. No one needs a realtor. The government needs to dismantle the RE boards

#185 rene nadeau on 01.12.15 at 9:00 am

be careful //39
You are right but for a few hundred dollars you could increase your liability insurance from 2M to 5M and solve this situation.

#186 maxx on 01.12.15 at 9:18 am

One of your very best Garth- bless you. Completely agree. Do I detect a note of desperation in this realtard’s vapid, overstated commentary?

#187 Capital One on 01.12.15 at 9:22 am

RE: #165 kommykim
RE: #139 Setting the Record Straight on 01.11.15 at 10:59 pm
#179 kommykim on 01.10.15 at 9:16 pm
RE #130 Capital One on 01.10.15 at 3:07 am
Let me rephrase – how do you account for defined benefit pensions in the n60/40 split?

STRS and kommykin.
Thanks for the input.

Yes – I was/am looking at it from an income point of view, not portfolio. Doesn’t that make the most sense?

No – I didn’t mean that the DB would constitute all of the fixed income part of our income. When I needed to rebalance, I’d boy or sell other fixed income investments.

kommykin – isn’t modifying your risk tolerance and investment mix (say from 60/40 to 70/30) the same thing as considering DB as fixed and staying at 60/40?

CO

#188 pbrasseur on 01.12.15 at 9:25 am

« With oil going to $20 or lower»

I don’t know if this time is THE time but at some point it’s coming. Oil will not disappear with a (peak-oil) bang, it will fade away.

Electric cars are coming and even if energy is still produced from fossil fuel they are so much more efficient that demand for oil will crash.

Already you can drive a Tesla across Canada for free. There is no turning back from that, down the road they will become cheaper, range will increase and fast charging stations will be everywhere.

For sure the market sees all this and I wonder if at least some of the current drop is related to that.

#189 Jeff in Moose Jaw on 01.12.15 at 9:48 am

One of the best blog posts I’ve seen. Well done Garth.

It be nice to share this with family and friends, but its politically incorrect.

#190 waiting on the westcoast on 01.12.15 at 9:59 am

It’s baaaack! Probably less to do with its own strength and more due to global weakness…

http://mobile.bloomberg.com/news/2015-01-09/u-s-retakes-the-helm-of-the-global-economy.html

#191 Yuus bin Haad on 01.12.15 at 10:16 am

There’s no debate – you’re right; they’re wrong – no need for a rebuttal.

#192 Casual Observer on 01.12.15 at 10:16 am

Blackdog, kommykim

Re: Renters Insurance vs. Owners Insurance

I had the same experience (about 10 years ago) of being charged nearly double for the exact same coverage when we sold our condo and rented it back from the new owner.

All I did was change the status from owned to rented and the cost went up from $250/yr. to $480/yr. for the exact same policy.

This was after they “allowed” me to keep my claims free discount (how nice of them).

Now keep in mind, this is for Contents Insurance only – not structure.

I posted about this a couple of years ago, but Garth basically called me a liar.

Sorry to hear about your experience, but glad that I wasn’t the only one.

#193 close down the oil sands on 01.12.15 at 10:19 am

Not only are they now economically not viable but they are a mayor pollutant to the point Canada doesn’t want the world to see the truth. Why are you afraid of Canada? Canada trying to hide ecological terrorism? If you have nothing to hide you have nothing to worry about.

http://www.cbc.ca/news/politics/nafta-scrutiny-of-oilsands-tailings-ponds-opposed-by-canada-1.2896100

#194 Former cultist on 01.12.15 at 10:36 am

Oil is $45 / barrel garth where’s the decline?

#195 footydiver on 01.12.15 at 10:43 am

This article is one of the best since I started following few months. It is much clearer when you starting crunching out the numbers. Garth, you should do this more often.

#196 honeybooboo on 01.12.15 at 10:56 am

#121 Finally.Bought! on 01.11.15 at 10:19 pm
I rented my whole life – until a few months ago. We bought a house, probably at the height of the market.

The only good thing about owning is you know you won’t get kicked out by a landlord. You may, however, get kicked out by your bank because you can’t pay your mortgage. It’s called forclosure, man.

In every other way, renting is better and it’s not even close.
++++++++++++++++++++++++++++++++
so what you’re telling us is you’re stoopid for buying but you did it anyways. stoopid alright

#197 Capt. Obvious on 01.12.15 at 10:57 am

I really enjoyed this post. The bit about thinking is very key.

#198 honeybooboo on 01.12.15 at 11:02 am

#138 BlackDog on 01.11.15 at 10:59 pm
@I’m Stupid,

Oh yeah, and think carefully about having kids. And if it’s too late, enroll them in drivers education. And, if you have girls, count your blessings, because they cost WAY less to insure on your auto policy!
===============================
What if your kid is transgender???

#199 waiting on the west coast on 01.12.15 at 11:13 am

honeybooboo – What if your kid is transgender???

Dress how you like… but insure as a girl… ;-)

#200 Alberta is finished on 01.12.15 at 11:19 am

Look at the oil stocks crashing. WEeeeeeeeee down oil stocks go with Alberta RE to follow. RE in Alberta is finished. GTA to get hit hard too

#201 The American on 01.12.15 at 11:23 am

At #105: Mark, you said, “Doubtful we’ll have the weaker CAD$ this time around, as Canada’s economy is far stronger than the US’s is this time around. And Canada has solid leadership in the industry which is likely to explode in value, the precious metals miners, compared to being a mere sideshow in the technology sector like it was in the 90s.”

Congratulations, Mark, as you receive the Dumbest Comment of the Week award, and it’s just Monday! The USD is already buying over $1.19 CAD, and the CAD has quite a bit more to slip. Seriously, where do you all come up with this stuff?!? LOL

#202 Nuke on 01.12.15 at 11:43 am

I use the following ratio. House costs > 15 times annual rent , keep renting. If < than look at buying. If that is how a normal market should work than TO and Van are anomalies and should be look on as such.

The market value of the house you live in is only an approximation of a house that was sold. The variables make an apples to apples comparison impossible or foolish.

ETFs and individual stock prices shown on the active exchange do reflect the paper value of your holding of the same units in your portfolio at that time.

#203 NoName on 01.12.15 at 11:43 am

#198 honeybooboo
@198

God thing Canada is not putines Russia, so his kids are OK eather way.

http://www.telegraph.co.uk/news/11334934/Vladimir-Putin-bans-transsexuals-from-driving.html

#204 Alex N Calgary on 01.12.15 at 12:01 pm

Ok lets assume lots of us don’t have 2 milllion in Cash and rent, that is probably about 0.00001% of people renting in Canada, since I’ve been forced from rental to rental, 7 in 7 years lets talk about what that guy said.

Privacy breaches during background checks: How about Privacy breaches as they wander through the house poking their nose in everything, happens too often in renting.

Owners who lie and kick you out so they can flip: Aint’ that the truth, they’re just waiting to Flip or tear it down, it costs a lot of money and Time to move, when you have more then a condo worth of stuff, happened to us TWICE in a row in Calgary, infuriating

Amateur landlords who don’t have a clue: Can’t stress this enough, moron landlords in Calgary, this current one is making me insane, useless, clueless, stressfull

No pride of ownership: Questionable of course, but when you barley unpack anymore and hold a big party, its a little embarassing you still live like a student, less embarassing then super overpaying for a house, but you know..

Being a second class citizen looked down upon by homeowners: That’s true by everyone, well covered on this site, but less annoying then getting into a rathole infill that is about to go down by 300k value

Constant financial insecurity: I guess thats true you don’t have a HELOC to fall onto, more like constant insecurity on when I have to move next

Stupid no pet rules that hurt your quality of life: Ain’t that the truth, rentals got 5x harder when I got a dog, amatuer landlords in Calgary are arrogant to say the LEAST, top quality renters and no dogs they insist, great…

The rest of the list is crap, people look at us like we’re insane to be moving again, I think my Wifes friends blame me for the moving, you should have seen her grandparents look at me last night at dinner like I’m ruining their granddaughters life for not buying a house already, at least FINALLY light at the end of the tunnel, until that point though, I have to pack it ALL up again for another move, oh 1 more on the list that guy missed…

In Alberta renters only give 1 months notice so you have to wait until the MONTH you have to move to find a house, no stress there right?

In Alberta damaged deposit equals 1 months rent at the Descretion of Said amatuer landlord to deduct for anything they feel is appropriate…

I sure understand why everyone bought a house, how we haven’t by this point, with all the stress and moving…I don’t know

Can you afford it, and still have a reasonable cash/savings/investment reserve? — Garth

#205 Simon Cowel on 01.12.15 at 12:15 pm

It seems oil is going down toward 30-yish, dollar towards 70-yish.

For now.

#206 T.O. Bubble Boy on 01.12.15 at 12:24 pm

@ #10 honeybooboo on 01.11.15 at 3:27 pm
Garth, I’m not knocking your math but admit that $3800 a month for a 2M house in nowhere near typical in Toronto

I had the choice of at least 20. — Garth
————————————————–

Having been in this exact rental market (detached houses in midtown Toronto) a few times in the recent past, I would agree that there are always choices, but it varies with the season.

I was renting a $1M+ house for around $3,000/month, so Garth’s $3,800 is believable (maybe a bit below market rate, but pretty close).

#207 Mark on 01.12.15 at 12:29 pm

“Congratulations, Mark, as you receive the Dumbest Comment of the Week award, and it’s just Monday! The USD is already buying over $1.19 CAD, and the CAD has quite a bit more to slip. Seriously, where do you all come up with this stuff?!? LOL”

I’ve laid out the reason why deflation will push the CAD$ up in Canada. Now, of course, in the short term, currencies can go anywhere, up or down. But the long-term outcome for the CAD$ is much higher, on account of running chronic structural trade surpluses, particularly with the United States.

That the CAD$ has declined another cent means that its just an even better buying opportunity than it was previously.

I know the blog comments here are notorious for people coming by with drive-by personal attacks, particularly on Garth and his belief, supported with evidence, that Canadian house prices are unsustainably high. But in the end, fundamentals always win out, and fundamentally there’s no reason why the CAD$ shouldn’t strengthen as debt deflation sets in. CAD$ short sellers (ie: borrowers) will eventually run out of steam, and then they will have to repay all that debt with the obvious consequences.

#208 fancy_pants on 01.12.15 at 12:34 pm

Lower oil = lower dollar = higher inflation for imported goods (especially viagra, higher demand during stresful times – the exception is truck nuts due to falling demand).

RE bubble, govt debts, listless economy all point towards no significant rate increases. The BofC will do lots more stick waving and then maybe raise rates quarter percent but at least we know they cannot effectively prop the RE bubble like before.

We’ll see how this all plays out.

#209 Kenchie on 01.12.15 at 12:39 pm

The world’s biggest problem….

http://www.bloomberg.com/video/autonomous-asia-s-chu-on-china-s-economy-banks-DPnxPaO_Qf~VRXNDf6B0bw.html

#210 Bottoms_Up on 01.12.15 at 12:52 pm

“Turn off the noise and come to your own conclusion.”

This is exactly the point of this blog (other than Garth highlighting the risks of real estate, and of being non-diversified).

Use all the information at your fingertips and figure out what’s best for you/your family.

#211 Rational Optimist on 01.12.15 at 12:53 pm

146 BlackDog on 01.11.15 at 11:29 pm

‘“So many people live in extremes.”
Is this a sentence?’

Yes.

‘Is this?
“Or both.”’

No. It’s a sentence fragment. But it clearly follows from the preceding sentence, so is understandable. I think that this is accepted in journalistic style. You will see fragments in magazines and newspapers that have exactly this same form.

You probably would not choose to write like that in a doctoral thesis. Which I’m pretty sure the article is not.

#212 Bottoms_Up on 01.12.15 at 12:58 pm

#204 Alex N Calgary on 01.12.15 at 12:01 pm
———————————————-
If you want to ensure your landlord is not about to pull a fast one on you, get stuff in writing.

In your next rental contract, ask for 2 months notice if unit will become owner occupied. Build in a penalty if they kick you out (ie, equivalent to 1 or 2 months rent).

That will give the landlord pause in future behaviour, and you will also be able to better determine the landlord’s motivation for renting to you.

#213 Rate-abate on 01.12.15 at 1:04 pm

HSBC’s Steven major saying interest rates going nowhere this year , repeat after me …..no rate hike in 2015! Lol

Never heard of either of you. — Garth

#214 -=jwk=- on 01.12.15 at 1:06 pm

Alex, it sounds like you are aren’t very good at interviewing landlords. Seven times you failed to ask questions like: “what is your average tenancy length”, “how often do you inspect ” “how many properties do you own, and how long have you owned them?” “who is your oncall maintenance provider?” etc.

Save these for next time.

We’re going on three years in a rental house (the only one in the area) with a landlord I see once a year when I hand him more cheques.

Note that in Toronto the landlord is required to maintain the property – but I do that. And a landlord can’t require post dated cheques – but I do that as it’s easier for everyone. A landlord requires 24hr notice, but when he called to come over and fix the roof the same day I let him – of course.

I own rental properties in the USA that more than cover our rent up here, and I act as the tenant I wish I had. Do you?

I also have an unsecured LOC. Completely free and gives us peace of mind. Why not get one?

#215 Bottoms_Up on 01.12.15 at 1:08 pm

#188 pbrasseur on 01.12.15 at 9:25 am
——————————————-
The new Kia electric has a range of around 190km (less in winter)…a distance that makes commuting possible. Not good for long trips, but it has now become affordable to the average car buyer. Running the car’s heater can drain the battery, so difficult for harsh winter conditions, but you can warm the car up in your garage while plugged in.

Ontario will cover $8500 of the cost of a 3-yr lease.

#216 Mike in Toronto on 01.12.15 at 1:09 pm

#7 I’m Stupid

Hole in your math?

Thought about doing this myself, getting off the BS insurance “years of continuous coverage” treadmill. If you can find a monthly rental at $650, good for you.

The hard part is the insurance. Your credit card will probably cover your Collision loss/damage, but…. my card has a 48 consecutive day limit.

It might work with multiple gold cards.

In Ontario, you’ll get liability insurance with the car, but be really frick’n careful if renting in the U.S., sometimes they don’t cover you if you’re not already an insured motorist. It’s hard to tell if they’re lying to your face to sell you the insurance you don’t need, or if they’re tryign to sincerely warn you that you don’t have the insurance you do need. And if you can’t explain it to yourself, you wont’ be able to explain it to the officer.

#217 Edward on 01.12.15 at 1:12 pm

Garth,
There seem to be only calls for oil to drop more. Alberta real estate looks vulnerable.

But, there are many many calls that the stock market has peaked as well. The best case scenario seems to be a flat market in 2015. Many are calling for a substantial cooling off period for a while.

How can even a balanced portfolio generate 7% under these conditions. Isn’t selling your house and investing the proceeds now like jumping from the frying pan to the fire?

Hardly. Cheap oil is great for the economies of the US, Europe, China etc, and for a balanced portfolio which has a reduced exposure to Canada. I expect a robust year. — Garth

#218 Bottoms_Up on 01.12.15 at 1:20 pm

#174 april on 01.12.15 at 2:51 am
————————————
There is no such thing as ‘no risk’.

Garth has covered guaranteed annuities before. There are “investments” out there where you are guaranteed to get your money back. That’s not so much an investment, rather it’s a way to ensure against substantial loss.

However, $1000 today properly invested in a 7% yearly return environment becomes $1400 in 5 years. However, if you only get your “money back” in 5 years (through a guaranteed principle repayment, or, you stick your money under your mattress), you’ve actually “lost” 29% of your money ($1000 / $1400).

#219 Bottoms_Up on 01.12.15 at 1:28 pm

#128 AnalysisParalysis on 01.11.15 at 10:32 pm
——————————————
It’s up to you, only you know what you can afford, where you are in life, where you want to be, what type of neighbourhood you want. Given the limited details in your post, if it were me, I’d be looking closer to the $3000 range. How important is the differential ($1000) to you, and is that worth the compromises?

#220 Bottoms_Up on 01.12.15 at 1:33 pm

#74 Cow Man on 01.11.15 at 7:38 pm
——————————————
What’s the population of Owen Sound? What municipal services do you receive?

Compare those items with Toronto and you have your answer.

#221 kothar on 01.12.15 at 1:40 pm

I guess then Germans should be ashamed of themselves then for being renters. They are a powerhouse economy and have the lowest unemployment in EURO land. Most people seem to be happy and have lots of EURO’s in their hands too. Unlike us.

http://qz.com/167887/germany-has-one-of-the-worlds-lowest-homeownership-rates/

#222 Pre-Retiree on 01.12.15 at 1:45 pm

#172 Mister Obvious
The endless arguments about renting versus owning never fail to drift away from specific underlying rationale into cat calling and jeers. Tiresome.
_____________

Yes, well said indeed. Can we stop now? Just decide what’s best for you, and do it. No need to proselytize

#223 DM in C on 01.12.15 at 1:49 pm

WUL: So our debate is about whether Calgary is a city that has gained a momentum as a desirable place to live and one that will survive beyond the one industry that built it or whether it is a glorified work camp where prospects of employment are better than say Kapuskasing.

***

Our kids are 2nd generation Calgarians and already looking at leaving. As one stated, “if you don’t like winter sports, there’s not much in this city for you other than jobs and shallow people”

He’s definitely on his way somewhere else, and frankly I kind of agree with him. It’s definitely not a place one aims to retire to. Once retired, we’ll go somewhere a heck of a lot warmer and cheaper.

#224 Keith in Calgary on 01.12.15 at 2:02 pm

LOL…..lists like this maae me laugh….in fact, anything that comes out of a realtor’s mouth does.

Privacy breaches during background checks.

How does this happen ? They ran my credit bureau and I showed them a statement from my bank with a 6 figure balance in one of my accounts and I was approved. No breaches here……

Maintenance delays.

Professional landlords have companies on call….never had a delay yet.

Hidden charges for water and garbage/recycling services.

Hide everything from me, who cares, if I don’t like the figure you are asking for rent, I won’t rent from you.

Owners who lie and kick you out so they can flip.

Rent from professional property management companies and you don’t have this problem.

Amateur landlords who don’t have a clue.

See answer above.

Legal fees if you have to go to landlord tenant board (much more common than anyone realizes)

See above answer……you don’t have problems if you pick who you rent from.

No pride of ownership.

I have pride of “rentership”. In fact. some of my previous rentals were nicer than 99% of stuff you can buy.

Being a second class citizen looked down upon by homeowners.

I don’t care what a bunch of stupid debtors think of me……I’ll trade bank balances with any one of them any day of the week.

Constant financial insecurity.

Really ?? LOL !! This is the stupidest one on the entire list. $850K and counting………….

Stupid no pet rules that hurt your quality of life.

I don’t do pets or pet buildings.

Missing out on building equity and future financial freedom – most people, about 95%, will simply never save and invest the way Garth wisely suggests, sorry that’s just the truth.

See two answers above.

Craigslist scams.

Deal with professional property management companies.

#225 pbrasseur on 01.12.15 at 2:26 pm

Bottoms_Up #215

On electric cars…

It’s coming that’s for sure! Constructors are racing:

http://evobsession.com/300-mile-electric-cars-vw-exec/

http://evobsession.com/250-mile-electric-car-thats-affordable-nissans-race/

Electric cars are already far more efficient and easier to maintain, the only problem remaining is range and that is only a matter of time, not a long time.

Once the shift occurs it will increase exponentially, just like it did for other technological changes. Oil will never be cheap enough to prevent that from happening, but cheap it will be.

Of course there will always be dinosaurs who prefer Hummers and Harleys :-)

#226 SWL1976 on 01.12.15 at 2:38 pm

#210 Bottoms_Up on 01.12.15 at 12:52 pm

“Turn off the noise and come to your own conclusion.”

—————————————–

Well said. Critical thinking people are becoming a rare breed and may soon face extinction.

The herd has been programed to constantly seek approval and likes to be told what to do

There are no safe bets in life, but following the herd as comforting as it might be… Generally leads to slaughter, especially now in the 21st century

#227 saskatoon on 01.12.15 at 2:44 pm

question:

oil drop going to be affecting saskatoon?

doesn’t seem to be right now.

#228 West Vanner on 01.12.15 at 2:55 pm

And on Vancouvers West Side……

http://vancouver.craigslist.ca/van/apa/4829009453.html

#229 JL on 01.12.15 at 2:58 pm

Garth, I’m not knocking your math but admit that $3800 a month for a 2M house in nowhere near typical in Toronto

I had the choice of at least 20. — Garth

A typical $500,000 DT condo in Toronto rents for $2000, but you can rent a property worth FOUR times the amount for less than double the rent?!

If this is true than looks like Garth has found an inefficient market. Doesn’t mean that you should all rent but ANYONE who wants to live in a $2 million dollar home is crazy to buy it.

By the way in Calgary $800,000-$1,000,000 properties rent for $3000-$4000 per month. I wonder why Toronto does not have the higher rents.

#230 Nemesis on 01.12.15 at 2:58 pm

#SpectacularGoldenGlobes,Or… #WTF?:JeremyRennerCastigated… #[ForStatingTheObvious]… #MiscreantMondayMischief…

[UK Independent] – Golden Globes 2015: Jeremy Renner criticised for making ‘sexist’ comment about Jennifer Lopez’s dress

http://www.independent.co.uk/news/people/golden-globes-2015-jeremy-renner-criticised-for-making-sexist-comment-about-jennifer-lopezs-dress-9972232.html

#231 fancy_pants on 01.12.15 at 3:09 pm

http://www.wsj.com/articles/canada-to-provide-loan-to-linamar-for-transmission-project-1421074140

They just don’t get it. big govt, big spending = big taxes = nobody wants to set up shop here unless they are heavily subsidized. sigh.
smaller govt, smaller budget = less taxes = more investment without dangling carrots. automagically better off. sigh.

#232 Arfmooocat on 01.12.15 at 3:26 pm

Goldman Sachs sees oil at $39 in 6 months

#233 GS on 01.12.15 at 3:28 pm

If you’re sharing a bit of your personal life Garth, do you mind answering if you are a self directed investor, or do you have an advisor?

I’m assuming you are self directing….. but maybe not?

And what would you recommend for those thinking about how to proceed themselves?

It’s easy to say, balanced and diversified, but maybe a limited knowledge will bite me in the butt?

Do you handle your own surgeries and dental work? — Garth

#234 bdy sktrn on 01.12.15 at 3:29 pm

Yes, well said indeed. Can we stop now?
————————-
better time spent discussing this (bonds vs stocks)http://finance.yahoo.com/echarts?s=%5ETNX+Interactive#%7B%22range%22%3A%7B%22start%22%3A%221999-01-31T20%3A00%3A00.000Z%22%2C%22end%22%3A%222015-01-12T20%3A00%3A00.000Z%22%7D%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22%5EGSPC%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%2C%22%5EDJI%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D; and why since 2012, has the relationship between the two ended?

#235 bdy sktrn on 01.12.15 at 3:31 pm

yeah i need that tiny url thing, next time i promise

http://finance.yahoo.com/echarts?s=%5ETNX+Interactive#%7B%22range%22%3A%7B%22start%22%3A%221999-01-31T20%3A00%3A00.000Z%22%2C%22end%22%3A%222015-01-12T20%3A00%3A00.000Z%22%7D%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22%5EGSPC%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%2C%22%5EDJI%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D;

#236 Jack on 01.12.15 at 3:33 pm

Just renewed my mortgage at 2.59% two year fixed. Seriously? This at the same time my self directed investment account is making upwards of 12% a year. Why should I even attend to pay off my mortgage? May be I should just sell my house in GTA, move to a 150K house in Hamilton or London and use all the money to buy oil stock. This is crazy.

#237 GS on 01.12.15 at 3:36 pm

Do you handle your own surgeries and dental work? — Garth

——————-

Ha! Well, I played Junior hockey, so on occasion I actually did….

#238 bdy sktrn on 01.12.15 at 3:39 pm

exxon jumps in to BC natgas late, but says it will jump to the lead and build first. do it, i say. it’s gonna be tough getting the heavy oil out to the west, but gas is clean and green. nat gas is sooo cheap in NA it’s almost free. they pay good money in asia and will continue to do so. whoever can start moving it over there fast and cheap will make out.
———————-

Exxon Mobil Corp., along with subsidiary Imperial Oil Ltd., says it could begin construction of an LNG facility in British Columbia in 2017, and their B.C. environment assessment application, filed last week, says the project would cost between $15 billion and $25 billion.

http://www.vancouversun.com/business/energy/Exxon+Mobil+could+begin+construction+facility+early+2017/10722395/story.html

#239 I Love Landlords on 01.12.15 at 3:48 pm

Just a big thanks to landlords, and those who agree with ‘I Love Real Estate”.

My landlord is into my residence for 800k. I don’t know the specifics, but I imagine he has about 200k in capital tied up, and servicing ~600k mortgage.

His costs before maintenance, but after properly tax, has to be above 3k a month.

I pay him just over 2k per month. So he’s subsidizing my lifestyle by at least 1k per month.

Do I even need to mention the opportunity cost of the 200k in cash he’s in for? Maintenance?

Again, just a huge thank-you.

(oh, forgot, he did like 100k in landscaping when he built it, and wants the work professionally handled, so HE PAYS A LANDSCAPER! Thanks for that too.)

#240 Spaccone on 01.12.15 at 4:20 pm

#239 I Love Landlords on 01.12.15 at 3:48 pm

Too many who want to play pretend property baron/high scoiety/moneyed people/etc, let them struggle under their own burden. I don’t want to play their game.

#241 Josh in Calgary on 01.12.15 at 4:22 pm

#232 Arfmooocat
“Goldman Sachs sees oil at $39 in 6 months”

You do know that Goldman Sachs is renowned for saying one thing publicly and doing another thing behind the scenes, right? They’ll be the first ones loading up on Oil futures when the timing is right. Best to drive it down first though.

#242 Perry on 01.12.15 at 4:23 pm

what if oil goes to $120 by end of the year?

did anyone ever think of that?

#243 Josh in Calgary on 01.12.15 at 4:27 pm

#229 JL on 01.12.15 at 2:58 pm

“A typical $500,000 DT condo in Toronto rents for $2000, but you can rent a property worth FOUR times the amount for less than double the rent?!”

You do realize that condo owners have to pay monthly fees and often include some utilities? It’s not exactly an apples to apples comparison. Also, from what I’ve heard rental markets are quite competetive on the lower end, but less so at the higher end (fewer people can afford the higher monthly). My guess is the $2 million home owner is just happy to get a good renter in to hold the property. Maybe they’re working over seas for a few years and didn’t want to sell.

#244 je sui charlie on 01.12.15 at 4:27 pm

Loonie below 84c.
Poloz want to assassinate the loonie and he’s succeeding.
Some leaders we got here….good grief!!!

#245 CalgaryRocks on 01.12.15 at 4:36 pm

#239 I Love Landlords on 01.12.15 at 3:48 pm
Just a big thanks to landlords, and those who agree with ‘I Love Real Estate”.

Again, just a huge thank-you.

(oh, forgot, he did like 100k in landscaping when he built it, and wants the work professionally handled, so HE PAYS A LANDSCAPER! Thanks for that too.)

But enough about your mom.

#246 Mark on 01.12.15 at 4:38 pm

Mark, get your nose out of your textbook. Dollar approaching 82 cents. I hope you don’t work in the financial sector.

#247 Correction done? on 01.12.15 at 4:42 pm

We have had a 20% correction in US dollars. So is this done now?

Average Canadian home price had went from $410,000 to around $330,000 USD.

Why is no one on this blog talking about this.

#248 Hicksville Alberta on 01.12.15 at 4:49 pm

I guess with the Canadian dollar closing in on a 20% discount to the US dollar, the TSX is now less than 12,000 in US dollar terms.
Not such a great return over the past year after all.
Don’t think there are many winners in many things anymore and if this does turn to more of a deflationery bear than it has shown so far, ultimately the real winners will be the ones that just lose less than others.
Could be the times they are a changing.

Why price a Canadian exchange in US$? Why not roubles? — Garth

#249 Paully on 01.12.15 at 4:55 pm

No-pet clauses are illegal and unenforceable in Ontario.

#250 TRT on 01.12.15 at 4:57 pm

Friends of the gov are making a killing in the FX markets.

Sacrificing the CDN dollar.

Never thought the day would come when an acre of farmland in Northern India goes for the same price as an acre of farmland in the Fraser Valley.

#251 TRT on 01.12.15 at 4:59 pm

“Why
price a Canadian exchange in US$? Why not roubles? — Garth”

Because the Reserve Currency of the world and foreseeable future is USD. That is the only real money. Not Rubles, Gold, etc.

#252 Dual Citizen In Canada on 01.12.15 at 5:01 pm

#214 -=jwk=- on 01.12.15 at 1:06 pm
I own rental properties in the USA that more than cover our rent up here, and I act as the tenant I wish I had. Do you?

Treat people as you would like to be treated always rings true. As a landlord in the US and a tenant in Canada, things could not be better. Wait….I have no debt in Canada and gas is cheap, that means I have more cash to invest. As for the Canadian dollar and oil, all I have to say is, “tank, baby, tank!”

#253 Piccaso on 01.12.15 at 5:09 pm

Canadian Ruble under .84 cents

#254 Ray Skunk on 01.12.15 at 5:13 pm

#242 Perry

what if oil goes to $120 by end of the year?

did anyone ever think of that?

http://business.financialpost.com/2015/01/12/were-never-going-to-see-100-a-barrel-oil-again-saudi-prince-alwaleed-bin-talal-says/?__lsa=5aba-1b55

This guy has the clout to ensure his predictions come true, if he wants them to.

#255 jess on 01.12.15 at 5:21 pm

labor force participation rate
see- bureau of labour statistics
Is the decline in the participation rate permanent ? then rates go up?

=
jobs

http://www.whitehouse.gov/the-press-office/2014/09/09/fact-sheet-build-america-infrastructure-investment-summit

#256 Victor V on 01.12.15 at 5:22 pm

Calgary’s weakening housing market provides first sign of Alberta economic slowdown

http://business.financialpost.com/2015/01/12/calgarys-weakening-housing-market-provides-first-sign-of-alberta-economic-slowdown/

“This is where you start to see some of the data come in over the next couple of months and I wouldn’t be surprised to see more weakness start to accumulate as we get into 2015,” David Tulk, chief macro strategist at TD Economics in Toronto, said in a telephone interview.

Home sales in Calgary, Canada’s oil capital, are falling even as listings rise, according to January data provided by the Calgary Real Estate Board. Month-to-date data show sales for January are down 34% from a year ago, while listings are up 22%.

That follows December readings that show Calgary’s real estate market closed the year with a 42% rise in listings, and a 7.5% decline in sales, according to the Calgary real estate board.

#257 jess on 01.12.15 at 5:23 pm

Labor Force Participation Rate
Labor force status: Civilian labor force participation rate
Type of data: Percent or rate
Age: 16 years and over

http://data.bls.gov/timeseries/LNS11300000

#258 The Econoom on 01.12.15 at 5:31 pm

Sure is nice to be a Calgarian getting paid in USD these days. Just got a 15% raise in the past year without working any harder. Don’t really give a shit what my house is worth. It’s paid off and I have to live somewhere. Why not here?

#259 Westcdn on 01.12.15 at 5:41 pm

I came across this article which simplified Thomas Piketty’s book and his concern about the concentration of wealth – Capital in the 21st Century. We do have to think about curbing the wealth of the 1% of the 1% because I don’t want to live medieval lifestyle where I am not one of the privileged. http://econospeak.blogspot.ca/2014/04/piketty-for-dummies.html
I see similarities with the robber baron era of the late 1800’s and think a new form of the Sherman Antitrust Act (1890) to reduce the income/wealth disparity I see. I am a capitalist at heart and believe people should rise through merit hence my pushing against the status quo.
I scanned the MLS for my hood in Calgary and it looks normal to me but there is one property priced to sell and one flipper which I think is overpriced. There is no doubt in my mind that my hood RE prices will fall – I just don’t know how far.
I got my property tax assessment and it looks fair after reviewing the sale price of homes in the hood prior to July 2014 on the city website. Renos are such a game changer if they are done right.
I am ready to pay the 4.5% property tax increase. I should cut Nenshi a break as school taxes are included my property tax bill but they seem locked to the City mill rate (duh). I hope the city employees spend their 4% wage increase wisely and provide us with the service we pay although I don’t expect them to stress themselves on our behalf (sarc) – I couldn’t resist throwing that comment just to get a response.

#260 Apocalypse2015 on 01.12.15 at 5:41 pm

Enjoy the winter doldrums people. Hell is about to break loose. This will be the worst year of the century.

China is about to implode:

“We’ve got the biggest debt bubble that the world has ever seen and credit is continuing to grow twice as fast” as the economy, Chu, 43, a partner of Autonomous Research Asia Ltd., said in an interview in Hong Kong today with Bloomberg Television’s Angie Lau. “We’ve got deflation looming on the horizon.”

http://www.bloomberg.com/news/2015-01-12/charlene-chu-says-china-s-credit-worsening.html

The CDN dollar is going down much more. I predict .75 by spring.

http://www.theglobeandmail.com/report-on-business/top-business-stories/canadian-dollar-sinks-below-84-seen-losing-a-nickel-more/article22416402/

Oil’s losses are starting to crush the S&P.

http://www.theglobeandmail.com/globe-investor/oils-plunge-wiping-out-sp-500-earnings-as-estimates-shrink/article22417803/

Absolute disaster in Alberta as soon as this spring. real estate should be down by at least 25% by then.

Hold on to your cowboy hats!!!!!!

Didn’t you used to be called Apocalypse2014? — Garth

#261 Toronto_CA on 01.12.15 at 5:50 pm

Oil down huge AGAIN today, could we see it go into the $30s? When does the bleeding stop? How long does it have to stay low before we start seeing mass energy sector layoffs in Canada? Lower prices at the pump will help offset the losses in Alberta, but again, as Canada is a net exporter of oil the end result is bad news for Canada if this keeps up for a few quarters/years.

#262 Jan on 01.12.15 at 5:54 pm

DELETED

#263 Porsche on 01.12.15 at 5:54 pm

#217

Hardly. Cheap oil is great for the economies of the US, Europe, China etc, and for a balanced portfolio which has a reduced exposure to Canada. I expect a robust year. — Garth

India as well… there’s another 1.25 billion people

#264 RealistvsExtremist on 01.12.15 at 5:58 pm

@#148 Reality vs Extremities
“you believes everything they read from the Govt. Good luck to you slave……”
+++++++++++++++++++++++++++++++++

nah, I just dont believe everything I read on the internet.

++++++++++++++++++++++++++++++++++++

I believe you……

#265 Debtfree on 01.12.15 at 6:19 pm

@242 perry you must be able to see right into Steve’s head .

#266 Jan on 01.12.15 at 6:25 pm

DELETED

#267 DM in C on 01.12.15 at 6:40 pm

#258 WestCdn

“I am ready to pay the 4.5% property tax increase.”

I wish, ours was 10.5% Bloody crooks.

#268 Blacksheep on 01.12.15 at 6:42 pm

“We have had a 20% correction in US dollars. So is this done now?

Average Canadian home price had went from $410,000 to around $330,000 USD.

Why is no one on this blog talking about this.”
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I am and have been for a long time now. US / CAN wages just equalized by the same %. Like others have pointed out today, this blog is just a guide, you gotta think for your self and it sounds like you are.

Groupthink can be a dangerous thing.

#269 Snowboid on 01.12.15 at 7:13 pm

#247 Correction done? on 01.12.15 at 4:42 pm…

I suspect because not too many people (despite the Professors’ advice) have investments or property in USD.

#270 Derek R on 01.12.15 at 7:16 pm

#229 JL on 01.12.15 at 2:58 pm wrote:
By the way in Calgary $800,000-$1,000,000 properties rent for $3000-$4000 per month.

Oh sure, you can find landlords asking $3000 rents for $800,000 properties. These people are what it is commonly known as optimists.

Occasionally you will find tenants who are willing to pay those optimists. These are commonly known as idiots. There aren’t a lot of them looking for rental property in that price range.

#271 Snowboid on 01.12.15 at 7:25 pm

#224 Keith in Calgary on 01.12.15 at 2:02 pm…

Great post, basically the same with the luxury condo we rent in Kelowna.

No problem dealing through the property management company, repairs/replacements were quick and professional.

Our annual rent is 1/28 of the owners’ purchase price, not including strata fees, repairs, special assessments, etc. – which of course the owner covers as well!

We enjoy a heated pool, spa, gym and are walking distance to the downtown stores, restaurants, beach and parks.

The owners like us, we treat their place like it’s our own home, and we like them (and the market) for allowing us to live in such a nice place and incredibly low rents.

#272 Jan on 01.12.15 at 8:20 pm

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#273 Zichmich on 01.12.15 at 9:57 pm

Garth, finally a blog entry I appreciate! Well done.

#274 the monk on 01.13.15 at 11:45 am

Can’t believe how much personal info you revealed – a big hairy dog?!

#275 Alex N Calgary on 01.13.15 at 5:54 pm

Thanks for the replys to my comments guys! We are the best tenants ever, clean the place perfect when we leave, always pay rent on time, I even fix stuff myself to avoid having them come over. Of course with all these moves we ask the people their plans for the property. I’ve been lied to MULTIPLE times, or the people just make Rash decisions. I think its renting places with decent locations that is the problem.

One place went up for sale right away, but we only had a 6 month lease, next house was on a big corner lot and the guy LIED straight up on how long he was going to keep the house, 1 yr, next house was 2yrs and the elderly owners who had rented it for 7yrs AND told us they had no plans to sell, bailed on retirement in interior BC (surprise surprise) and came back to live in their long time rental house.

This woman had an illegal suite in the basement and couldn’t afford the house on her own, she seemed like looking for longer term renters, LIES.

Our friends rented a 900k house in a worse location and haven’t had to leave for years as the guy can’t get out of the more expensive house.

We’ve done our best.

I think as the one guy suggested, we are adding a clause in the contract to protect us from getting booted so fast. But with the way oil is going, I think 1yr from now or 1.5 we’ll be nearing bottom and can buy. Regardless, There will be TONS of rentals that they can’t rent when Calgary empties out, so it won’t be a problem to hold down a rental no more!!