The lost cause

LOST

Jeffrey was devastated when he lost his job at the sprawling engine plant in Windsor eight years ago. “Never saw that one coming,” he says. “In those days we weren’t even in any financial crisis.” So, he started remodeling basements, to support his family of three.

Two years ago the company called. Gotta job for you, the HR guy said. But it’s in Oakville. At the assembly plant. So Jeff went. Rented a pad. Left the family so the kids could finish high school. Worked every overtime hour offered, and struggled to keep it together, paying for two places.

Now school’s almost done and the house in Windsor gets listed in two weeks. Jeff hopes to walk with close to three hundred thousand. At 58, with a meagre pension and scant savings, it’s precious capital. But now he’s in a quandary.

“If I rent in Oakville or Mississauga it will cost $2,000 for something big enough for the family,” he says. “But if I buy it will cost me maybe $1,000 a month for a mortgage, so isn’t that better?”

It’s the argument realtors constantly use. It’s all about monthly cash flow, plus feeding the expectation that real estate values will constantly rise, and houses always be liquid. At work Jeff’s buddies are encouraging him to be like them. “Don’t throw money away on rent. Build equity.” It’s seductive, and I think Jeffrey will ignore me and do it. Too bad.

In reality his three hundred plus a $200,000 mortgage will buy him precious little in the area – maybe a used townhouse on a street of questionable minivans. The cost certainly won’t be a grand a month, because his $300,000 in equity – which could be throwing off at least $21,000 a year if invested – will earn nothing. Along with property tax, insurance and condo fees, the true financial impact will be closer to $4,000 a month – and appreciation in this kind of property (even if the market stays stable) is far from assured. Moreover, Jeff will be renewing his mortgage just prior to retirement, and at a higher rate than the 2.85% now being offered.

Yes, the family will own a townhouse. But they’ll have no money and owe a couple of hundred thousand. Is that, I asked him, how you want to go into retirement?

The alternative is to invest the house money. If he gets the same return as a balanced portfolio delivered over the last 10 years (7.4%, even with the 08-9 crash), he’ll have about $610,000 when he walks out of the plant gate for the last time. Over that decade he’ll fork out an extra $120,000 on accommodation, but now have a portfolio capable of throwing off $45,000 in annual income without diminishing the principal. Add in CPP (no OAS) for the couple, plus the company pension of $20,000 and this turns into a perpetual income stream of $84,000.

Compare that to a retirement income of $39,000. Plus debt. And no money.

Yup, they must rent. But at that age, as owners, they’d still be carrying a mortgage and paying the operational costs of a house. That’s the choice. Own real estate, or have a decent income stream. You don’t get both.

This is ripping Jeff up. It runs absolutely counter to what he hears at work. It’s not what Linda wants. He’s already subscribing to a Re/.Max daily hot sheet of new listings. The bank pre-approved him for a $550,000 mortgage (income of $125,000). He reads in the paper about GTA prices leaping 8% or 10% higher year/year. He understands what a house is. He has no idea what a preferred or an ETF is. Like most people he thinks risk means losing money, when it really means running out of it.

Like I said, the big house in Windsor will be gone in a few weeks. Jeff will have a skinny three-storey row house and a quarter million dollar debt, lying in the shadow of a Mississauga monster mall. And that’s when the real stress begins.

Today we live in a Jeff society. Any doubt of that was laid to rest by an RBC report last week.

Canadian families added $80 billion in debt, most of it mortgages, in the past year. Borrowing in the last few months was especially significant. New mortgage debt jumped 5.2% in January, the quickest growth in almost three years. “There is a risk that highly accommodative financial conditions could exacerbate household imbalances as evidenced by the recent strengthening in mortgage accumulation,” the bank said. Translation: when rates fall, people pig out. The Bank of Canada blew it.

Now, I don’t blame Jeff for succumbing. Most do. It’s deathly hard to swim against the tide. Collectively, we’ve made home ownership the goal of life, when we should be worrying about freedom and time.

But these are days when trust has been erased by Googling. When marrieds mingle fluids faster than bank accounts. When stuff’s more important than experience. When debt becomes wealth and everyone’s entitled to what they cannot afford.

There’s no shortage of things to fear. Being unencumbered isn’t one of them.

246 comments ↓

#1 Ferrari321 on 03.11.15 at 5:36 pm

FWIW – dont think the Fed hikes rates this year …

#2 TurnerNation on 03.11.15 at 5:43 pm

Oil’s not a lost cause. Bottom.

#3 ShawnG in TO on 03.11.15 at 5:43 pm

second!

I don’t understand, what kind of amortization would Jeff get? 25 years? he’d be 84 before the house get’s paid off. that’s higher than avg Canadian male life expectancy. what money would he use to pay mortgage after he retires?

#4 earthboundmisfit on 03.11.15 at 5:45 pm

Not everything is black and white Jeff. Consider
Option 2. Buy in the Hammer and commute. Half the price … invest the difference, as written in The World According to Garth. You’re welcome.

#5 The American on 03.11.15 at 5:47 pm

Funny… I have four friends with families that live in Toronto. Two have their homes on the market. One home on the market since November 2014, and one home on the market since September 2014. Amazing! Not a single offer made on either one of them. Yet, somehow, the CREA is able to pump out numbers that reflect price increases YOY. My ass. Will someone PLEASE order and investigation to how data is extracted and compiled to report to the masses?

#6 Mike T. on 03.11.15 at 5:49 pm

‘The Bank of Canada blew it.’

Not if what happened is what they actually planned for.

Call it the pink battleship metaphor.

Build a battleship and paint it pink. In this case it is low rates. Put flowers in the turrets and raise peace flags.

A guy like me walks by and says nice battleship and everyone else asks what battleship, because they see a pink flowery peace……something.

Then one day the turret fires and it is too late, everyone fell for the trick.

Another pink battleship is our precious new ‘terrorism’ bill…..

I contend that the BoC wants Canadians in debt so they’ll accept whatever is coming down the pipe….cause problem, offer solution.

Build it up, burn it down.

#7 Plan B Guy from Calgary on 03.11.15 at 5:49 pm

From BG (post #13 from yesterday) I want to keep it in the corporation to defer personal taxes and leverage the Dividend Tax Credit as much as possible.

Where do you incorporated blog dogs invest your corporation money?

Suggestion: Open a self-directed trading account in the company name. Buy the types of investments Garth has been speaking about, in the same 60/40 proportions, using the company’s money. Let this grow inside the company and try leave it there until you retire. Dividend it out to yourself as part of your retirement earnings. In real life you will probably raid it some time when you find yourself short of funds. Same thing: take it out as dividends.

If you want to get fancy, talk to your accountant about forming a holding company, and if you have kids that will go on to college, open a family trust.

PB Guy

#8 Derek R on 03.11.15 at 5:53 pm

That is a sad story. I hope that it will have a happy ending but it doesn’t sound like it will.

#9 anony on 03.11.15 at 5:56 pm

I guess this is Harper’s action plan: If Canada doesn’t want him, he will light the fuse on the Canadian economy and hand it off to Trudeau to explode in his arms.

Right out of the Bush II playbook. But I doubt Trudeau will be able to rescue the economy the way Obama did.

#10 Contrarian Coyote on 03.11.15 at 6:05 pm

Stick with renting, Jeff – listen to Garth. Ask your wife to read Garth’s advice if you have to. Draw up a chart on a piece of paper comparing the potential income from the Renting/Investing option vs. the Buy/Debt option. Best of luck, I know convincing our better halves is not easy.

#11 LH on 03.11.15 at 6:08 pm

Debt slavery is the fate of the house horny middle classes.

#12 mitzerboy aka queencity kid on 03.11.15 at 6:10 pm

Being unencumbered isn’t one of them…

u got that right garth

#13 Mister Obvious on 03.11.15 at 6:11 pm

On this blog I’ve read so many sad stories like this one over the years.

I don’t know how I would handle the pressure to buy that sits upon this poor fellow’s solders. And this comes from a non-conformist who has spent a lifetime swimming against various tides.

A good case can be made that I might have profited equally well if I had invested in liquid assets as opposed to the real estate path I took starting in 1985 at the age of 34.

I’ve estimated that after all expenses are considered, I averaged about 7.5% on my properties during the 25 year period I held real estate.

It should be noted that I had the necessary discipline to invest in other assets and there was nobody (including my wife) who would have pressured me to buy a house.

But, I bought a house and two recreational properties largely because I was strongly self-inclined to do so and also because I knew precisely nothing about investing at that time anyway.

Fortunately. I was skilled enough to handle the majority of maintenance and repairs and admit to have done plenty of that.

Today I haven’t a scrap of real estate and I’m very happy to have put that phase of life behind me.

If all my friends and my entire family were jumping on me today to liquidate my investments and buy residential real estate again I would be extremely stressed about it. I sympathize completely.

I think it’s different now. And not in a good way.

#14 crossbordershopper on 03.11.15 at 6:12 pm

He should be happy that he is working at 58, most guys are done by then.
he should move to a small town, rent or own, at a very modest amount relative to Toronto and gta area.
why does everyone want to live there, the grocery stores are the same, the doctors are the same, no hussle and bussel, friendly people. doctors are the same and the income is the same. but overall expenses much lower.
I don’t understand why retired people live in the city for? move out and into the country and smell the fresh air.

#15 Blogbitch on 03.11.15 at 6:13 pm

You work hard all your life so you can retire in style only to find yourself with an albatross around your neck in the form of a mortgage.

“And a good south wind sprung up behind;
The albatross did follow,
And every day, for food or play,
Came to the mariners’ hollo!”
– Samuel Taylor Coleridge

Do as Coleridge would do: Shoot the albatross.

#16 Willy H on 03.11.15 at 6:16 pm

What a sad mess Jeff is about to get himself into… purchasing a home will all but ensure a poverty level retirement. Sad.

#17 The American on 03.11.15 at 6:18 pm

At #9: Anony, unlike the U.S., Canada cannot print its way out of the rapid economic decline it is witnessing. The CAD is not a global reserve currency, and the Canadian economy is a commodity-driven economy. Now, add to this the absolute INSANE amount of consumer debt and jobs being lost daily. What does this mean? Trouble. Lots of trouble. It’s almost like nobody in the government or CREA wants to hear it? Mmmmmmmmm. Wonder why… Reminds me of when I try to call my cell carrier to update my plan, and then they’re conveniently unavailable. In fact, sorta reminds me of this!

https://www.youtube.com/watch?v=EVBsypHzF3U

#18 PM on 03.11.15 at 6:26 pm

I like doom and gloom as much as the next guy but lets talk about opportunity. Lets say this housing market goes tits up and those with a well balanced portfolio have the means to buy. Just because real estate is a bad investment now doesn’t mean it always is. Surely people who scooped up $60K houses in Phoenix in 2009 are happy with their purchases. What does that look like here? How will we know the opportunity when we see it?

Because I’ll tell you. — Garth

#19 DJG on 03.11.15 at 6:28 pm

The dividend tax rate for non-eligible dividends in Ontario is now 40%, so taking it out of the corporation as a dividend is of zero benefit these days, even with an almost 50% rate on regular income. The corp. tax rate is 15.5%, so if you bonused out the cash as regular income, you’d reduce the corporation’s tax liability by 15.5% of the amount you take. These numbers assume you’re in the top tax bracket. There really is no way of escaping giving away half your money in this scenario.

#20 gut check on 03.11.15 at 6:29 pm

#10 Contrarian Coyote on 03.11.15 at 6:05 pm
Stick with renting, Jeff – listen to Garth. Ask your wife to read Garth’s advice if you have to. Draw up a chart on a piece of paper comparing the potential income from the Renting/Investing option vs. the Buy/Debt option. Best of luck, I know convincing our better halves is not easy.
———————-

oh for the love of all that is holy… stop with the sexism already.

#21 Bill Gable on 03.11.15 at 6:29 pm

A home sold in Vancouver for around $50 million to a Chinese buyer.
Amazing, considering Chinese Nationals are allowed a modest number of thousand of RMB to be removed from China, at any one time. I mean, come on!

This City is filled with people that are living in “cloud cuckoo land”. Everyone I know – they all talk Real Estate, more than they do about their kids.

If the Stock Market continues to swoon – my next question is – what do you invest in now?

What swoon? The TSX was up 100 points today and the S&P is near its record high. — Garth

#22 JimH on 03.11.15 at 6:31 pm

#2 TurnerNation on 03.11.15 at 5:43 pm
“Oil’s not a lost cause. Bottom.”
=============================
Very curious to hear your rationale! (BTW; is the third or only the second time you’ve called “Bottom!”in oil?)

WTI has been following its declining 50 DMA lower and is now trading below it. What makes you so sure the bottom is in???

#23 I'm stupid on 03.11.15 at 6:37 pm

And that’s the difference between the 1%ers and the 99%ers.

#24 JimH on 03.11.15 at 6:40 pm

#18 PM
“Surely people who scooped up $60K houses in Phoenix in 2009 are happy with their purchases.”
===========================
Some are and many, many aren’t. As a resident of Arizona let me tell you that oodles of the $60K foreclosure ‘give aways’ were in semi-finished or even barely-started subdivisions. Developers caught short had no option but to rent what they couldn’t sell.

Many of those that were bought in those crumbling “neighborhoods” and are now sitting in the middle of low-rental hell and can’t sell at any price!

There ain’t no such thing as a free lunch! (anywhere!)

#25 zedgt87 on 03.11.15 at 6:40 pm

As a young person with good savings and no debt this housing market is very frustrating. Tired of renting dumps, but refuse to buy at these hugely inflated levels.

#26 Andrewski on 03.11.15 at 6:41 pm

Unencumbrance is the way!

#27 Investing on 03.11.15 at 6:42 pm

So should we also shun RE investments with good cap rates? It seems to me that even if RE crashes, would someone else paying off the mortgage not lessen the pain and still be building equity long term superior to the market?

#28 Ponzif on 03.11.15 at 6:43 pm

“Never saw that one coming”
———————–
Typical Canadian.
Remember, keep your head up and always finish your checks.

#29 bigtown on 03.11.15 at 6:44 pm

In the states housing is affordable and available and is suited to renting for many incomes small and large. There must be available capital and government support in the states that allows investment to be made in renting as a normal way to live but in Canada the GOVERNMENT and the BANKS have an agenda that seems to work to make the majority of Canadian families to believe that they are required to own a home. The American housing allows for better housing choices and a much better and flexible workforce able to move to a job and once at the new job able to find a good quality rental that is affordable.

This seemingly unseen agenda of house buying might prove to cause major problems in the future if cities have no jobs but people are stuck in their homes they cannot sell to move to a place where there are jobs and again no rentals where the jobs are.

So the solution seems to be a change in the agenda that the government and the banks have working in the big house ownership society.

#30 Smoking Man on 03.11.15 at 6:46 pm

Jeffrey, do what ever you want, it won’t matter shortly. If you have all your loot in one asset, house, or in a balanced portfolio.

I the not to distant future, mushroom clouds will give us all instant tans.

I’ve been scouting out destinations where I think it could be OK.

World has no idea how close we are.

#31 Ponzif on 03.11.15 at 6:46 pm

What does that look like here? How will we know the opportunity when we see it?

Because I’ll tell you. — Garth
—————-
We will be waiting, Great Prophet Garth.

#32 Vanecdotal on 03.11.15 at 6:46 pm

Ugh, it’s depressing the number of people blowing their brains out on mortgage debt due to a basic lack of financial literacy. At least thedazed and confused who stumble upon this blog may yet regain their sanity before pulling the trigger.

Meanwhile, a RE market update from $leepy $pendy White Rock, the geriatric South of the Fraser Kits-wannabee for the Freedom 55ers, and until recently, a “foreign-buying hotbed”. In the 4-5 years I’ve been following this market, it seems to be playing out as a sort-of leading indicator (maybe by 2-3 years?) for luxury home sales in some other areas of YVR. I would not write it off as a typical sleepy suburb due to the fact it once had years of sustained foreign buying interest, and now… not so much.

Re-lists across all categories coming on strong and steady in both attached and SFH, adding to the glut of perennial over priced luxury SFHs that never left the market last year… and the year before… and sometimes the year before. Seeing > $ million SFH new build luxury spec flips piling up. Ping pong pricing with the re-lists appears all but completely dead. Homes are returning to market @ same price as prev. de-list, or in many cases considerably lower. This is NEW this year as sticky and / orping-pong pricing has been de regeur for years. There are multi-million price drops in some of the highest priced SFHs, these are listings going on 2-3 yrs+ now, some perpetually listed.

A large number of the post-spec-luxury flip SFHs completed in the last few years appear not to be occupied, a few others are shown as rented. Note: the stated rents on the listings would come no-where near being cash-flow positive unless homes were cash purchase or very low ratio mortgage. It’s looking like a build-up of failed flip inventory, with more of the same coming online weekly, and many more fresh holes in the ground just starting construction. Already seeing quick price drops on recent re-lists as well. For the first time in years, there is a good selection of newish (built @10-20yrs ago) SFHs now listed just over the magic CMHC insured limit of $1 million. It appears sellers finally this year are realizing suddenly they need to price according to local buyers’ actual incomes. Interesting. Seeing some fresh new SFH lot assignments for sale as well, I think developers are getting nervous.

As for condos from entry-level to luxury, there is a staggering amount of inventory here and more coming online daily. The new luxury condo developments have been flogging non-stop for several years and are still not sold out. Prices still sticky, few token price drops in this category but with increased incentives in some cases.

But to believe the FVREB frankenumber stats, prices & sales are UP again baby! Riiiight.

What has changed? Where are all the deep-pocketed buyers? Are they all shopping in Westside Van & West van now? Did poor little White Rock offend somehow? Mysterious…. Perhaps a cautionary tale of the which direction the headwinds are blowing.

#33 Firebird on 03.11.15 at 6:48 pm

Jeff should rent, put his cash away to make money, retire in 7 years or less and buy an acreage in NS for less than 160,000. Buy a motorcycle and live.

#34 aL pacino on 03.11.15 at 6:50 pm

Add in CPP (no OAS) for the couple, plus the company pension of $20,000 and this turns into a perpetual income stream of $84,000.

WHY NO OAS?
OR IS I GOING TO BE SCALED BACK? ???

#35 The lost cause | Realties.ca on 03.11.15 at 6:54 pm

[…] Source: http://www.greaterfool.ca/2015/03/11/the-lost-cause/ […]

#36 Karol on 03.11.15 at 6:54 pm

I have the option to take out a $4000 loan interest free. Actually, I’ve already applied for it. My intention is to invest it.
Has anybody had any experience with “wealthsimple” for example or maybe recommend something similar?

I can start from $5000 with them. I’m fairly young- 27. Should I just setup a tfsa account first and later on think about an unregistered account?

If anyone has any good advice, I’d highly appreciate it.

On a side note… I should be able to add about $700-$1000 monthly to the account.

#37 Terrier on 03.11.15 at 6:55 pm

“Townhouse on a street of questionable minivans” … you’re killing me Garth!!! :)

#38 Gmailer on 03.11.15 at 6:55 pm

“Collectively, we’ve made home ownership the goal of life, when we should be worrying about freedom and time.”

This is the bottom line for a happy life. I wish most people would understand and repent. However..
seeing professional bragging about their condos and when asked how is it manageable, just shrug their shoulders.

so
DONT live a liftstyle
Live a Life

#39 Island Girl on 03.11.15 at 6:57 pm

Well we just bought a house, after 4 years of renting, we got tired of the cold, mold and rats. It’s going to cost us about $350 more a month than we pay right now. We have been looking for the last year for something better to rent with no luck.
We got the house for what we wanted, hope it doesn’t go down too much more. It was 25thousand less than the sellers asking price and 90 thousand less than they paid. I figure if it loses another 10-15, as long as we break even when we decide to sell (11 years from now) then I’m ok with that since I was willing to rent for the same amount (so throwing away the same amount of money each month). Our realtor didn’t think we’d get what we were offering and was gobsmacked that we did.
Yup, prices aren’t going up here, only down.

#40 Vanecdotal on 03.11.15 at 6:57 pm

#15 Blogbitch

Great analogy. Especially when the albatross is hoovering up all your catch / cash.

#41 Frustrated Kiwi on 03.11.15 at 6:58 pm

Is Oakville where Jeff wants to retire? If not, he should definitely not buy. In a normal market it takes about five years just to recover the closing costs on a place, and this is not a normal market. He should promise his wife her pick of place for retirement, instead of a millstone for the next seven years. Rent Jeff – even if somehow you’re “priced out” of Oakville, many towns in Canada have declining real estate markets right now – there’s no way you’ll be priced out if all of them and chances are you’ll get much more for your money in seven years (and you’ll have more money). Good luck!

#42 Ret on 03.11.15 at 6:59 pm

How old are the kids? Are they going to college or university? If, yes, there is little point living miles in the opposite direction from where they could possibly be going to school and they might even be able to live at home.

Do you have to drive into/ home from Ford at rush hour?

#43 Van Isle Renter on 03.11.15 at 7:00 pm

#9 anony on 03.11.15 at 5:56 pm
I guess this is Harper’s action plan: If Canada doesn’t want him, he will light the fuse on the Canadian economy and hand it off to Trudeau to explode in his arms.

Right out of the Bush II playbook. But I doubt Trudeau will be able to rescue the economy the way Obama did.
+++++++++++++++++++++++++++++++++++

Silly comment. Bush never “blew up” the economy on purpose, and Harper would not do it either.

And Obama didn’t save the US economy. All he did was give handouts to the very wealthy and make them mega-wealthy. The man on the street is seeing nothing but the opportunity to work three jobs where one would suffice before.

A Starbucks barista job is not the same as an auto plant job, but according to US government stats, it is.

I see large numbers of people in the US loading up on auto debt to buy new cars, but they don’t have the $$ to drive them. Miles driven are way down and as one of my friends who manned a gas bar cash machine pointed out to me, a great many people come in and buy $5 or $10 in gas.

You can’t fake energy consumption, and people that are tapped out use much less energy than people who are flush. That is one of the reasons oil prices are down and staying down.

Something is out of whack.

#44 Vanecdotal on 03.11.15 at 7:00 pm

Meant to add re: “Seeing some fresh new SFH lot assignments for sale as well, I think developers are getting nervous.” lot assignments WITH Sfh plan already approved by the city included in the deal. Smells like cut & run to me.

#45 Joe Schmoe on 03.11.15 at 7:05 pm

#7 commenting on #13 yesterday.

To my knowledge the dividend tax credit from small companies (less than $550K?) has been reduced to the point where income pulled out is equivalent (incuding CPP +EI which is what the govt really wants)

No benefit to pulling it out as a dividend vs salary…

The benefit is entirely compounding at at 15% tax rate.

And/or income splitting if you have spouses and kids listed as share holders….be careful in this on how you classify shares…

I aplogize if this is not the situation you are in and am off base.

#46 BG on 03.11.15 at 7:07 pm

#7 Plan B Guy from Calgary on 03.11.15 at 5:49 pm

Suggestion: Open a self-directed trading account in the company name. Buy the types of investments Garth has been speaking about, in the same 60/40 proportions, using the company’s money. Let this grow […]
—————————————————————

Thank you for the reply, appreciated.

I’ve been contemplating this option for a couple of months as I already have this kind of portfolio in my TFSA.

But I’m wondering how tax efficient is such portfolio in a corporation.

I read about a strategy of investing in Canadian Dividend payers companies.
Supposedly you can then flow the dividend all the way from the investment your own corporation’s shareholders with tax breaks both at the corporate level and the personal level.

The thing is:
1/ You need to pick stocks
2/ It has to be Canadian companies

…Which is not too appealing considering where the economy might be heading.

You seriously need tax help. — Garth

#47 BG on 03.11.15 at 7:11 pm

#38 Joe Schmoe on 03.11.15 at 7:05 pm
#7 commenting on #13 yesterday.

To my knowledge the dividend tax credit from small companies (less than $550K?) has been reduced to the point where income pulled out is equivalent (incuding CPP +EI which is what the govt really wants)
—————————————————————-

My understanding is the Dividend tax credit is still interesting if you don’t pull more than around 40k/year and that’s your only income (which in my case would suffice).

I need to read the details again.

#48 Darryl on 03.11.15 at 7:12 pm

#17 The American on 03.11.15 at 6:18 pm

Mr. The American
It used to be fun having you here back when we could say that we were financially smarter than you . It was good when we could look at your economy and think “we the man”

Now that you have recovered from your financial melt down and we are just starting ours, And you are starting a strong recovery , you are no fun anymore. :)

BTW can you get me a green card. :)

#49 FormerSaskie on 03.11.15 at 7:12 pm

Really Jeff, you contacted Garth b/c you knew he would tell you to rent and invest so follow his advice now. You can always change your mind and buy later if you cannot stand renting.

Thanks for the good answers I received to my question a few days ago.

#50 Happy Renting on 03.11.15 at 7:13 pm

Jeff, on top of Garth’s financial argument, consider this: what happens if you are laid off again? Perhaps for another few years? With the mortgage you have money being sucked out of you no matter what kind of cash your family brings in, and no option to quickly and cheaply change the level of your housing costs.

You’re in a stage of life where your housing needs are going to change every few years. Your kids will grow up and hopefully leave the nest. Some time after that you’ll realize how much it sucks to shovel a driveway and how nice Florida is in the winter. Some time after that, if your health doesn’t hold up, you may prefer to live someplace with no stairs. You need flexibility and mobility right now, not a 25 year amortization.

#51 boonerator on 03.11.15 at 7:14 pm

Jeff – rent until the housing prices deflate or crash.
RBC has an income fund that would pay about $1750 into your account every month. They reset the rate every year and it could go up or down by 20 or 30 basis points, but once a year only. It pays the rent and you still have the 300K to use later on.
We sold last summer and it feels good to have the rent paid every month.. and still have the capital in liquid form.

Bad idea. His income should pay the rent. The portfolio should grow and shelter gains. — Garth

#52 Joe Schmoe on 03.11.15 at 7:17 pm

#46
you should get some professional help…it’s worth the moola.

#53 Confirmed Renter on 03.11.15 at 7:27 pm

Dear Jeff,
We saw the light and sold our house five years ago and have been renting ever since. Capital from sale of our house covers the rent. No taxes, no Reno costs, no real estate agents fees, no land transfer tax, etc.
Our neighbours who are in their early sixties took a different route. About five years ago, They sold their long time family home and bought their dream home. A sudden job loss, meant that lower income and smaller than antipathy pension meant that this was to much for them to carry.
They sold this house and bought a smaller house across from us. This house has now been sold. The public reason for this is that the husband now has health issues, but he confided to my husband that the cost of living there has add $800 per month to their line of credit, so they will now be renting.
The irony? The amount of money that they have spent on real estate agents, taxes, land transfer fees and home improvements would have more than covered their cost of renting for the past five years.
Smarten up Jeff.

#54 JSS on 03.11.15 at 7:30 pm

When I read stories like these, it makes me feel so freakin sad. Taking on more debt at a later stage in life is such a bad idea. As every decade goes by, we as humans get more and more weaker and tired. this guy is going to be paying a mortgage till he’s dead (or close to it). And hardly any income to get by. What a crappy way to live.

#55 Andrew Woburn on 03.11.15 at 7:37 pm

Transparency in politics reaches new levels. Let’s really hope and pray Rob Ford isn’t going to run again.

http://www.dailymail.co.uk/news/article-2988585/Naked-ambition-Female-candidate-goes-completely-nude-posters-promoting-bid-mayor-Spanish-town.html

#56 Nagraj on 03.11.15 at 7:38 pm

“they’ll have no money and owe a couple of hundred thousand”

EXACERBATED HOUSEHOLD IMBALANCES, especially on this grand Canadian scale, will, I think, result in – exacerbated political imbalances.
The “pigged out” population will blame whatever crosses its line of sight, popular anger is great political fuel.
The far left and the far right have a future in Canada.

#57 Italians love real estate on 03.11.15 at 7:38 pm

Ok I’ll say it when no one else will.

Jeff, I think you should buy the house.

Work hard and pay mortgage off as quick as you can .

Curtail spending . Enjoy ownership privileges.

CPP in the bag , small pension and hopefully home paid off by 65 to 70 at latest.( you can do it ! )

By then , should have risen in value.

Italians have spokend

What possible advantage is there to living your retirement on 50% of the income? — Garth

#58 rawdiswar on 03.11.15 at 7:46 pm

# 33 Firebird

That is exactly what he should do, given the value of properties out there. The wife and I are saving up for a few acres in New Brunswick, ideally near Shediac/Moncton.

Garth, may we please have a post for the Millennials on how to best to save for a property? I am totally on your page with a liquid, balanced and diversified portfolio, but where should the funds come from for the downpayment (i.e. RRSP, TFSA, or non-reg.)? I’d like to leave the TFSA untouched for ALAP (As Long As Possible) in order to maximize growth.

Gotta be ready when she’s time to vulch!

NS is way better than NB. Half the damn snow. — Garth

#59 Waterloo Resident on 03.11.15 at 7:49 pm

I’ve got bad news for anyone who is hoping for house prices in either Toronto or Vancouver to fall anytime soon.

I was watching some YouTube videos about China’s housing boom and their ‘GHOST CITIES’, and yet even though their housing prices are way over-priced compared to incomes (like Toronto and Vancouver are over-priced in a similar way), and have so many condos just sitting empty (like Toronto and Vancouver), their housing bubble keeps getting bigger because it is a GOVERNMENT SPONSORED bubble. The government itself is doing whatever is necessary to keep their housing bubble inflating for as long as possible.

As I was watching those videos I started getting some feeling that maybe that’s exactly what we are seeing here in Canada?

Whenever China’s housing economy starts to soften they bring out new stimulus measures or loosen up on housing restrictions. Whenever our housing-linked economy starts to soften our government seems to do the same sort of thing, so far with just reducing interest rates, and each year our immigration endlessly increases to keep the treadmill of immigrants buying new homes on a nice steady speed. And since 90% of those new immigrants end up in either the greater Vancouver / Toronto areas, then that is one constant supply of new demand for houses that will probably never end. The next time the economy falls into recession I am sure that the government will either double immigration, or provide incentives for buying/investing into new houses, political interventions just like what China does to stimulate their housing market.

Even if the world was to go into a massive depression tomorrow, the never ending influx of new immigrants will guarantee that housing prices in Toronto and Vancouver will only go up and up, never down.

Is there any ETF that targets ONLY Toronto real estate, not real estate from outside of Toronto?
I ask that because if there is then that will be the ULTIMATE GOOSE THAT KEEPS LAYING THE GOLDEN EGG, sort of speaking, all thanks to our government policies on immigration.
(and yes, that is probably the only thing keeping our economy afloat at this stage.)

My lady friend who bought a condo in Toronto told me that she’s now getting offers on her Condo that is $30,000 MORE than she paid for it just a few years ago. She wants to rent it out and buy a townhouse and then rent it out too. I was going to tell her that is a bad idea but now after understanding that it is our own government that is pumping up this bubble, I think I’m going to tell her to go ahead and buy that townhouse, she can always rent it out to cover PART of the monthly carrying cost, and then in 4 to 5 years time she can sell it to a new immigrant for $100,000 MORE than she paid for it, since that is already happening with her micro-condo that she has on the Lakeshore, new Fort York.

#60 Mark on 03.11.15 at 7:52 pm

Its rather a good thing that the ‘masses’ don’t own stocks, and have left them relatively inexpensive to own. Especially the universe of significantly undervalued Canadian stocks and the Canadian dollar, also significantly under-owned by Canadians.

As this reverses itself as it must inevitably, look out! Last time there was an excess of enthusiasm for houses that dissipated, the TSE/TSX tripled (1990-2000!).

#61 mark on 03.11.15 at 7:55 pm

I still don’t get how people can be taking on debt at that age.

#62 8====D on 03.11.15 at 7:58 pm

Put it all in CN Rail. That sucker’s been throwing out over 30% every year for the last decade.

You’re welcome.

#63 Fortune Teller on 03.11.15 at 7:58 pm

The future of Jeff and Linda could not be clearer:

They will buy the shack in the 905.

It will go down in value, then go up but very slowly.

They will be cash-strapped and stressed for the rest of their days.

They will take out a CHIP or other home equity loan to try to make themselves feel better.

This will still not give them anywhere near $84,000 income.

They will run up other debts on credit cards and LOCs to compensate for their feeling of being pinched all the time.

They will never have the peace of mind to enjoy their remaining time on earth fully.

One of them will suffer a health or employment crisis that forces an earlier retirement – demographically and epidemiologically, this is virtually guaranteed.

They will die financially poor. Hopefully their marriage bonds will get them through this emotional turmoil.

Their kids will inherit nothing. The remaining home equity will be surprising for its small size and will barely cover remaining bills.

Their children will already be too far down the same path to correct their own lives when their parents pass away. The apples will be close to the tree.

That one was too easy. No charge this time.

Fortune Teller

#64 Andrew Woburn on 03.11.15 at 7:59 pm

Maybe Alberta isn’t finished after all. Hang on to those truck nutz, cowboys, maybe they’ll come back.

“Meanwhile over the last 10 years, the U.S. and Canada’s market share of global supply has jumped from 4 percent and 10 percent, respectively, to 5 percent and 15 percent, capturing market share from an eclectic mix of countries across Latin America, Europe, and Asia, also known as the Rest of the World (“ROW”).

All of North America’s growth has come at the expense of ROW, which has seen its share over the last 10 years fall from 35 percent to 29 percent as a result of factors like poor geology, unfriendly fiscal regimes, lax rule of law and resources owned by slow-moving governments (there are a few exceptions, such as off-shore Brazil). North America is facing a winning battle for market share against the feeble ROW.

The IEA is forecasting that by 2020, North America will have increased production from today a further 3.0 million barrels (20 percent) and be producing about 19 million barrels per day.

Both the IEA and the futures market are currently pricing oil in 2020 at $73 per barrel. At that price, the North American energy industry will be earning revenue of about $1.4-billion per day in 2020 – comparable to the $1.5-billion per day in 2013 when oil was $100 per barrel. With costs lower, returns will remain attractive at $73 per barrel.”

http://business.financialpost.com/2015/03/10/adam-waterous-north-america-will-continue-to-build-market-share-in-global-oil-market/

#65 JSS on 03.11.15 at 8:04 pm

#60 Mark

Check out the stock prices and corresponding dividend yields of the big-six Canadian banks! This is an ideal time to buy them.

#66 RonB on 03.11.15 at 8:07 pm

Looking forward to sell one of these days so I can start investing my money instead.

#67 Fortune Teller on 03.11.15 at 8:07 pm

Oh, I forgot one other prediction – I’ll throw this in a as a freebie too :)

Jeff and Linda will realize the isolation and bleakness of living in suburbia with barely enough money to pay for the car bills. They may even blow it all up and buy another house – in Windsor again.

#68 Dogman01 on 03.11.15 at 8:09 pm

Jim 24 Arizona real estate

My parents experience, bought in Maricopa in 2011 for $69000.00 US.
One block down the music stopped with five to ten nearly done houses abandoned by builders. All the roads and fire hydrants are in…..looks odd.

1600 sq ft bungalow would cost me 500 k in calgary.

Fast forward to 2015, similar places are now going for $120,000 US. Thet have an awesome full service fitness facility just completed behind their winter home. It is 31 temp as I sit on their patio typing this.

Carry costs are 10k a year, tax , HOA fees, and people to look after it in summer.

I could not wish them a nicer middle class retirement.

Thanks to Garth I think my old man actually listen to me when I made the suggestion that he look into it.

With the $CAN tanking they sure had the real estate hourse shoe in the right place these last 30 years.

#69 Andrew Woburn on 03.11.15 at 8:10 pm

I noted the other day that SFH prices in North Nanaimo might be softening since some new listings were coming in at below assessed value. However, of the last five sales in the area I watch, one was $100k over assessed, three were $20-50k over and one was at assessed value. I know that assessments mean nothing in YVR or the GTA, but it is usually a useful measure here. Of course if you just pocketed a ton of cash from some YVR teardown, everything here looks crazy cheap.

Anecdotally a friend who works at Finning in Vancouver tells me there is a steady flow of people out the door. Finning is a major producer of heavy construction and mining equipment.

#70 Industrial Guy on 03.11.15 at 8:10 pm

Investing is the way to go … but happy wife … happy life.

Why buy in Oakville?
Consider Brantford…… $150,000 to $200,000 buys you a house .. not a big house. $1,100 a month rents you a 4 bedroom town house in a quiet area close to the highway. Good schools, Laurier University … and a 40 minute commute from Ford Oakville.
Not perfect but workable.

#71 Freedom First on 03.11.15 at 8:13 pm

Jeff is living my nightmare. But then again, most people are.

Unencumbered? Freedom and time?……..Works for me. I have been living it for years. I am blessed. Few people have it.

#72 Washed Up Lawyer on 03.11.15 at 8:14 pm

I was hoping for a banner day here in Ft. McM today. The first half of my day was attending a workshop hosted by an oil sands major on its plans for a major extension of an oil sands mine. It was early engagement and consultation. The applications to the regulators are a year out.

With the cost cutting prevalent, I was expecting the free lunch to consist of a thin ham sandwich on stale bread with a cold cup of coffee. Instead it was a dandy lunch.

I have another meeting on Friday with another major oil sands producer on its application for an extension of its mine. No free lunch as the meeting is an afternoon meeting.

What raised my optimism was the location of the meeting today which was the same building that houses the Ft. McM Public Library. I was hoping to borrow a few of Garth’s books. When I hit the card catalogue with my perfect memory of the Dewey Decimal System, my spirits spiked. There were six books or so.

None on the shelf.

There should be an investigation into stolen rare book collections on Van Isle and in New Brunswick. I will speak to my MP.

#73 Italians love real estate on 03.11.15 at 8:15 pm

From #57

What possible advantage is there to living your retirement on 50% of the income? — Garth

Well, it could just be my deep cultural bias to ownership of RE, deeply seeded in the psyche of italian culture or it could be my distrust of paper assets that ” can’t be seen or touched” like a pile of ” bricks” but a ” brick licker” like me just likes the idea that if all else goes to hell in a hand basket , I still got a roof over my head.

And with all due respect to you garth, I disagree with your bearish view of RE and think that he will be buying an appreciating asset.

Appreciation means diddly when you don’t have enough income. — Garth

#74 BG on 03.11.15 at 8:15 pm

You seriously need tax help. — Garth
————————————————

Of course I do, but doesn’t this work:

Corporation:
———–

Original Cash balance : 20 000

Income (from Dividends) : +50 000
Corporate tax (20%) : -10 000
Refundable tax (26.67%) : -13 335

Net Inc.(from Dividends) : 26 665
New Cash balance : 46 665

Now I distribute this amount to myself 40 000 dollars as a dividend from my corporation and
get refunded 1 dollar back in the corporation for every 3 dollars distributed.

To myself as Dividends : -40 000
Refund (40 000 / 3) : +13 333
New Cash balance : 19 998

Personal:
——–
Well I’m too lazy to detail here, but basically the way the Dividend Tax Credit works, if these 40 000$ are my only source of income I should pay close to no tax.
Just like my corporation.

Of course in this “ideal” scenario my corporation would need to earn 40 000 in dividends which makes me a millionaire living on 40 000$ a year.

#75 flyingfox on 03.11.15 at 8:15 pm

Same happening in Australia. Now our treasurer has joined the bandwagon to allow retirement savings to be used to by your first home. When you get such pearls of wisdom form your politicians, you just have to sigh.

http://www.abc.net.au/lateline/content/2015/s4195936.htm

TONY JONES: Here’s the other side of the ledger: you’ll be throwing fuel on an already overheated property market and the money these people take out of their super funds could be eaten up by the increase in the prices of the houses when you overheat the market further. What about that argument?

JOE HOCKEY: Well the argument would be – well, you’ve also got the argument that they get capital gain and the capital gain may well be far greater than anything they get on their return in existing superannuation funds. So, you know – and no-one’s taking a clip along the way if it’s their own home. So there are lots of arguments both ways. I – seriously, I’m not advocating that position other than to say: please, let’s have a measured, considered, bipartisan discussion about how we are going to maintain and improve our quality of life.

#76 A Yank in BC on 03.11.15 at 8:16 pm

Well whadaya know! I just ordered a new Edge SEL.

Hey Jeff.. you’re welcome. And please, at least consider Garth’s advice.

#77 weedeater on 03.11.15 at 8:19 pm

Jeff, do as Garth says–you’re getting first class financial advisor advice. For free. Take it.

Just DO NOT spend the funds you get from selling the house. Not for anything. No kids education, vacations, “we deserve this treat” crap, etc. If necessary put it in a GIC for 90 days (sorry Garth) while you learn how to invest and to keep your paws off it.

Renting is cheaper than paying mortgage plus interest plus property taxes plus utilities plus repairs & maintenance plus landscaping plus renos (who buys a house and doesn’t put their own imprint on it?) plus new window coverings plus plus etc. At your age, renting IS cheaper than buying.

#78 West Coast on 03.11.15 at 8:19 pm

Death by House….had an uncle who died of that…..in another country….in another time….but it was hard to listen to the details. He and my aunt bought a new house before they had sold the old one. No problemo…they got a bridging loan to tide them over. That’s when the trouble began. They did sell the original house, but then the deal fell through…the buyer was a developer who realized he wasn’t going to be able to develop the property in the way he had planned. So there was my uncle – stuck with two properties and a massive bridging loan. He was near retirement. Yes, he did sell the second house – finally. However, the stress was too much for him. A year later he was dead. His wife quickly remarried and is still living happily ever after – in the first house. A cautionary tale!!

#79 Harbour on 03.11.15 at 8:21 pm

Saipem which is a contractor for Husky lays off a 1000 today at Fort Mac

#80 Julia on 03.11.15 at 8:21 pm

# The American

“Funny… I have four friends with families that live in Toronto. Two have their homes on the market. One home on the market since November 2014, and one home on the market since September 2014. Amazing! Not a single offer made on either one of them. Yet, somehow, the CREA is able to pump out numbers that reflect price increases YOY. My ass. Will someone PLEASE order and investigation to how data is extracted and compiled to report to the masses?”

Maybe they have unrealistic expectations of what their properties are worth? Not unusual. People usually think their assets are worth much more than what others are willing to pay for them, which is the real test.

#81 Yyc not retired on 03.11.15 at 8:26 pm

It’s funny, a year ago in calgary I was considered dumb for renting. This year, I look like a rockstar. That’s how quickly it can change. Remember that TO and VAN.

#82 james on 03.11.15 at 8:27 pm

#29

“In the states housing is affordable and available and is suited to renting for many incomes small and large.”

That’s a gross overgeneralization.

BOTH rents and home prices are well above historical norms in many key cities: SF, Austin, Seattle, San Diego, San Jose, etc.

This has prompted the fed to announce a year ago that the housing bubble has re-inflated in many US cities.

There is also a major issue with rental costs in many of those same cities.

Note that the cities with high home prices and rental costs tend to be the ones with jobs. Do you want to live in Flint Michigan? (Unless you carry a glock and a rottweiler, I don’t recommend it). Kansas City? St Louis? Wilmington Delaware?

Affordability is great in many parts of the US, but jobs are scarce and hard to come by. On an aggregate level it is certainly far better than Canada for housing (both rents and purchase prices), but good luck to you if you want to live in SF, NYC, San Diego, etc. Even Portland is pretty pricey at the moment.

#83 Snowboid on 03.11.15 at 8:35 pm

#18 PM on 03.11.15 at 6:26 pm…

Yes we are happy that we bought in Phoenix, although we paid a bit over $ 100K. We didn’t initially buy it as an investment but it sure turned into one.

Depending on how low the CAD goes will determine when we cash out.

We have decided the right time to purchase in Kelowna is when we see prices down about 15-20% from the current pricing today.

If they don’t go down that much we will continue to rent.

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

#24 JimH on 03.11.15 at 6:40 pm…

Agreed, we looked a couple of foreclosures and decided it wasn’t worth it.

But when you consider a decent SFH in the NW valley could be had for around $ 100-125K in 2010 and a similar home in most Canadian cities would have been about $ 450-500K it does seem like a ‘free-lunch’.

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

#39 Island Girl on 03.11.15 at 6:57 pm…

“…tired of the cold, mold and rats…”

Funny, even though our mini-McMansion near the inner harbour was a new build, we didn’t escape those three for long.

We did correct those problems before we sold, but they certainly would come back at some point in that area of the city.

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

#43 Van Isle Renter on 03.11.15 at 7:00 pm…

“…a great many people come in and buy $5 or $10 in gas…”

You realize that even with gas prices up here in Arizona, that $ 10 US will put over 16 litres in your tank.

Today I just filled up our beast with premium at our nearest Costco and it was only .83 CAD a litre.

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

#68 Dogman01 on 03.11.15 at 8:09 pm…

Couldn’t agree more, good for your folks.

#84 Fuzzy Camel on 03.11.15 at 8:35 pm

Sold my house, renting an apartment.
I will pocket roughly $150k.

Only way the government can fight deflation is by lowering interest rates, at 0.75% it has more room to go up than down…Also trend analysis, we’ve been in a 30 year downtrend for rates, if it goes up slightly this will break the downtrend, when the trend is broken look out.

Yellen will up the rates this summer. Rabbi Kahn going around fulfilling the commandment of the Torah to tell us before they do something, and to expect judgement this ‘shemitah’, doesn’t sound pleasant.

Smoking Man, will Russia start a nuclear war? When old man Rothschild is warning that we are at a situation as dangerous as WW2, something tells me to listen. He didn’t have his usual smirk, he looked worried.
Will the sky fill with mushrooms and our fish grow 6 eyes? Hard to tell. It is easier to dodge a draft (and an atomic bomb) when you are not shackled down with a house. Mobility is a wonderful thing in times of uncertainty, it feels like fresh underwear after a month in the bush.

#85 young & foolish on 03.11.15 at 8:36 pm

” … his $300,000 in equity – which could be throwing off at least $21,000 a year if invested … ”

This is exactly what people have trouble buying into.

Which is why most of them struggle. — Garth

#86 Retired Boomer - WI on 03.11.15 at 8:39 pm

Jeffrey-

The look from here says invest your proceeds, and rent for now. You have a few more years to work. Things can change, and change rather quickly. Pile up savings for your retirement.
Gotta tell ya 58 years old with 300K is not large, great start, but not large. Renting until retirement, stashing what you and the wife can, you will have choices at retirement. Remember, it is time in the market, not timing the market that produces the flowers of compounding growth.
Buy something now, and your options are going to be -well limited!
We have a well known blogger here who says “Freedom First” and he is not wrong, but so many love DEBT bondage. Freedom is a new paradigm, that few Americans, or Canadians seem to understand, let alone relish.

Try it for a couple of years, if I am wrong, there is always debt bondage.

#87 Julie K. on 03.11.15 at 8:40 pm

Just called the local RE Agent. With SFH selling like hotcakes at or over asking in North Vancouver, no time to waffle. And if you and your blog dogs are correct, Garth, no time to wait either. Besides, the husband has always wanted to win a million or more in the lottery……

#88 Tiggertoo on 03.11.15 at 8:42 pm

With current rates we can lock in a LofC for two years at 2.45%. Longterm avg return of a balanced investment is 7%
Any reason now is not a good time to borrow and invest?

#89 Sue on 03.11.15 at 8:50 pm

#14 crossbordershopper on 03.11.15 at 6:12 pm
“He should be happy that he is working at 58, most guys are done by then.
he should move to a small town, rent or own, at a very modest amount relative to Toronto and gta area.
why does everyone want to live there, the grocery stores are the same, the doctors are the same, no hussle and bussel, friendly people. doctors are the same and the income is the same. but overall expenses much lower.
I don’t understand why retired people live in the city for? move out and into the country and smell the fresh air.”

I personally agree with crossbordershopper (and others). Especially as there would be so little time for Jeffrey, at 58 years old, to recover his finances if anything goes wrong with his proposed real estate “investment”.

If you were 28 or 38, perhaps you could get away with it (I made wasteful decisions like that myself when younger). You may not have as many productive future years of work as you think.

#90 Mr. Frugal on 03.11.15 at 8:52 pm

Jeff,

Whether you are renting or buying, Mississauga and Oakville are way too expensive. It would make more sense to rent somewhere cheaper and commute to work.

#91 young & foolish on 03.11.15 at 8:52 pm

“So should we also shun RE investments with good cap rates? It seems to me that even if RE crashes, would someone else paying off the mortgage not lessen the pain and still be building equity long term superior to the market?”

Very hard to find any such properties in areas where demand for rentals is strong (backed by rising job market and close to all amenities and transportation).

#92 Mr. Frugal on 03.11.15 at 8:54 pm

Jeff,

P.S. If you can’t figure out the financial stuff, it’s probably a good idea to cough up the 1% for a smart guy like Garth. That’s $3000 per year. But, it’s cheap if you haul in $21K.

#93 Hawk on 03.11.15 at 8:58 pm

#19 DJG on 03.11.15 at 6:28 pm

Hi there, would like to ask a question specific to small business, since you raised this subject. If I have a $43,000 or so income, net of expenses and have to pay 15.5% small business tax through my corp are you saying that I will have to pay tax all over again on the $43K when its added to my personal income?

#94 The American on 03.11.15 at 9:02 pm

At #48: Darryl, not to worry! Okay, I won’t soften up on you. Banks in Canada have been naughty. Very, very naughty for a very, very long time. They know it. Canada never escaped anything. Canada only prolonged it’s economic downturn in ways that are starting to really show their cracks. The banking system was no more sound there than it is here. Believe me. Now, I guess it’s our side of the fence saying…

https://www.youtube.com/watch?v=7Nr33m1zXVE&index=16&list=PLCD2C60EFEB63DCA7

#95 A Yank in BC on 03.11.15 at 9:04 pm

#39 Island Girl on 03.11.15 at 6:57 pm

Island Girl,

Perhaps you would care to enlighten us all as to just where your story applies to. There are many Islands in Canada. One of them is even a Province.

#96 Gang violence inn Vancouver on 03.11.15 at 9:05 pm

Three separate shootings in one day.
Doesn’t the word MONEY LAUNDERING ever come up in this blog when it comes to stupid real estate priced ?

#97 Washed Up Lawyer on 03.11.15 at 9:12 pm

#79 Harbour

Re: The layoffs of 1000 or so at Husky Sunrise.

Link below.

Makes sense. The transition from construction (what 2000 positions? – I could check the Socio-Economic Impact Assessment but they bore me too much) to operations staff (what 600 jobs?).

They have commenced steaming and the SAGD project production is coming on line.

Just like Keystone XL will transition from a massive number of construction jobs to a small number of operation positions. And LNG projects and Site C Dam. That is how it works.

http://www.fortmcmurraytoday.com/2015/03/11/1000-contractors-dismissed-as-huskys-sunrise-begins-production

#98 Andrew Woburn on 03.11.15 at 9:15 pm

Keep renting, Jeff.

“The most recent Fed minutes cited worries that the flood of capital coming into the US on the back of the stronger dollar is holding down long-term borrowing rates in the US and effectively loosening monetary policy. This makes Fed tightening even more urgent, in their view, implying a “higher path” for coming rate rises. Nobody should count on a Fed reprieve this time. The world must take its punishment.”

Global finance faces $9 trillion stress test as dollar soars
The world is more dollarized today that any time in history, and therefore at the mercy of the US Federal Reserve as rates rise

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11465481/Global-finance-faces-9-trillion-stress-test-as-dollar-soars.html

#99 meslippery on 03.11.15 at 9:20 pm

Windsor auto factory work, housing or rent fair value.
Oakville run away fast. Iam thinking wages might just be less than the 90,s
Yeah houses go up wages stagnant or go down.

#100 meslippery on 03.11.15 at 9:33 pm

Further to my point Ford has been in Oakville since I was a kid. Can someone crunch the the pay 40 years ago visa/vee what houses cost now in Oakville?
I think wage pay and benefits have lost ground???
Anyone?

#101 MB on 03.11.15 at 9:41 pm

To the Aussies investing in ETFs out there, is there a preferred share ETF available on the Australian Stock Exchange? I can’t seem to find one. What is an alternative in its absence? A higher allocation to a bond ETF? Thanks.

#102 praisetheallah on 03.11.15 at 9:41 pm

DELETED (Anti-immigrant)

#103 Fan #42 on 03.11.15 at 9:51 pm

“NS is way better than NB. Half the damn snow. — Garth”

Maybe so but the taxes OMG!

HST
Marginal tax rate
Marginal Rate on CapitalGains
Marginal Rate on Eligible Dividends
Marginal Rate on Ineligible Dividends

Big OUCH!

#104 lou on 03.11.15 at 9:57 pm

“When debt becomes wealth and everyone’s entitled to what they cannot afford.”

Central Bank Driven, further and further down the road of easy debt/GDP boosting….
Let’s see if the Fed can do something as simple as removing ‘patient’. Remember that the Fed cut QE and Japan quickly fired their bazooka (and now buy/save their own stock market dips), and now the Eurozone shoots theirs… China next? a merry-go-round of debt entitlement…

on a lighter note Garth, ordered your Apple watch yet? haha….

#105 Mark on 03.11.15 at 9:59 pm

“Doesn’t the word MONEY LAUNDERING ever come up in this blog when it comes to stupid real estate priced ?”

Just like the people who run around claiming “immigrants” or “foreigners” are bringing “money” to Canada to buy RE — the question to ask is simply, Where is the money?? Because all that is to be seen is credit, particularly subprime credit, and basically oceans full of it.

When house prices significantly de-correlate from mortgage debt, the people who suggest foreign money, money laundering, etc., might have some credibility. But until that happens…

#106 Balmuto on 03.11.15 at 10:01 pm

#4’s got it right – Jeff could move to Hamilton, buy and commute to Oakville. For $300k he could buy a decent house in Hamilton. But he doesn’t have to blow all his savings on the house. He could take out a $150k mortgage with a 7 year amort – at today’s rates that’s a little more than $2000 a month to finance – that would be fully paid off at retirement. Meanwhile he would have $150k left over to invest – which would grow to $250k at retirement assuming Garth’s balanced fund return (305k if he waited a decade to retire). Not as nice as $610k – but with a paid-off house his cost of living would be much lower. And Hamilton is starting to gentrify – it’s a good place to invest for the long term.

You want to live in the Hammer long-term? — Garth

#107 Mark on 03.11.15 at 10:04 pm

“If I have a $43,000 or so income, net of expenses and have to pay 15.5% small business tax through my corp are you saying that I will have to pay tax all over again on the $43K when its added to my personal income?”

Of course, but at a reduced rate. The whole name of the game of the Canadian tax system revolves around a concept known as ‘integration’, where one cannot merely use a business corporation to significantly reduce one’s tax rate.

That’s not to say that there aren’t benefits, particularly in the area of liability, from doing business as a small business corporation, or investing as a small business corporation, but in terms of tax, don’t expect a windfall. And in some situations, one could end up paying even more tax than they would if they had invested as an individual.

Incorrect. His tax burden will not be reduced if he takes the money as income. Only if he takes it as dividends will there be some relief, but he will earn no RRSP room. — Garth

#108 Mark on 03.11.15 at 10:11 pm

“Funny… I have four friends with families that live in Toronto. Two have their homes on the market. One home on the market since November 2014, and one home on the market since September 2014. Amazing! Not a single offer made on either one of them.”

This has been happening for the past 2 years, with the top of the Canadian RE market being in the 1st half of 2013. Minister of Finance “F” (RIP) popped the RE bubble by introducing a significant crack-down on the activities of CMHC in their subprime mortgage guarantee activities in Budget 2013. Ever since, the RE boards have been working overtime and mostly relying upon significant changes to the “sales mix” to disguise falling prices for RE. In most of Canada, they have completely run out of ammunition, although they’ve been able to keep the ruse going a bit longer in Vancouver/Toronto on account of the severity of stratification in supply between high end and low-end property. A gap that doesn’t exist to anywhere near the same extent in any other Canadian city, especially not Regina where the RE board was honest enough to come out and warn their members and the public not to rely upon the “headline” averages.

#109 Smoking Man on 03.11.15 at 10:11 pm

#84 Fuzzy Camel on 03.11.15 at 8:35 pm
Sold my house, renting an apartment.
I will pocket roughly $150k.

Only way the government can fight deflation is by lowering interest rates, at 0.75% it has more room to go up than down…Also trend analysis, we’ve been in a 30 year downtrend for rates, if it goes up slightly this will break the downtrend, when the trend is broken look out.

Yellen will up the rates this summer. Rabbi Kahn going around fulfilling the commandment of the Torah to tell us before they do something, and to expect judgement this ‘shemitah’, doesn’t sound pleasant.

Smoking Man, will Russia start a nuclear war? When old man Rothschild is warning that we are at a situation as dangerous as WW2, something tells me to listen. He didn’t have his usual smirk, he looked worried.
Will the sky fill with mushrooms and our fish grow 6 eyes? Hard to tell. It is easier to dodge a draft (and an atomic bomb) when you are not shackled down with a house. Mobility is a wonderful thing in times of uncertainty, it feels like fresh underwear after a month in the bush.
……..

I’m a Nectonite, have an impenetrable force field thing happening.

It’s you bastards I worry about. My earth wife and my hybrid kids…

The baby, youngest has some of my power, hence his trading. It’s not human.

I’ve called for re enforcements. Not sure they will make it in time.

#110 Karma on 03.11.15 at 10:15 pm

#76 A Yank in BC on 03.11.15 at 8:16 pm
“Well whadaya know! I just ordered a new Edge SEL.

Hey Jeff.. you’re welcome. And please, at least consider Garth’s advice.”

Beautiful machine. One of my favourites. My buddy has one and he likes it a lot (but didn’t use the word “love”).

I hear that plant is going to be shipping them to Europe and other parts of the world. Can anyone confirm?

#111 Mark on 03.11.15 at 10:15 pm

“Incorrect. His tax burden will not be reduced if he takes the money as income. Only if he takes it as dividends will there be some relief, but he will earn no RRSP room. “

Garth, if he’s paying 15.5% business tax through his corporation (and not merely paying a business income deductible salary), then my comment stands correct. Either way, he gets to pay tax, roughly at the same rates, and the only argument is whether the business income is taxed in the hands of the corporation and paid out to him as the owner as a dividend (which then is subject to preferential tax treatment on his personal taxes), or if he is paid a salary which is deductible to the business, but fully taxable (and RRSP eligible) on his personal account. This is the practical consequence of ‘integration’ in the tax system.

Of course, at a higher level of sophistication, and with proper professional advice (crucial if the numbers are non-trivial here!!!), IPP’s may be worth looking at as part of the tax and retirement savings optimization process.

Bottom line: get thee to a competent tax planner!!!

Corps pay tax on profits. If his income was deducted from revenues and a profit remained, the company is taxed on it, while he is taxed fully on the income. — Garth

#112 PM on 03.11.15 at 10:17 pm

“Because I’ll tell you. — Garth”

You’re kind of a jerk, huh? That’s okay, I think you’re my kind of jerk.

Okay I’m game. Good history of it? Did you recommend anyone buy US real estate at the bottom? I’m scanning old posts but I can’t find anything.

Yes. — Garth

#113 BG on 03.11.15 at 10:18 pm

#93 Hawk on 03.11.15 at 8:58 pm
#19 DJG on 03.11.15 at 6:28 pm

Hi there, would like to ask a question specific to small business, since you raised this subject. If I have a $43,000 or so income, net of expenses and have to pay 15.5% small business tax through my corp are you saying that I will have to pay tax all over again on the $43K when its added to my personal income?
—————————————————————

Yes, but there is a Dividend Tax Credit for ineligible dividend (small businesses).

Basically:
1- The “gross up”: add 18% to your dividend income: 43k = 51k
2- Add 51k to your other income : this amount is your new taxable income. Yes, so far it sucks, but wait.
3- The federal dividend tax credit is 13% on the actual dividend: 43k * 0.13 = 5.6k you get this back

What you really save in the process is the difference between your hypothetical tax on Other Income + 43k and your actual tax on Other Income + 51k minus 5.6k.

The actual credit (here 5.6k) is a fixed percentage of your dividend, while the additional tax you pay on the gross up (51-43) part is proportional to your higher tax bracket.
Which means the lower tax bracket you’re in with your Other Income, the most interesting is the credit.

That’s my understanding so far.

#114 Roial1 on 03.11.15 at 10:20 pm

Garth, I do not know what is happening, BUT.
I was down island to Victoria over the weekend to visit friends and observed one thing that was counter to all that you are saying.
Very few homes with “for sale” signs but almost all of them with “sold” stickers attached.
I also saw a lot of Ontario plates on cars.
Now would there be a connection between what I observed and snow?

We, of course have none, and this winter you have an abundance.

Just saying.

I published the report on the origin of Victoria buyers. Locals dominate. — Garth

#115 BG on 03.11.15 at 10:20 pm

My previous message assumed #93 Hawk would get the 43k as dividend.

#116 Smoking Man on 03.11.15 at 10:29 pm

Attention, my CSIS, MOSSAD, CIA, NSA, FBI, RCMP, observation teams. USA Veterans and active duty Generals..

Arest the NEOCONS, they’re crazy, do you have kids, son’s, daughters, do it for them.

Russia has a robot retaliation algo that can’t be stopped. Easily tricked.

Obama arrest them tomorrow. Before its to late.

You deserve to be a grandfather.

#117 Mark on 03.11.15 at 10:32 pm

“So should we also shun RE investments with good cap rates? It seems to me that even if RE crashes, would someone else paying off the mortgage not lessen the pain and still be building equity long term superior to the market?”

“Cap rates” are a non-GAAP measure which deliberately ignores depreciation, amortization, vacancy, etc. When an asset class becomes overvalued by traditional GAAP-compliant measures, promoters usually resort to such measures (“AFFO” is another BS metric invented by the industry) to puff up the apparent valuation of their asset. As we saw with the income trust fiasco, the results of such were tragic.

There’s nothing wrong with owning RE. In fact, its part of a balanced portfolio. However, like any component of a balanced portfolio, it should not be bought at nosebleed prices, and one should not expect price appreciation in the long term (ie: 30-60 years) of anything in excess of inflation, assuming proper upkeep and re-investment of a portion of the rents on capital maintenance expenses. Hence, if the long-term average after-tax P/E for common stocks, which tend to grow long-term earnings at 2-3%/annum above inflation is around 15 — one should not consider RE until its after-tax P/E is lower than 10.

As for buying RE on credit (ie: using a mortgage or leverage), evidence is significant that leverage does not enhance total return when buying RE, and over the long term, actually destroys value for the RE owner. The practical consequence of such is that one should examine RE’s metrics on an unlevered basis (ie: without a mortgage), rather than buy into pro forma numbers on the basis of the property being mortgage financed. People who can’t afford to buy an entire property without a mortgage other than their principal residence and still keep a balanced portfolio, probably would be better served with REITs (ie: fractional RE ownership) in their portfolio in the long run.

#118 Balmuto on 03.11.15 at 10:35 pm

“You want to live in the Hammer long-term?” — Garth

There’s no appreciable difference between death and life in Oakville, so yeah, given the choice I’d rather live in the Hammer.

#119 Henry Rearden on 03.11.15 at 10:44 pm

Worried for my fellow Nova Scotians. Home-owners that is. Viewpoint.ca showing daily price drops from 2008, 2009 levels. Big drops, not small potatoes. Some very nice waterfront properties too. No sign the economy here is going to pick-up any time soon so it’s only going to get worse. Me? I’m free, mobile, lots of investments paying me regularly, will likely never own property. Would just tie down a global citizen like myself.

#120 Ryan on 03.11.15 at 10:47 pm

Commute from Niagara region Jeff. Places like Grimsby and Beamsville are both city enough and country enough. You get the best of both worlds. Right along the QEW to get to work. Hopefully you work shift work and that would ease the burden of traffic to and from. If you decide to rent and then buy after the apocalyptic housing crash we are about to witness, Niagara region has some of the lowest property taxes in Ontario and homes are affordable.

#121 Obvious Truth on 03.11.15 at 10:55 pm

jeff you’re obviously a great guy. Working hard to do what’s right.

And you’re asking the important questions.

What about renting for a year or two to see how things turn out. Why rush. Let time show you the way. Share your story with your kids. Maybe there is something to learn for everyone.

A bird in the hand……

As an aside and not specific to jeff. Does a 550000 mortgage to a 58 year old mean that it gets paid off at age 83?

#122 45north on 03.11.15 at 10:55 pm

Worked every overtime hour offered, and struggled to keep it together, paying for two places.

Jeff, let me tell you what you already know: overtime at 58 is not like overtime at 38. I mean time is running out. You’ve got to do the right thing.

That said, the right thing is so damn hard. It’s hard to find a nice place to rent. Don’t look for support from the guys at work. But a man shouldn’t have to fight his wife to make the best provisions for his family. Doesn’t she see you’re 58? Doesn’t she know you put in whatever overtime you can get?

One of the big advantages that families in the 1930’s had was they knew it was a depression. There was an understanding that times were tough and you had damn well better make good decisions because there was nobody to bail you out. Nobody.

#123 Mike on 03.11.15 at 11:09 pm

Ahh..I take a few weeks off only to return to the same old, paranoia inducing, fear- based adjective-laden circular reference, that is this blog. If only the discussion around home ownership could be steered toward productive action rather than deer in the headlights distress…

When the chance of even qualifying to purchase a freehold or even a town home in the 416 is becoming the realm of dreamland for soon to be 90%+ of households (excluding those with inheritances, those moving up market, foreign cash buyers or lottery winners) – doesn’t it make sense to debate or discuss strategies/trends that will make it work – rather than passively observe, whine and complain? This will be useful, at least for most of the poor(er) blog dogs that have been sitting on the fence for an eternity it seems.

Here are the emerging trends that work in your favour, if you’re looking to buy in the 416

– Multi- generational/family ownership model massively taking hold, amongst those willing to work as a team – less stress and you split the risk, less cost per person too…who know maybe even some cash left for that diversified portfolio

– Saving more than enough by simply forgoing car, cable, cab etc…technology has made things easier & cheeper and sharing economy is here to stay, like it or not. Can’t wait for self driving cars in less than 5 years.

– Healthy food & lifestyle. Home cooking and anything organic is hot – packaged goods and sodium rich fast food is not. What will that do for some sectors, remains to be seen..

-Attaining skills and knowledge is now free and available to everyone – anything from hobbies to home repair

– RE already down nearly 25% for foreign buyers with USD’s, what do you think that means?

#124 BS on 03.11.15 at 11:10 pm

25:

As a young person with good savings and no debt this housing market is very frustrating. Tired of renting dumps, but refuse to buy at these hugely inflated levels.

Common error for people renting. Just rent a place like you would like to and the frustration will go away. In other words quite renting dumps. Problem solved.

#125 Fed-up on 03.11.15 at 11:16 pm

I wonder what response was given my Joe Owe, if any:

https://www.youtube.com/watch?v=q4_53IAznaE

#126 ShawnG in TO on 03.11.15 at 11:32 pm

toronto school board is cutting 256 teaching jobs due to, Gasp! Lower enrolment.

Waaaa, i thought our city is flooded by new immigrants families. ’cause, you know, real estate board said so.

more specifically, 100 ESL teaching positions cut due to fewer immigrant families.

maybe HAM immigrants all speak perfect English before coming here. ’cause you know, realturds are angels who would never lie to us for money.

#127 BS on 03.11.15 at 11:36 pm

“If I have a $43,000 or so income, net of expenses and have to pay 15.5% small business tax through my corp are you saying that I will have to pay tax all over again on the $43K when its added to my personal income?”

Of course, but at a reduced rate. The whole name of the game of the Canadian tax system revolves around a concept known as ‘integration’, where one cannot merely use a business corporation to significantly reduce one’s tax rate.

That’s not to say that there aren’t benefits, particularly in the area of liability, from doing business as a small business corporation, or investing as a small business corporation, but in terms of tax, don’t expect a windfall. And in some situations, one could end up paying even more tax than they would if they had invested as an individual.

Incorrect. His tax burden will not be reduced if he takes the money as income. Only if he takes it as dividends will there be some relief, but he will earn no RRSP room. — Garth

There are 2 ways to take money out of a corporation as an shareholder and employee:

1. You take it as a salary. That salary is a business expense so you pay no corporate income taxes on it, but you pay the same personal income taxes on the salary as anyone else. No advantage for the tax payer.

2. You do not take a salary but take a dividend instead. The dividend amount is taxable at the corporate level at about 15% depending on province but each shareholder can collect a $40K per year dividend almost tax free. A husband and wife who are share holders can collect $80K between them almost tax fee (other than the 15% tax the cooperation pays). After the initial $40K in dividends the tax rate goes up and is similar to any other income (when combined with the corporate income tax paid). The nice part is you can keep money in the corporation to give a husband and wife the $40K each year tax fee until long after the corporation makes money. It is the main reason anyone who can earn income through a cooperation should do so. One of the few free lunches for taxation.

#128 Oil Is Sticky on 03.11.15 at 11:49 pm

If the Stock Market continues to swoon – my next question is – what do you invest in now?

What swoon? The TSX was up 100 points today and the S&P is near its record high. — Garth

——

Yeah….its called QE 1 trillions out of thin air QE 2 trillions out of thin air QE 3 trillions out of thin air. And as Garth said…….”Its in the economy”.

While I don’t disbelieve this, I have yet to see my check as a small business owner. I don’t know any of my American friends who own or run businesses who got a fed check. In fact other than private banks, insurance companies and companies like Goldman Sucks……I don’t know anyone that got a check from the fed that is now “in the economy”.

#129 NEVER GIVE UP on 03.11.15 at 11:49 pm

ELECTION YEAR…. People, Remember all hell will break loose right after the election.

Government support will be gone so they can hopefully correct by the next election in 2019.

There will be no significant correction until after the election.

70% of the voters are homeowners.
How could they possibly expect to win if the homeowners are screwed?

Watch for disconnect interest rates with the USA. (Ours down , Theirs up).
Watch for CMHC Loosening or books fiddling to get more mortgages out the door.
Watch for all the usual suspects perping the usual tricks.

#130 Hawk on 03.11.15 at 11:50 pm

Garth, Mark and BG, thanks for your input. I think the way this sounds next time I am probably better off withdrawing the money as a full salary, making my business income zero and then just paying tax on the full salary.

I thought that by withdrawing money as (dividends) I would effectively pay the same amount as withdrawing a salary, but avoid CPP. However, it appears from all that you have said that by withdrawing the $43K as dividends, I will probably more in tax by the time I am done paying $7400 in corporate taxes and then again paying personal taxes, even with that dividend tax credit kicking in.

Live and learn I guess. tx.

#131 JimH on 03.11.15 at 11:52 pm

#83 Snowboid

Yes! I get your drift!
My retirement home in SV (2BR 2BA) was $155K; w/ swimming pool and in an outstanding gated community with adjacent golf course and HOA fees of $76/Month.

Life is good.

#132 Godth on 03.11.15 at 11:52 pm

#98 Andrew Woburn on 03.11.15 at 9:15 pm

So we’re at the point in the strategy game where the entire map has been infiltrated, there’s very few unknowns, everyone is exposed and it’s time to collapse and consolidate. Economically the world is dominated, militarily too – the Empire of chaos is wiping away borders, politically it’s doing it’s best to dominate everyone too. Anyone wishing to develop on their own terms is an enemy to full spectrum dominance. This is going to get really ugly.

#133 kommykim on 03.11.15 at 11:53 pm

Jeff should rent a crappy little place for a few years to get the teens to move out. Then buy a nice place just for him and the wife.

#134 BG on 03.11.15 at 11:56 pm

After running more numbers, considering both the corporate and personal taxes, I understand better this integration concept.

Such a pain in the arse.

Will definitely let my accountant deal with that.

#135 Don on 03.11.15 at 11:57 pm

#114 Roial1 on 03.11.15 at 10:20 pm

Garth, I do not know what is happening, BUT.
I was down island to Victoria over the weekend to visit friends and observed one thing that was counter to all that you are saying.
Very few homes with “for sale” signs but almost all of them with “sold” stickers attached.
I also saw a lot of Ontario plates on cars.
Now would there be a connection between what I observed and snow?

We, of course have none, and this winter you have an abundance.

Just saying.

I published the report on the origin of Victoria buyers. Locals dominate. — Garth
***************************

Perhaps those SOLD signs are:
1) Legitimate
2) Sales tactic: SOLD signs left on for a longer period of time praying on peoples shortcomings.
3) SOLD signs are put up on empty new builds, one month and taken down the next – no furniture no activity – all of a sudden available again!!.

Things one notices an the same route. What’s the old adage “Believe half of what you see” or in current times “nothing”.

Stay Alert folks.

Holy Batman, BAM ! The turnover is not!

#136 Bottoms_Up on 03.12.15 at 12:00 am

Realtor math (seriously, you can’t make this stuff up!)

“Here’s a quick example for you:

If you were 25 in 1993, and you bought a house for around $150,000 and you put down 20%, or $30,000, and your amortization period was 20 years.

Right now you’d have your mortgage paid off, and your house would be worth $360,000.

That’s not a bad return on your initial investment of $30,000. Try getting that sort of return from your bank !”

http://www.agentinottawa.com/1956_-_Present_Prices/page_491704.html

#137 omg the original on 03.12.15 at 12:28 am

#114 Roial1
Very few homes with “for sale” signs but almost all of them with “sold” stickers attached.
—————————–

Victoria RE is pretty stable – its been up and down a bit over the past 7 years, but on average prices are about the same since 2007.

BUT for the more tonier ‘hoods like Broadmead, Oak Bay and Fairfield prices are up maybe 10-15%. Anything on the market in these areas that is priced at market goes within days.

But take a ride out in the Western communities – lots for sale out there and some pretty good deals (for Victoria).

I do not see a lot of people from Ontario – mainly AB and SK. I think when people from ON come here they love it but it is seriously far from everything meaningful in their live – like kids and family.

But in NO WAY is Victoria a buyers market – still morbidly overpriced.

#138 kommykim on 03.12.15 at 12:29 am

RE: #92 Mr. Frugal on 03.11.15 at 8:54 pm
That’s $3000 per year. But, it’s cheap if you haul in $21K.

How’s that “cheap”? That’s 14.3% of your cash flow gone to fees!

The fee is 1% annually of the assets managed, and in this case would be 100% tax-deductible, dropping it to about 0.6%. The capital gains, dividends and interest gained are reinvested, so considering the fees as a percentage of unrealized ‘cash flow’ is disingenuous. Jeff is an auto worker. He’s not an investor. Assuming he can build a correct portfolio, rebalance and be tax-efficient on his own is a stretch. — Garth

#139 captom72 on 03.12.15 at 12:35 am

#59 Waterloo Resident on 03.11.15 at 7:49 pm

China’s real estate market has actually been in decline for months now:

http://www.cnbc.com/id/101945949#.

#140 The American on 03.12.15 at 12:39 am

At #80: Julia, the sellers have representation, their agents “guiding” them through the process and also setting unrealistic expectations in the buyers’ minds. Does this raise the question of a concept called “fiduciary standard.” Perhaps agents are doing one thing only, and that is to serve themselves as to continue the farce of a falling market. Well, that and the applause! Does anyone else out there here another Lady GaGa video? What’s that? More you say? Okay. Here you go.

https://www.youtube.com/watch?v=pco91kroVgQ&list=PLCD2C60EFEB63DCA7&index=3

#141 PM on 03.12.15 at 12:54 am

#114

You’re seeing what you want to see. Prices are slowly easing. Inventory is seasonally low. It’s not a crash by any means but it’s no hot market.

Anyways in reply to my own post (#112) I looked up some old posts and 3 years ago Garth did tout the merits of US real estate: http://www.greaterfool.ca/2012/08/30/very-disappointed/

even more further back. He cautions against home ownership in a foreign country but acknowledges the opportunity. So it’s not like he hates housing in general.

I’m new to this blog and enjoying it. Just remember it’s always important to evaluate your sources. A stopped clock is right twice a day and someone calling for a bust will be right eventually. In the mean time the housing market has had enormous gains beyond mortgage rates so anyone that didn’t buy in (and selling before a downturn if any) is laughing last. That said I spent an hour browsing past posts and the messaging is consistent and tempered. I like the one in 2011 telling people how stupid they are to call for things like a 50% fall simply because they want it.

#142 MGTOW on 03.12.15 at 1:07 am

If you are rich and you get married = YOU’RE TOAST.

If are poor, get divorced, then 20 years later you get rich = AGAIN, YOU ARE TOAST.

I keep telling guys that marriage is a bad deal for men these days, but they just don’t listen.

(I also tell them that over-priced houses are a bad deal for men, and again they just don’t listen.)

Well listen to this, and if you have half a brain and have any plans on becoming financially successful in life, it will shock you.
FOR ANY MAN WITH MONEY, or any man who plans to make a lot of money in the future, this is a must watch video:

‘Ex Wife Wins Claim 20 years After Divorce In The UK !!!!’

https://www.youtube.com/watch?v=ueuyji2lDp4

#143 tkid on 03.12.15 at 1:16 am

Jeff and the missus already went through the stress of attempting to pay off the mortgage without a job. And now they are going to put themselves through the same nightmare all over again.

He and she are betting everything on that job in Oakville. If the job goes, so does the house. If the house goes, how much of that $300,000 will they get to keep? Both are assuming the next house will never go down in value, this despite their experience with the Windsor market depreciating.

And they won’t buy a townhouse; there’s probably an $800,000 jobbie that’s just calling their names. How the frak do you justify going into retirement with half a million dollars worth of debt?

#144 Leo Trollstoy on 03.12.15 at 1:46 am

Funny… I have four friends with families that live in Toronto. Two have their homes on the market. One home on the market since November 2014, and one home on the market since September 2014. Amazing! Not a single offer made on either one of them.

Your friends in Toronto are greedy.

For better or worse everything priced appropriately in Toronto sells quickly.

I sold a crusty, tear down, 50 year old bung in a 3 day bidding war.

Your friends are greedy.

#145 Valleyboy on 03.12.15 at 1:50 am

Collectively, we’ve made home ownership the goal of life, when we should be worrying about freedom and time.

Well said.
Home ownership, 7 year financed vehicles, toys / rv’s financed over years.

#146 wallflower on 03.12.15 at 1:52 am

#39 Island Girl on 03.11.15 at 6:57 pm
“Our realtor didn’t think we’d get what we were offering and was gobsmacked that we did.”
>>>
Gobsmacked that s/he was jacked out of that extra $25K commission percentage.

#147 jane 24 on 03.12.15 at 2:23 am

I have been reading a lot of these stories lately in the press and the context is always the same. Pre-retirement couple who would in a previous generation been grandparents, now in 2015 still have kids in school/university but the family income and opportunities are declining with their age.

If you start a family in your 30’s and 40’s instead of in your 20’s then yes this will be the logical outcome. Run the numbers. There are more and more of these late-stage young families too. Garth have you considered this in your demographic forecasts.

Such old parents accept their fate at working until 70 to get the late kids out of the house but their health or job may not last that long. Lose the job and it is hard to get another well paying one that would support a family in your 60’s.

My cousin had kids at 39 and 40 and is now unemployed at 55 with kids at high school.

You can party when you are young OR when you are older. Older is better because you have more money!!!

#148 Freedom First on 03.12.15 at 2:27 am

#109 Smoking Man

If the re enforcements don’t make it in time I would like to pre book my seat on your space ship. I look forward to reading your book on the flight. Thank you for caring. Freedom First (bastard first class).

#149 Lillooet, BC on 03.12.15 at 2:39 am

Or Jeff can quit his automaker slave job, move to a small town in southern or central Ontario, buy a three bedroom house for $175k, invest the remaining $125k, start up a small reno business, work for five years, then semi-retire, working part time, collecting his government pensions and living happily ever after.

“None are more hopelessly enslaved than those who falsely believe they are free.”
Johann Wolfgang von Goethe

Heard at the water cooler today:

Seth Rogen, Steve Carrell and Judd Apatow are working on a new movie to be filmed in Toronto called “Me So House-Horny”.

#150 nubbers on 03.12.15 at 4:42 am

I feel for Jeff. I hope he finds the strength to avoid destroying his life. I suggest googling ‘Case Shiller 1890’ or ‘Japanese house prices bubble’ or even ‘Wile E Coyote gravity’.

#151 Italians love real estate on 03.12.15 at 6:56 am

From #73

Appreciation means diddly when you don’t have enough income. — Garth

You have a point of course but what I seem to find is that people like Jeff, who live at the margin ,seem to lack the ability to accumulate assets over their lifetimes. Assets that regardless of whether they spin off yield through financial dividends , rental income or capital appreciation.
The problem I see with your balanced portfolio suggestion, is that the temptation to consume the capital base will probably to much for him . I make that assertion because, afterall , if he didn’t have that pre disposition already , he would be in better shape at 58.

You speak highly of the advantages of liquidity in financial assets over those of real ones but I tell you it is exactly that liquidity that serves as temptation to those who will mismanage there capital base. The illiquidity of RE will probably serve as a buffer to Jeffs tendencies to mismange his finances.

#152 Voice From Riderville on 03.12.15 at 7:02 am

#7 Plan B Guy from Calgary

I have a holding company that owned my operating business, which I sold. The holding co now holds the cash. I set up a self dir discount broker margin acct. I trade the account as if a personal acct.

Works well but requires attention to keep track of the various income for tax purposes. I take the money out personally as a dividend as i choose.

#153 maxx on 03.12.15 at 7:51 am

#9 anony on 03.11.15 at 5:56 pm

Trudeau doesn’t decide entirely on his own. He has access to the same talent and data required to make sensible decisions.

Will he be a better data filter and decision maker is the true question.

Who will be the better leader?

Who can and more importantly, will repair Canada?

Who will be respected?

#154 Mr. Frugal on 03.12.15 at 7:57 am

#138 kommykim on 03.12.15 at 12:29 am
RE: #92 Mr. Frugal on 03.11.15 at 8:54 pm
That’s $3000 per year. But, it’s cheap if you haul in $21K.

How’s that “cheap”? That’s 14.3% of your cash flow gone to fees!

———————————————————–

It’s cheap “if” you aren’t capable of handling your own investments. I get the impression that Jeff falls into that category. I look after my own investments because I would rather not shell out 1% of assets per year. But, it’s not for everyone. Some people like Jeff need a hand.

#155 TurnerNation on 03.12.15 at 8:36 am

I thought it was April 1st for a second…
For the economizers:

“Loblaw begins selling Natural Imperfect produce

Smaller misshapen produce that tastes great and is good for you is now available at Loblaw Companies Ltd.’s Real Canadian Superstore and select no frills locations in Ontario and select Maxi stores in Quebec. Furthering its commitment to offer affordable, quality products to customers, Loblaw Companies is introducing the no name Naturally Imperfect line of fruits and vegetables today. Starting with apples and potatoes, no name Naturally Imperfect produce costs up to 30 per cent less than traditional produce options found in store.

“We often focus too much on the look of produce rather than the taste,” said Ian Gordon, senior vice-president, Loblaw brands. “Once you peel or cut an apple you can’t tell it once had a blemish or was misshapen. … “

#156 Obvious Truth on 03.12.15 at 8:43 am

123. Mike

Sound like some powder puff ad for Toronto life magazine.

No math or basic economics needed. Just glossy pictures of stainless steel and granite. Along with a picture of yorkvilke.

Houses cost money. The higher the price tag. The more they cost. Nothing you said works in favour of home ownership. And I own more than one home.

#157 MarcFromOttawa on 03.12.15 at 8:53 am

Smoking Man

The reinforcements are already here.

Stop worrying and go back to your drinking.

#158 AD on 03.12.15 at 8:58 am

To Derek R: This is not a sad story. A sad story is having your head cut off in the desert. Get a Life.

#159 LOL Canada on 03.12.15 at 9:04 am

How can the USA rise interest rates if their inflation is going negative?

http://www.tradingeconomics.com/united-states/inflation-cpi

#160 rosie "moving forward" in the knowledge that, "this won't end well" on 03.12.15 at 9:09 am

Jeff should avoid a house in these three markets, going up. For the rest of the country, you might want to wait a bit.

http://www.theglobeandmail.com/report-on-business/economy/housing/canadian-housing-there-have-clearly-been-corrections-in-progress/article23417122/

#161 LOL Canada on 03.12.15 at 9:11 am

easy. Buy a house cash for 300k in Hamilton, then get a mortgage up to 80% ltv. Invest the money and write off the interest paid under borrowing to invest.
Buy dividend ETFs paying 5% approx. Buy a basket
Your ROI will pay your mortgage, taxes, etc.
Plus, you will still have all the money in the bank, own your home, and the bank takes the risk.

Sell it when rates go up.

#162 Funcouver on 03.12.15 at 9:11 am

Another advantage to the personal corp is income splitting when the kids turn 18.

I’m lucky enough to be able to pay myself a good salary, max on RRSPs and keep a tidy sum in the corp’s investment account. Kids aren’t old enough to split.

Another benefit is that you can claim a tax break on loan interest. My corp owes $100K at 3 percent which is 1.5 percent after the tax break. Why would I pay that loan off when I can invest money at a higher return???

#163 Daisy Mae on 03.12.15 at 9:47 am

#5 The American: See REVOLTING REALTORS.

QUOTE: “As I told you a few weeks ago, the Toronto Real Estate Board (the continent’s largest such cartel) will be in court in a few weeks, trying to defend the indefensible. The feds’ Competition Bureau is pushing ahead with a case that could forever alter the real estate landscape, forcing TREB to make market data available to those who think consumers should have it.”

#164 The real Kip on 03.12.15 at 9:48 am

Jeff should stay in Windsor, work at Walmart. He’d be better off.

#165 4 AM Sunrise on 03.12.15 at 9:49 am

#155 TurnerNation on 03.12.15 at 8:36 am

Thanks for the heads up! As an economizer, I’m mighty ticked off. The greengrocer on my block buys this kind of imperfect produce (it’s obvious that’s how they’re sorted at the warehouse – for example, a batch of mangoes with the same brown patch of over-ripeness) and retails it to me at a lower price than a Loblaw. What’s going to happen to the price of imperfect produce when a behemoth like Loblaw buys up the stock? They’ll probably retail it to me for less than their regular unreasonably inflated prices, but probably more than my greengrocer.

#166 H on 03.12.15 at 9:49 am

As you can see….US rates wont be rising in June. OR September.

Why. Mandate of the fed is control inflation. There is a whole new ball game going on now.

As the US imports a tremendous amount of goods, so does it import the prices paid. Which is going DOWN. This is tied to the CORE and as you can see the core is heading DOWN. Not just this month but take a peak at the last revision. DOWN.

Garth, let me help you write tonight’s blog which is a photo copy of the bank of canadas surprise move.

“well I didn’t see that coming”.

That would be the Fed putting off rates INDEFINTATLEY.

That will be the word they use instead of “patient”

Like I said, it’s a great thing all the people commenting here know more about the US economy than the central bankers. — Garth

#167 miketheengineer on 03.12.15 at 9:50 am

Jeffrey can get this:

http://www.realtor.ca/propertyDetails.aspx?PropertyId=15343182

It is about a 25 minute drive south along Ninth Line, which leads directly to Ford Drive. ~ 450k. Which is completely manageable on a Ford Job with a 300k downpayment. House will need some upgrades, and likely a new furnace (unless replaced)…but the area is o.k. But it sounds like this guy is handy with a hammer, so the age of the home (~ 17 years) should not be an issue.

Conclusion….Buy if you can get one of these.

You don’t get it, do you? If he puts all of his wealth in a house, he lives on KD after retiring. It’s a disaster strategy. — Garth

#168 Sonny on 03.12.15 at 9:57 am

About 1,000 oilsands workers laid off unexpectedly at Husky Energy’s Sunrise project

http://business.financialpost.com/2015/03/12/about-1000-oilsands-workers-laid-off-unexpectedly-at-husky-energys-sunrise-project/?__lsa=7d65-c46c

#169 Daisy Mae on 03.12.15 at 9:58 am

Best of luck, I know convincing our better halves is not easy.
———————-

#20 GUT CHECK: “oh for the love of all that is holy… stop with the sexism already.”

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

I agree. Married couples are an equal team — both have a voice. No more condescending remarks, please.

#170 Smoking Man on 03.12.15 at 9:58 am

Ha, Yelping Yellen has got her self boxed into a corner, with inflation and growth heading for South pole, and fast. She has a conundrum.

Spike and prove she has nuts and credibility, and absolutely destroy the fragile recovery.

Do nothing, show some patients, and unleash mad dog economists on her like Poloz has on his back now.

Or cut it, admit the truth, and save the stock market.

Oh, I just bid on a small contract, guess what the client wants modified. A bond trading system needs to be modified to handle negative interest rates.. Ouch..

Dr Smoking Man…..

#171 Broke Dick on 03.12.15 at 10:03 am

#106 Balmuto on 03.11.15 at 10:01 pm
#4’s got it right – Jeff could move to Hamilton, buy and commute to Oakville. For $300k he could buy a decent house in Hamilton. But he doesn’t have to blow all his savings on the house. He could take out a $150k mortgage with a 7 year amort – at today’s rates that’s a little more than $2000 a month to finance – that would be fully paid off at retirement. Meanwhile he would have $150k left over to invest – which would grow to $250k at retirement assuming Garth’s balanced fund return (305k if he waited a decade to retire). Not as nice as $610k – but with a paid-off house his cost of living would be much lower. And Hamilton is starting to gentrify – it’s a good place to invest for the long term.

You want to live in the Hammer long-term? — Garth
+++++++++++++++++++++++++++++++++
Live in the Hammer? Why not, remember he was living in Windsor before. I’m with Balmuto on this one. And when the kids finally move out perhaps he can rent out the basement for extra income if he has to or wants to.
BTW- Why are Jeff and the Missus not going to receive OAS??????????

#172 Ivan the Moderate on 03.12.15 at 10:09 am

Canada’s debt-to-income ratio hits fresh record: StatsCan

Consumer credit debt for Q4 was $519 billion, up 0.8 per cent, while mortgage debt advanced 1.2 per cent to about $1.2 trillion.

https://ca.finance.yahoo.com/blogs/balance-sheet/canadian-consumers-continue-to-rack-up-record-133605382.html

#173 Red Deer Rob on 03.12.15 at 10:13 am

Major bloodbath coming to the oil services in a few days time. Road bans are on and rumours are flying. People are scared and rightly so. As for me, I’m debt free and mobile. I will survive.

#174 JeanSelfEmployedItGuy on 03.12.15 at 10:19 am

Posted 2 Days ago by James Altucher;

Garth is on to something :)

below is from Casey Research’s post called
“The Ultimate Cheat Sheet to Investing” by James Altucher…
==
N) Is a House a Good Investment?
Everyone will disagree with me on this, but the answer is an emphatic “NO!”
It has all the qualities of a horrible investment:
1. Constant extra layers of fees and taxes that never go away (maintenance, property taxes, etc. that all rise with inflation).
2. Usually housing is too large a percentage of someone’s portfolio. Even just the down payment ends up being the largest expense of someone’s life.
3. Usually massive debt is involved.
If you can avoid, 1, 2, and 3 and don’t mind the opportunity cost in the time required to maintain your house, then go for it. Else rent and use the money you saved for other investments that will be less stressful and pay off more.
Fact: Housing has returned 0.2% per year in the past 100 years.
====

Yikes, 0.2%
Regards
JMG

#175 bdy sktrn on 03.12.15 at 10:27 am

Anecdotally a friend who works at Finning in Vancouver tells me there is a steady flow of people out the door. Finning is a major producer of heavy construction and mining equipment.
——————————-
“people out the door” – meaning layoffs? or customers?

usually your comments are extremely well stated and factually perfect, but finning is a cat distributor, rather than a producer.(sorry for splitting hairs!) i would think the AB offices would be getting it worse than BC.

#176 4 AM Sunrise on 03.12.15 at 10:35 am

I had no idea that pretty, fondue fork-twirling Switzerland had trailer parks. This documentary highlights a few residents – Swiss men who’ve been hit with one or more whammies of layoff, divorce, disability, or their own financial imprudence; intra-EU migrants motivated by higher salaries, and even a TFW from the Philippines. They bought trailers because rents in Geneva at CHF 1700/month are out of reach if you have imperfect circumstances:

http://www.rts.ch/emissions/temps-present/4752464-un-hiver-en-caravane.html

#177 IM in C on 03.12.15 at 10:37 am

http://news.nationalpost.com/2015/03/12/proposed-80-storey-toronto-tower-would-be-tallest-building-in-canada/

Bring on the multi million dollar shoe boxes in the sky

#178 rosie "moving forward" in the knowledge that, "this won't end well" on 03.12.15 at 10:43 am

This is just nasty. But when you’re broke, you’re broke!

http://www.bnn.ca/News/2015/3/12/Laid-off-oilfield-workers-stranded-at-remote-work-camp.aspx

#179 Joe Schmoe on 03.12.15 at 10:51 am

BG and Hawk, don’t use your PC as tax avoidance vehicles, think of them as deferment with more flexibility than RRSPs.

There were some small misses in the tax discussions above, but very small impacts…and the rules continually change, so no point debating income/dividend tax rates.

The key is the ability to pull money out when you want…sell, withdrawl, use your money, income reported, pay tax (which can be legally deferred 18 months if you time it right), rinse repeat.

The other concept missed is use of expenses to reduce income…basically using pre-tax dollars for things the business needs that may be a personal perk as well…electronics, mileage/gas for vehicle, portion of the house costs etc.

We waffled on setting up a PC for my spouse, the accounting fees/legal fees etc seemed cumbersome, but after a year or two, things grind away on autopilot and that money you retain compounds and grows…after 8 years I would say the benefit is tremendous…

You can also leverage the retained value of the PC and predictable income into credit lines that you can use to further invest….this is entirely separate from HELOCs most use as the easiest way to secure credit at a low interest rate.

#180 Squirrel Meat on 03.12.15 at 10:51 am

It’s a home run.. Way to go

http://www.theglobeandmail.com/report-on-business/economy/canadian-household-debt-burden-hits-record-high/article23417022/

#181 Rational Optimist on 03.12.15 at 10:51 am

A lot of the answers to this case study are nutty. Living in Hamilton or, worse, Brantford, means a torturous commute. The 403 through Hamilton is bad and will get worse. Why would someone choose to do that every day as he enters his 60s?

We have to presume that this fellow will want to get back to Windsor when he retires or is retired, so that alone suggests the right thing to do is to rent. Besides, does he think the same company that laid him off eight years ago is above doing it three years from now?

I strongly suspect that people suggesting “living” in places like Beamsville and commuting are cases of misery loving company. Same with ideas about spending half a million dollars on a street called “Snowball Lane.”

#182 rosie "moving forward" in the knowledge that, "this won't end well" on 03.12.15 at 11:01 am

Do credit unions need a stress test?

http://www.cbc.ca/news/canada/british-columbia/vancouver-housing-prices-risk-mortgage-default-report-1.2991252

#183 bdy sktrn on 03.12.15 at 11:03 am

You want to live in the Hammer long-term? — Garth
————————————–

garth is a hammer xenophobe.

#184 Ray Vasquez on 03.12.15 at 11:08 am

I have been hearing about people wanted lower interest rates, mortgage rates for at least 18 years now.

They are happy and giddy and don’t care that they will be in a financial pickle with lots of debt.

The fact that most seniors and retirees will have to use a reverse mortgage and C.P.P., OAS, GIS if they are low, low income to survive not retire well.

Now, we have negative interest rates in Europe and ultra low rates in Canada, U.S.

Those that were never investors but are savers can’t even rely on a normal 4.5% to 5% interest rate with annual 2.00% inflation.

Many people are like children and are clueless. Others are just abusing the system, policymakers are in this group too.

#185 bdy sktrn on 03.12.15 at 11:15 am

#116 Smoking Man on 03.11.15 at 10:29 pm
…. Before its to late.

You deserve to be a grandfather.
——————————————
hey smokey relax, and maybe light one up.

if war is coming oil would be shooting up instead of sinking like a dead salmon.

putin wants time to enjoy all his stolen billions, and for all the nukes they have , who’s got better aim? Raytheon amd boeing or ‘smirnoff guidance and tracking’?

#186 H on 03.12.15 at 11:36 am

“Like I said, it’s a great thing all the people commenting here know more about the US economy than the central bankers. — Garth”

Garth I believe you have been the one predicting the raise in rates when the Fed has not said a date. The dates of “JUNE” did not come out of the mouth of the bank.

I have been commenting here based on what the gages are saying. And the gages that determine when they will raise have NOT been indicative of the outcome you have been cheering for.

I have been commenting on facts.

So now the fact is inflation is dropping in the us. The usdx is in the stratosphere and they haven’t even raised yet.

The impacts of these TWO CLEAR AND EASY TO READ data points for some reason are being missed by people who claim to follow this stuff. Instead its being over looked as “return to normal” or “back to neutral”

It would be nice for once to read someone who looks at the data as the facts and truly predicts based on reality vs wish.

#187 fancy_pants on 03.12.15 at 11:37 am

Straight from CMHC website:
CMHC’s prudent underwriting standards and market presence serve to minimize risk to taxpayers and contribute to stable and efficient housing markets across the country.

my interpretation (your mileage may vary):
CMHC’s speculative underwriting standards under socialist gov’t presence serve to minimize risk to the mortgage and banking industry and contribute to stable and efficient payouts to shareholders of those said lending institutions.

Remove CMHC from the equation and place all default risk on the banks, allow the banks to offer higher rates to offset the risk. Now watch RE prices magically correct and the equilibrium fall back to traditional standards of rewarding savers.

But since reality and common sense are not on the same page, live beyond your means or risk being left behind. Gov’t policies both practice and encourage such, whether intentional or unintentional.

Just look at debts at all levels (govt, consumer) and RE prices the past decade. perfect correlation. Who wins? not the savers.

#188 DreamingInTechnicolour on 03.12.15 at 11:38 am

Who know’s for sure, but I sense that our PM Harper may be given the hook by the Conservatives before heading into this Fall’s Election campaign – anyone else see Jason Kenney or as the new leader ?

#189 fancy_pants on 03.12.15 at 11:40 am

darn… missed end tag on italics

#190 young & foolish on 03.12.15 at 11:47 am

” …. and one should not expect price appreciation in the long term (ie: 30-60 years) of anything in excess of inflation …. ”

Exactly. The only reason to buy & hold rental property (besides a quick capital appreciation) is to have the mortgage paid off by the income. In other words, the building should be able to “stand on it’s own” even after a small to modest down payment is invested to secure it.

#191 Farsyd on 03.12.15 at 11:54 am

The reader is in a pickle. At 58, there is no time left to work off more financial mistakes. 6 years into an equity bull market I would not recommend he plunker whole hog into Garth’s portfolio but in NO way should he buy a home in the GTA. Stay liquid. Stay away from commodity funds. Some prefs are a good idea and some short term fixed income. Preservation of capital should be his top priority. Nothing, not housing nor the equity market goes up forever.

#192 fancy_pants on 03.12.15 at 11:56 am

thanks for fixing. blowing kisses to the amazons, Chrissy in particular ;)

#193 Victor V on 03.12.15 at 12:01 pm

Canadian household debt burden hits record 163%

http://www.theglobeandmail.com/report-on-business/economy/canadian-household-debt-burden-hits-record-high/article23417022/

Canadians’ household debt burden hit another record high in the final quarter of 2014, as debts grew faster than the sluggish pace of disposable income.

Statistics Canada reported that the ratio of household credit-market debt (mortgages, loans and credit cards) to disposable income, the key measure of consumers’ debt burden, was a record 163.3 per cent in the fourth quarter, up from 162.7 per cent in the third quarter. Statscan said credit market debt grew 1.1 per cent in the quarter, slower than the 1.5 per cent reported in the previous quarter. But disposable income grew by only 0.5 per cent in the quarter, the third straight quarter in which debt growth outpaced disposable-income growth.

#194 Mister Obvious on 03.12.15 at 12:02 pm

#151 Italians love real estate

“You speak highly of the advantages of liquidity in financial assets over those of real ones but I tell you it is exactly that liquidity that serves as temptation to those who will mismanage there capital base.”
—————————-

I can’t really argue with the above statement but I don’t believe the remedy lies in rabid over-leveraged home ownership to the detriment of all else.

The answer is in education. The kind that this blog offers and the kind that should be mandatory in public schools. Admittedly, its too late to bring three generations of greater fools up to speed but society must start somewhere.

Innumeracy is the devil we fight. That together with a pervasive air of entitlement occupies the heart of Canadian economic risk.

I have contemporaries who have already burned through generous inheritances. They won’t again see that much capital in one place again in their lifetimes.

Those with the propensity to frivolously blow a few hundred thousand dollars inheritance (there are many) never had a financial chance in the first place, even if they do qualify for a mortgage.

#195 Victor V on 03.12.15 at 12:03 pm

Canadian housing: ‘There have clearly been corrections in progress’

http://www.theglobeandmail.com/report-on-business/economy/housing/canadian-housing-there-have-clearly-been-corrections-in-progress/article23417122/

“These trends are expected to continue, with commodity-driven markets (including St. John’s) likely to experience price corrections of up to 10 per cent peak to trough through the year,” said economic analyst Admir Kolaj of Toronto-Dominion Bank.

“Elsewhere, economic conditions are expected to remain more favourable for housing activity due to a rising U.S. economy, a low Canadian dollar and lower-for-longer interest rates. That said, the impact of lower rates on the housing market is likely to be modest due to a lack of pent-up demand and deteriorating affordability in a few major markets. Meanwhile, an increasing trend in listings is likely to keep home price growth in check for most major markets.”

#196 DM in C on 03.12.15 at 12:14 pm

Similar topic being debated on Reddit in Calgary right now.

http://www.reddit.com/r/Calgary/comments/2ysfwe/new_couple_in_calgary_looking_to_buy_a_house_and/?sort=old

#197 chapter 9 on 03.12.15 at 12:18 pm

Jeff! You are the point in your life where “you have more history than future”. The thought of taking on potential debt of over half a million at this stage in your life is nothing short of insanity. Forget about what your co-workers are saying and the crap from the real estate sales people cause “they won’t be making all the payments, you will.
“It wasn’t raining when Noah built the ark” this is your opportunity to start building.

#198 bdy sktrn on 03.12.15 at 12:33 pm

wti making 30 day lows, look out below (sorry turner nation, hope you’re not too heavily in yet)

#199 bdy sktrn on 03.12.15 at 12:34 pm

OTTAWA (Reuters) – Do not count on the Bank of Canada to match possible interest rate hikes by the U.S. Federal Reserve, one of the Canadian central bank’s economists suggested on Thursday.
Economist Rhys Mendes told the House of Commons finance committee the Bank of Canada would view a Fed rate hike as a sign the U.S. economy is strengthening, which would be good for Canada.
However, asked whether a U.S. rate hike would put pressure on the Bank of Canada to raise rates itself, Mendes replied: “Not necessarily. The bank targets inflation in Canada and decisions regarding monetary policy in Canada would be based on the outlook for inflation.”

#200 Ponzif on 03.12.15 at 12:38 pm

#63 Fortune Teller.
Don’t be arrogant.
There’s only one seer of the future on this blog.
And it’s the Great Prophet Gartho.

#201 NotAGreaterFool on 03.12.15 at 12:42 pm

In San Antonio visiting, talked to a local cowboy who works in oil and gas, while I don’t know his business, his company pumps out 25,000 widgets per month. He says they are now down to 10,000 and forecasts the number to dip further to 7,000 because of the OPEC measures. No order coming in.

#202 Nagraj on 03.12.15 at 12:48 pm

Would a US rate hike put pressure on the BoC to follow suit? One BoC economist, Rhys Mendez, speaking to the House of Commons finance committee on Thursday (I’m getting this from BNN this morning) answered, “Not necessarily.” And went on to say that inflation readings in Canada would determine BoC rate moves.

Who names their kid Rhys?

That rhetorical question aside, suppose the Fed hikes while the BoC’s take on inflation implies no BoC hikes.

Do we not want to spook the real estate industry by saying of course we’ll have to quickly follow any Fed hike?

(Who the heck is buying Canada, and Ontario bonds?)

#203 Alberta is FINISHED on 03.12.15 at 12:54 pm

OIL is down again looking to continue its drop to $30 . The rumours I’ve been hearing about what’s going on in Alberta is shooking. Those who haven’t sold will most likely go bankrupt. OH yeah another round of lay offs that actually made the news . Get ready for a lot more “unexpected” lay offs. Alberta is FINISHED. http://business.financialpost.com/2015/03/12/about-1000-oilsands-workers-laid-off-unexpectedly-at-husky-energys-sunrise-project/?__lsa=7d65-c46c

#204 Mark on 03.12.15 at 1:12 pm

“Do credit unions need a stress test?”

Hell yeah! From a few anecdotal examples I’ve seen, credit unions are basically the out of control lenders in Canada, with (provincial) regulators asleep at the switch. Yet they’re viewed as sacred cows by some, and there’s a significant cadre of “little old ladies” who have entrusted their entire life savings to them ostensibly because they pay better “interest” than what the big chartered banks pay.

I’ve advanced the view, on a number of occasions, that as house price declines accelerate significantly in Canada (minor to date), a number of prominent credit unions will be exposed as being insolvent. And that politicians will likely strong-arm the big-5 federally chartered institutions to take them over in such a way as to ensure that the little old ladies get paid. At a significant hit to the short and medium term earnings of the big-5 institutions in question.

#205 Holy Crap Wheres The Tylenol on 03.12.15 at 1:23 pm

#185 bdy sktrn on 03.12.15 at 11:15 am
#116 Smoking Man on 03.11.15 at 10:29 pm
…. Before its to late.
You deserve to be a grandfather.
——————————————
hey smokey relax, and maybe light one up.
if war is coming oil would be shooting up instead of sinking like a dead salmon.
putin wants time to enjoy all his stolen billions, and for all the nukes they have , who’s got better aim? Raytheon amd boeing or ‘smirnoff guidance and tracking’?
_________________________________________
Way back in the day I worked at Hughes Research Laboratories, I believe its HRL Laboratories now. We started work on the xenon ion propulsion system. Perhaps Smoking Mans ship need some assistance in getting airborne before the mushroom clouds start forming. Call me for a boost Smoking Man!

#206 Poutchli on 03.12.15 at 1:24 pm

1,000 jobs were laid off unexpectedly by one of Husky Energy contractors.

Stay liquid.
Stay mobile.
Make your kids learn how to program.
Buy $VDY ETF.

#207 Holy Crap Wheres The Tylenol on 03.12.15 at 1:32 pm

If Jeff is on shift work what does it matter? This guy just like many others can commute into Oakville and live in some small town for pennies on the dollar! Go north young man, or west for that matter. Buy your home! If hes on a fixed shift, well then good luck. I do see the point though as I live in Oakville and it is crazy to rent or purchase here for the average person. If I was Jeff I would find some place just out of the GTA, commute and rent for a year to figure out where and how to start tucking the cash into some sort of investment. At least until the real estate nuking is over!

#208 bdy sktrn on 03.12.15 at 1:47 pm

So now the fact is inflation is dropping in the us. The usdx is in the stratosphere and they haven’t even raised yet.

The impacts of these
TWO CLEAR AND EASY TO READ data points
——————————
this is very telling.

us exporters will not be happy.

and isn’t the primary mandate of the fed to manage inflation within a range? well it has moved outside of that range and is accelerating in the wrong direction.

ms yellen did NOT promise a thing , other than some early warning. no warning=no move. no warning by next meeting=no summer bump.

#209 Calgary boomer on 03.12.15 at 1:51 pm

West Coast, death by house #78

That’s hilarious, hope everyone picked up on it

#210 Ponzif on 03.12.15 at 2:05 pm

#206
make your kids learn how to program.
—————-
Kidding me?
See where it got Smoking Man.

#211 industrial Guy on 03.12.15 at 2:09 pm

Garth, why so down on “The Hammer”?

The Mountain area is very nice. Ancaster the other side of the highway is upscale. You get quite a view from the Devil’s punch bowl.

Hamilton offers many excellent world class educational opportunities. Mcmaster University has a topnotch medical school and a Nobel prize winner taught for decades in its Physics department. Mohawk Colleges’s technical grads are always in high demand.
The city has one of the lowest unemployment rates in Ontario.

Copps could well be home to Canada’s next NHL team.
Hamilton is a cool place to live …. Go Ticats!!

#212 4 AM Sunrise on 03.12.15 at 2:23 pm

#204 Mark on 03.12.15 at 1:12 pm

Provincial regulators may be asleep at the switch, but their deposit insurance says somebody has to pay out the little old ladies in the event of financial disaster.

At the last Coast Capital Savings annual meeting I attended, some guy was ripping into them for sitting on a bunch of retained earnings and not paying it out to members or doing anything with it. Me, I flipped through the annual report frontwards and backwards and could not find any numbers pertaining to board compensation. I thought I was dumb (not having a formal education in finance) until somebody challenged them on it and they said compensation was in line with “industry norms”. Good times.

And while I’m ripping into Coast, I saw a job posting for a permanent part-time teller, vehicle required. What does it matter to them if their tellers arrive by Tesla or camel so long as they arrive on time? Maintaining a vehicle is not cheap, especially not on a “permanent part-time” salary. It’s the employee’s responsibility to leave the house at 5 a.m. if necessary (if the camel’s hung over from the night before). And if they have a track record of lateness, then they’re gone. Easy.

#213 Squirrel Meat on 03.12.15 at 2:31 pm

Kick the kidults out……….

http://business.financialpost.com/2015/03/11/still-supporting-your-adult-children-your-kids-are-ruining-your-retirement/

#214 Mark on 03.12.15 at 2:35 pm

“That rhetorical question aside, suppose the Fed hikes while the BoC’s take on inflation implies no BoC hikes.”

A very likely scenario. After all, deflation in Canada’s RE industry has only been minor to date, implying that there is a huge amount of deflation ahead of us as excess margins are removed from the industry and mean reversion overshoots to the downside. This will keep BoC policy rate hikes subdued, if not non-existent for many years to come, while the US is far further along the garden path in their process of liquidation.

In fact, not only do I believe that the BoC will eventually have to cut to zero, but deflationary forces in Canada will also force the BoC into programs such as US-style QE or similar. All the while, fighting to keep the CAD$’s value down, which will eventually prove to be a very difficult task.


(Who the heck is buying Canada, and Ontario bonds?)

People predicting deflation and a much higher Canadian dollar in Canada for years to come as consumer demand is severely truncated while exports remain relatively intact. Falling RE prices implies a much stronger CAD$ in the long run for such reason.

A bond buyer really doesn’t care if they get their required return through interest coupons alone, or interest coupon + currency appreciation. Low rates imply currency appreciation over the medium to long-term. CAD$ debt is extremely attractive to USD$-based buyers for this reason alone.

#215 Scalgary on 03.12.15 at 2:54 pm

http://www.fortmcmurraytoday.com/2015/03/11/1000-contractors-dismissed-as-huskys-sunrise-begins-production

#216 saskatoon on 03.12.15 at 2:58 pm

despite the oil turmoil:

saskatoon real estate holding strong!

#217 H on 03.12.15 at 3:12 pm

One simple chart that states where the Fed is Going.

http://www.tradingeconomics.com/charts/united-states-inflation-cpi.png?s=cpi+yoy

#218 Ft Mac House Guy on 03.12.15 at 3:13 pm

Although the layoff at Husky’s Sunrise mine sure isn’t helping Ft Mac out, I don’t see how it’s a huge “Surprise”.

When mine sites are being built, they have tens of thousands of contracted employees. Once the mine is built, it takes only a few thousand to actually run it, thus, all the contracted workers get let go. This isn’t something new. It’s completely normal, so for anyone outside of Ft Mac, Husky’s move today should not come as a surprise…. UNLESS they got let go wayyyy earlier than expected, but even then – it’s bound to happen sooner or later.

#219 cramar on 03.12.15 at 3:16 pm

The salary you need to buy a home in 27 U.S. cities. San Fran by far the worst.

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/08/map-the-salary-you-need-to-buy-a-home-in-27-u-s-cities/

Someone needs to do the same for Canadian cities.

#220 Oil Is Sticky on 03.12.15 at 3:22 pm

Like I said, it’s a great thing all the people commenting here know more about the US economy than the central bankers. — Garth

———-

Hundreds of trillions of debt from pretty much every country in the world which for the most part all have central banks.

How’s the central bank thing working out exactly?

#221 Musty Basement Dweller on 03.12.15 at 3:28 pm

Nail on the head with today’s post. Jeff will probably succumb for sure, you are swimming not against the tide with the housing mentality in this country but against Niagara Falls.
I think a lot of people don’t believe the investment income potential is real. I will admit to having that opinion in the past, but no more. It is real and paying me nice, low tax dividends to live on every month.
The freedom of not being a homeowner is priceless, and what a joy to have more money to spend on enjoying life.
It involves taking a bit of risk in new territory for most of us.
Good luck Jeff.

#222 Holy Crap Wheres The Tylenol on 03.12.15 at 3:38 pm

#208 bdy sktrn on 03.12.15 at 1:47 pm
So now the fact is inflation is dropping in the us. The usdx is in the stratosphere and they haven’t even raised yet.

The impacts of these
TWO CLEAR AND EASY TO READ data points
——————————
this is very telling.

us exporters will not be happy.

and isn’t the primary mandate of the fed to manage inflation within a range? well it has moved outside of that range and is accelerating in the wrong direction.

ms yellen did NOT promise a thing , other than some early warning. no warning=no move. no warning by next meeting=no summer bump.
___________________________________________
Rising USD is like heart disease and they don’t even know its there. Our company has shelved over $12M in USD new equipment purchases due to it rapidly rising rate in the last three quarters. A surging dollar is good for nothing except purchasing foreign imports however almost all of the imports to the US are in USD already. The surging dollar that exacerbated the collapse in oil is going to be the undoing of the export market as well.

#223 Coastalwaters on 03.12.15 at 4:01 pm

This bull market is 6 years old and we have entered uncharted waters here, I’m not sayin time the market but a little more cash on hand would be a good idea,
We are all on te same side of the same trade , Wall Street can’t make money that way

#224 4 AM Sunrise on 03.12.15 at 4:12 pm

#213 Squirrel Meat on 03.12.15 at 2:31 pm

My brain used to hurt whenever I met somebody and I couldn’t reconcile my estimate of their income with their lavish expenses. Cognitive dissonance resolved!

#225 Smoking Man on 03.12.15 at 4:26 pm

#222 Holy Crap Wheres The Tylenol on 03.12.15 at 3:38 pm

The rate hike is already priced into the fx market, now this unpredictable and dangerous for novice traders.

When it comes to this Russian roulette Fx world . It’s not how you trade the winners, it’s how you fight the losing bets.

Dude, go to my blog, unreal, my kid hit the 100% gain, just shy of it, 4 months ahead of where I expected him too. His % ratio is kicking my ass, if he doesn’t shoot himself in the head, it’s a thought, just a thought.

But I might let this tactful warrior trade my book…

Na, he takes way to much risk. Rule one, never have more than 7% of your stack in play.. He’s all over the map.

But he’s young…

#226 jess on 03.12.15 at 4:34 pm

*should never have been given loans.

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

Lump-sum loans online typically cost $20 per every $100 borrowed per pay period, which works out to an annual percentage rate of 650 percent, The Pew Charitable Trusts found in an October report. One in three online loans carry an annual percentage rate as high as 700 percent.

….” Pew found that online lending revenue tripled from $1.4 billion in 2006 to $4.1 billion in 2013.”

=
payday uk
http://www.theguardian.com/money/2014/nov/11/payday-loans-caps-fca

…”In October the company was forced by the City watchdog, the Financial Conduct Authority, to write off £220m of loans to 375,000 borrowers, who it admitted should never have been given loans.
http://www.theguardian.com/business/2015/feb/24/payday-lenders-forced-by-watchdog-to-be-more-transparent

#227 Poutchli on 03.12.15 at 4:48 pm

“Home prices slide in 8 of 11 major markets in February”

Source: http://www.cbc.ca/news/business/home-prices-slide-in-8-of-11-major-markets-in-february-1.2991861?cmp=rss&utm_source=twitterfeed&utm_medium=twitter

…Headlines are changing.

#228 Harbour on 03.12.15 at 4:49 pm

The average Canadian household owes $1.63 for every $1.00 of income

Lets keeping gorging on debt at the smorg of low rates

#229 Squirrel meat on 03.12.15 at 5:00 pm

Come on Harpo – ya chicken-little shit.

http://www.theglobeandmail.com/news/politics/economists-say-stable-oil-price-means-no-need-for-federal-budget-delay/article23413508/

#230 Italians love real estate on 03.12.15 at 5:22 pm

#194 mister obvious.
“You speak highly of the advantages of liquidity in financial assets over those of real ones but I tell you it is exactly that liquidity that serves as temptation to those who will mismanage there capital base.”
—————————-

I can’t really argue with the above statement but I don’t believe the remedy lies in rabid over-leveraged home ownership to the detriment of all else.
I would also like everyone to consider that the fact that you can’t price real estate minute to minute second to second like you can a financial security is also a benefit to the average joe because it is that exact volatility in financial assets that will cause him to trade in and out to his detriment.

Thus the average Joe is in poor financial shape, is an excellent candidate for living on cat food in the kitchen of a lovely house in Vaughan, and doesn’t read financial blogs. — Garth

#231 Millenial on 03.12.15 at 5:45 pm

I have a prediction.

Tomorrow Garth will be all over the Canadian household debt ratio hitting a new record high, with some witticisms about house horny millenials.

Conveniently, US retail sales dropping for a third consecutive month won’t be mentioned, or if they are mentioned it will be in the context of ‘America Haters’ or something negative like that.

If the retail sales mattered, I would. But they don’t. Transient data like that comes and goes (remember the Black Friday doomer headlines?), but debt levels take decades to repair. Maybe you should mature a little before you post again. — Garth

#232 Josh in Calgary on 03.12.15 at 5:47 pm

#213 Squirrel Meat on 03.12.15 at 2:31 pm,

Some people might blame the kids for taking advantage of their parents. I blame the parents for failing as parents. My father-in-law’s favourite saying is “your job as a parent is to work yourself out of a job”.

Another one I like is “your job as a parent is to prepare your children for the road ahead. Not to prepare the road ahead for your children.”

#233 Oil Guy on 03.12.15 at 5:57 pm

sub $47….

I guess the rebound will be later than sooner

#234 jess on 03.12.15 at 6:04 pm

on parenting?
…”coaching excellence trumped his crimes!!!!! geezzz and now ski coach

US Swimming sexual abuse scandal continues to grow
Truth of decades of abuse is seeping out with more than 100 coaches banned
http://www.irishtimes.com/sport/other-sports/us-swimming-sexual-abuse-scandal-continues-to-grow-1.2060550

Congress and the USA Swimming scandals

the USA Swimming sex abuse saga is the most under-covered scandal in sports. The Penn State crisis, no matter how vile and sinister, is a fraction of the breadth of USA Swimming’s history of sexual abuse by coaches and ensuing – and documented – cover-up by USA Swimming officials.
http://thehill.com/opinion/op-ed/221837-congress-and-the-usa-swimming-scandals

#235 Italians love real estate on 03.12.15 at 6:05 pm

#230 Garth’s response to Italinas love real estate

Thus the average Joe is in poor financial shape, is an excellent candidate for living on cat food in the kitchen of a lovely house in Vaughan, and doesn’t read financial blogs. — Garth

Once again, I do not dispute your observation nor conclusion.

What I do think is that real estate, Inspite of all the faults you mention with it at this juncture garth, will serve most financial illiterates better because I do not believe that a blog, no matter how well written by its author ,will be able to penetrate the ” lizard brain” type reactionary behaviors that easy liquidity and second by second valuations of financial assets cause people to do to their own detriment.

Real estate has been an excellent investment for blue collar uneducated types and dare I say , even some of the white collar educated ones as well.

#236 Squirrel meat on 03.12.15 at 6:13 pm

#232 Josh in Calgary on 03.12.15 at 5:47 pm

My father-in-law’s favourite saying is “your job as a parent is to work yourself out of a job”.

Another one I like is “your job as a parent is to prepare your children for the road ahead. Not to prepare the road ahead for your children.”
___________________________

Good ones. It is truly the kindest thing we can do. Out the door!

#237 Porsche on 03.12.15 at 6:13 pm

House for sale comes with ‘free wife’

https://ca.news.yahoo.com/indonesia-house-sale-comes-free-wife-153455339.html

… and in a year she divorces him and get’s half her house back. lol

#238 Mark in Guelph on 03.12.15 at 6:15 pm

Like I said, it’s a great thing all the people commenting here know more about the US economy than the central bankers. — Garth

That’s right Garth, I don’t trust the very same people who said everything was great back in 2007. You?

#239 Mark on 03.12.15 at 6:28 pm

“Real estate has been an excellent investment for blue collar uneducated types and dare I say , even some of the white collar educated ones as well.”

Which is why RE must continue to fall in the future, so as to inflict pain on a group that makes up the majority. Otherwise, the economy, as comatose as it is outside of the FIRE industry, will never recover, and investment will never occur in a meaningful way in industries that make up the broader economy.

Opportunities to trade against the RE bubble, against the debt bubble, has almost never been, at least in my lifetime, as readily available or as significant as we see today. A young person who simply avoids the RE bubble, and makes even relatively minimal investment in assets classes counter-cyclical to that of debt, will increase their consumption dramatically compared to their house-owning, over-indebted peers over the next few decades. Let the housing bubble present itself as an opportunity to load up on the out of favour stuff, not as something to complain about!

#240 Squirrel meat on 03.12.15 at 6:33 pm

#219 cramar on 03.12.15 at 3:16 pm

The salary you need to buy a home in 27 U.S. cities. San Fran by far the worst.

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/08/map-the-salary-you-need-to-buy-a-home-in-27-u-s-cities/

Someone needs to do the same for Canadian cities.
__________________________

Used to live in SF.. insanely expensive.. folks drive for hours…. get up at 3Am to drive from inland. Now that’s a place to rent.

Weird that NY is cheaper.. something about the zones they are using. Some that I knew from NY thought SF was the greatest deal they had ever seen!

#241 Snowboid on 03.12.15 at 6:36 pm

#137 omg the original on 03.12.15 at 12:28 am…

I believe you are wrong. Unless you meant to say current prices are still at 2007 levels (which isn’t really what I would call stable).

When you look at prices…

The peak price for a SFH in Victoria was $ 711,392 in 2010 and a condo was $ 344,020 (source VREB historical stats).

Last month the ‘benchmark’ prices (as per Times-Colonist yesterday) for a SFH of $ 557,000 and a condo at $ 277,000 doesn’t really look that good, even worse when you factor in the near 8% inflation.

#242 FormerSaskie on 03.12.15 at 6:41 pm

212 4am sunrise

The teller job may require travel to more than one branch office during a shift in an area not served by public transit. A really fast camel would be needed – a souped up camel??

#243 Nagraj on 03.12.15 at 6:49 pm

SHOOKING!

#203 Alberta is FINISHED
” . . . what’s going on in Alberta is shooking.”

I googled shooking, I read in Wiktionary “present participle of shook”. I’m shocked. Aren’t you too? Does that mean the present participle of rattled is rattleding?
Anyway, with your permission I shall henceforth use shooking. [If the BoC lowers rates again some of us will be shooked.]

[Can’t recall who poeticized strangely into star angle but I’ve already been using that, as in – it’s star angle dark out this evening.]

(And thanks to Mark for a the reply to #202.)

#244 Island Girl on 03.12.15 at 7:47 pm

#95 A Yank in BC on 03.11.15 at 9:04 pm

Vancouver Island to be exact! The weather is beautiful here, but I still worry that I’ve paid to much even with it $23000 under assessed.

I expect I’ll still have to stay on top of the new house to keep control of the mold and cold, but at least it will happen. Where we are now the roof leaks water (so that doesn’t help) and the windows leak cold and the landlord is not so proactive in fixing it.

#245 boonerator on 03.12.15 at 11:55 pm

#51

Jeff – rent until the housing prices deflate or crash.
RBC has an income fund that would pay about $1750 into your account every month. They reset the rate every year and it could go up or down by 20 or 30 basis points, but once a year only. It pays the rent and you still have the 300K to use later on.
We sold last summer and it feels good to have the rent paid every month.. and still have the capital in liquid form.

Bad idea. His income should pay the rent. The portfolio should grow and shelter gains. — Garth
—————————————————-
Much as I hate to disagree with Garth, we should consider the psychological factors. The fund pays 7%/year which is respectable. The fact that it could deposit cash in Jeff’s account every month is ammunition he could use against the house-horny ones.
“Look at all this cash coming in, do you want to lose it?

#246 Batt519 on 03.13.15 at 11:24 pm

Jeffery should rent in Brantford, buy a Focus and join the Ford carpool there. Then do whatever the host here says he should with his oodles of $$’s.