Bewildered

RABBIT modified

Here’s a cautionary tale. Louise sent me her email yesterday. “Two Boomers at the Crossroads”, she called it. And she signed, ‘Bewildered.’ Melodramatic. It settled into my inbox about the same time as the latest house-pumping release showed up from the national realtors’ cartel. Sweet juxtaposition.

As you know, May was a big month for real estate. Besides being the traditional rutting season for moist virgins, this one was notable for seeing the average house price (nationally) pass $450,000 – an increase of 8.1%, three-quarters of which was attributable to the GTA and YVR. In the rest of the country house prices barely kept up with inflation, even with the lowest mortgage rates on record.

But you know what this kind of news does. So do the realtors. It reinforces a pro-housing prejudice running deep into the Canadian psyche. This reinforces the decision a majority of people have taken to buy real estate, and real estate only, since history has ‘proven’ that’s all they need to do. So, cue Louise.

“My husband and I have followed your blog for many years and back when you had a newspaper column we followed your advise regarding mortgage rates and found it to be sound,” she says.

So far so good.

“We are 60 and 62 and have raised two kids on two pretty good salaries. Between us we now make about $140K per year. Even with these salaries we have mostly lived pay cheque to pay cheque. Neither of us has a company pension and we are not collecting CPP yet. We now have a house worth about 500K but with a mortgage of about 300K. We have helped put our two daughters through university and have renovated a cabin on Okanagan Lake (on lease land but still 75′ of waterfront bliss).There is no mortgage on it and the hope was to someday retire to the cabin, which is worth about $250,000. We have about 40K in credit card debt.

“We have never had enough extra to seriously do any investing or saving. We have recently received a 200K inheritance and have a number of choices to make. We would like to be able to stop working in approximately two years and live between the cabin (split 50/50) and where our daughters live. This inheritance has made us realize we need a plan for retirement! Any advice?”

I emailed Louise and asked her to itemize what financial assets they have. RRSPs? Or TFSAs? Any cash in the bank, on non-registered investment accounts?

“None,” she replied, and added a little smiley face. :-)

So, no corporate pensions. No savings. No investments. Forty grand in credit card debt and three hundred in a mortgage. But they have two properties with a market value of $750,000, and now a $200,000 inheritance. That equals a net worth of just over $600,000, of which two-thirds is in real estate.

To impoverished Millennials or GenXers struggling with an epic mortgage and income-eating kids, that might not sound too bad. But there’s just one small problem – what are these people going to live on?

CPP for both would average $800 a month, or $19,000 a year, plus about $13,000 in OAS. But $32,000 a year doesn’t go far when you’re carrying a $300,000 mortgage, have two sets of property taxes, insurance and maintenance. Plus you need a vehicle, food and enough booze to make you stop regretting your bad choices. Of course, the Bewildered duo could start consuming the $200,000 inheritance, in which case it would be gone in less than a decade, leaving them to forage on berries and bugs in their 70s.

Or, they could invest and hope for 7% or so a year from that stash, providing another $14,000 in (taxable) income. Now that’s still not enough to carry $17,000 a year in mortgage payments (destined to rise), plus the other costs. In fact, the two properties alone would consume a little over 60% of their pre-tax income. That should leave enough for some sauce for the bugs.

Seriously, Louise and her squeeze cannot afford to retire in two years and expect to survive, let alone afford their current lifestyle. Without the inheritance money, they’d be screwed. With it they’re merely diddled. In fact, it sounds like $40,000 of that found money has to disappear immediately for high-interest debt repayment.

This, kids, is what real estate obsession does to you. By eschewing diversification, remaining a financial illiterate and believing what the housing cartel feeds you, there’s an excellent chance you’ll spend the last decades of your life pissed and stressed. Was that the goal?

On the surface, these people seem to be affluent. They own a house, have a cabin, raised their family, got a windfall inheritance and are gainfully employed. It would be shocking to their neighbours, as to them, to know they’ll never again buy a new car, go on a holiday, or live a single month without sweating the bills.

Obviously they must sell one or both of their properties, pray the real estate market holds until it happens, then fully invest the proceeds (plus the inheritance) in a portfolio designed to generate a predictable, consistent, tax-efficient stream of income. They have over $80,000 in available TFSA room to employ, should be collecting and investing their CPP now plus making RRSP contributions in the final years of employment to defer taxation into retirement.

So, Louise and her hubs played by the rules, financed their family and poured 100% of their net worth into a single asset. The truth escaped them – at the end of the day nobody needs a house, but everybody needs income.

At least she reads this blog. Now she can be bewildered and miserable.

201 comments ↓

#1 espressobob on 06.15.15 at 5:39 pm

Garths blog is a good starting point.

#2 ShawnG in TO on 06.15.15 at 5:43 pm

what were they thinking when they were in their 50s?

#3 Victoria Real Estate Update on 06.15.15 at 5:45 pm

Blah Blah Blah

*Insert random made up stats with no factual evidence about Victoria’s real estate that few people care about*

#4 Randy on 06.15.15 at 5:46 pm

Dumb people don’t know they are dumb.

#5 VanRant on 06.15.15 at 5:57 pm

We have to bring back the statement of citizenship from the new owner in every real estate transaction registered in BC (or Canada). At the very least, we will know who’s buying up houses or land in BC or Canada so we have control over our country and our future.

We do. Go worry about something that matters. — Garth

#6 Cdn Flier on 06.15.15 at 5:58 pm

My bubble ready to pop moment:

Friends of ours bought their house on ’06 in a suburb of Ottawa for $420. Got a job in Vancouver and need to move. Listed at 620K and recently lowered to 600K. Without doing any improvements, they expect a nearly 50% profit in 6 years! Now they’re moving and will have a vacant, listed house that they’ll have to pay for until it’s sold.

They asked us how much we pay for rent ($1750 for a 400K house), they said “why r u paying their mortgage”. I quickly responed “my downpayment that is invested is paying our rent! I live for free!”

#7 The American on 06.15.15 at 6:00 pm

Shame

#8 sam on 06.15.15 at 6:01 pm

Calgary is back in action!

#9 8102 on 06.15.15 at 6:02 pm

Sadly, this story is not unique, but is happening right across the land…

#10 HD on 06.15.15 at 6:11 pm

I really don’t understand the real estate obsession. Clearly the answer to their problem is to dump the properties ASAP and invest the proceeds.

I must be missing something.

I said it before and will say it again: Even if RE in Vancouver plummets 50%, I still wouldn’t touch it.

But hey, that’s me…what do I know? To each their own I guess.

Best,

HD

#11 Llewelyn on 06.15.15 at 6:14 pm

According to the American news media their housing market is red hot and new housing starts have reached the heady heights of 2007.

If we believe that annual housing starts actually jumped from 965,000 in March to 1,100,000 in April this enthusiasm would seem warranted.

I feel it is important to note however that 1,100,000 new housing starts only represents 3.4 new units for each 1,000 citizens the USA.

The latest annual projection of new housing starts in Canada for 2015 ranges between 180,000 to 190,000 units or 5.1 to 5.4 new units per 1,000 citizens. No one seems to be shouting this news from the rooftops.

Clearly Canada has a significantly higher demand for new houses than the USA and the reasons behind this demand should be understood.

Garth implied that an immigration rate of 0.008 of current our population was normal and no cause for concern. While it may not be any cause for concern it remains of the highest immigration rates in the world.

For comparison the immigration rate in the USA, where I hear the economy is absolutely booming, has been capped at 1,000,000 immigrants, an immigration rate of 0.003 of their current population.

The primary reason why Canada might construct 5.4 new units per 1,000 citizens while the USA might only construct 3.4 new units per 1000 citizens in 2015 is the simple fact that our immigration rate is 2.6 times higher than theirs.

I am certainly not suggesting that our current immigration targets should be reduced or amended. What I am suggesting is that our Federal and Provincial governments should be devoting much more time to assuring our new citizens of access to affordable housing and full time employment.

I realize that your blog is focussed on financial advice and the importance of establishing a balanced investment portfolio not on political issues.

In that vein could please advise the Government of Canada of the importance of balance.

Inviting 285,000 new citizens to dinner without worrying about where their food is going to come from or where they are going to sit seems just a touch unbalanced to me.

#12 CJ Saskatoon on 06.15.15 at 6:17 pm

I’m speechless, what are these people spending their money on!! How is it even possible to have a $300,000 mortgage at age 60. I find this hard to believe. Garth you don’t need to make up these crazy stories we will read your blog anyways.

I wish. — Garth

#13 Cow on 06.15.15 at 6:20 pm

With all the woes in the EU with Greece, it doesnt look rosy for the world economy long term outlook. Wonder what ripple effect it will have on Canada….

#14 Cow on 06.15.15 at 6:22 pm

40K in credit card debt????? They really outta start teaching YMOYL (Your Money or Your Life) type strategies starting in Grade 7 or Grade 8

#15 DM in C on 06.15.15 at 6:23 pm

So they used the HELOC to buy the ‘cottage’ on land they don’t own. 40k in credit card debt, in their 60’s and owe 300 large on their mortgage.

They don’t need you, they need the jar lady. Smells like an overreaching sense of entitlement.

#16 sam on 06.15.15 at 6:23 pm

give up garth.

#17 Suede on 06.15.15 at 6:24 pm

Vancouver’s yoga party on the bridge has been cancelled.

Sorry folks.

#18 Mr. Reality on 06.15.15 at 6:25 pm

And i bet its these people that “advise” their children to buy home a right?

Another fine example of how sheeple operate and an even better example that in Canada, the real problem here is quite simply the majority of the population is horrible at math and an entire economy dependent industry has been created preying on just that – people’s inability to understand math.

Mr. R.

#19 Nwo on 06.15.15 at 6:29 pm

Sell both. Invest. Get 7%.
With CPP & OAS = 72000/yr
Rent for same as mortgage.
Buy a used camper.
Relax.

#20 Nora Lenderby on 06.15.15 at 6:31 pm

$140K income and no savings? They read your blog? Blimey. It doesn’t sounds credible, really.

As you describe, this family needs to radically change their spending habits and lifestyle.

Sell all the stuff, rent a garret, work and live seriously poor for a few years*. You are so much fitter to suffer this now than you will be in 20 years time.

#21 Got You Coming Or Going on 06.15.15 at 6:34 pm

Who in their right mind carries $40k in credit card debt? Get a line of credit at the bank. Unfortunately for me, you’ll save plenty of money. Although, fortunately for me, I also own all the bank stocks. You pay me either way.

#22 MSM-free Zone on 06.15.15 at 6:36 pm

In other news, the manufacture of Volkswagens, Corollas, and Freightliner trucks has been moved to Mexico whose residents don’t require above-market wages to pay for above-world-market $450,000 bungalows.

Considering labour is usually the largest expense for any corporation, while shelter is the largest expense for any employee, even the most ardent of anti-union, anti-tax, right-to-work, low power rate whining, ideologically-blindered, tea party wannabes must someday realize that overpriced housing in this country is the single largest exporter of Candian jobs.

Unless, of course, you’re a CMHC-subsidized CREA parasite.

#23 sideline sitter on 06.15.15 at 6:38 pm

$40k in credit card debt plus a mortgage a 60?

Do you really need to carry that much debt on your CC? Pay it off, and cut up your cards…

#24 Leo Trollstoy on 06.15.15 at 6:44 pm

The core Consumer Price Index increased year/year by 1.8%, just below the Fed target of 2%. Wrong again, Mark. — Garth

Core CPI is all that matters to serious observers. — Garth

Sorry Mark.

Better luck next time I guess.

#25 Leo Trollstoy on 06.15.15 at 6:45 pm

what were they thinking when they were in their 50s?

I think the results show that they weren’t.

#26 White Crock BC on 06.15.15 at 6:47 pm

#21 MSM-free Zone

I don’t care what the housing market in Canada is doing, you won’t find a Canadian (or American) who would work for what the Mexicans are getting paid.

#27 prairie person on 06.15.15 at 6:54 pm

I used to take my third year students through a once a year exercise. I picked one of them, had him or her tell us what she wanted to have when she graduated. Apartment? House? Condo? Where? How much it would cost to rent. Groceries? Car? Then we added it all up. Then we discussed where they were going to get the money. What kind of job. If freelancing, contracting, how much an hour would they need? How many hours a week? By the time we’d gone over the expectations of three students, the room was pretty solemn. I think some of them decided they’d better apply for the Co-op program and graduate with a couple of terms work experience. These were bright young people but what examples did they have except Mom and Dad? Many of the people Garth tells us about are parents. Their kids learned their financial behaviour from them. To break the chain, there has to be outside intervention. These kids have also learned their consumerism from their parents and assume that since their parents have an 80 inch TV, drive two new cars, go to restaurants, they should be able to as well. If they can’t, they feel deprived, betrayed. Being yanked out of a comfortable middle class life and finding out it has to be earned can be a very painful experience.

#28 Victoria Real Estate Update on 06.15.15 at 6:56 pm

# 3

I obviously didn’t post that. You realtors must think you’re clever.

Anyone reading any of my posts would know that the source of the data used for my charts is clearly written in brackets.

Sales data is from the local real estate board’s website (Victoria).

Price data used lately has been from the same source ( Victoria’s board). Other sources I’ve used have included Teranet’s index and Brookfield’s index.

Clearly you don’t want Victirians to know the truth about Victoria’s market.

You may have noticed that I’ve posted more recently than in the past. The reason: people like you posting comments like this.

This won’t stop me. Nobody who reads my posts will stop because of comments like this.

#29 Allen Iverson on 06.15.15 at 6:57 pm

We talking ‘bout saving? Saving? We talking ‘bout saving?

#30 johnk on 06.15.15 at 7:04 pm

I stopped reading at the 40K in credit card debt.

#31 crowdedelevatorfartz on 06.15.15 at 7:08 pm

Louise is typical of most people I know.

I have mentioned my co-worker before but here goes again.
50 next month. Makes $70k /year
Works in Burnaby lives in Agassiz(140km commute each way 5 days a week!)

Rents……refuses to rent in Burnaby or anywhere else in the Tri-cities area.
Smokes 2 packs a day drinks. Wife smokes drinks.
3 kids.
Purchased a new car 2 years ago… 4 more years of payments( it has 125,000 kms on it already).
No savings.
Owes 40k to his father with no way to pay. Cut off.
His wife, kids and him havent seen a dentist in over 5 years….hideous teeth problems beginning to crop up.
No vacations, no money, no pension, nothing saved, No credit, cant borrow, will never retire.

and he still talks/argues about “buying a house”

I have come to the conclusion that Financial illiteracy and delusional stupidity cant be fixed after the age of 30…….

I dont waste my time anymore.

#32 Patient in Richmond on 06.15.15 at 7:12 pm

Great article about Richmond BC

http://news.nationalpost.com/news/canada/why-is-richmond-neighbourhood-with-many-expensive-mansions-also-one-of-the-citys-poorest

#33 Millmech on 06.15.15 at 7:16 pm

Those cabins are not worth that much,I would never pay that much for a place where I didn’t own the land.They should be living on the lowest wage,bank the higher wage sell all real estate assets and rent for the rest of their lives.If they were smart stay away from rrsp’s and go TFSA and non registered accounts,then apply for low income seniors housing.

#34 I'm stupid on 06.15.15 at 7:16 pm

Wow!

#35 Victoria Real Estate Update on 06.15.15 at 7:17 pm

@ Garth

Re: comment # 3

You may have accidentally let that comment go through.

If it was intentional – why?

Free speech zone. — Garth

#36 MF on 06.15.15 at 7:20 pm

***From the post titled “Thrilling” on June 9th***

#164 HD on 06.09.15 at 1:28 pm

“Remember, the whole point in rebalancing is to be a contrarian. Buy more when people or selling and sell when people are buying (until target weighing is reached). You are not supposed to make ‘money’ with bonds. They are in your portfolio to tame volatility.

You just started investing. Give your strategy at least a year before you start playing around with the design.

Did you end up applying for that margin account at BMO?”

Sorry about the delay HD. Busy last week at work.

This is what I have read from multiple sources regarding regular rebalancing. It takes the emotion out of the equation, and allows for a more objective approach since resisting the temptation to time the market is difficult.

As for my portfolio and timeline, I’m staying completely committed to it. I’m consistently learning thanks to Garth, yourself, other blog dogs, and books (The Intelligent Investor is taking me a while to get through lol). The whole thing is pretty exciting.

I looked into the margin account. I know market timing is futile, but it seemed like a strategy that would be a little dangerous when my portfolio is still down (don’t want to get a margin call!). If there is a correction or dip, I think it would be wise to then use leverage on the way up, if that makes sense? I do have regular excess cash flow at the end of the month but based on my job, the amount can vary. It is something that I am considering though!

Thanks again HD,

MF

#37 Lonely in Toronto on 06.15.15 at 7:24 pm

Their was a day I would have called BS thinking these people were just looking for a magic bean stock pick from the bearded one.
After finding myself oddly aroused by this blog I have become the black sheep of the family and ostracized
by most of my former friends for not playing the one trick pony real estate “investment” strategy.
I now find myself lurking around financial departments trying to find someone to have lunch with that actual even knows how to buy an ETF.

…sigh

#38 Brokerthanyou001 on 06.15.15 at 7:29 pm

So unbelievable the only thing I can add is the below comedy link. Here’s your sign (Stupid People)

Bill Engvall

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

#39 ANON on 06.15.15 at 7:30 pm

Paid up renovated cabin, nice. Did you mention recreational properties will drop first and hardest, or was the bewilderment already complete? They make good retreats in case it gets a tad hairy, though.

#40 Mark on 06.15.15 at 7:32 pm

“Core CPI is all that matters to serious observers. — Garth”

Oh? So people don’t use fuel nor do they eat? Since when?


Sorry Mark.
Better luck next time I guess.

Don’t need ‘luck’. The facts are on my side. The US is in deflation YoY.

#41 chapter 9 on 06.15.15 at 7:34 pm

They are 60 and 62 with $40,000.00 in credit card debt. If they make a minimum payment of $800.00 a month for the next 9 years, assuming the rate on the card is 19.9% they will only have to pay back interest and principal of $85,950.00. Maybe, cut up the card and pay it off and dump the place with mortgage. How do you they even sleep at night?

#42 Kreditanstalt on 06.15.15 at 7:37 pm

What’s “income”?

We live in a time of Greenspan/Bernanke/Yellen and their “return-free risk”.

Our position is a little different. We have two houses, no debt, lots of assets and a small regular “income” from work.

No one understands the difficulties in this position in Canada, because almost everyone here is in the opposite camp – like Louise…lots of debt, few paid-off assets, paycheck to paycheck and a mortgage.

#43 Freedom First on 06.15.15 at 7:38 pm

Knowing what I know from first hand experience of the Boomers I have listened to over the years, plus the information from Garth’s Blog concerning the Boomers, there is a critical piece of information missing regarding Louise and her husband not having their RRSP’s and TFSA’s maxed out. Never mind their credit card & mortgage debt.

That piece if information is: “How much money did their 2 daughters siphon off, in total, from the Bank of Mom and Dad?”

#44 Fed-up on 06.15.15 at 7:38 pm

“In the rest of the country house prices barely kept up with inflation, even with the lowest mortgage rates on record.”

———————————————————————————-

Yet they continue to climb, regardless of how little. They should be deeply correcting.

Just baffling.

#45 Andrew Woburn on 06.15.15 at 7:41 pm

#113 Cyclist on 06.15.15 at 1:06 am
Re: Victoria RE update

here is how its done

“The average sale price for the rest of the island peaked in 2008 and we are now only getting close to revisiting those valuations”

http://www.vireb.com/index.php?page=20

See? One post. One link. Simple and brief. Bloggers can research further if they wish.

Did I piss anybody off??
========================

This would be helpful in understanding the Victoria real estate market if it actually had anything to do with Victoria. However VIREB only covers Vancouver Island north of Victoria, which has its own real estate board.

Prices are tending up in the VIREB area, not so much in Victoria. Part of the reason may be that Victoria doesn’t offer as much relative advantage to retirees as it used to. The larger Island communities are much less industrialized than 25 years ago and offer decent shopping and amenities. Victoria is much congested than it used to be although to me it seems like a more interesting place to visit.

#46 HD on 06.15.15 at 7:44 pm

@ MF

“I looked into the margin account. I know market timing is futile, but it seemed like a strategy that would be a little dangerous when my portfolio is still down (don’t want to get a margin call!). If there is a correction or dip, I think it would be wise to then use leverage on the way up, if that makes sense? I do have regular excess cash flow at the end of the month but based on my job, the amount can vary. It is something that I am considering though!

Thanks again HD”
—————–
No problem at all. You are welcome.

A few things here…

My suggestion was to use a margin account *only* to resolve your ‘cash sitting idle’ problem. You will never need to worry about a margin call/correction/rally if you use it that way.

I would personally advise against using a margin account to leverage and time the market.

That’s why my recommendation came with a disclaimer: Only attempt if you are disciplined i.e. refund the account as quick as possible and do not succumb to maxing it out on bets you can’t afford.

Otherwise, no biggy. You seem to be doing well.

Best,

HD

#47 Some guy on 06.15.15 at 7:44 pm

5 years ago I had a girlfriend who lived in a cluster of condos at cityplace. On her balcony I could see into about 40 living rooms that all had the same layout. A tv on the wall facing out and a couch backed to a floor to ceiling window.

About 90 percent of people seemed to be watching sports, HGTV or the food network. I found it bizarre..is this really what people want to do with their free time? Watch sensationalized TV shows surrounded by endless commercials with hidden agendas? Its like I lived in a dystopian future where people in their 20s lived in “dating silos” and then moved to the “breeding sheds” outside the city.

I could never identify with that lifestyle and to me it just never made sense, yet so many people buy into it with full confidence that everything will be fine. I guess all the marketing tactics worked and everyone feels good when buy their first house just like the paid actors playing happy couples in every banking commercial they see on TV.

Anyways, thanks Garth for bringing some truth and honesty in a world filled with obfuscation.

#48 MF on 06.15.15 at 7:51 pm

#30 crowdedelevatorfartz

“I have come to the conclusion that Financial illiteracy and delusional stupidity cant be fixed after the age of 30…….”

Nah. It can be learned any time, but the earlier the better obviously. I started reading this blog 3 years ago at 29 when I searched “buying a toronto condo worth it?” in Google. Best thing I ever did. I’ve learned a ton so far and I like to think I am now financially literate, or at least more than I was before.

What you are referring to is spending habits. I was always good at saving my money. Changing someone’s spending habits at 30 is more difficult than teaching financial literacy.

#17 Mr. Reality

Bingo. Most people are too dumb to comprehend numbers. They just drift off.

I see at work all the time. Most people glance at CP24 and read the ticker: Gta house m/m house prices increase x % to 1 billion dollars. And that becomes: house = i’m rich baby. For that reason, I actually don’t blame the RE cartel. It’s always buyer beware and if people are too stupid to do their homework then let them deal with the consequences.

When RE agents start pretending they know something about finance and it is annoying. They are in sales and nothing more. Like someone on here said a while back: “they should stick to selling houses to some idiots”.

MF

#49 raisemyrent on 06.15.15 at 7:52 pm

#10 Llewelyn on 06.15.15 at 6:14 pm
your analysis is thought-out, but don’t forget that our overall population barely moves and in fact has gone down at least once in the last few years (statscan). In my opinion, we could use more people because we have the resources. we do not want overpopulation, however. and no I don’t want to rattle the xenophobes on here.
don’t forget as well that the US has a very different demographic situation (3rd overall in sheer number), and WAAYYYY more usable land than us (in fact, if you take out water alone, they’re bigger than us, and it’s all populated, not a frozen wasteland).

#21 MSM-free Zone on 06.15.15 at 6:36 pm
#25 White Crock BC on 06.15.15 at 6:47 pm

don’t forget people in mexico don’t generally use mortgages to finance new builds (only as what we call HELOCs when in dire straits and when the property is valuable), most people pay cash for their houses, and even the ‘poorest’ live in solid brick and concrete homes. we had a maid who was a single mum with 4 children, and had AC and a custom bathtub at her paid-off house. put that in your pipe and smoke it.

#30 crowdedelevatorfartz on 06.15.15 at 7:08 pm

holy crap, and I thought my friends were bad (most of them don’t actually have mortgages)

#36 Lonely in Toronto on 06.15.15 at 7:24 pm

agreed and understood. isn’t that why we all read the comments??

#50 not 1st on 06.15.15 at 7:56 pm

They have no wealth, because they have no idea what it even is.

The cabin on the leased land is worth zero. Anybody that would lease land and build on it is a complete utter idiot. I imagine this is native land. They are the ones whose wealth has increased by your stupidity.

#51 dosouth on 06.15.15 at 8:01 pm

Louise seems to be quite honest about their incomes. In past posts those Millennials would bemoan their pitiful single 140k income after being out of school (also paid for by their parents or at least partly) for at least 4 years now!

You are certainly direct and brutal but especially since they have what appears to be property on the Kelowna First Nations band property, their is never certainty in these land leases so that should be the first to go.

Wish them well and hopefully their daughters make good use of the education that has cost this couple a few questionable choices that you may have mentioned.

#52 Linda on 06.15.15 at 8:02 pm

Golly, where does one start? Sell the main house & rent, invest the money left over (if any). Keep the cabin only if it is something that is 1) in good to excellent shape structurally & 2) fully winterized (unless where they have the cabin never sees cold weather). Though if said cabin is in a lovely lake but otherwise rural area, maybe sell the cabin too. Getting older – if a place one must have, make sure it is near all the required amenities – doctor, hospital, pharmacy, transit etc. Plus make sure it is as open concept/on one level/wheelchair accessible as possible. May never be needed, but smart to plan ahead. Plus set a budget for purchase & don’t exceed it.

If they are earning $140 K per year between them now they need to concentrate on getting rid of as much debt & smacking cash into safe, dividend producing assets asap. Start by stacking their TFSA’s with that lovely windfall, after getting rid of the high interest debt. They want to retire ‘soon’ so RRSP’s are bottom of the list but should be given enough to offset any income tax they pay on earned income now. Then roll any big tax return into more safe dividend bearing assets.

Nice that they put their children through university etc but OMG, they are going to either have to work to 65 (esp. if they can’t shed the properties) or REALLY scale back on their retirement expectations. I’ve got a company pension – for now, anyway – & I’m working to age 60 because that DB pension is at best going to cover the necessary costs – utilities, property tax, groceries, health care costs & running a single vehicle, home insurance. Nothing left over for ‘extras’ like hobbies/travel. That will be coming out of CPP or savings/investments. I’ve got that gold plated DB plan, too. That gold plate is pretty thin is all I can say & I’ve been told my plan is one of the better ones out there.

#53 Cici on 06.15.15 at 8:03 pm

Actually, I think Louise and her squeeze could be very affluent and lucky if they can somehow find a way to emotionally detach themselves from their real estate ;-)

Now would be an excellent time to get out of both properties (market top)…screw the cabin Louise..if they can sell the house and cabin for about $750,000, they’ll be able to pay off the mortgage and credit debt, and have some $610,000 left to save and invest. But no DIY please, find a good and trustworth adviser!

Next, they need to develop a realistic budget and stick to it, because they are living WAY BEYOND their means. For the next three years, their goal should be to rent a decent yet somewhat modest place that doesn’t cost them more than 35% of the monthly take home of ONE of their salaries. Next, they should live on one salary for those next three years, saving $70,000 per annum for an extra $210,000 of retirement funding.

In three years time, there’s a good chance that cabins and houses will be worth less, so now would be a great time to get and stay out of the market. Besides, my guess is that their kids will be having kids and will be expecting granny and grandpa to be living close enough nearby to step in and do half the work for them. So, sorry, no lake…let that dream sink to the weedy bottom. Of course, they could rent a lakeside cabin every summer using their investment proceeds ;-)

For this plan to work, Louise and her squeeze are going to have to play hardball with their grown children, who’ve enjoyed their financing up to now. That means no gifting mortgage payments to the kids, and no paying for their cars and lavish vacations. The kids now have to figure this stuff out for themselves. But if Louise and her beau do manage to follow this through, they’ll be setting a fine example for their own grown children.

#54 Babblemaster on 06.15.15 at 8:04 pm

“As you know, May was a big month for real estate. Besides being the traditional rutting season for moist virgins, this one was notable for seeing the average house price (nationally) pass $450,000 – an increase of 8.1%, three-quarters of which was attributable to the GTA and YVR.” – Garth

“Obviously they must sell one or both of their properties, pray the real estate market holds until it happens. ” – Garth

——————————————————

Garth, your message of the last few years has been that housing is risky and that it will correct, or flatline, or whatever. It obviously hasn’t done that. Not in the GTA. And there is absolutely no indication that it ever will. As such, your exhortation for this couple to sell now while prices are holding is bad advice. There is no urgency.

#55 Snowboid on 06.15.15 at 8:10 pm

#32 Millmech on 06.15.15 at 7:16 pm…

“…I would never pay that much for a place where I didn’t own the land…”

Very true, why not just outright rent a place? At least then you don’t have to worry about what to do with your cabin when the lease expires.

I recall the wise professor advising consumers to steer clear of leasehold properties a few years back in a G&M article.

Methinks the cabin should be sold forthwith – perfect time to put it on the market.

#56 Retired Boomer - WI on 06.15.15 at 8:16 pm

Louise & Squeeze look to me like of couple of baked “turkeys.”

First off their income is quite high, their savings nil. They can’t even “live within their means” as they have 40 GRAND in credit card debt. We know they have 300 LARGE on a mortgage. Clueless as to car debt, boat debt, etc.

60 and 62?? Is THIS a ‘typical’ Canadian today?

I would hope not, but I doubt we Americans are much better off.

How many at that age have no debt, fully funded emergency money, and enough to live off of even if (when) the social insurance for the Geezers runs out -or- gets trimmed harshly?

DAM FEW but, you had better plan that way.

Did we think for a nano second our politicians ever planned for contingencies? Never… beyond the next election.

Sorry. Louise you won’t be owning a home in retirement. Get moving to that reality now, SELL while you can still SELL before prices melt. You won’t be alone in the stampede to sell. Sorry you couldn’t do math.

#57 MF on 06.15.15 at 8:17 pm

#38 Babblemaster

Since you are good at quoting Garth, I will help you out.

1) “To impoverished Millennials or GenXers struggling with an epic mortgage and income-eating kids, that might not sound too bad. But there’s just one small problem – what are these people going to live on?

2) “Seriously, Louise and her squeeze cannot afford to retire in two years and expect to survive, let alone afford their current lifestyle. Without the inheritance money, they’d be screwed. With it they’re merely diddled. In fact, it sounds like $40,000 of that found money has to disappear immediately for high-interest debt repayment.”

3) “This, kids, is what real estate obsession does to you. By eschewing diversification, remaining a financial illiterate and believing what the housing cartel feeds you, there’s an excellent chance you’ll spend the last decades of your life pissed and stressed. Was that the goal?”

I disagree with your comment. If this couple is in the GTA or GVR, the housing markets there are an unmitigated disaster waiting to happen. Like Garth and others have said many times, when things turn sour (and they will), being illiquid and stuck with a falling asset is dangerous.

I’m sorry but did you even read the post or any others?

MF

#58 Andrew Woburn on 06.15.15 at 8:23 pm

#116 The American on 06.15.15 at 1:58 am
And the worst capitalized banking system goes to? Canada! Yes, it’s true. This news is 9 months old.

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

I would say that the Sovereign Man is a paranoid gold bug with delusions of economic competence.

“Even more troubling is that Canada has legislated an actual Cyprus-style confiscation of deposits in the event that Canadian banks deplete their capital.”

Well, no, but if you get all your financial awareness from conspiracy blogs, you might believe that.

“Any strong, healthy banking system requires a central bank with a pristine balance sheet… specifically, substantial net equity as a percentage of assets.”

Why, exactly? Central banks are not in business and they have no creditors. They function by expanding or contracting both sides of their balance sheet simultaneously. They are a de facto branch of their controlling governments which will always back them.

The Fed is probably technically insolvent at this time because half their assets are mortgage backed securities of questionable value and a lot of the rest is long bonds whose price will be hammered when interest rates go up.
Also, If they have to crank interest on excess reserves to 2%, they will be writing an annual cheque for maybe 50 billion dollars to the major banks. However the taxpayer will cover the gap as usual.

The most exposed central bank is the ECB. If Yellen or Poloz or Carney hit the wall, they have only one phone call to make. Mr Draghi needs 19 governments to agree. Good luck.

#59 Renter's Revenge! on 06.15.15 at 8:27 pm

#4 Randy: “Dumb people don’t know they are dumb.”

Or, to paraphrase Colin Powell, there are people who know that they know, there are people who know that they don’t know, and then there are people who don’t know that they don’t know.

#60 the jaguar on 06.15.15 at 8:30 pm

60 & 62? Liquidate, rent the minimum space that you can reasonably find comfortable and make your new job staying fit and healthy. Get rid of any bad habits you might have and start working on whatever personal goals you might have left in life. You have less time than you think. Damn anyone who gets in your way.

#61 to_be_frank on 06.15.15 at 8:32 pm

A sad case of financial illiteracy, but sadder still that this is so common. You would think, after having followed Garth’s column and blog for so long, they would have learned something by now. I am wondering – who is paying them $140K?

#62 easy target on 06.15.15 at 8:37 pm

When the conclusion is “stupid” we know the bar was too low. We need better story.

#63 Rob Clark on 06.15.15 at 8:40 pm

I reckon their takehome is just shy of $6k/month but they are living month to month and have $40k of credit card debt? Something is wrong in the way they are spending money. If they don’t address that then they will be back in debt again in short order without the deus ex machina of an inheritance to wipe the slate clean.

#64 tkid on 06.15.15 at 8:42 pm

Louise and Hubby: sell the godforsaken cabin. No one, not no one throws $250,000 at a LEASED property. Take the money from the cabin, put the money off of the frickin’ mortgage. Take the windfall, use that to pay off the credit card debt & the remainder of the mortgage.

Take the $100,000 that you have remaining, figure out how much YOU can make on it (you sound like GIC babies so go with 1.5%) That’s $1500 a year.

Take that $1500 and rent a nice cabin on the lake somewhere. Someplace nice where you’re happy. While you are at your nice rented cabin, try to figure out how you will make the $1500 pay for your gas expenditures for the year plus the insurance and maintenance. Put some thought in this exercise because when you are 70 you’ll be living in the damned car.

Don’t go looking at that $100,000 to saving your bacon – it ain’t enough money to save you, and if I know your type you probably have it 50% spent already.

#65 "cici" on 06.15.15 at 8:42 pm

DELETED

#66 MF on 06.15.15 at 8:43 pm

#46 HD

Yes you are correct. I was worried about having idle cash sitting around. I suppose the amount borrowed from the bank on margin and the investment choices are the most important factors with regards to risk. I know you don’t recommend the strategy, but based on spending habits so far, I always have left over savings every month that I can use to pay off anything borrowed. Might not be too risky if controlled. I will do some more research and report back in a bit! If anything it is always good to further my knowledge on the topic.

PS: my portfolio has made up some ground as of today. Even though equities are almost all down, some fixed income has been deposited in my account, and losses have been reduced a little. Feels good.

Best :)

MF

#67 Lucky Renter on 06.15.15 at 8:43 pm

Canada’s household indebtedness is pushing to dizzying levels.

The Bank of Canada considered the housing market up to 30% overvalued. That may be conservative. Deutsche Bank estimated that it was 63% overvalued. The IMF warned about high household debt levels and the “overheated housing market.” And the Economist determined the housing market to be overvalued by 35% compared to incomes, and 89% compared to rents.

High household debt and a magnificent house-price bubble coagulate into a toxic mix for Canada’s financial system. An increase in unemployment would put these highly indebted households under severe pressure, and if this happens as home prices succumb to gravity once again, it will give the good folks at the Bank of Canada a lot of gray hairs in trying to prop up the banks.

But even in Toronto, where the bubble is at its most splendid magnificence, the hiss of hot air can already be heard: unsold new condos spiked to an all-time record. Read….Toronto’s Epic Condo Bubble Suddenly Turns into Condo Glut.

More : http://www.businessinsider.com/canadas-household-economies-are-a-mess-2015-6

#68 Unhinged Citizen on 06.15.15 at 8:46 pm

So far, the markets returned anemic numbers for 2015. This often touted 7% is a pipe dream.

Balanced, globally diversified portfolio is right on target. — Garth

#69 Karma on 06.15.15 at 8:48 pm

#17 crowdedelevatorfartz on 06.14.15 at 5:55 pm
“Vancity
With the most nauseating, ass kissing, politically correct tv ads ever produced.
I think they’ve covered just about everyone in BC with this ad…
https://www.youtube.com/watch?v=xAJtlpTekr4&list=PL0DA4087C2CD0999D&index=1

Caucasians, asians, gays, straights, singles, marrieds, men, women….yup that just about covers it!
Rolling……. Cut! Print!”

Overly politically correct adverts lack authenticity. IMO, if they are trying to target everyone under the sun, they clearly don’t know their market well enough to have effective adverts. I’m not talking just about bank adverts only, but all sorts of businesses nowadays…

#70 Yuus bin Haad on 06.15.15 at 8:49 pm

OK, that does it! These queries are definitely made up!

#71 Karma on 06.15.15 at 8:51 pm

#20 North Burnaby on 06.14.15 at 6:07 pm
“Buying into pre-sale condos early is not only a great investment, but it also acts as a forced savings account for young people too!”

Making pitches to the blog dawgs, eh? Getting desperate? bwahahaa

#72 Karma on 06.15.15 at 8:53 pm

#22 Hot Albertan Money on 06.14.15 at 6:26 pm
“Does anybody even read Victoria Real Estate Update’s posts?

4 posts in 15 minutes? Give it up dude”

I do.

#73 Not retired on 06.15.15 at 8:54 pm

That email is terrifying. Instead of writing to you Garth they should have gone to scotia bank to hear “you’re richer than you think!!” Because I feel like that’s what they were looking for…

#74 Millmech on 06.15.15 at 8:59 pm

#55 Snowbird
What happens to the value of the cabin if the leaseholders decide to blockade or revoke lease.There has been issues in the past when this has happened.You are correct to advise them to rent.I remember that happening in the past and it can happen again.

#75 Mike T. on 06.15.15 at 9:01 pm

‘is this really what people want to do with their free time?’

it’s worse I think

so many people think the ultimate goal of life is to become a celebrity, either via YouTube or (chortle) reality teevee

it’s almost as if we’re breeding a whole society of vapid minded people that want to be controlled/subdued

Russell Brand has some interesting points on the issue

#76 A Yank in BC on 06.15.15 at 9:04 pm

#11 Llewelyn on 06.15.15 at 6:14 pm
According to the American news media their housing market is red hot and new housing starts have reached the heady heights of 2007.

That’s totally false. New home starts in the U.S. have only recovered to about half of what they were at the peak in 2006.

http://www.census.gov/briefrm/esbr/www/esbr020.html

#77 45north on 06.15.15 at 9:04 pm

Victoria Real Estate Update: You may have accidentally let that comment go through.

If it was intentional – why?

Free speech zone. — Garth

that is anyone can post with whatever name he wants. Yes this annoys me but I don’t make the rules. The alternative would be registration with a password.

#78 wheatfree on 06.15.15 at 9:05 pm

Recently accepted an offer on my house in a village in SE Ontario. Built the small, energy-efficient bungalow 5 years ago. Sold it in a week – might be a record for the village – some homes take 2-3 years to sell, even with 10% or more price cuts. If I hadn’t gone with one of the ‘sell-it-yourself’ real estate services, I would have lost money on my 5-year stay. This was my 7th house in different locations in S. Ontario – haven’t lost money on any of them, but only made a good return on 2 of them.
Moving to Van for family reasons, but will be renting.

#79 Babblemaster on 06.15.15 at 9:05 pm

#57 MF

“I’m sorry but did you even read the post or any others?”

————————————————

Yes. I did. In fact, I’ve been reading these kind of scary posts for YEARS!!! I understand all the reasons that RE is supposedly risky. That the prices are not supported by the fundamentals. Etc, etc. I’ve made these same arguments myself. I advised my son to NOT buy in 2010 and he listened. However, RE in the GTA has not corrected and those prognosticating such, (myself included) have been spectacularly wrong. It has such momentum that I see no reason why it will correct anytime soon.

#80 Cdn Sailor on 06.15.15 at 9:05 pm

Louise, U need a 25′ yacht 2 go w 75′ of waterfront bliss :)

#81 8102 on 06.15.15 at 9:06 pm

#3 Victoria Real Estate Update on 06.15.15 at 5:45 pm

Blah Blah Blah

*Insert random made up stats with no factual evidence about Victoria’s real estate that few people care about*

A little testy are we?

I read his/her comments all the time and find them informative, it comments like yours above that validate them for me.

Have a nice day!

#82 Mukadi on 06.15.15 at 9:30 pm

They’re even lucky that they’re not in the US.

50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax – trimming their networth to $500K at the age of 62!!!

#83 Global News National - Nauseating on 06.15.15 at 9:32 pm

Just watched their opening segment of the “National” news cast.

Reported as if “breaking news”. Housing is red hot in Canada, mainly in Vancouver and the GTA. Bidding wars were mentioned and that prices have gone up nearly 10% over last year. This is old news. Why are they pumping real estate to their audience so shamelessly? Don’t answer that.

Disgusting to say the least.

Vancity is complicit in this fraud.

Real estate is the only game in town. Nothing else matters anymore.

Vancouver is The Klondike of 2015. Same hype, same expectations and same hardships for those trying to make it work somehow.

When the gold rush was over, The Klondike was abandoned. Expect the same for Vancouver. Who wants to keep living here?

#84 Prairieboy43 on 06.15.15 at 9:36 pm

More common than you think! True. My Sister In Law is heading down same road. I talk finance with them. They become uncomfortable. Wife says shut up!

#85 45north on 06.15.15 at 9:40 pm

We now have a house worth about 500K but with a mortgage of about 300K. We have renovated a cabin on Okanagan Lake. There is no mortgage on it and the hope was to someday retire to the cabin, which is worth about $250,000.

about $500K, about $250K. This is where Louise and squeeze can really lose. This is where Garth talks about risk: if interest rates go up then the real estate market will go down. Louise and squeeze cannot just sit it out they would have to aggressively lower their price.

some guy: Its like I lived in a dystopian future where people in their 20s lived in “dating silos” and then moved to the “breeding sheds” outside the city.

very imaginative! great expression!

Cdn Flier: Friends of ours bought their house on ’06 in a suburb of Ottawa for $420. Got a job in Vancouver and need to move.

friends of mine bought a house (River Road?) in Ottawa. Got a job in Vancouver and need to move. I wish them the best in Vancouver.

#86 BS on 06.15.15 at 9:41 pm

So, no corporate pensions. No savings. No investments. Forty grand in credit card debt and three hundred in a mortgage. But they have two properties with a market value of $750,000, and now a $200,000 inheritance. That equals a net worth of just over $600,000, of which two-thirds is in real estate.

By my calculations 100% of their net worth is in real estate since they owe more in mortgages than their cash holdings.

#87 S.Bby on 06.15.15 at 9:48 pm

#32 Patient in Richmond:
Gives new meaning to the phrase: “house poor”.

#88 BS on 06.15.15 at 9:51 pm

On the surface, these people seem to be affluent. They own a house, have a cabin, raised their family, got a windfall inheritance and are gainfully employed.

A lot of people in this category. Looks like they are doing well but it is all an illusion built on debt. They need to get ready for a major set back in lifestyle. You never want to move backwards from the lifestyle you are used to. It is fine to live the good life as long as you can finance that lifestyle until you die. Trying to keep up with the Jones can put you in the poor house quickly.

#89 The Grand Illusion on 06.15.15 at 9:54 pm

Would you like a burger and fries when you visit my McMansion, since that is all I can afford….other than cat food and spam!

http://www.thestar.com/news/gta/2015/06/15/ontarios-eye-popping-shift-to-low-wage-work.html

Ontario’s low-wage work force has skyrocketed by 94 percent over the past two decades, compared with just 30 percent growth in total employment, according to a new report.

#90 Christopher Mewhort, EA on 06.15.15 at 9:55 pm

82 Mukati

They’re even lucky that they’re not in the US. 50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax – trimming their networth to $500K at the age of 62!!!
—————-
This is completely wrong. There is no Federal inheritance tax in the US. There would be no tax payable on gift/estate tax either.

Christopher Mewhort, EA

#91 Transplant on 06.15.15 at 9:55 pm

#82 Mukadi on 06.15.15 at 9:30 pm
They’re even lucky that they’re not in the US.

50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax – trimming their net worth to $500K at the age of 62!!!

Absolutely false.

Why post such a silly comment and expose yourself to possible ridicule?

#92 Who are these emailing people? on 06.15.15 at 10:01 pm

Funny how this blog regularly receives emails with perfect Grammar yet only gets about 200 posts.

i call BS. Sorry.

(a) I admit it. I clean up grammar. (b) Consustently, about 1% of daily visitors leave a comment. (c) Deal with it. — Garth

#93 Julia on 06.15.15 at 10:01 pm

#61 to_be_frank
I am wondering – who is paying them $140K?
————-
$140K for 2 people at that stage in their life is really not that much.

#94 Brad in Van on 06.15.15 at 10:05 pm

Andrew Woburn that’s a bunch of rubbish. You also don’t believe our Canadian banks were bailed out, do you? The American consider the source of Andrew Woburn. When someone like Andrew asks why or uses words like probably then they having nothing. Andrew is only angry the cracks are starting to show.

#95 kommykim on 06.15.15 at 10:06 pm

RE:”Between us we now make about $140K per year. Even with these salaries we have mostly lived pay cheque to pay cheque. ”

The problem with these people is not that they own real-estate, but their spending habits. At 60, with those wages, the house should have been payed off years ago, their RRSPs should be brimming, and their TFSA’s should be full.

#96 Interstellar Old Yeller on 06.15.15 at 10:12 pm

Oh man, I don’t even know where to start.

Louise, are you reading the comments? Anything you want to elaborate on or explain?

I cannot fathom how someone reads Garth’s advice for years and only realizes in their 60s that they need a retirement plan.

The smiley face when admitting you have zero financial assets totally makes everything better. :-)

How do you rehabilitate the finances of a couple who lack discipline (see: credit card debt) and financial literacy? The plan needs to be realistic to have a chance of being executed.

Louise and hubby: pay off the credit card. No more consumer debt. Forget about voluntary retirement, in two years there is no retirement possible that will fund your lifestyle the way your jobs can. If you can be sensible and brave sell one of the properties and rent (a nice apartment or a vacation property only when you’ll actually be using it.) Save and invest every dollar you possibly can. Work for as long as you’re able and they’ll have you. Understand that financial reality will likely overtake and overwhelm your efforts. What you are doing now is damage control. Hopefully your kids will be in a position to substantially help by the time you need them to.

#97 BG on 06.15.15 at 10:17 pm

Thanks to all the posters who replied to my questions about Richmond yesterday. That’s a lot of useful info.

I’ve decided to not live in Richmond.
And about taking the job and commuting from a nicer area… I don’t know. I’m not a fan of long commutes.

That, and the higher cost of life mentioned by a few posters makes me lean toward not taking that particular job.

#98 Bottoms_Up on 06.15.15 at 10:17 pm

Garth offers some good advice. They need to work longer in order to save more, and need to sell their more expensive piece of real estate (or rent it out if it will be significantly cash flow positive). In their position they shouldn’t have helped their kids through university, OR they shouldn’t have taken on the cottage.

#99 Steve French on 06.15.15 at 10:19 pm

Hey Smokey what’s the “UCC” ?

SteveO

#100 Nagraj on 06.15.15 at 10:21 pm

THE FROZENBUGSUCKERS
A Cautionary Tale for Canadians

Skipping to the end, the last paragraph of this classic Cautionary Tale actually reads:
“They’ll never again buy a new car, go on a holiday, or live a single month without sweating the bills. They’ll develop hemifacial spasms, their teeth will painfully rot, they’ll break out all over in really big ugly pimples, and be reduced to surviving Winter by sucking on frozen bugs.”

[Credit: Frozenbugsucker is a term invented by economic blogger The Mogambo Guru, if memory serves.]

[“Canadian psyche” appears in GT’s version of THE FROZENBUGSUCKERS. Kindly research Antonio Canova’s 1787 sculpture Psyche Revived By Cupid’s Kiss for further insight.]

#101 TurnerNation on 06.15.15 at 10:24 pm

#47 chilling, Some guy.
Toronto Star today reporting surging minimum wage job rolls.
My first thought was Exactly what the elite want. A world of low paid but happy slaves.
It never changes Bread and circuses. Using our taxes to fund overseas conquests. Never forget whose face bums our coinage.

Say what’s going on in Haiti -a crucial drug and human trafficking port – all the billions we sent. News blackout. Thought so.

#102 TurnerNation on 06.15.15 at 10:27 pm

HD if you get a margin call just sell some near term covered calls near your position’s vaule. Work it. A margin account is not a toy but a sophisticated tool.
Go on be a tiger/smoking man.

#103 omg the original on 06.15.15 at 10:32 pm

Cowtown House Values Holding Up as Expected

I got to pat myself on the back for this one.

A few months ago the “humble me” forecast that Calgary house prices would likely not budge.

And this so far is exactly what has happened.

Down a miserable 1.8% year over year for May. Ok, down about 3.5% YTD so far for June but in a market that is up over 100% since 2004 this is rounding error.

The middle income job loss in Calgary is staggering – house prices should be collapsing – yet people will do anything to hold on and not sell at a loss.

People will sell their granny to pirates before they will lose money on a house.

#104 Montreal has upside on 06.15.15 at 10:37 pm

#97 BBG

We sold in the Vancouver area and considering other parts of Canada including Montreal.
The only city in Canada (maybe North America) that has real diversity and knows how to live. If only the winter…

#105 AACI Home-Dog on 06.15.15 at 10:37 pm

Another thing about leased land. In BC you are also assessed for taxes as if in fee simple, or full title ownership. Ouch ! 99 year leases are the most common though, I believe. But still…the land lease expense is typically about the same cost as annual taxes…so…nice…it`s like being taxed twice, and you cannot even really claim to own the place.

#106 The Grand Illusion on 06.15.15 at 10:43 pm

Garth

2 points,

Why does everyone need to live in YVR and GTA in this day and age…with the net should be able to live in nicer places and telecommute…..why not stay in Grand Bend and telecommute.

As for your couple, just wondering why you never advise clients to sell everything and relocate overseas to a cheaper location with nice weather like Ecuador or Bali?

#107 cramar on 06.15.15 at 10:45 pm

The time to have developed a retirement plan should have been 30 years ago. But now in their sixties?

Anyone want to take bets that they will not sell one or both the properties? Selling your cherished RE is like cutting off an arm…or both arms in this case.

Of course the best thing to do is sell both properties, pay off all debts, invest the rest, live frugally, spend little, work until both reach 65 before collecting pensions, then they will be able to retire in comfort. I doubt they’ll do it.

#108 omg the original on 06.15.15 at 10:46 pm

WHY CALGARY HOUSE PRICES HAVE NOT FALLEN

People absolutely HATE to lose money on a house and will do anything to hang-on. Here’s my top 5 ways people will HANG-ON no matter what.

1) people have lots of FAT in their lifestyle – they will cut before they ever default – items such as the $160/m cell phone plan, the second leased Lexus, the $225/cable package, eating lunch/supper out 10 times a week, private school for the kids, the list goes on and on.

2) many people working in the private sector have a spouse working in recession proof GOVERNMENT jobs. So for many dual income earners in Cowtown one income is bulletproof and will help them hang on to the house for months or years.

3) Bank of MOM AND DAD – the only thing worse than losing your own house is your kid losing HIS house. Mom and dad will forego their golden years to make sure the BRAT does not default.

4) POGEY – sure not much, but every little bit helps.

5) Tens of thousands of Calgarians are just waiting for prices to come down 5 or 10% so they can “SCOOP” a bargain. Housing is a Canadian obsession – most people will view this as a little dip not the beginning of a long-term retrenchment.

#109 NoOneOfConsequence on 06.15.15 at 10:47 pm

Here’s how you can make $80,000 a year and be broke:

Net Income after deductions: $4,340.00
Children: 4 (oldest 16, youngest 6)
Marital Status: Widower (no life insurance payout)

Rent: 5 bedroom rancher, in suburbia, all in: $2,500.00
BC Health Insurance: $168.00 per month
Car Insurance: $225.00 per month
Gasoline: $375.00 per month
Tolls: $140.00 per month
Kids school activities: $200.00 per month ($50 per kid)
Groceries: $600.00 per month
Cell phones: $140.00 per month
TOTAL TO SURVIVE: $4,348.00 per month

Amount left over for any emergency, vacation, or relative enjoyment of life: $-8.00 per month.

No debt, eat no junk food, exercise daily, and in general have an ok life.

I guess my point is that on the face of it….$80,000/yr seems like a lot…but at the end of the day it’s actually just scraping by.

#110 Drill Baby Drill on 06.15.15 at 10:50 pm

This couple featured here today have very little to look forward to financially in their future. The cabin on leased native land is not liquid unless they price it below $100K. They owe 40K plus another 200K. They think a combined salary of 170K/year is a great income. They are so screwed.

#111 A Yank in BC on 06.15.15 at 10:54 pm

#82 Mukadi on 06.15.15 at 9:30 pm
They’re even lucky that they’re not in the US.

50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax
—————————————————————–

That’s complete bunk. Federal inheritance taxation in the U.S. doesn’t begin until an estate exceeds $5.43 million. In addition, it tops out at 40%.. not 50%.

#112 JSS on 06.15.15 at 10:59 pm

Although this blog shuns buying stocks, the following common shares are for sale:

Transcanada Pipelines
Canadian Western Bank
Canadian Utilities
Potash Corp of Canada
Dream office REIT

Yummy stocks for millennials who might buy and hold long term, while collecting dividends that rise annually.

#113 Balmuto on 06.15.15 at 11:00 pm

Looks like the oil shock is hurting Calgary commercial real estate as well:

http://calgaryherald.com/business/commercial-real-estate/calgary-commercial-real-estate-market-reeling-from-oil-price-drop

#114 TurnerNation on 06.15.15 at 11:15 pm

Calgary Herald:

“”In an oilfield services report last week, Calgary investment bank Peters & Co. said it expects Canadian drilling activity to decline compared with 2014 in every quarter of this year, reaching a trough in the first quarter of 2016.

It said the situation is worse than in the last downturn in 2009.

“From September until May, oil price and equity weakness tracked largely in line with the pullback of 2008-09, although valuations did not compress to the same magnitude,” says the report.””

#115 Leo Trollstoy on 06.15.15 at 11:33 pm

“My husband and I have followed your blog for many years and back when you had a newspaper column we followed your advise regarding mortgage rates and found it to be sound,”

This seems to imply that what they proceeded to do was unsound.

#116 Darren on 06.15.15 at 11:37 pm

Louise merely needs to learn how to get ‘financial freedom through badassity’. A few years of following a fair bit of this
http://www.mrmoneymustache.com/
and voila, no cat food.

#117 Larry1 on 06.15.15 at 11:40 pm

It is happening based on my observation of a limited sample size. The Boomers are listing their houses. Their financial advisers are encouraging them.

#118 Leo Trollstoy on 06.15.15 at 11:41 pm

Don’t need ‘luck’. The facts are on my side. The US is in deflation YoY.

Everybody needs a bit of luck here and there. And although you say that you don’t need it, I wish you good luck anyway.

I’m sorry that you’re making so many poor observations recently. You have my sympathies. Seriously.

Just remember the famous quote by Wayne Gretzky: “skate to where the puck is going to be, not where it has been.”

Hope that helps you turn your finances around.

#119 Marco on 06.15.15 at 11:43 pm

I think the reality is that they can’t and shouldn’t retire in 2 years.

They need to either continue working the current job or find another with very similar income to maintain the lifestyle. Lets not forget to estimate future medical bills because they are guaranteed to occur!

#120 Carpe Diem on 06.15.15 at 11:46 pm

Sh*t.

I have more than them in investments but worry about me and my lovely wife’s retirement and have another 20 years to reach those ages!!

The investments include RESPs so I don’t have to worry in my 50’s about University costs. I think people don’t plan for the costs of kids when they hit university…. I see it with some boom co-workers.

I also rent a nice, treed acreage and home 25 minutes from downtown Ottawa. Winters a super fun where the kids and slide down the hill in front.

My last year’s rent went into new windows. Thank you landlord!

I wanted to buy this place. But now enjoy it renting and paying far much less than my landlord.

I think people are programmed to buy a place, live in it, use it as an ATM and then stress out in their 60’s.

I’ve like to give thanks to my dad who retired at 52 and never looked back. He is my model that I can never beat. But in my 40’s I better try!!!

Carpe

#121 DON on 06.15.15 at 11:59 pm

#45 Andrew Woburn on 06.15.15 at 7:41 pm

Prices are tending up in the VIREB area, not so much in Victoria. Part of the reason may be that Victoria doesn’t offer as much relative advantage to retirees as it used to. The larger Island communities are much less industrialized than 25 years ago and offer decent shopping and amenities. Victoria is much congested than it used to be although to me it seems like a more interesting place to visit.
***************************

Not sure I agree with the rest of the island trending up. (Are we all still believing the data from the realtors – I guess I might if I had skin in the game). Once Vancouver corrects, Nanaimo will be done.

Who will pay to move into all the houses when the high paying jobs in the industrialized centres are gone. I was here in the 80’s – just you wait. The town of Qualicum Beach boasted an average age of 67 back in 2002, the average age now is most likely in the 80’s. One person left in most houses, not a sustainable model going forward. I do not mean to be a dick, but reality bites.

Victoria offers better hospitals. The one in Nanaimo – go in sick and come out with a new disease. You have to go to Victoria for any of the more serious stuff (heart, cancer etc) – however it does have a brand new maternity ward.

If it is trending up in your area (steep waterfront behind woodgrove) …you are extremely lucky. It is not over yet – it has been trending down since 2010. Prices in Victoria are sticky. Betting on retirees to push up the market is short term move. You’ve seen all the retirement assisted living complexes popping up all over Nanaimo (behind Woodgrove mall). You need young people to be able to afford the average house over the long run. Boomers can’t live forever.

Remember it only takes one or two over leveraged homeowners to bring any neighborhood down.

The nail in the coffin is on its way. Have you checked out the house prices in the once Industrialized richest boom town there was (Port Alberni). The only reason the older folks haven’t moved there in droves is the highway in an out.

Another thing to worry about on VI is the return of the fly in – fly outs coming home not able to replace the Alberta incomes…it is only a matter of time before they run out of cash. Most of the ones I know didn’t save a penny, divorce rates will increase due to financial pressure. It really is sad. To each their own though.

#122 Jon B on 06.16.15 at 12:01 am

Why the soft touch today? These people are financially toast. Doubt they will change their ways at their age.

#123 Christopher Lackey on 06.16.15 at 12:20 am

These people you profiled remind me of the (almost always) boomers
we get treated to every weekend in the globe and the post with their “financial facelift” or “retirement readiness” columns. I know its a cheap way to fill up space but you cant help but be aghast at boomers general
cluelessness on all matters financial. It seems like they all carry a ton of debt or if they dont they’re quickly devising harebrained schemes to destroy their wealth involving cottages, acreages, US sunbelt condos, or buying houses for their kids.

Wouldnt it be so much more satisfying to see your kids work and accomplish something on their own?

#124 The American on 06.16.15 at 12:22 am

#82 Mukadi, you truly don’t know what the hell you’re talking about. Inheritance tax in the U.S. does not even kick in, unless said estate exceeds well over $5,000,000 to each Tax ID. Additionally, it caps at 40% on a GRADUATED TAX BASIS. It isn’t a flat tax. You friggin’ moron. More b.s. propaganda you’ve been told and are repackaging as gospel truth. Ugh. What they teach you…

#125 Lorne on 06.16.15 at 12:24 am

WHY CALGARY HOUSE PRICES HAVE NOT FALLEN

People absolutely HATE to lose money on a house and will do anything to hang-on. Here’s my top 5 ways people will HANG-ON no matter what.

1) people have lots of FAT in their lifestyle – they will cut before they ever default – items such as the $160/m cell phone plan, the second leased Lexus, the $225/cable package, eating lunch/supper out 10 times a week, private school for the kids, the list goes on and on.

2) many people working in the private sector have a spouse working in recession proof GOVERNMENT jobs. So for many dual income earners in Cowtown one income is bulletproof and will help them hang on to the house for months or years.

3) Bank of MOM AND DAD – the only thing worse than losing your own house is your kid losing HIS house. Mom and dad will forego their golden years to make sure the BRAT does not default.

4) POGEY – sure not much, but every little bit helps.

5) Tens of thousands of Calgarians are just waiting for prices to come down 5 or 10% so they can “SCOOP” a bargain. Housing is a Canadian obsession – most people will view this as a little dip not the beginning of a long-term retrenchment.
……….
That is all well and good, people can hold on as long as they wish BUT, as soon as a similar house in their neighbourhood is sold….because it has to be sold (divorce, promotion to another city, interest rate rises and some cannot hold on, etc), the actual value of their house automatically declines, no matter what they choose to do.

#126 b riding dirty on 06.16.15 at 12:25 am

#17 Suede on 06.15.15 at 6:24 pm
Vancouver’s yoga party on the bridge has been cancelled.

Sorry folks.

………………………………………………………………………News flash

Blog dawg something that we didnt know you jabarone.

Suede just because the Legend Smoking Man gave you a degree in some letter combo that makes no sense don’t think you have some special entitlement to speak of news of a week old and pretend its knew news, plus if he knew who you really where he would put out one of his cigarettes in your eye! We both know he is way to bad ass for a pony boy like you and Garth. Smoking Man rides Dirty! Where’s the Debtor at?

#127 Justin on 06.16.15 at 12:28 am

Am I the only one who sickly tabs between this blog and housing listings?

#128 Interstellar Old Yeller on 06.16.15 at 12:31 am

#29 Allen Iverson on 06.15.15 at 6:57 pm
We talking ‘bout saving? Saving? We talking ‘bout saving?

Funny! But Louise makes no mention of a $30M Reebok Fund that will save her, someday.

#129 gut check on 06.16.15 at 12:50 am

#104 Montreal has upside on 06.15.15 at 10:37 pm
#97 BBG

We sold in the Vancouver area and considering other parts of Canada including Montreal.
The only city in Canada (maybe North America) that has real diversity and knows how to live. If only the winter…
_____________________________

Listen, I am still wistful for life in Quebec myself – I remember animated people, an interesting culture, and large family gatherings full of relatives and neighbours who knew that being loud and opinionated didn’t mean you were an unsophisticated barbarian (Ontario is SO up its own ass)

BUT, do you speak French? Don’t kid yourself – if you don’t, it’s not a great place to be.

#130 My parents are DUMB and POOR on 06.16.15 at 12:52 am

Hmmm…I didn’t know my parents read this blog….
Hi Mom and Dad!!!!

#131 Cyclist on 06.16.15 at 1:16 am

45 andrew – I wasnt trying to say anything about
Victoria. You can count me in the “I dont care about Victoria” camp. It was just an example of how to save
blog space. I make and do my living on the rest of the
island. Blogger Oceanside made good points.

#132 PM on 06.16.15 at 1:28 am

Why the soft touch today? These people are financially toast. Doubt they will change their ways at their age

$200K in cash, $250K cabin, $200K equity in a house and $140K/year income is nothing to sneeze at. They are hosed if they stay the course but they have strong resources if they adjust immediately and plan smart. Shame that they won’t be able to leave their children the same windfall they received.

#133 Turtle on 06.16.15 at 1:32 am

Louise, don’t get upset but the only solution for you that I see is “SELL ALL YOUR STUFF!”

Everything that you have – convert into money. Leave only the absolute necessities. Think about packing for a trip around the world: take only things you can’t live without.

When you are done you will have some money and your jobs of $140K/year. Do what newcomers do – rent a small place, drive a used car, cook at home. Say “goodbye” to the life you were building. Start building another one.

Accept your failure. Don’t fight it. And you will be fine.

#134 Smoking Man on 06.16.15 at 2:06 am

Spent the last 10 hours lost…..

I’m in the dog house , wife’s sends out 100 or so text messages, wtf are you..

Face down in the the sand in the desert…

I think….

Smoking in 114 degrees does a number on your lungs.

Finally, leaving the place where the old come to die.

Dance party tomorrow night at the Cromwell. Cra you know I’m writing off this trip… Book research.

So I only sell 40/copy’s…

It had potential…

#135 Nagraj on 06.16.15 at 3:04 am

THE KILLER RABBIT OF CAERBANNOG appears in “Monty Python and the Holy Grail” and so, obviously, the ATTACK RABBIT so prominently featured in Garth’s picture, is one of its descendants.
If you unfortunately don’t know a damn thing about THE KILLER RABBIT OF CAERBANNOG and ignore the BEWARE OF ATTACK RABBIT sign, you’ll be very sorry.

Please, blogdogs, let us all implore Garth not to go near this house again (especially with Bandit).

On a lighter note – what in the world made GT dream up a rabbit as the centerpiece for the “Bewildered” visual?
Rabbits are ordinarily not consciously recognized for the powerful and complex symbolic role they play in the human psyche. Many of Garth’s visuals have, in my opinion, a certain, unintended, nightmarish edge.

THE KILLER RABBIT OF CAERBANNOG will jump on your back and quickly, sounding like a can opener, chew through your neck to make your head fall off.

#136 Axis on 06.16.15 at 3:34 am

Saw this today, according to RBC the future isn’t any better for housing affordability.

https://www.youtube.com/watch?v=9QubmTqiuwQ

Luckily I rent so google analytics is also trying to sell me firearms accessories, paragliding gear, climbing gear, trips to SA and Europe, and dating websites.

#137 jane 24 on 06.16.15 at 3:56 am

Maybe I have been married to an Italian too long but both myself and hubby and the kids are assuming that when we fully retire, currently age 60 and 64, we will choose to live with a child.

This way there are less childcare bills, we can dog share, daughters have help with their house bills and we don’t have to worry about leaving our own house/garden empty while we are traveling or at our Italian home.

Everyone wins. This is what families are for, so you can be together and be part of the grandkids lives.

As I grew up our Granny lived with us in her own annex and it totally made my childhood.

#138 Sean on 06.16.15 at 7:58 am

#28 Victoria Real Estate Update

———

Hard to believe you’re getting hate mail / comments… lol. Having lived coast to coast in Canada, I can say without a doubt that Victoria is the nicest place in the country to live. And having lived there for several years, I find the obsession with Toronto and Vancouver and Calgary to be bizarre and comical…and the numbers even more so.

Anyhow, keep up the good work.

#139 Weedeater on 06.16.15 at 8:03 am

Garth, you mentioned they should be drawing CPP. Even though they’re still working? Something you’d recommend routinely or just for these idiots?

Everybody should start the day they turn 60. — Garth

#140 Buy? Curious? on 06.16.15 at 8:15 am

Couldn’t they get a reverse mortgage and live out their years?

Bad idea. The cabin would not qualify and they have only 300K equity in the house, which would yield enough cash to live less than a decade, at the end of which they’d have a giant reverse mortgage principal. — Garth

#141 crowdedelevatorfartz on 06.16.15 at 8:24 am

@#130 My Parents are dumb and poor

Just make sure that “Mortgage Helper” basement suite has its own entrance otherwise Mom and Dad will have to use your front door………

:)-

#142 tony on 06.16.15 at 8:41 am

excellent article. How do people find reverse gear when life ruining financial decisions have been made?

#143 HD on 06.16.15 at 9:07 am

Had dinner with a friend last night to catch up. 28 yrs old. She just got laid off (read dismissed….had a disagreement with the owner). Recently broke up with the boyfriend. Needs a fresh start. Doing the organic only food thing, vegetarian and on gluten free diet (mind you…she is not celiac). Always looks nice…designer clothes no less. No savings as far as I know. Wants to get back to school. Going on a trip to the Middle East this summer. Needs a fresh start she says.

I took care of the bill. I was happy to see her, really. Did not have much to say about her situation. She wouldn’t listen anyway.

Best,

HD

#144 TurnerNation on 06.16.15 at 9:19 am

I can really feel it. Things are speeding up. Now till October will be quite a ride. Mostly driven by elites and their rule of law. A pen stroke and the world overnight changes. Wars are passe. Huddle around your flags and local prefecture emblems. Block captains will provide updates.

#145 Ret on 06.16.15 at 9:21 am

So much for that, “Albertan Advantage.”

http://www.cbc.ca/news/business/alberta-throne-speech-optimism-not-shared-by-business-owners-1.3114314

There is nothing wrong with Alberta that tax increases won’t fix!

#146 Brutus on 06.16.15 at 9:30 am

Two long trajectories appear to have been set to come together to start what could be a major war between Russia and the west. By this time next year, June 2016, I think it will be upon us.

Doubtful?

Remember that seemingly small crises can blow up hugely if there is enough righteous indignation.

Here is what some smart and informed commentators from the worlds of politics and sport have said in the last week.

First, it appears Greece is courting Russia to escape its problems, and split the EU in the process.

http://www.theglobeandmail.com/report-on-business/international-business/european-business/greeces-tsipras-raising-the-bluffing-game-to-a-new-dangerous-level/article24976362/

“Mr. Tsipras, in other words, is using his SPIEF appearance to lift the game of bluff to a whole new – and dangerous – level: Give us what we want or we will leave the euro and potentially fall into the Russia orbit.

The bluff might work, or it might not. What seems more apparent, if not certain, is that Greece is prepared to play a high-risk game because it feels that it has nothing to lose.”

Secondly, the west is preparing to give Russia a huge slap in the face next winter, by getting FIFA to cancel the 2018 World Cup there.

http://www.theglobeandmail.com/sports/soccer/the-tricky-politics-of-ditching-the-russia-and-qatar-world-cups/article24884323/

“If Russia and the U.S. are in the midst of starting another Cold War, soccer, rather than Ukraine, is currently its forward salient. As soon as the FBI made its move on FIFA, Russia was the first to begin shrieking about judicial colonialism.

This isn’t the financial annoyance of sanctions and embargoes any more. Now they’re creeping up behind something Putin actually cares about – the 2018 World Cup.”

“Domenico Scala, the head of FIFA’s audit committee, opened the can of worms and then lit it on fire this week, when he suggested Russia and 2022 host Qatar might yet be stripped of their World Cups.

“Should there be evidence that the awards to Qatar and Russia came only because of bought votes, then the awards could be cancelled,” he was quoted as saying in a Swiss newspaper.

That’s the sort of “could” that starts international crises.”

“How will it look if Putin’s greatest critics are seen benefiting from his high-profile embarrassment? I know how it’ll look to him. It’ll appear as a red cape being waved by the international community. If NATO’s goal in Ukraine is to de-escalate a civil/proxy war, it won’t help much.

Starting from a point of righteous indignation about something not terribly important – how soccer is governed – we might very quickly detour to a place of existential gravity. At the risk of sounding hysterical, people might very well die out of this.”

Don’t think Ukraine is settled. It is on the back burner, but bubbling up to a boil once again. My family and friends there tell me they are now even more concerned than last spring.

http://cnnpressroom.blogs.cnn.com/2015/06/14/un-ambassador-samantha-power-believes-that-there-could-be-a-possibility-of-russia-invasion-in-ukraine/

Put all these things together and you have major geopolitical events on a collision course.

Lesser things have precipitated global war, like the murder of a redundant archduke 101 years ago.

The year 2016 looks to be the time when this all hits the fan.

Stay liquid. Sell your investment real estate now, quickly. Changes are coming that will make your jaw drop very soon. Hopefully you and your families will live through it all, but no guarantees.

#147 to_be_frank on 06.16.15 at 9:44 am

#11 Llewelyn

Good comment.

#148 Bottoms_Up on 06.16.15 at 9:59 am

#143 HD on 06.16.15 at 9:07 am
——————————————–
Next time you meet up be sure to describe how as a vegetarian she is still killing plant life (vegetables are living organisms with cells that replicate), and will be lacking certain essential micronutrients found in meat. Also describe that going gluten free means missing out on a healthy source of protein, likely missing out on vitamin B fortified foods, and missing out on whole wheat fibre.

#149 Bottoms_Up on 06.16.15 at 10:00 am

#137 jane 24 on 06.16.15 at 3:56 am
———————————————-
Some families can work with that dynamic, and many others can’t.

#150 Bottoms_Up on 06.16.15 at 10:08 am

#132 PM on 06.16.15 at 1:28 am
————————————————
In retirement, Garth points out they will get $32,000 in CPP and OAS.

If they cash in all of their assets (roughly $600,000 after expenses), that money invested could maybe throw off another $30,000 per year.

So the aging couple would have combined yearly income of a little over $60,000 ($45,000 after taxes, or $3750 a month?).

That’s not a lot to live a lavish retirement…and there will likely be weddings and grandkids down the road.

I’d be looking into finding the cheapest rental possible, as well as working as long as possible to save more money.

#151 Bottoms_Up on 06.16.15 at 10:12 am

#125 Lorne on 06.16.15 at 12:24 am
—————————————————
Agents always say “well that house was a forced sale” to help buffer the price drops.

What truly will kill the housing market is when mortgage interest rates rise. The 5 or 10% price tag decline will no longer be a ‘deal’ because the monthly nut will not have changed. Bank of Mom and Dad will not be able to backstop junior because they have their own debts to worry about, and will no longer want to take on the risk in a declining market.

#152 Bottoms_Up on 06.16.15 at 10:15 am

#124 The American on 06.16.15 at 12:22 am
——————————————————
Another factoid that Garth has mentioned is that social security in the US is about twice what Canadians get. That, plus the standard of living is much better (cheaper). Funny, eh?

#153 CJBob on 06.16.15 at 10:18 am

This isn’t an example of a real estate problem, these people would have over spent on something else even if they were renting.

#154 Herb on 06.16.15 at 10:40 am

Surprise, surprise …

“Trickle down economics doesn’t work, IMF says”

http://www.cbc.ca/news/business/income-inequality-is-bad-for-everyone-imf-report-concludes-1.3115232

#155 Mike T. on 06.16.15 at 10:43 am

If you doubt the truthfulness of the emails Mr. T receives, like if you think these are made up life stories, well watch a few of these relics…it’s so much worse

http://www.slice.ca/til-debt-do-us-part/video/#til-debt-do-us-part/video

making mortgage payments with a HELOC and rolling all back into one….par for the course in this universe

#156 JimH on 06.16.15 at 11:02 am

#82 Mukadi on 06.15.15 at 9:30 pm
“They’re even lucky that they’re not in the US.
50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax – trimming their networth to $500K at the age of 62!!!”
=====================================
What a silly, ignorant comment!
Like so many other false assumptions held by Canadians about things in the US, your comment reflects the thinly-veiled anti-Americanism that permeates and muddles much of Canadian thinking.

Only inheritances over $5 million are affected on a sliding scale and the max is 40%.

#157 TurnerNation on 06.16.15 at 11:22 am

Dollarama stock catching a big bid today.
Forget core CPI just watch their pricing! :-)

#158 bdy sktrn on 06.16.15 at 11:23 am

#109 NoOneOfConsequence on 06.15.15 at 10:47 pm

Children: 4 (oldest 16, youngest 6)

Groceries: $600.00 per month
——————————-
5 mouths to feed for 600/mo?

what’s your secret?

that is 20/day for 15 meals, or 1.33 per person per meal.

apples at safeway are often near a buck each, other fruits even more.

so, an apple and a piece of toast and 1/4 glass of oj and you have used up your budget. i can only assume none of you are overweight!

beef and seafood rarely cost under 5$/serving , how do swing that on $4/day total budget per person ???

#159 bdy sktrn on 06.16.15 at 11:34 am

#109 NoOneOfConsequence on 06.15.15 at 10:47 pm

Car Insurance: $225.00 per month

Cell phones: $140.00 per month
———————————————-
these two have room to improve.

my icbc is 960/yr. per vehicle drop the collision and comprehensive.

For 2 cars and one motorcycle, i save over 1k/yr by not buying those. been doing it for 15 yrs = 20k saved.

i can replace all 3 vehicles for much less than that.

re: cellphone
telus prepaid costs me 10/mo for 500texts and about 35 min of talk time. wifi is free, use an app to make calls/txt over wifi.

#160 Trading Naked on 06.16.15 at 11:41 am

#123 Christopher Lackey

Not “all” Boomers…you don’t hear about the ones with the long-ago paid off houses who are now quietly living below their means on DB pensions from jobs ranging from “blue-collar trade backed by union” to “coveted government gig”. These are the ones who have made the most of being born in the right place at the right time. All my parents had to do was save, save, and save again. Saving is easy. Investing is hard (relatively speaking).

Oh wait…you DO hear about these cashed-up Boomers! Read about the Bank of Mom & Dad lately? Some branches of that bank have cold, hard cash. Not all of them took out a HELOC to help their Junior buy a house.

Wouldnt it be so much more satisfying to see your kids work and accomplish something on their own?

No, because the Bank of Mom & Dad takes pride in having the means to make that house happen. A small crowd of Boomers even come from the school of “we worked hard so that now you shouldn’t have to work at all”. Strange but true. I fought so hard to make my own way in the world that I had to move out.

#161 Trading Naked on 06.16.15 at 11:55 am

Not surprising that The Gap is closing stores. The “middle” class that is being hollowed out of society doesn’t have the money to shop at Gap Inc.’s mid-range stores anymore. All that’s left is the higher end at Banana Republic and the dollar-store crowd at Old Navy.

#162 Holy Crap Wheres The Tylenol on 06.16.15 at 12:06 pm

#134 Smoking Man on 06.16.15 at 2:06 am
Spent the last 10 hours lost…..
I’m in the dog house , wife’s sends out 100 or so text messages, wtf are you..
Face down in the the sand in the desert…
I think….
Smoking in 114 degrees does a number on your lungs.
Finally, leaving the place where the old come to die.
Dance party tomorrow night at the Cromwell. Cra you know I’m writing off this trip… Book research.
So I only sell 40/copy’s…
It had potential…
____________________________________________
Sorry Garth I hit the enter button before commenting. Smoking Mans wife’s texts would be absolutely hilarious, we have to see these.
Smoking Man please post them!

#163 Holy Crap Wheres The Tylenol on 06.16.15 at 12:13 pm

Louise and her squeeze on the left coast may be screwed but my buddy in West end Toronto just sold his bung listed for $890K went for $910K, his brother just sold town-home around the block listed for $760K sold for $780K. The craziness is still apparent. When will the big smoke cool off? Killer rabbit on on the lose and all. I know him, The Killer Rabbit of Caerbannog!

https://www.youtube.com/watch?v=tgj3nZWtOfA

#164 Ogopogo on 06.16.15 at 12:18 pm

#31 crowdedelevatorfartz on 06.15.15 at 7:08 pm

I have come to the conclusion that Financial illiteracy and delusional stupidity cant be fixed after the age of 30…….

Not true. My financial illiteracy was fixed at the age of 36.

#165 Holy Crap Wheres The Tylenol on 06.16.15 at 12:21 pm

“We are 60 and 62 and have raised two kids on two pretty good salaries. Between us we now make about $140K per year. Even with these salaries we have mostly lived pay cheque to pay cheque. Neither of us has a company pension and we are not collecting CPP yet. We now have a house worth about 500K but with a mortgage of about 300K. We have helped put our two daughters through university and have renovated a cabin on Okanagan Lake (on lease land but still 75′ of waterfront bliss).There is no mortgage on it and the hope was to someday retire to the cabin, which is worth about $250,000. We have about 40K in credit card debt.
___________________________________________
They’re pooched! Might as well cash in all the equity, take a trip to a Vegas Roulette table and put it all on Green. After they loose it all take a trip out to the desert and look for Smoking Man. He has your answers.

#166 Kisame Uchiha on 06.16.15 at 12:25 pm

7% returns? That is even better than selling drugs or doing business that omits the tax portion. (Although some companies do pay 7% dividends) A more appropriate target for the retail person would be 3.5% to 4.5% dividends. That a better convincing argument in my opinion.

A 60/40 balanced and globally-diversified portfolio returned 8.5% last year and 7.8% on average over the last five. — Garth

#167 Doug in London on 06.16.15 at 12:30 pm

I still don’t get it. I could see how a couple in their sixties, making low wages, could have no savings and be living pay cheque to pay cheque, but if they are making 140 grand? What’s wrong with this picture? Even an idiot like me, who failed a basic college financial course could do better than that.

#168 Doug in London on 06.16.15 at 12:33 pm

@Holy Crap Wheres The Tylenol, post #163:
It looks like you know 2 people, with some basic common sense, who cashed in their winning lottery tickets!

#169 Horus Spies on 06.16.15 at 12:35 pm

When you state that a 7% income is an easy target…is that 7% monthly income or a split of anticipated capital gain and an income from dividend mix? What is the actual dollar amount in monthly a person could draw out of that ‘7%’ and what is the inflection point when the capital has been withdrawn where the income becomes negligible due ti deterioration of the capital base from consistent withdrawal? Kevin O’Leary said recently on BNN that his experts have a very hard time targeting a consistent 6% guaranteed return. I know the seduction of ‘averaging’ during the good times but can a person rely on 7% p/a income from your advice when they need the money month to month as opposed to ‘averaging’ the returns out over a longer term?

Not surprised at Kevin O’Leary’s comment, given his funds’ performance. I did not say achieving a 7% return is an easy target. It’s not. It takes discipline, expertise, rebalancing and a non-emotional approach to investing. It is also an annualized return over time. Monthly fluctuations are the normal, and corrections occur with some regularity. The key is lifelong income and security, and ‘saving’ will not longer get you there. If you get hung up on fluctuations and react to them, such security is far harder to achieve. — Garth

#170 Holy Crap Wheres The Tylenol on 06.16.15 at 12:40 pm

124 The American on 06.16.15 at 12:22 am

#82 Mukadi, you truly don’t know what the hell you’re talking about. Inheritance tax in the U.S. does not even kick in, unless said estate exceeds well over $5,000,000 to each Tax ID. Additionally, it caps at 40% on a GRADUATED TAX BASIS. It isn’t a flat tax. You friggin’ moron. More b.s. propaganda you’ve been told and are repackaging as gospel truth. Ugh. What they teach you…
____________________________________________
You are 100% on track re estate tax. Most Canadians just hear the ugly horror stories about uncle Sam grabbing the family jewels of some rich family and assume it is an across the board SOP. However just like Americans learning about CRA strategies Canadians are not taught about Uncle Sams 1040 strategies. Most US citizens never have to worry about it.

#171 4 AM Sunrise on 06.16.15 at 12:41 pm

#158 bdy sktrn on 06.16.15 at 11:23 am

Safeway is overpriced, yes. Do you shop at the Santa Barbara Market? They’re pretty competitive.

Bread: I’ve watched the price of anything made by Canada Bread or Weston surge by some 50% over the past few years. Salaries aren’t rising, and yet I still see Dempster’s or Wonder Bread in most people’s carts. It’s nuts. In protest I used to go to the Bon-Bon Bakery on Victoria at the end of the day when this darling girl presses these giant loaves into my arms for $1 each.

#172 Nora Lenderby on 06.16.15 at 12:43 pm

#109 NoOneOfConsequence on 06.15.15 at 10:47 pm
Here’s how you can make $80,000 a year and be broke:
Net Income after deductions: $4,340.00
Children: 4 (oldest 16, youngest 6)
Marital Status: Widower (no life insurance payout)

Rent: 5 bedroom rancher, in suburbia, all in: $2,500.00
…etc…

If this is a true example, put the kids into bunk beds, and rent out the 2 spare bedrooms. This can probably make enough money to seriously help out.

The kids and father have to start working part time as soon as possible to keep this together.

(This isn’t helpful but obviously anyone with children who doesn’t insure his/her spouse’s life isn’t very sensible.)

On the subject of grandparents moving in: it can be good, or it can be a disaster; obviously it depends on circumstances and personalities. It wrecked my brother-in-law’s life. My husband loved it.

#173 CalgaryPotato on 06.16.15 at 1:00 pm

Sad situation, I don’t think you can blame it on real estate though. Even with the amount of money they’ve put into the two residences by this stage in their life with those salaries they should have something to show for it.

#174 4 AM Sunrise on 06.16.15 at 1:41 pm

#172 Nora Lenderby on 06.16.15 at 12:43 pm

If this is a true example, put the kids into bunk beds, and rent out the 2 spare bedrooms. This can probably make enough money to seriously help out.

For certain house configurations, I vote for “heck no”. The safety of minor children is paramount and you just don’t know what kind of people are out there, no matter how much they’re screened and vouched for.

The kids and father have to start working part time as soon as possible to keep this together.

And what’s so great about this digital economy is the opportunity to make that money. “EvanTubeHD” makes huge money doing toy reviews on YouTube(!).

(This isn’t helpful but obviously anyone with children who doesn’t insure his/her spouse’s life isn’t very sensible.)

There are tragic situations where life insurance won’t pay out even if you’ve been paying in…just saying.

#175 Mark on 06.16.15 at 1:53 pm

“Everybody needs a bit of luck here and there. And although you say that you don’t need it, I wish you good luck anyway.

I’m sorry that you’re making so many poor observations recently. You have my sympathies. Seriously.”

The only “poor observations” are those that you’ve made. You claim that I’m poor, which couldn’t be anything further from the truth. You claim that I make poor observations, which couldn’t be anything further from the truth. And your trolling indicates that not only do you not have sympathy for me, but you’re actively trying to foment scorn when no scorn is deserved.

The facts are clear, US CPI deflated on a YoY basis by 0.2% according to the BLS. Its entirely open to debate whether this is just a temporary blip on the way to greatness, or the sign of an economy which is into a longer period of secular deflation and austerity. But the facts are definitely pointing away from any sort of ‘inflation’, and your claims of inflation occurring in the US economy are completely without merit.

#176 jess on 06.16.15 at 1:59 pm

http://www.therecord.com/news-story/5677169-universities-students-say-waterloo-housing-surplus-could-lead-to-trouble/

#177 Ronaldo on 06.16.15 at 2:05 pm

Something to put Louise at ease.

https://www.youtube.com/watch?v=VbLz2DcxZEQ

#178 blobby on 06.16.15 at 2:28 pm

@#169 Horus Spies

U have a fairly diversified portfolio, spread it out quite a bit over risk zones… The last 10 years i’ve averaged 10.15% a year.

Worse performing year was 4.25%, back during the crash… But then i had a monster year the year after…

It can be done.. You just have to be careful.

#179 blobby on 06.16.15 at 2:29 pm

Whoops, i meant “I have” – not “u have”… My typing isnt as good as my portfolio it seems.

#180 Cowtown Non-cowboy on 06.16.15 at 2:31 pm

The houses that sell in my inner city neighbourhood are down 20% from last July’s assessment. Not sure what that represents year over year.

#181 Calgary Rip Off on 06.16.15 at 3:05 pm

The assumption of many is that a retirement exists.

Only in the last 100 years. Before that you either died young or died of disease or gunfire or warfare.

There is a way around all this nonsense: Not if, but when, you die. Make the most of today. Do things that bring you happiness. The funny thing about cash and things are that they arent transportable. Dont have ’em when you are born, and don’t have ’em when you die.

Are you truly at peace so that if right now you were to flatline you would be ok with that?

Maybe these people writing to Garth instead of complaining about this retirement fund should instead realize that, guess what, they get to work until they drop dead.

Changing gears:(on #103)

People make it sound so easy to sell properties in Calgary. Not so easy. If you get to stay in the city, the rent is likely more than your mortgage, so that really isnt an option. Mortgage, rental, its all a rip-off.

On Calgary: “Mortgage owners screwing other mortgage owners with nonsense advice”.

#182 Made in BC on 06.16.15 at 3:15 pm

Not surprised at Kevin O’Leary’s comment, given his funds’ performance. I did not say achieving a 7% return is an easy target. It’s not. It takes discipline, expertise, rebalancing and a non-emotional approach to investing. It is also an annualized return over time. Monthly fluctuations are the normal, and corrections occur with some regularity. The key is lifelong income and security, and ‘saving’ will not longer get you there. If you get hung up on fluctuations and react to them, such security is far harder to achieve. — Garth

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

All of which is impossible to do in today’s completely “rigged” markets as pointed out in US Federal Court.

http://www.reuters.com/article/2015/05/20/us-banks-forex-settlement-idUSKBN0O50CQ20150520

And by the way….these banks should have lost their licenses for this…..but hey….its New York. And its “just us”….not justice. Bada bing !!!!

#183 pinstripe on 06.16.15 at 3:16 pm

At the coffee shop today, the news is not too encouraging to the locals, and many are peed off at the local politicians.

big corp in the Alberta heartland industrial area is requesting a tax holiday from the county, claiming that their costs are too high and they need to cut costs by not paying their share of the tax to the county.

the locals are spitting mad and the elected officials just several weeks ago were patting themselves on the back for doing such a good job.

Now that the MESS has been created it looks like the taxpayers could be on the hook to clean this up.

I ;wonder how many times history has to repeat itself. It never fails that the elecdted officials look after their own self interest first.

Many are so glad that Premier Rachel come on scene at the right time.

#184 Dan Sampson on 06.16.15 at 3:34 pm

The problem is that people would rather buy real estate and be in huge debt for 1, 2, 3 properties than save money on a regular basis.

If they just saved that money that it would cost to buy, finance, maintain their real estate properties and got even a modest 4% compounded annually over time, they would have millions in RRSP’s, TFSA’s, investments in 25, 30, 35 years by retirement.

For example, a $500,000 house in Toronto paid off in 25 years would cost a total of $750,000 which is $2,500 for monthly mortgage payments assuming a low 3% mortgage rate. If mortgage rates were 4%, 5%, it would cost much more.

Also add insurance, maintenance, repairs, property taxes, utilities and all this increasing on average, realistic, 5% annually, this would all cost over 25 years a total of $597,000.

Add all the interest or investment returns of 4.00% annually compounding plus the reinvesting of annual RRSP income tax refunds of $7,800 a year and a grand total of $2,200,000 in RRSP’s, TFSA’s.

So those at 30 years old would have this at ages 55. If you invested for 5 or 10 or more years , it would be $2,676,000 or $3,256,000.

Even at 4.00% annual rates, these would spinoff income or money coming in of $107,000 to $130,000 annually plus you would not be in debt like more Canadians are in retirement which is becoming more of a nightmare reality.

This is not even including all the property taxes, utilities, insurance, repairs, maintenance you would be saving annually in 25, 30, 35 years of $45,000+5.00% annual increases.

Note, there are no more RRSP, TFSA contributions after 25 years and no more reinvesting of RRSP income tax refunds. It is purely reinvesting existing RRSP, TFSA investments accounts.

Buying real estate with almost all debt is the worse forced savings program for sure.

#185 Leo Trollstoy on 06.16.15 at 4:37 pm

But the facts are definitely pointing away from any sort of ‘inflation’

I’m sorry that nobody agrees with you. Including the entire bond market. I wish it could be otherwise. Best of luck improving your finances.

#186 Prairie Girl on 06.16.15 at 4:41 pm

#183 Dan Sampson
“The problem is that people would rather buy real estate and be in huge debt for 1, 2, 3 properties than save money on a regular basis.

If they just saved that money that it would cost to buy, finance, maintain their real estate properties and got even a modest 4% compounded annually over time, they would have millions in RRSP’s, TFSA’s, investments in 25, 30, 35 years by retirement.”

Thanks for the illustration. Well said!

#187 CalgaryPotato on 06.16.15 at 4:53 pm

@#183

I don’t understand the value of showing how much money you would make by not buying a house, unless you show it against the rent on a comparable property. I’m not saying it isn’t a good plan, but you need to show rent increasing at inflation past the point of the mortgage ending to try to make a real point.

#188 waiting on the westcoast on 06.16.15 at 4:57 pm

#175 Mark on 06.16.15 at 1:53pm
“The only “poor observations” are those that you’ve made. You claim that I’m poor, which couldn’t be anything further from the truth. You claim that I make poor observations, which couldn’t be anything further from the truth. And your trolling indicates that not only do you not have sympathy for me, but you’re actively trying to foment scorn when no scorn is deserved.

The facts are clear, US CPI deflated on a YoY basis by 0.2% according to the BLS. Its entirely open to debate whether this is just a temporary blip on the way to greatness, or the sign of an economy which is into a longer period of secular deflation and austerity. But the facts are definitely pointing away from any sort of ‘inflation’, and your claims of inflation occurring in the US economy are completely without merit.”

Mark – by stating that deflation is strong in the US and exclaiming that one data point proves it makes you the target for posters like Leo.

While the blip that your are hanging onto as proof of deflation may be a tipping point (but very unlikely), there is significant evidence (such as the core CPI) that inflation is solid and the US economy is growing well.

Quit searching for evidence to support your thesis and rather look at what the majority of evidence is pointing towards.

Good luck! (Not meant sarcastically but definitely with a little cheek. ;-)

#189 bdy sktrn on 06.16.15 at 4:58 pm

#183 Dan Sampson on 06.16.15 at 3:34 pm

If they just saved that money that it would cost to buy, finance, maintain their real estate properties and got even a modest 4% compounded annually over time, they would have millions in RRSP’s, TFSA’s, investments in 25, 30, 35 years by retirement.
—————————
tell that to those who bought in tor/van in the 90’s. they didn’t have to wait 25 years for the $$$.

no doubt the risk seems higher now but the demand seems unlimited for a backyard in the city.

#190 raisemyrent on 06.16.15 at 5:02 pm

#186 CalgaryPotato on 06.16.15 at 4:53 pm

which has been done on here before, with even custom spreadsheets to back it up. I can’t be bothered to search or paste a link to mine (which is obviously the best out there), but I stumbled upon a moneygeek one that seemed good a few days ago (didn’t look for more than 20s). beware spreadsheets that don’t take everything into account (inflation on everything, changing rates, opportunity cost, repairs, taxes, cmhc, etc etc), because precision is one thing but accuracy is another.

#191 JimH on 06.16.15 at 6:07 pm

#175 Mark on 06.16.15 at 1:53 pm
“The facts are clear, US CPI deflated on a YoY basis by 0.2% according to the BLS. &etc. etc.”
===================================
Mark, I have no idea why, in the greater scheme of things, you need so badly to prove yourself to be “right” in every discussion here, nor why you think that the market gives a tinker’s damn about your opinions, right or wrong.
In the end, only price pays, and the market will not always do the “right” thing.
In the meantime, in between time, why not go out on a limb… stick your neck out… take a leap of faith off that ivory tower, and tell us how… directly and immediately… one can bank some coin by heeding your advice.
You can keep your opinions… they’re similar to assholes, as we all have them.
What SPECIFICALLY is your advice and recomendations in this rather uncertain environment?

#192 Ed on 06.16.15 at 6:08 pm

RE #5 VanRant
True Story: A brown-skinned woman was talking to someone she was with on a public street in the US several years ago. A man overheard her speaking a “foreign” language. Indignant, he walked over to her, interrupted, and said, “In this country we speak English. If you want to speak that gibberish go back to where you came from.” She replied, “Actually, I was Navajo. If you speak only English why don’t you go back to England.”

#193 raisemyrent on 06.16.15 at 6:19 pm

first it’s “Vancouver is a world-class city!!! We’re so special!!!”
then it’s: “Rich foreigners, please don’t come here!!!”

forget dumb, people are crazy.

#194 Bobs ur uncle on 06.16.15 at 6:46 pm

#187 CalgaryPotato

You can pump in your own numbers here:

http://www.getsmarteraboutmoney.ca/tools-and-calculators/buy-or-rent-calculator/buy-or-rent-calculator.aspx#.VYCm7IpHaJK

#195 The American on 06.16.15 at 8:21 pm

At #192: Ed, that story is complete bullshit. No truth to it at all, except for the lesson of it. That is a story we are all told as Americans as children by our parents and neighbors to remind us we were not first here. It keeps us in check. It’s an urban legend of a story, although the message behind it is good. Unfortunately, Canada is far more racist to its Indigenous population than even the Americans.
http://www.macleans.ca/news/canada/out-of-sight-out-of-mind-2/

#196 Dan Sampson on 06.16.15 at 8:37 pm

To #189 bdy sktrn

First of all, the last time I checked, we are in 2015, 1990 was 25 years ago.

You forgot to mention one important part about your 1990’s higher real estate prices binge, in the 1990’s until today, all that money invested would be at much higher interest rates or rates of return.

It would be not at 4% but more like 6.5% to 7.5% on average. This would add 1.5 to 2.0 million net of tax more to the $2.676 to $3.256 million total I shown above. It would be $4.176 to $5.25 million.

I guess it is easy to try to simply criticize when you have no numbers to back it up or illustrate one’s points.

By the way, you even said, the risk seems higher. What, real estate has no limit right, it just keeps going up, up and up. Why the doubts now.

Also, the 1990’s real estate boom was so artificially

#197 Dan Sampson on 06.16.15 at 9:28 pm

Also, most of these real estate buyers forget about land transfer taxes, capital gains taxes, real estate commissions, H.S.T., lawyer fees and other closing costs, transaction costs when they said they made all this money in real estate.

#198 Carpe Diem on 06.17.15 at 12:47 am

#129 gut check

Dude …. WTF are you talking about?

You can live in MTL and never speak French. I’m French Canadian, living in Ottawa and when I go back to MTL, I only speak French to my family members. Friends, bars, etc .. English.

Even in remote places like Quyon across the Ottawa River.

On my B-Day a few years back, I wanted to go for an adventure with my young family. What more fun than taking a ferry from Ontario to Quebec into Quyon.

It wasn’t easy to find the way to Gatineau. We ask some local kids directions. We were in Quebec, so I asked in French.

You should have seen this kids’ faces.

A Pause.

An answer … “We don’t speak French in these parts.”

#199 -=jwk=- on 06.17.15 at 11:28 am

@ #90
82 Mukati

They’re even lucky that they’re not in the US. 50% of that inheritance would have had to be paid to Uncle Sam as inheritance tax – trimming their networth to $500K at the age of 62!!!
—————-
This is completely wrong. There is no Federal inheritance tax in the US. There would be no tax payable on gift/estate tax either.

Christopher Mewhort, EA
———————————————

There is a federal tax (estate tax) AND a federal gift tax, as well as assorted state inheritance taxes. The tax starts at 10,000 but there is a credit that negates it up to about 2M. So ihey would not apply in this instance as the amount is so small.

#200 Linda Stein on 06.17.15 at 12:21 pm

To CalgaryPotato #187

A $500,000 house in Toronto does not get you more than $2,000 a month. This is being generous and is gross rent not net.

A good estimate is about $1,200 a month net rental income after property taxes, insurance and other costs.

Annually, it would be 11 months*1,200=$13,200.

Assuming at rising rents rising at 3.00% a year for 35 years and the mortgage is paid off in 25 years, it would be $870,000. This would be around $600,000 net after taxes.

The $500,000 house would have to be worth $3.5 million gross which is about $2.65 million after capital gains taxes, real estate commissions, H.S.T., lawyer fees etc.

If you think that Canadian real estate prices going up 7.0 times or 700% which is a straight 20% every year or straight 100% every 5 years then go for it.

Even CIBC had a report on Canadian real estate prices back in 2007 that they would double in 20 years. Going by this, in 35 years, it would be 3.35 times or a 335% not 7 times or 700%.

First of all, is there any vacancies meaning is it fully rented all year round. The reality is most times a realistic rental rate is 85% to 90% not 100%.

Also, what about lawyer fees and court costs that must be factored in because nobody has a smooth rental experience as tenants usually do not pay 100% of the time and leave damage or clean up costs when they move.

What about costs of a property management company or some rental agency which charge about 1 months rent a year for a fee.

Don’t forget, rental income is 100% taxable at one’s marginal income tax rate. As another poster above mentioned capital gains taxes, real estate commissions, H.S.T., closing costs etc.

#201 Roial1 on 06.17.15 at 1:02 pm

The Age of Persuasion.

I think that this radio show really tells what is behind all of the disaster about to unfold in Canada.
Everyone who grew up in Canada since about 1950has been so indoctrinated to believe what they see on TV or read in a paper that the difference between infomercials and reality is no longer perceptible.
Our news is loaded with infomercials paid for by the real estate industry and other advertising for “things” we really do not need, but want, because we are trained to “want” them.

There is a whole tv channel devoted to “fishing” where they sell boats and tackle. And a few destination resorts dedicated to “fishing”. They use VERY pretty girls spotted here and there to keep up the interest and create a sense of hornyness for those young enough (or think they are)to still be thusly distracted from there buying of boats and trips and tackle.

I for one think that this is the true cause for our mistaken perception of entitlement in the housing world.

Garth, you have saved at least two from financial disaster in later life so to that end thank you.