Bad thinking

HOT modified

Whether you plan on it or not, you’ll age. Wages will be a memory. But your debts will live on. If you fail to plan, you’ll fail. As oft said here, the biggest risk we all face is running out of money. Life is long. Focus on that.

Here are two recent developments to showcase this.

First, let’s revisit a woman I wrote about a few months ago, now in her eighties, whose life turned twice. First with the death (liver cancer) of her husband twenty years ago, and later with the 2009 financial crisis. When he passed away, he left a house worth $300,000 and one Canada Savings Bond with a face value of $60,000. Keeping the house was no option, since property tax alone equalled her OAS, leaving only $425 a month in CPP.

So, she sold. Wise. And the $350,000 that remained, prudently invested for long-term growth in the 6% range, would provide enough income to pay her rent, put food on the table and live a respectable life. No substitute for losing a husband who was still working, but enough.

I helped her set up that balanced investment portfolio, asking an advisor friend to maintain it, ensuring the principal was kept relatively intact and her bank account received a steady amount each month. It worked for years. Then came the credit crisis. She watched CNN, and freaked.

In the winter of 2009 she pulled her investments – which were down a little over 20% (temporarily, as it turned out, as she was told would happen) – putting the remainder in a bank savings account. “Now it’s safe,” she said. So she started to live out of that. Of course, with no growth and almost no interest, the well eventually went dry. Then she got by on overdraft and Visa. “I never thought I would live this long,” she said. “So that’s the basic problem.”

Last month her daughter, herself financially stressed after her husband lost his job in the energy business, convinced mom to go bankrupt. She got power of attorney, arranged things through a credit agency, and was able to erase $72,000 in debt. But the toll’s been immense. “Never,” mom said, “did I think I would end up like this. How did it happen?” I hear she hasn’t left the apartment in weeks. Shamed.

Now here’s John. A traveller on a similar road.

“Hello Garth. I am 70 years old and my wife is a few years younger. We have been retired for 6 years with a modest pension and government benefits. Unfortunately we still have a mortgage of 195K and the house would sell for approximately 400K in today’s market.

“Our mortgage is up for renewal next spring and are already thinking of what we should do for some extra funds. We still have a mortgage, minimal savings, no investments and not enough income. We would like to have some extra cash to help our kids and some travel. Is this best done by increasing our mortgage amount or going for an HELOC ?”

Recent stats show more people are retiring with a mortgage than ever before in our nation’s history (a bank survey found 60% of retirees have debt). It’s easy to see how this will turn from a curiosity into a crisis, given current real estate prices and the epic mortgages people are committing to for the next 25 years. John and his wife have a mortgage and two hundred grand in equity, yet not enough income to get by. So what’s their proposed solution? Sign. More debt.

The best course of action is to bail out of the house, invest the money and get an extra thousand bucks a month income from the account – which should preserve the principal for any storms that lie ahead. They’d be freed from property taxes, maintenance and insurance while collecting tax-free proceeds. Half the cash should go into TFSAs, and the rest in a balanced non-registered account. A HELOC is a thoroughly bad idea, since it would give only 65% of their equity, cost at least 4% and be a demand loan they could never pay if called.

The last option? A reverse mortgage – good for getting about half their equity out, but at a huge cost. While the money is tax-free and need not be repaid until they sell or croak, it’s still a mortgage. Interest charges accrue instead of being paid, so every year the debt grows larger. Worse, the rates are insane. HomeEquity Bank’s five-year reverse mortgage rate, for example, is currently 5.59%. Imagine how fast that builds up.

Two small examples of how the wrong kind of thinking will quickly make a bad situation worse. Misunderstanding risk is fatal. You needn’t be afraid of market volatility, but rather fear lasting longer than your money does That almost always comes from trying to avoid risk. Eschew debt, and plan to be rid of it before you even think about turning fifty. Invest, don’t save. Don’t consider residential real estate to be a retirement plan, since it will end up costing, not paying. Give lots of attention to taxes, knowing that interest and rent are nailed fully while capital gains and dividends get a massive break. Never put cash in your TFSA, as this is a crime against nature.

Most importantly, talk to your parents about their money. If they give you grief, send ‘em here.

136 comments ↓

#1 John on 05.05.16 at 6:37 pm

“Isolationist” -is that the new Orwellian word of the day. Id rather be an ‘Isolationist’ then a ‘globalist.’
Presserat ruled that the image violates the “code of ethics” because it amounts to “blanket slander and discrimination” against Arab men:

“The men are all portrayed with the same fierce-looking facial expression, dark hair and noticeably dark eyebrows. In this way — in the context of the attacks in Cologne — the artist is constructing a prototype of men from North Africa, i.e., the Arab world. The uniformity of the image suggests that, rather than portraying individuals, it depicts a homogenous group whose members all behave in the same way.

“Therefore, readers could be left with the impression that the sexual assaults in Cologne were not the acts of individual persons or person groups, but that such conduct is typical for men from North Africa, i.e., the Arab world. The image could leave the impression that all North Africa men who are here in Europe fail to conduct themselves correctly vis-à-vis women.”
The editors of Falter defended themselves against accusations of racism:

“The fact is that North Africans were overwhelmingly responsible for the assaults in Cologne. This is what took place and we should be allowed to represent it as such.”
Vienna is the epicenter of migrant crime in Austria. According to data compiled by the Austrian Interior Ministry, nearly one out of three asylum seekers in Vienna was accused of crimes in 2015. Of the nearly 21,000 officially approved asylum seekers in the capital, 6,503 were known to have committed crimes in 2015, a jump of nearly 50% over 2014. The data shows that 2,270 of the criminals were under the age of 20, a 72% jump over 2014. Seven were under age nine, while 31 were under age 13.

According to Vienna Police Chief Gerhard Pürstl, North African gangs fighting for control over drug trafficking were responsible for roughly half of the 15,828 violent crimes — rapes, robberies, stabbings and assaults — reported in the city during 2015.

The area around the Praterstern station, where the exchange student was raped, has become overrun by shiftless migrants from Afghanistan and North Africa who are selling drugs, fighting turf battles and assaulting female passersby. Police were dispatched to the area a total of 6,265 times in 2015, or an average of 17 times a day, according to local media. But local authorities appear unable or unwilling to restore order to the area.

The area around Praterstern train station in Vienna is overrun by shiftless migrants from Afghanistan and North Africa who are selling drugs, fighting turf battles and assaulting female passersby. Police were dispatched to the area 6,265 times in 2015, or an average of 17 times a day.
The head of the Austrian Police Union, Hermann Greylinger, estimates that Vienna needs around 1,200 more police officers in order to establish order in the capital:

“If we are allowing in our country 111,000 migrants, few of whom have had background checks, then clearly the police must be massively increased. Almost all asylum claimants are moving to Vienna.

We now have more migrants than the population of the city of Salzburg, the fourth-largest city in Austria.”
Austria’s migrant crime problem is being exacerbated by an extremely lenient criminal justice system. On May 4, for example, a 21-year-old migrant from Kenya randomly killed a 54-year-old woman on a busy street in Vienna by hitting her over the head with an iron bar. It soon emerged that the Kenyan was well known to city police: since arriving in Austria in 2008, he had committed at least 18 previous crimes — including dealing drugs, attacking police officers and hitting someone over the head with an iron bar — but he has repeatedly been set free.

Given the growing insecurity, it comes as no surprise that Austrian voters are looking for a change in political direction.

In what amounts to a political earthquake, Freedom Party (FPÖ) candidate Norbert Hofer won 36% of the vote in the first round of Austria’s presidential election on April 24. Hofer — who has campaigned on a platform calling for strict limits on immigration and tough rules for asylum seekers — defeated all of the other candidates, including those from the two governing parties, the Social Democrats and the Austrian People’s Party, which have dominated Austrian politics since the end of World War II.

Hofer, who says that as president he will be the “protector of Austria,” is now on track to defeat the Green Party’s Alexander Van der Bellen, a 72-year-old economist who is opposed to limits on immigration, in a run-off ballot to be held on May 22.

Hofer’s meteoric rise is focusing the minds of the establishment parties. On April 27, just three days after Hofer’s electoral victory, the Austrian Parliament adopted what may be one of the toughest asylum laws in Europe.

Under the new law, Austria will declare a “state of emergency” on the migration crisis. This will allow Austrian authorities to assess asylum claims directly at the border. Only asylum seekers with immediate family members already in Austria, or those who can prove they are in danger in neighboring transit countries, will be allowed to enter the country. Other migrants will be turned away. The new law also limits any successful asylum claim to three years.

Interior Minister Wolfgang Sobotka said the new law is needed to stem the flow of migrants and refugees: “We cannot shoulder the whole world’s burden.”

Austria received 90,000 asylum requests in 2015, the second-highest number in the European Union on a per capita basis, but this pales in comparison to what may lie ahead. In a radio interview on April 28, Sobotka warned that up to one million migrants are poised to cross the Mediterranean Sea from Libya to Europe.

#2 Jimmy on 05.05.16 at 6:38 pm

First!

#3 waiting on the westcoast on 05.05.16 at 6:41 pm

My parents are the opposite. They live like mizers while sitting in an acreage that is now saleable for between 1.4-1.5M.

My sister and I are financially fine and need no nest egg. We are both hammering them to sell so they can basically travel (my sister lives in Phoenix, I am moving to Uruguay, rest of family is spread between the prairies and Italy. Nope… this is our legacy…

So they sleep and save scared of spending too much on a can of beans when they could be living on 85k extra a year… CRAZY!

#4 Island Girl on 05.05.16 at 6:47 pm

Thankfully of my parents, one is living in a paid off house and actively follows this blog. And the other one has accepted that buying anything (and not renting) is a horrible idea for them.

I wish I could say I would be mortgage free by 50, but we’re looking at more like 60. No way would I want to be paying a mortgage at 70.

#5 Ray Skunk on 05.05.16 at 6:48 pm

Someone in their seventies who still has mortgage debt and no investments wants to help their kids and travel.

Cute.

#6 All along, you are right on 05.05.16 at 6:49 pm

Garth, have a house in Ottawa for six years now, not my principal residence, just been told its worth Ten grand less from when I bought it. I would like to know what metrics to use in deciding on what constitutes a good preferred share etf with the potential rate reset. Thank you.

#7 ed on 05.05.16 at 6:51 pm

Parents? My parents, pre-boomers, have the worst financial advice possible–to buy a house quickly. Everyone has drunk the Kool-Aid. You cannot blame just millennial & boomers.

I was lucky enough to live overseas for 10 years, where RE is real-istic and in value gradually after you buy, and could see things from a distance–the dot com bubble, the commodities bubble, and the RE bubble first in the US now in Canada. I think the best advice is to do what you say Garth–take stock of your finances, prepare for retirement, live within your means, and enjoy life–for things could go up in smoke without a moment’s notice…

#8 TurnerNation on 05.05.16 at 6:57 pm

Again the middle class (with its affordable and plentiful housing) was a temporary post-war marketing phenomenon. Also, driven by credit cards.

All this ended with 2008. We have a reflexive follow up action with low interest rates as its driver. This time, the debt is HELOC sized. What’s in your wallet?

Serfdom, sufferage will prevail.

Btw Dollarama’s toilet paper brand “Fluffs” is scratchy.

#9 Frank on 05.05.16 at 6:57 pm

Easy for me. My parents are already broke and living with my sister. No money to mismanage.

#10 Allen Rodrigues on 05.05.16 at 6:59 pm

If I’m 30 and have the stomach for downturns should I have a balanced portfolio, or is 80% equity ok?

#11 crowdedelevatorfartz on 05.05.16 at 7:00 pm

Unfortunately.
If most people havent figured out how to save money by their 30’s……….they probably never will.
As for people in their 70’s in debt and trying to “raise cash”.
May I suggest a balaclava and a replica squirt gun?

#12 bigtowne on 05.05.16 at 7:01 pm

T2 has for his professional development snowboard instructor/supply teacher…if this is sufficient to run Canada then Trump with his extensive career in money and business surely is capable to manage America.

Who are we to say has underwhelming leaders?

#13 slam on 05.05.16 at 7:01 pm

“Never put cash in your TFSA”

Thank you for the advice. I completely agree with this one.

#14 JSS on 05.05.16 at 7:07 pm

Excellent article today. Thank you!

#15 April. on 05.05.16 at 7:10 pm

Hindsight is always 20/20, so let us not be too harsh about the widow; it’s easy to be smart after the fact.

But I want to thank you for banging the drum about real estate VS investing. I have put a little pile of money to work in a TFSA under a DIY discount broker and I have learned a thing: if you pick things that pay dividends, then even when they lose a scary percentage of themselves in the stock price (recent mini dip) – they keep on paying dividends. Well – there’s a thing.

#16 Buy another house on 05.05.16 at 7:18 pm

Get a heloc from first property, put it as a downpayment on multiple other properties! Win!
Or die…

#17 LCBO land sold for more Condos on 05.05.16 at 7:20 pm

http://www.torontosun.com/2016/05/05/liberals-ink-deal-to-sell-lcbo-hq

#18 S.Bby on 05.05.16 at 7:21 pm

Most women are very risk adverse which is why they make bad investment decisions. But then they turn around and want to buy an overpriced house because they think that’s “safe”. Women are very afraid of being destitute in their old age.

#19 President trump. on 05.05.16 at 7:22 pm

#2 Jimmy on 05.05.16 at 6:38 pm
First!

Actually Jimmy boy you are a TOTAL LOSER who will be deported from my kingdom. I bet you come second at everything. You don’t know how to WIN.

#20 Doug t on 05.05.16 at 7:25 pm

#1 John

Um wtf – quite the ramble there buddy and not about anything here. Check your screws they be loose

#21 SeriousQuestion on 05.05.16 at 7:26 pm

Any insight on what happens to real estate transactions involving Fort Mc Murray?

Let’s say I had a contract of sale and paid a deposit on a house that has now burned down. I assume that I don’t have to complete.

Now let’s say that seller has gone ahead and made an accepted offer in Edmonton – can he walk away and get his deposit back? How far can the chain go?

What if someone owns a primary property in Fort McMurray and a rental property in Edmonton and last month they sold their house in Edmonton (offer accepted, deposit accepted – not yet completed/transferred title) Now their house in Fort McMurray burns down. Can they get out of the contract to sell their Edmonton house?

#22 Smartalox on 05.05.16 at 7:27 pm

A couple of times now I’ve heard evacuees from Fort Mac list their mortgage papers amongst the things they grabbed when they were forced to evacuate. I assume that this is to establish some sort of agreed-upon value of their home, in the event that it is consumed by the fire.

I can’t help but wonder if these people understand the difference between the price they paid for the property, despite the equity they may have built up in it, and the replacement cost of the structures on it.

I suspect that there will be a lot of people disappointed as a result of the difference between the two.

#23 marty mcfly on 05.05.16 at 7:27 pm

#1 there’s gotta be a limit on how much crap you write.
I can understand why she was concerned the @#[email protected] was hitting the fan pretty good

#24 Jimmy on 05.05.16 at 7:32 pm

President trump,
Maybe you’ll come in first someday soon.

#25 tundra pete on 05.05.16 at 7:34 pm

That reminds me of another widow. Mrs. Simpson. Mr. Simpson was a cheap son af a gun. Pinched every penny he could.

All her days he made her scrimp and save every penny. Never had a new pair of shoes in twenty years. Anything she ever bought he insisted be on sale. She always did her best and made sure their three kids always had what little was available. All the while Mr. Simpson stashed away every penny including some gold bullion.

As he got nearer his final days, he insisted that every cent, including the gold, be jammed in his coffin so he could take it with him, after his death.

After his death and some years had passed, Mrs. Simpson carried on a comfortable life with some travel and lots of spa days and good times with friends. Her best friend asked her one day, did you really put all that money your husband had saved, in his coffin? She responded, I sure did. I wrote him a cheque!

#26 palebird on 05.05.16 at 7:38 pm

#22 Exactly, sad but true

#27 For those about to flop... on 05.05.16 at 7:52 pm

#150 WUL on 05.05.16 at 12:21 pm
Garth:

If I may and just for you, a dog refugee story.

As I boarded Suncor’s lovely Bombardier Challenger 890 jet at midnight last night with the other refugees at the Firebag aerodrome, I had my choice of seats. I avoided the wailing babies.

There was a limit on the number of pet crates that could go in the luggage hold so that human luggage could be loaded so about 15 dogs were brought into the cabin.

What do I get in the seats in front of me? A baying, whining, slobbering and farting 150 pound Mastiff.

Fortunately that waddling slob disembarked in YEG where he belongs.

I will be forever grateful to Suncor for having housed me, fed me and transported me back to my family in YYC but I will never fly that crap airline again!!

;} ;}

Once my nerves settle down, I will return here restricted to all matters financial, real estate and rodeo cowboys.

There are fires 3 blocks from my office and 5 blocks from my rental in Fort Mac this morning. Once the fire jumped the Athabasca River, I knew we were hooped.

Fortunately, at Easter, I digitized my 40 years of family photos and between grabbing the memory stick and my wedding ring, I have my treasures with me.

Thanks Hon. Big Heart.

WUL

///////////////////////////////////////

Hey WULLY,the bit about the dog cracked me up.

I think you lost some stuff ,but besides your ring and your memory stick you still got your sense of humour.

It been a bad week ,but hearing Mark will be too busy to post for the next three weeks makes it all worth it…

M41BC

#28 crowdedelevatorfartz on 05.05.16 at 8:02 pm

Hmmmmm.

Perhaps the Feds might want to look at the Premier of BC’s lastest foray into “conflict of interest” territory?
Might explain why she’s ignoring the outraged voters of the Lower Mainland that cant afford to buy OR rent in Vancouver or its burbs.

http://thetyee.ca/News/2016/05/02/Clark-Donors-Tied-Real-Estate/

#29 Chris in Nanaimo on 05.05.16 at 8:05 pm

R.E. John and bailing in their home.

…..What am I missing? They clear $200k on the sale….still gotta live somewhere….the extra $1000 monthly income will go straight on rent? Cash flow is no better?

As a side…anecdotal evidence from local Realtor….now seeing lots of multiple offers on SFHs in Nanaimo, and average time to sell is down to 4 days.

#30 Smoking Man on 05.05.16 at 8:05 pm

Batman alert on CAD Bond yields

#31 Linda on 05.05.16 at 8:12 pm

Sadly, far too many people believe they will get far more in pension (I’m talking CPP/OAS) than what they will actually receive. Many think if they just work to age 65 they will get the maximum. They also have a very inflated idea of what the maximum would be.

Leaving aside the debate about whether owning or renting is better, how is it people think that they can retire in comfort despite having high levels of debt? If they had difficulty making ends meet while working, what makes them think the living on a fixed income will be easier? Maybe they have to retire – are mentally or physically unable to work any longer or were downsized & can’t find anyone willing to employ them for whatever reason – but some at least are choosing to retire despite the fact they really can’t afford to. Maybe they are all of them living off the expectation of inheriting a huge pile of cash. Not the smartest strategy!

#32 JimH on 05.05.16 at 8:23 pm

#5 Ray Skunk

Cute?
More like extremely sad.

#33 Terrence on 05.05.16 at 8:27 pm

Hey Garth, u r leaving out who is really 2 blame ! Politicians, who cant keep theyre hands out of our pockets, i also luv the way they r really shakin down the savers these days also! A measely 6% return on ur investmnts aint gonna cut it these days either. Hey werent u a politician once?

#34 Caught In The Grip on 05.05.16 at 8:32 pm

Lots of spelling & grammar errors in the comments today. Don’t all computers have spell checks today? Yiiiiiikes!

Yes, I agree completely. Most Canadians are skaaaaaaroooooooooed.

#35 DT on 05.05.16 at 8:36 pm

first!
http://66.media.tumblr.com/27dd1a380fd792b33555e12cf6814764/tumblr_nyfowgfXao1qg39ewo1_500.gif

#36 For those about to flop... on 05.05.16 at 8:46 pm

#34 Caught In The Grip on 05.05.16 at 8:32 pm
Lots of spelling & grammar errors in the comments today. Don’t all computers have spell checks today? Yiiiiiikes!

Yes, I agree completely. Most Canadians are skaaaaaaroooooooooed.

///////////////////////////

I typed “it’s been a bad week”
My iPad said listen here buddy I’m gonna make you look like your 4 years old and took the “s” off.

What are you gonna do?
Blame the sales mix…

M41BC

#37 Andrew Woburn on 05.05.16 at 8:51 pm

#29 Chris in Nanaimo on 05.05.16 at 8:05 pm

As a side…anecdotal evidence from local Realtor….now seeing lots of multiple offers on SFHs in Nanaimo, and average time to sell is down to 4 days.
===============

I agree. There’s hardly any inventory in my area of North Nanaimo, it sells fast, and some properties are selling over asking price. However I suspect it’s more about FOMO than a surging local economy.

#38 DM in C on 05.05.16 at 9:01 pm

http://calgaryherald.com/business/local-business/discover-real-estate-closing-up-shop-founder-blames-faltering-economy

Doesn’t sound like the economy, sounds like bad business practices.

#39 For those about to flop... on 05.05.16 at 9:03 pm

#3 waiting on the westcoast on 05.05.16 at 6:41 pm
My parents are the opposite. They live like mizers while sitting in an acreage that is now saleable for between 1.4-1.5M.

My sister and I are financially fine and need no nest egg. We are both hammering them to sell so they can basically travel (my sister lives in Phoenix, I am moving to Uruguay, rest of family is spread between the prairies and Italy. Nope… this is our legacy…

So they sleep and save scared of spending too much on a can of beans when they could be living on 85k extra a year… CRAZY!
//////////////////////////////////////

Hey Waiting ,I wrote a similar post last week.
My in laws have a house that they could get 1.8 for but they have minimal money in the bank.

TFSAs are in cash getting a juicy 1.1 percent return.

My FIL winces like Rocky punched him in guts every time he gets a bill.

I showed him on the weekend how to delay paying his property taxes.

He wasn’t on board until I showed him it will cost them less than 25 cents a day.

Now he can’t wait for the bill to come…

M41BC

#40 Interstellar Old Yeller on 05.05.16 at 9:06 pm

Love the last line. Hope you can save a few retiree parents from bad choices, Garth. And if not, hope they have successful kids that can keep them afloat (because every blog dog besides me is a self-reported 1%er, right? ;)

Sad story about the widow. Though, back-of-the-napkin math, it sounds like post-2009 she was spending down the account at a rate of $50k/year. Don’t know her reasons for that, but it’s no wonder the money evaporated so quickly. Yikes.

#41 Caught In The Grip on 05.05.16 at 9:07 pm

Smoking Man:

“Smoke ’em if you’ve got ’em!” – W. Axl Rose

#42 Caught In The Grip on 05.05.16 at 9:09 pm

What do you think of the RBA move to cut rates? Do you think the BOC will follow suit?

#43 Gen X Confessions on 05.05.16 at 9:13 pm

Well, today’s post has seniors making poor decisions, so I’ll add a youth being gutsy and independent without a helicopter parent in sight:
http://www.theweathernetwork.com/news/articles/teen-rides-horse-to-safety-amid-fort-mcmurray-fire/67399/

#44 Thanks Garth on 05.05.16 at 9:14 pm

For providing those links on how to help the folks in Fort Mac:

YMMfire.ca

https://donate.redcross.ca/ea-action/action?ea.client.id=1951&ea.campaign.id=50610

Edmonton Emergency Relief – http://www.eerss.org/

Pray for Fort McMurray – https://www.facebook.com/groups/fortmacdonations/?fref=nf

#45 D T on 05.05.16 at 9:15 pm

found a gif – topical, racist and sexist, fits right in here

http://66.media.tumblr.com/27dd1a380fd792b33555e12cf6814764/tumblr_nyfowgfXao1qg39ewo1_500.gif

#46 WalMark of Sadkatoon on 05.05.16 at 9:20 pm

70 yr old John is a perfect candidate for selling that bloody anchor called a house. but he won’t because they never do. would rather live on cat food

#47 BobC on 05.05.16 at 9:20 pm

My very soul is screaming to sell and go to cash. I’m up one day and down the next. Nine out ten articles talks about a crash coming very soon. If I hadn’t found this blog I’m sure I would have. I didn’t listen when Garth said sell gold at $1900 until it had dropped to $1600. Garth, when the time comes will you advise us to sell like you did with gold? I’ll listen this time.

#48 New West on 05.05.16 at 9:21 pm

#29 Chris in Nanaimo

Not a straight across swap, of course, rent for mortgage.

I just did a quick calculation and a $190,000 mortgage at 3.29%, 25 year amortization, costs $927 a month. That does not include property taxes, insurance, or maintenance. Do you think these people are going to be able to afford a $6000 roof replacement, renewing the drainage system, electrical upgrade on top of that? Or even just lawn and garden care, window washing, gutter cleaning, driveway shovelling as they get older and are unable to do this for themselves? If they are in a condo, add in condo fees and special assessments.

Renting is definitely the way to go here. Sold my long time house two years ago and rent a lovely condominium and have never been happier. Pet friendly, the landlords live nearby and are quick to attend to any problems. I pay my rent and utilities and that is it. If I bought a place like this I would be paying at least double what I pay now, and would always be worried about a special assessment being levied, as has happened to many of my friends. Some have had to go back to work after retiring to pay for these assessments of 20, 30, 40k.

X husband got his half of the house money and immediately bought a 1970s vintage house in poor repair in a semi-industrial area because “houses in BC always go up”. He’s 60 this year with a 300k+ mortgage, in poor health, and I think the girlfriend has packed her bags and left him to fend for himself. And he feels sorry for me, because I didn’t “invest in a house”.

#49 WalMark of Sadkatoon on 05.05.16 at 9:22 pm

#1 John on 05.05.16 at 6:37 pm

TL;DR

I got cancer scrolling past that

#50 Chris on 05.05.16 at 9:22 pm

Trump is the GOP nominee. Well, say hello to the second President Clinton.

#51 Andrew Woburn on 05.05.16 at 9:22 pm

As everybody knows by now, the denizens of Nanaimo mostly spend their time shooting up, dealing or patronizing their local fence. At the end of a hard day, they and 20 of their closest friends ride their hogs to the nearest stripper bar. But these time-honoured traditions are about to be challenged by a new wave of immigrants.

No, not them. The Techies are coming. Life will never be the same. Lattes, not beer. Bike paths, not choppers. Irony will replace big iron. Can Whole Foods be far behind?

– Nanaimo quietly builds itself into a tech startup hub | Financial Post

“Chris Davis, founder of cybersecurity startup Hyas, returned to Nanaimo from Ottawa after selling another security business to a U.S.-based firm. “We looked at Spain, France, and Austin, where I lived when I worked for Dell,” said Davis, who was born and raised in British Columbia. But Nanaimo topped his list.

“You can buy a house on the ocean here for under a million dollars” he said. With 80,000 people, it’s big enough for a Costco and other large retailers, but small enough he didn’t have to worry about the quality of schools, or gang crime, he said.

Davis formed Hyas in February to offer high-end cybersecurity services at rates small businesses could afford. Armed with friends and family funding, he built a back-end intelligence system that allowed his security appliance to better assess security threats.”

http://business.financialpost.com/executive/c-suite/nanaimo-quietly-builds-itself-into-a-tech-startup-hub

However Chris will still honour our outlaw past. If you check the Hyas website, you will see they are providing a unique approach to continued access to US Netflix and other geo-blocked streaming services.

#52 WalMark of Sadkatoon on 05.05.16 at 9:23 pm

So they sleep and save scared of spending too much on a can of beans when they could be living on 85k extra a year… CRAZY!

when it comes to their home, seniors have dementia or act like they have dementia

#53 TurnerNation on 05.05.16 at 10:00 pm

Yeah Smoking man until TLT.US stays below 122 it’s a big chunk in my port.

#ChancellorRebalancer

#54 Chinstrap on 05.05.16 at 10:04 pm

Thank goodness the woman had a house to sell when her husband passed away. Not many people could have saved up $300,000 that easily. I bet they wished they had bought two when they bought the original and rented it out.. just a thought

#55 Bat Flipper on 05.05.16 at 10:18 pm

Unfortunately, there are pensioners in their 60s, 70s, and 80s with nothing but 5% down for a home, that they are amortizing over 25 years. Lenders don’t discriminate based on age.

#56 Katherine on 05.05.16 at 10:26 pm

OK, I am confused; I thought putting cash into my TFSA was a good thing? What am I missing?

#57 Chris in Nanaimo on 05.05.16 at 10:53 pm

#32 Andrew Woburn

“I agree. There’s hardly any inventory in my area of North Nanaimo, it sells fast, and some properties are selling over asking price. ‘

Yep, seen this first hand now, our neighbour put his house up for sale…BOOOM….sold the next day, over asking, I can only assume there was a bidding war.

I’m thinking if this high speed passenger foot ferry between Nanaimo and YVR ever gets going, house prices will explode in ‘DianaKrallville’….Mainland folks will realise what they can buy over here and even taking into account travel fees, still make a killing and have reasonable commute to downtown YVR.

#58 Smudgekin on 05.05.16 at 10:55 pm

Dad: died 93 in self induced act of auto erotic asphyxiation. Left mom $300K rrsp and $350K home.

Mom bought $200K condo and pissed the rest away at the slots. Had 45K worked up on a CC. Had to sell condo to clear debts. RRSP completely drained. Survives on a widower pension subject to the UK pound/CDN exchange.

Complete assholes the pair of them.

#59 Hotdogs from Heaven on 05.05.16 at 10:56 pm

#21 SeriousQuestion on 05.05.16 at 7:26 pm

Any insight on what happens to real estate transactions involving Fort Mc Murray?

Let’s say I had a contract of sale and paid a deposit on a house that has now burned down. I assume that I don’t have to complete.

Now let’s say that seller has gone ahead and made an accepted offer in Edmonton – can he walk away and get his deposit back? How far can the chain go?

What if someone owns a primary property in Fort McMurray and a rental property in Edmonton and last month they sold their house in Edmonton (offer accepted, deposit accepted – not yet completed/transferred title) Now their house in Fort McMurray burns down. Can they get out of the contract to sell their Edmonton house?

#22 Smartalox on 05.05.16 at 7:27 pm

A couple of times now I’ve heard evacuees from Fort Mac list their mortgage papers amongst the things they grabbed when they were forced to evacuate. I assume that this is to establish some sort of agreed-upon value of their home, in the event that it is consumed by the fire.

I can’t help but wonder if these people understand the difference between the price they paid for the property, despite the equity they may have built up in it, and the replacement cost of the structures on it.

I suspect that there will be a lot of people disappointed as a result of the difference between the two.
———————————————–
#21 SeriousQuestion :

Deposits are deemed NON-refundable by their very nature. The buyer pays them as a way to guarantee to the seller that their offer to buy is so serious that they are willing to lose the money if they change their mind.

Courts from Britain, Canada and the U.S. have enforced this concept for at least 2 centuries. The case law is quite extensive.

The only caveat is that any deposit greater than 10% of the value of the property being purchased is considered excessive and a court may allow you to keep that portion greater than 10%.

#22 Smartalox :

It actually depends on their Property policy. While the basic policy is actual cash value, based on the latest sale price of similar properties in the same or similar neighborhood, many others are Replacement Value which is set by having your property appraised and the policy limit set at that value.

#60 For those about to flop... on 05.05.16 at 11:04 pm

#54 Katherine on 05.05.16 at 10:26 pm
OK, I am confused; I thought putting cash into my TFSA was a good thing? What am I missing?

///////////////////////////////////////

Hey Katherine ,you are missing steps 2 and 3.

Step 1 …put cash in tfsa

Step 2 ….invest cash in whatever financial products you feel comfortable with.

Step 3 leave to marinate…

M41BC

#61 BOOM! on 05.05.16 at 11:05 pm

Garth, sad, but hardly uncommon stories of older people “panicking” when the markets turn down, as markets always have, and will. They recover, sometimes quickly, other times not so quickly, but inevitably do.

Making an unwise decision, can lead to fiscal death before you’re ready! Very Sad.

Retiring with debt is also a fools errand. Have investments ready for car replacement, home maintenance. Never be afraid to sell the home, probably your largest paid up asset to help carry you through retirement.

Your friends will help carry you out, when you’re done.

Never ceases to amaze me the numbers who still have done no, or little planning for tomorrow.

#62 For those about to flop... on 05.05.16 at 11:11 pm

#57 Smudgekin on 05.05.16 at 10:55 pm
Dad: died 93 in self induced act of auto erotic asphyxiation. Left mom $300K rrsp and $350K home.

Mom bought $200K condo and pissed the rest away at the slots. Had 45K worked up on a CC. Had to sell condo to clear debts. RRSP completely drained. Survives on a widower pension subject to the UK pound/CDN exchange.

Complete assholes the pair of them.

/////////////////////////////////////

At least your dad went out with a bang.

I won’t be able to go out like that, as my wife has too many clothes on the back of the bedroom door…

M41BC

#63 understood by few on 05.05.16 at 11:29 pm

#55 Katherine

———

It would have read better as don’t hold cash in your tfsa.

Fill it with ETFs and REITs etc, not cash which doesn’t generate capital gains, dividends or at significant interest (none if it’s sitting in cash in a discount broker).

Problem is people think of a tfsa as a product (thanks to banks). You just put money in your tfsa, and they give you more of whatever crap mutual fund they sold you on.

You can hold your registered investments in any number of institutions (simultaneously). Some of my registered investments are with a bank, others are with a discount broker.

#64 Ronaldo on 05.05.16 at 11:52 pm

#18 S. Bby

”Women are very afraid of being destitute in their old age.”

Can’t blame them for that. I wouldn’t want to be either. Does that mean that most men are “not” afraid of being destitute in their old age?

#65 Shawn on 05.05.16 at 11:54 pm

Reverse Mortgage

“HomeEquity Bank’s five-year reverse mortgage rate, for example, is currently 5.59%. Imagine how fast that builds up.”

“”””””””””””””””””””””””””””””””””””””””””””””””””
I’d be okay with the idea of a reverse mortgage for some situations except for the very high rate. Agreed, borrowing at 5.59% is too high these days. At 3% and considering the amount borrowed starts off small it might make sense in some cases.

We’d probably have more competition in the market and better rates if the population was not so visceral in their hatred of the notion and the product. The big banks don’t need the bad press that comes with offering reverse mortgages.

#66 cowtown cowboy on 05.05.16 at 11:57 pm

Another ‘letter’ to Garth that doesn’t quite pass the sniff test…How the hell do you end up at 70 with a mortgage worth half the value of your house????

Pretty much all real estate in Canada has at least doubled in the last 10 years at a minimum, so the house was was likely no more than 200k when they retired. What did they do, piss all the money away on LOC’s???

Well the world needs ditch diggers too, and you can’t fix stupid.

Alberta Strong

#67 Ronaldo on 05.06.16 at 12:02 am

#22 Smartalox

”I can’t help but wonder if these people understand the difference between the price they paid for the property, despite the equity they may have built up in it, and the replacement cost of the structures on it.”

Most of the equity buildup would have been in the land which is the illusory portion of the total value. Depends what happens to the land value after this is all said and done. I suspect there will be a major drop in that area as many may choose not to rebuild. Likely many of those houses were for sale.

#68 Ronaldo on 05.06.16 at 12:17 am

#29 Chris in Nanaimo on 05.05.16 at 8:05 pm

”As a side…anecdotal evidence from local Realtor….now seeing lots of multiple offers on SFHs in Nanaimo, and average time to sell is down to 4 days.”

So it’s our turn to cash in is it? I’ve noticed a lot of SOLD signs as I drive around the area so something is happening for sure. Not much local real estate talk but much about the lower mainland for sure. You can still buy close to 5 Nanaimo homes for the price of 1 tear down in Vancouver so we have a long ways to go to catch up.

#69 ontheledge on 05.06.16 at 12:30 am

I’m a young man. 45. I spent 20 years on Bay Street. The notion of dragging my ass down there until I was 65 was perhaps the most depressing thought I could conjure. I woke up one day (February 2015) and while still horizontal told my missus that it was time to monetize the pile and become mortgage free. I’m in Guelph now, mortgage free in beauty of a home. A year later that dream is gone for many. A century home around the corner is listed at 789. There are others chasing this dream, lots of Toronto money flooding in. As far as I can tell the only beneficiary of these inflated prices are realtors. This is the other side of the story, a small minority that goose the market that suck dollars out of our economy, just to earn a commission. Your first offer has to be your best offer here, I lost a house to a realtor double ending deal by 2k. My offer was 711k, 60k over list. No sign back. In the valley of the blind the one eyed man is king.

#70 Ronaldo on 05.06.16 at 12:34 am

#46 BobC

”I didn’t listen when Garth said sell gold at $1900 until it had dropped to $1600.”

Had you sold your gold at $1900 and took the proceeds in USD which gold is priced in, and sold last January you would have been up 45% in Cdn dollars just on the exchange. If you’d turned around and bought the RBC precious metals fund at the time you cashed in your USD’s you would be up an additional 65% ytd. Or, if you had bought ZJG you’d be up 106%. Most would have missed out on these opportunities.

#71 Ronaldo on 05.06.16 at 12:43 am

#55 Katherine on 05.05.16 at 10:26 pm

”OK, I am confused; I thought putting cash into my TFSA was a good thing? What am I missing?”

Financial advice.

#72 DON on 05.06.16 at 1:21 am

#56 Chris in Nanaimo on 05.05.16 at 10:53 pm

#32 Andrew Woburn

“I agree. There’s hardly any inventory in my area of North Nanaimo, it sells fast, and some properties are selling over asking price. ‘

Yep, seen this first hand now, our neighbour put his house up for sale…BOOOM….sold the next day, over asking, I can only assume there was a bidding war.

I’m thinking if this high speed passenger foot ferry between Nanaimo and YVR ever gets going, house prices will explode in ‘DianaKrallville’….Mainland folks will realise what they can buy over here and even taking into account travel fees, still make a killing and have reasonable commute to downtown YVR.
***************

Pumping Nanaimo? Wow! I get it – you have property at stake. But you do realize you are talking about Nanaimo…right? Don’t get me wrong, I prefer the Island, and plan on never leaving. I didn’t know they had a North Nanaimo, but branding is everything.

Passing through Nanaimo the other week, I noticed they have built houses next to the swamp, drove through the area – lots of retirees and soon to be lots of mosquitoes. Location location location.

As for commuting from Nanaimo to Vancouver – there once was a jetfoil (or something like that – a little fast ferry) – it couldn’t travel in certain weather and ended up shutting down. They are trying the same thing from Victoria to Vancouver in 2017 for tourists (will not be cheap though). Victoria experiences heavy fog in the winters, grounds the float planes on bad weather days.

One of my friends is an RCMP officer in Nanaimo…let’s just say it is NOT a drug-gang free area – new Vancouver gangs have moved in on the local market – giving the bikers and the Vietnamese gangs some competition. By the way the bikers live in North Nanaimo – formerly known as the outskirts and the boonies. I have family in Nanaimo as well, and they tell it like it is.

Lots of retirees from all over the country have made the Island their retirement homes. That’s all cool. My hometown has been overrun with older folks, nothing wrong with that – started back in the late 90’s, when the freedom 55’s started rolling into town. Ballooned into a retirement mecca. Although after 6pm, the town and surrounding area appear to be deserted. Lots of older sick folks living in their homes. My relative is one of the local RNs – busy – too busy. Home’s are emptying as fast as they are being filled – an equilibrium between supply and demand. Funeral homes have been expanding as I take it business is good. I am not trying to be cold, just lost my Mom recently.

The town has hedged it bets on retirees for the property taxes and has over built in traditionally dry areas without adequate fire protection. If our current heat records continue (this early in the season) then watch out – forests fires – big ones (like in the 70s). Hopefully, they will employ locals to fight the fires. Those severance funds are starting to run out. Even the once bustling Kelowna is overrun with crime and high unemployed due to oil & gas sector layoffs.

#73 kik on 05.06.16 at 6:17 am

What do you mean by ” Never put cash in your TFSA”???
“it is crime against nature??

Why do you say like that…………

I put my cash in TFSA and made money……………

#74 m on 05.06.16 at 6:45 am

What about income? Would a lender give a mortgage to someone with no income other than a pension? Impossible.

#75 The Lazy Taoist on 05.06.16 at 7:00 am

A nice dose of reality for the illiquid masses.
How depressing.
I guess ya gotta call ’em like ya sees ’em.

#76 Caught In The Grip on 05.06.16 at 7:34 am

AUD is down >400 bps in 1 week. Will CAD follow?

#77 Felix on 05.06.16 at 7:58 am

Finally, a blog pic that puts a dog to good use :)

Here’s another example of the same idea:

http://www.wikihow.com/Cook-Lemongrass-Dog

Keep it up, Garth.

Dogs are idiots, but they CAN be useful, and even tasty, too!

#78 People Who Write to Garth on 05.06.16 at 8:00 am

It would be interesting to see some sort of analysis about the people who write to Garth. I don’t want lurid details, or to gloat over the misfortunes of others, but I think it would be interesting to see the big picture.

How many of them are writing letters like the seniors with a mortgage in this post? What level of understanding do different age groups display about finance and investing? What other distinguishing characteristics might emerge? Are they genuinely interested in being helped or is it just a plea for sympathy?

#79 Holland Marshall on 05.06.16 at 8:23 am

Please remove that piece of hate mail by John. The first Comment.

#80 Tony on 05.06.16 at 8:24 am

Taking a shot at the U.S. jobs report.

187,000

#81 Grey Dog on 05.06.16 at 8:46 am

My mid 80 MIL was having severe back problems, and needed to get out of 2storey 2acre country property. SIL finds the perfect property for them within community, 5 acres of grass to cut surrounding a bungalow with a long winding driveway. Husband and I advised them NOT to purchase, nothing about this purchase made sense at their age! Then the shocker surprise, yup a 200k$ mortgage to a couple in their mid 80s!

#82 Andrew t on 05.06.16 at 8:51 am

#72 kik on 05.06.16 at 6:17 am
What do you mean by ” Never put cash in your TFSA”???
“it is crime against nature??

Why do you say like that…………

I put my cash in TFSA and made money……………
—-

This got answered further up the thread, but the message is don’t leave it parked as cash (or GICs), put it to work as investments.

#83 Grey Dog on 05.06.16 at 9:11 am

Another story for you, with husband,s retirement within a year, we have started sniffing around RVs a between 100-200k$. The salespeople say getting a loan will be no problem! Banks supposedly can amortize RV loan like a mortgage loan! Are they CRAZY!

-Walking around RV site, another younger couple than us, mid fifties, were absolutely giddy, they had found the perfect unit, overheard them say, “let,s get the kids to help us pay for this”!

-Researching RVs, one blogger, early 30s was celebrating his new RV said financing it was a breeze. Get your parents to consigned the loan!!!

#84 Tony on 05.06.16 at 9:31 am

Re: #46 BobC on 05.05.16 at 9:20 pm

October 03 this year should be the start. The 2009 lows will most certainly be taken out. Buy deep out of the money puts starting that date. I think the DOW will drop to 4,500 but if the bankers start unloading everything we could see the DOW go back to the 1,000 level.

#85 A Canadian Abroad on 05.06.16 at 9:36 am

Banks are 1/2 the problem. They lend recklessly and take on too much risk. So many Canadians are confused. Debt has NEVER equaled wealth. Mortgage debt = Debt, not wealth.

We need more prudent lending like what the Swedish banks said this weeks “It is our job to not lend as well when we see too much debt in the system.” – BNN

Don’t listen to those banks who say “you are richer than you think (by taking out more debt)”. It isn’t you who is becoming richer.

#86 A Canadian Abroad on 05.06.16 at 9:54 am

#10 Allen Rodrigues “If I’m 30 and have the stomach for downturns should I have a balanced portfolio, or is 80% equity ok?”

If I may suggest (I’m a Financial Trader), take an online risk tolerance test and see how you fair, but remember, emotions (fear/greed) are very strong (as evidence in today’s real estate).

That said, your in your 30’s now, so you can have a higher risk tolerance as time is on your side. I’m in my 40’s and have a 60/40 balanced (Ticker: ATB103) core holdings portfolio which works out fine for me for my risk tolerance. Seek the advice of an UNBIASED financial advisor.

Always protect your core capital, then outside that, invest in other things you want to try out.

Goal #1: Pay off debts and MAX that TFSA.

#87 WalMark of Sadkatoon on 05.06.16 at 10:07 am

why is the CAD such a piece of crap?

#88 Wild Roasted Gonads on 05.06.16 at 10:56 am

#65 cowtown cowboy on 05.05.16 at 11:57 pm

Another ‘letter’ to Garth that doesn’t quite pass the sniff test…How the hell do you end up at 70 with a mortgage worth half the value of your house????

Pretty much all real estate in Canada has at least doubled in the last 10 years at a minimum, so the house was was likely no more than 200k when they retired. What did they do, piss all the money away on LOC’s???

Well the world needs ditch diggers too, and you can’t fix stupid.

Alberta Strong

Yup…HELOC vacations and kitchen renos… people are completely nuts … low rates are massively distorting everything.. and now when they hit 70 they go who cares just die bankrupt what diff does it make!

#89 WalMark of Sadkatoon on 05.06.16 at 10:57 am

know thyself is probably the most important thing when it comes to investing in anything. if u have absolutely no idea or experience about how you’ll react when markets move against you, then you need gartho’s balanced portfolio. period.

unfortunately most ppl find out about their character when they’re in the process of getting wiped out

#90 Ronaldo on 05.06.16 at 10:57 am

#71 Don

”Don’t get me wrong, I prefer the Island, and plan on never leaving. I didn’t know they had a North Nanaimo, but branding is everything.”

You need to get out more Don.

#91 Wild Roasted Gonads on 05.06.16 at 11:02 am

61 For those about to flop… on 05.05.16 at 11:11 pm

#57 Smudgekin on 05.05.16 at 10:55 pm
Dad: died 93 in self induced act of auto erotic asphyxiation. Left mom $300K rrsp and $350K home.

Mom bought $200K condo and pissed the rest away at the slots. Had 45K worked up on a CC. Had to sell condo to clear debts. RRSP completely drained. Survives on a widower pension subject to the UK pound/CDN exchange.

Complete assholes the pair of them.

/////////////////////////////////////

At least your dad went out with a bang.

I won’t be able to go out like that, as my wife has too many clothes on the back of the bedroom door…

M41BC

WTF was all that!

#92 Chris in Nanaimo on 05.06.16 at 11:41 am

#71 Don

We’ve already seen mainland Realtors in the media pumping the Island to encourage YVR’ers to cash out and move here for early retirement. There is a tonne of new build, a lot on crappy land, guess there must be demand.

And What is this facination with Nanaimo ‘Gangs’. Are folks stuck in the 80’s? I’ve lived here 11 years….they don’t affect me, or any other law abiding citizen. If I want daily drive by shootings I’ll move to Surrey.

#93 CJBob on 05.06.16 at 11:48 am

Once again predictions of rate increases are likely not going to materialize:

http://business.financialpost.com/news/economy/u-s-jobs-growth-lowest-in-7-months-casting-doubt-on-further-fed-hikes-this-year

#94 edgy on 05.06.16 at 11:53 am

RE #91 Chris in Nanaimo
Perception bias is the technical term for those who see Nanaimo through rose-coloured glasses. No need to move to Surrey; you’re already there. “North Nanaimo”, hah! funny attempt to rebrand “Surrey-by-the sea.” Nanaimo, where you can count your drug free neighbours on one hand, one finger, even less…

#95 Mark Moretti on 05.06.16 at 12:16 pm

Think Garth talks about all the rate hikes coming from the Fed this year in tonight’s post?

#96 IHCTD9 on 05.06.16 at 12:22 pm

#87 Wild Roasted Gonads on 05.06.16 at 10:56 am

Yup…HELOC vacations and kitchen renos… people are completely nuts … low rates are massively distorting everything.. and now when they hit 70 they go who cares just die bankrupt what diff does it make!
____________________________________________

I know a guy who years ago bought a house for 100K, after paying for it for 10 years, he owed 100K on it LOL!

#97 Ronaldo on 05.06.16 at 12:25 pm

#86 WalMark of Sadkatoon on 05.06.16 at 10:07 am

”why is the CAD such a piece of crap?”

Feeling the pain from our rising dollar are you?

#98 Damifino on 05.06.16 at 12:29 pm

Any financial advisor who cares equally about people as she does about money is a wonderful person to behold.

All through the GFC of 2008-2009 she said it again and again: “Do not liquidate your carefully planned portfolio into the maw of an falling market.” I trusted her and listened. It saved my butt in the long run.

Of course today, it’s all sunshine, unicorns and butterflies… until next time, I suppose. But that which did not kill me made me stronger. The liquidators of 2008 have yet to recover.

Stop and think about the confidence, strength and courage it took to keep her cool in a boiling cauldron of panicking clients with hundreds of millions invested.

I am not made of such stuff.

#99 Ronaldo on 05.06.16 at 12:31 pm

#93 edgy on 05.06.16 at 11:53 am

”Nanaimo, where you can count your drug free neighbours on one hand, one finger, even less…”

Must be quite the neighbourhood you live in.

#100 Walmart of Saskatoon on 05.06.16 at 12:31 pm

I know a guy who years ago bought a house for 100K, after paying for it for 10 years, he owed 100K on it LOL!

but by then the house was worth $150k so it all worked out?

#101 Walmart of Saskatoon on 05.06.16 at 12:32 pm

why is the CAD such a piece of crap?

oh.

http://www.cbc.ca/beta/news/business/canada-jobs-march-employment-1.3569704

#102 Ronaldo on 05.06.16 at 12:34 pm

#91 Chris in Nanaimo on 05.06.16 at 11:41 am

Couldn’t have said it better myself Chris.

#103 DON on 05.06.16 at 12:45 pm

#89 Ronaldo on 05.06.16 at 10:57 am

#71 Don

”Don’t get me wrong, I prefer the Island, and plan on never leaving. I didn’t know they had a North Nanaimo, but branding is everything.”

You need to get out more Don.
***************************

Lived in Vancouver – nice when you are young and in the scene. But for day to day life – nope. I’ll take the Island. It’s a personal preference having see other parts of the world – back packing.

#104 Alyssa Hanes on 05.06.16 at 12:48 pm

Homequity’s 5.59% 5 year rate reverse mortgage rate assuming not increasing for 13 years will turn $100,000 to $202,813.

Yes, $102,813 in accrued interest in just 13 years. This is $7,908 per year. Yikes!

Don’t forget the other $80,000 to $120,000 in lost investments gains, returns in that 13 years as well. This is a terrible idea as borrowing more is not the sane decision.

#105 Ronaldo on 05.06.16 at 12:54 pm

#95 IHCTD9 on 05.06.16 at 12:22 pm

”I know a guy who years ago bought a house for 100K, after paying for it for 10 years, he owed 100K on it LOL!”

I’m 70 and have owned and lived in 8 homes in my lifetime, two of which I built myself. I put only as much equity into them as required to avoid the CMHC insurance and kept the payments to no more than 25% of (my) net income. Any excess cash including wife’s income invested. I believe too much emphasis is made on paying off a house. Most people move on average every 3 to 4 years or so. I have moved 22 times in my careers. By the time I had purchased my third house, I had sufficient investments to pay it off which I did and then re-borrowed 75% of the equity to invest and thereby making the interest tax deductible. I looked at home ownership as simply an alternative to rent. Why would you want all your money tied up in one asset when you could have it working for you elsewhere? The house values were going up (or down) whether I had it paid off or not. Nothing wrong with having a mortgage at 70 as long as it is “good debt” and you have the ability to pay it off at any time should you choose to do so.

#106 DON on 05.06.16 at 12:58 pm

#91 Chris in Nanaimo on 05.06.16 at 11:41 am

#71 Don

We’ve already seen mainland Realtors in the media pumping the Island to encourage YVR’ers to cash out and move here for early retirement. There is a tonne of new build, a lot on crappy land, guess there must be demand.

And What is this facination with Nanaimo ‘Gangs’. Are folks stuck in the 80’s? I’ve lived here 11 years….they don’t affect me, or any other law abiding citizen. If I want daily drive by shootings I’ll move to Surrey

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

You moved to Nanaimo during the boom years (11 years). Recency is the problem. The oil and gas folks are trickling back, looking for work that isn’t there, severances running out, older folks passing on (only here for a good time…not a long time). Nanaimo will return to being the old Nanaimo unless they start to diversify. Nanaimo has the most notable mentions for crime on the Island. Where exactly is the tonne off new build – driving through next weekend again – will take some time and do some real analysis. The major drug unit for RCMP is stationed in Nanaimo. To each their own, but crime is now rising due to economic decline. I hope you never get affected, but just because you haven’t yet…doesn’t me you won’t. Have you tried commuting from Nanaimo to Vancouver on a daily basis – I have. Why not just tele-commute. People chose to live in Van for the scene, not just work – it is all centred around the scene. Not bashing Nanaimo and soon you’ll witness Nanaimo in the 80’s.

#107 DON on 05.06.16 at 1:05 pm

#93 edgy on 05.06.16 at 11:53 am

RE #91 Chris in Nanaimo
Perception bias is the technical term for those who see Nanaimo through rose-coloured glasses. No need to move to Surrey; you’re already there. “North Nanaimo”, hah! funny attempt to rebrand “Surrey-by-the sea.” Nanaimo, where you can count your drug free neighbours on one hand, one finger, even less…

*********************
Stuck in the middle with you. But a local realtor told him so. I take it considering the source (local realtor) is good enough for him…so be it. To each their own.

#108 Move on VREU on 05.06.16 at 1:14 pm

Hey, where is our weekly scatter graph showing 2008 to 2013 prices from VREU? I guess the 2016 Victoria graphs are too much to post for fear of undermining the weekly rant of buying into the market.

Or perhaps VREU has actually left her basement suite, looked around, and bought in Victoria.

#109 WUL on 05.06.16 at 1:27 pm

#86 WalMark of Sadkatoon on 05.06.16 at 10:07 am

why is the CAD such a piece of crap?

oiloiloiloiloil

40% of oilsands production is now shut in because of the conflagration in the Boreal Forest.

No GDP growth this quarter say the econo guys.

Financial Post

#110 Shawn on 05.06.16 at 1:37 pm

On Reverse Mortgages

#103 Alyssa Hanes on 05.06.16 at 12:48 pm said:

Homequity’s 5.59% 5 year rate reverse mortgage rate assuming not increasing for 13 years will turn $100,000 to $202,813.

Yes, $102,813 in accrued interest in just 13 years. This is $7,908 per year. Yikes!

Don’t forget the other $80,000 to $120,000 in lost investments gains, returns in that 13 years as well. This is a terrible idea as borrowing more is not the sane decision.

******************************************
A main problem is the high interest rate.

Not every reverse mortgage involves an upfront sum such as $100,000. According to the HomeEquity web site you can take it out as monthly payments to cover expenses. That way the interest starts out very small and compounds much slower.

If the only other option is to sell and move and you don’t want to and if you are not concerned with leaving an estate (and why should anyone sacrifice where they live just to leave an estate?) then this could be a good option. Again, I would like to see lower interest rates but then again maybe 5.59% is not SO high considering other rates that desperate people pay.

Where is the lost investment gain? The homeowner still receives the value of the house upon sale less the mortgage owing. Do you refer to the lost opportunity of investing cash if the house is sold? But the point is some people don’t want to sell and move.

Different strokes for different (old) folks…

#111 Shawn on 05.06.16 at 1:42 pm

Is Lower Oil Production Such a Bad Thing?

#108 WUL on 05.06.16 at 1:27 pm said:

40% of oilsands production is now shut in because of the conflagration in the Boreal Forest.

*******************************************
Not sure that is such a bad thing. If oil prices were low due to a glut then this looks like a cure. This is a very temporary shut-down of production.

This gives a chance for the apparently clogged pipelines out of Alberta to clear away some stored oil and oilsands, no?

The big oilsands players can afford a few weeks of no revenue.

#112 Bat Flipper on 05.06.16 at 1:53 pm

Garth, this will make your blood boil.

http://www.theglobeandmail.com/real-estate/the-market/a-836000-home-on-a-single-salary-the-reality-of-pink-mortgage-living/article29840551/

#113 The @realdonaldtrump on 05.06.16 at 2:11 pm

After I deport all of you your fired.

#114 family beagle on 05.06.16 at 2:19 pm

#82 Grey Dog on 05.06.16 at 9:11 am
Another story for you, with husband,s retirement within a year, we have started sniffing around RVs a between 100-200k$. The salespeople say getting a loan will be no problem! Banks supposedly can amortize RV loan like a mortgage loan! Are they CRAZY!

-Walking around RV site, another younger couple than us, mid fifties, were absolutely giddy, they had found the perfect unit, overheard them say, “let,s get the kids to help us pay for this”!

-Researching RVs, one blogger, early 30s was celebrating his new RV said financing it was a breeze. Get your parents to consigned the loan!!!

….

Nice to read. I bought an RV park.

#115 riyaz on 05.06.16 at 2:27 pm

See below from Fairfax Financial 2015 Annual news letter
“history shows, being bullish in 1929, when the Dow Jones hit 400, meant you had to wait 25 years (until 1954) before the
Dow Jones saw 400 again. In the meantime you had to survive a 90% decrease in the index. More recently in Japan,
the Nikkei has yet to hit the 40,000 level it traded at in 1989 – almost 27 years ago. It is still over 50% below its alltime
high in 1989. As they say, caveat emptor!”

–Think Twice before you put your nest eggs in market including all kind of financial balanced portfolio ETF’s investment You may not recover in your life time

#116 WUL on 05.06.16 at 2:48 pm

#110 Shawn on 05.06.16 at 1:42 pm

Noted. Good points. Time will tell.

#117 WUL on 05.06.16 at 2:51 pm

#110 Shawn on 05.06.16 at 1:42 pm

Shawn:

We need to add to the mix the difficulties in staffing up with the thousands of workers currently displaced and without accommodation in The Mac.

No simple answer.

#118 Smoking Man on 05.06.16 at 3:42 pm

Bad Thinking?

Feeling good. Heading to senica eod. Garth be ready on delete button. I get hammered on two beers now.

#119 BOOM! on 05.06.16 at 3:43 pm

#114 Riyaz

I think you need a bit of “context” to your comments on “investing in the market, including all kind of balanced portfolio ETF.”

1929, plenty of “warning signs” before the fateful break in October 1929, including an overheated debt, margin trading, and real estate markets in the US. Add in “protectionist” trade legislation via the Smoot-Hawley tariff legislation damaging many international trade relationships. Yes, the market broke in 1929 finally bottoming out in 1932 with an overall 90% loss in value.
Perhaps a MAJOR contributor was the ability to borrow up to 90% of the price of your stock purchase on “margin” borrowed money. When these borrowers could not put up more margin to offset the decline in their share’s value they were sold out at a 100% loss. That led to further price declines, more margin calls etc etc. Today, you cannot trade on 90% margin in stocks… but you CAN in real estate…

Depression Unemployment in the US was stated at 25% other countries as high as 33%. While recovery in the US was seen starting in 1935, you’re right the market values never hit their old higher until 1955. You forgot the impacts of legislation in 1937 causing a recession, and the effects of WWII, Korea, the devastation in Europe and SE Asia.

Japan, driven by high real estate, thus pushing up the markets. Remember at the height of Japanese real estate the imperial palace grounds 3.41 sq km was valued at more than all the real estate in California. (oops!)

Anyone blind might have seen those bubbles forming…

While I’m think about it, don’t you guys have a couple of detached from reality property markets, Toronto, and Vancouver… or are you stating this is “the new normal”??

A balanced portfolio is JUST that -balanced- perhaps unlike people who ‘shun’ the markets?

Yes, there IS RISK investing in any equity market, also any BOND markets, be it Canada, US, Russia, UK, Germany etc etc. There is also reward, or loss, or stagnation.

Did I mention there is RISK in a GIC, or a ‘savings account’???

What might be you flavor?

#120 Smoking Man on 05.06.16 at 3:45 pm

#57 Smudgekin on 05.05.16 at 10:55 pm
Dad: died 93 in self induced act of auto erotic asphyxiation. Left mom $300K rrsp and $350K home.

Mom bought $200K condo and pissed the rest away at the slots. Had 45K worked up on a CC. Had to sell condo to clear debts. RRSP completely drained. Survives on a widower pension subject to the UK pound/CDN exchange.

Complete assholes the pair of them.
…..

Not really. They lived. Your mom, a bit long. Timing is everything. Look at USDCAD go…….

#121 Deb on 05.06.16 at 4:10 pm

#55 Katherine + #72 kik

Most people I know contribute cash to their TFSAs. The point is to not allow the contribution that you have made, to rot, in cash. Figure out an asset allocation that you are comfortable with first, – % to fixed income, and % to growth – and invest the cash accordingly. If you think you need help to do this, then get help to do this.

The TFSA is the best thing since sliced bread, so take full advantage of your available options. Leaving a TFSA contribution in cash is like having a backyard full of dirt. If you want a lovely garden in the summer, you need to plant some seeds in the spring.

#122 Up, Up, Up on 05.06.16 at 4:26 pm

Good article in National Post today confirming condo prices are up, up, up too in Toronto. Looks like everything is coming up roses in TO. The crash people on this site keep predicting for Toronto looks like it is a faint mirage. If you say something often enough, you might actually start to believe it yourself. Although, I don’t think anyone truly believes that this Toronto crash will ever happen. There’s enough people to go around to keep bidding up the prices for a long, long time. Regardless of what you think about renting versus buying, the prices are what they are and the demand will continue unabated during out lifetimes. People will only really realize it when they hit retirement empty handed. Look around the City. It is really not that big and we keep cramming more and more people into it. The people who bought the LCBO lands this week must obviously know something most of you don’t, or they are really stupid.

#123 brett on 05.06.16 at 4:58 pm

We sold our house in Calgary three years ago. It was too big and we wanted to downsize. We traveled for seven months, then rented. We are still renting.

So, after a lifetime of home ownership we found it to be so liberating not to have one. The surprising part was how much money we saved. Our insurance essentially disappeared. No more $50/$100 visits to Home Depot. No large tax bills…ours was then $6K year. Cost of our utilities went from 250. month to $70.
You get the idea. Not to mention house prices have been stable and going down ever since.

We are not in a financial position where we have to rent. But from a financial perspective this has been such a good decision that we will be renting for at least another 9 months, and perhaps forever. It has proven to be great for our pocket and great for our mindset. Grass…what grass. Clearing snow…nope. Painting….no, we have lots of oils and watercolours!

#124 Smoking Man on 05.06.16 at 5:40 pm

To funny. Everyone going how did we so underestimate the trump train.

They didn’t know about smokeys incredible alien reach.

Humans are oblivious to everything. If only I didn’t sign the non disclosure. You pricks would be proud of me.

#125 Chris in Nanaimo on 05.06.16 at 5:42 pm

#105 Don

“Soon be witnessing Nanaimo in 80’s”

Based on what, Your crystal ball??

Nanaimo does not even register in the top 30 cities for violent crime. Surrey though has had 33 drive bys so far in 2016.

New build all over the place, new sub divisions going up
at Westwood lake, Extension Rd, East Wellington Rd, 10th st, those are just the ones I’m aware of.

Busy Local builder and trade shortgage……
http://www.cheknews.ca/168128-168128/

Employment rate is way below national ave at 4.4%

Totally agree Nanaimo needs to diversify, so does the whole of Canada.

Right, I’m off to walk the dogs at Neck Pt Park, one of the most beautiful coastal parks in BC :-)

#126 WalMark of Sadkatoon on 05.06.16 at 5:49 pm

#122 brett on 05.06.16 at 4:58 pm

uncanny timing

#127 triplenet on 05.06.16 at 5:59 pm

#58 Hot Dogs

A deposit is not a legal requirement in an offer to purchase real estate or a contract of purchase and sale.
If there is a deposit, it is in trust, and both parties to a contract must agree to its eventual disbursement.
If a deposit is non-refundable, it will be stated in very clear language.
Hope you haven’t lost too many deposits.

#128 Ronaldo on 05.06.16 at 6:04 pm

#124 Chris in Nanaimo on 05.06.16 at 5:42 pm

Your absolutely right Chris. Lots of building going on in Nanaimo including a large amount of commercial along Bowen Rd. After a 4 year drought from 2009 to 2013, things began to pick up. Lots of building along Hammond Bay Rd. and at the end of Stephenson Point Rd.

And Don, next time you drive thru, stop and check out our waterfront park and take a stroll along the waterfront then check out the old downtown area. Amazing transformation taking place. Lots of good eating places. Drive down Bowen Rd. and Hammond Bay Rd. You may get a different view of things once you’ve had a good look around.

And yes Chris, Neck Point Park is a wonderful place to take a stroll. Wife and I do it often. Also the walk around Westswood Lake is a favorite as well. We also do Mt. Benson, and many other hikes in the area from Duncan to Arrowsmith and not to mention several of the surrounding islands where there is also great hiking. Nanaimo is a wonderful place to live but we don’t want too many people to know that do we Chris?

#129 Tony on 05.06.16 at 7:13 pm

Got this in an email:

• 1 Year GIC – 2.05% (currently 1.95%)
• 18 Month GIC – 2.75% (currently 2.05%)
• 2 Year GIC – 2.75% (currently 2.10%)
• 3 Year GIC – 2.75% (currently 2.15%)
• 4 Year GIC – 2.75% (currently 2.30%)
• 5 Year GIC – 2.75% (currently 2.50%)

Is Oaken going bankrupt?

#130 Tony on 05.06.16 at 7:20 pm

Re: #122 brett on 05.06.16 at 4:58 pm

Insurance is for idiots, the house always wins as in the insurance company. If you don’t have a mortgage never ever take out insurance. I’ve never had insurance on any of my homes, condos, apartments or townhouses.

#131 Jesse Harrison on 05.06.16 at 7:53 pm

Oaken’s website still has lower rates listed with 2.5% its highest for 5 years.

There is no 2.75% anywhere, http://www.oaken.com. Check it out for yourself.

#132 Andrew Woburn on 05.06.16 at 8:32 pm

71 DON on 05.06.16 at 1:21 am

Pumping Nanaimo? Wow! I get it – you have property at stake.
================

No, just reporting. We’re in this house till we get carried out. Any assessment increases will just cost us.

I didn’t know they had a North Nanaimo, but branding is everything.
==================

Apparently nobody does, but if you like upscale homes, ocean views, deer on the lawn, eagles in the trees and quiet streets, it’s worth a look.

One of my friends is an RCMP officer in Nanaimo…let’s just say it is NOT a drug-gang free area – new Vancouver gangs have moved in on the local market – giving the bikers and the Vietnamese gangs some competition. By the way the bikers live in North Nanaimo – formerly known as the outskirts and the boonies. I have family in Nanaimo as well, and they tell it like it is.
===================

There is nowhere in BC that free of drug dealers or some form of bikers. I never see bikers. Maybe they’re on the inland side of the highway where the trailer parks are.

Lots of retirees from all over the country have made the Island their retirement homes. That’s all cool. My hometown has been overrun with older folks, nothing wrong with that – started back in the late 90’s, when the freedom 55’s started rolling into town. Ballooned into a retirement mecca. Although after 6pm, the town and surrounding area appear to be deserted. Lots of older sick folks living in their homes. My relative is one of the local RNs – busy – too busy. Home’s are emptying as fast as they are being filled – an equilibrium between supply and demand.
====================

Sounds like Qualicum Beach. That’s why we didn’t move there. It’s like dying twice.

#133 NEVER GIVE UP on 05.07.16 at 3:26 am

#46 BobC on 05.05.16 at 9:20 pm
Garth, when the time comes will you advise us to sell like you did with gold? I’ll listen this time.
———————————————————
While Garth is an extremely knowledgable person regarding wealth allocation and investments.
No one can really time the markets.

There are many many large hedge fund managers that admit they gave up trying to time the markets.

Garth gave advice to many to sell their Vancouver property in 2010 2011 etc.

Many have missed out on very large capital appreciation as a result of taking his advice.
Garths advice was reasonable and backed with sound reasoning, but it still resulted in many losses.

In Garths Defense I would say he has saved many more asses than he has hurt.

Cheers!

#134 NEVER GIVE UP on 05.07.16 at 3:35 am

#57 Smudgekin on 05.05.16 at 10:55 pm
Dad: died 93 in self induced act of auto erotic asphyxiation. Left mom $300K rrsp and $350K home.

Mom bought $200K condo and pissed the rest away at the slots. Had 45K worked up on a CC. Had to sell condo to clear debts. RRSP completely drained. Survives on a widower pension subject to the UK pound/CDN exchange.

Complete assholes the pair of them———————–
—————————————————————-

Not really, now.
Dont be too hard on them, You never lived in their shoes.
Sounds like interesting people who pushed the boundaries.

#135 NEVER GIVE UP on 05.07.16 at 3:38 am

Does anyone have a link to the complete history of Garths Blog.
Once before many years ago it was posted.
Could you please post again?

#136 acdel on 05.07.16 at 10:37 pm

#123 Smoking Man

I agree with what you have said about Trump; past and current.

Am I a supporter? NO! I do like the fact that he tells it like it is

But at what point does it become fictitious? If he is elected, what power does he really behold? As far as I can see he is (he never really expected to get this far) like any brilliant marketer, sell the crap to the most un educated to their own laziness, there is lots of info out there that seek the truth.

His whole policy is based on anger and fear (like our previous President oh I mean PM)

At what point do you or any of us that feel that this is all a game show sucking (little by little) our freedom to the point where ????????????????????????