The afflicted

bs-modified

Well, time for some more of those fake letters that income-challenged deplorables in the comments section swear I make up, You wish.

“I’ve read your blog for years,” says Randy, not quite sucking up enough, “but have never written in so I thought it might not be a bad time to start.

“My girlfriend and I have tried to balance where our money goes but are unsure now with the doom and gloom of the housing market. We’re both 32, make about 100k a year each (for a few years now) and have accumulated about 100k (in liquid assets) in the past couple of years, while we own condos in downtown Toronto (350k) and downtown Victoria (360k). The latter is where we currently live.

With the changes coming to mortgages and the housing market my question lies with the Toronto condo. It’s currently rented out and roughly breaks even @ a rate of 2.74% (we are locked in for 2 more years).  We make $400 a year. Would the inevitable rise of the rate when we remortgage make this an unsound investment or should we consider the appreciation a factor?  We bought it for 320k and have about 270k left on it, valued roughly around 350k. Any info would be greatly appreciated :)”

First, Randy, you’re not covering costs on this condo. Not even close. You might be up four hundred bucks in rent over mortgage payments, monthly fees and property tax, but that fails to take into consideration the $50,000 you put down when you bought it. Invested inside your TFSA instead, it would generate more than $3,000 in taxless returns – which means the condo is actually giving you a negative yield.

As for the appreciation (up $30,000 in the last three years), that’s a middling 3% return, fully taxable. Worse, if you sell the place and pay the standard 5% commission, your capital gain is reduced to $12,000, with the annual return descending into GIC territory – 1.2%. Plus, if the unit’s vacant for a few months between tenants, or gets trashed, or ends up hit with a special assessment or a hike in condo fees, you’re pooched.

In fact, without consistent, robust, mindless appreciation in the capital value of a condo, it’s impossible to make any money as a landlord. But it’s real easy to lose it. And I haven’t yet even talked about (a) rising interest rates and the certainty your mortgage will renew at a far higher rate or (b) the recent mortgage stress test carving out a huge chunk of the condo-buying crowd.

A single rental condo unit 4,500 km away on which you are already losing money is a really bad idea, R. What were you thinking? Bail before it eats you.

Now, here’s Cory and Denise, writing in from the Socialist Republic of Rachel:

“My wife and I love your blog, and are real estate investors in Edmonton and have been liquidating our portfolio for a year. We’re firm believers that real estate is in a bubble. Our question for you, should we sell the last two properties? They are our personal residence with a lower suite and a duplex that we’re in the middle of converting to a 4 plex.

“Our home costs us $900 a month with $50,000 of equity in it. If we go rent elsewhere, we are looking at $12-1500/Month. The Duplex is cashflow neutral as is. We would renovate to the sum of $80,000 to convert to a 4 plex and then it would cashflow $1200 a month with 4 suites and $150,000 equity in this one.

“We have $88,000 in cash and $191,000 in mortgage investments @ 12% – first position mortgages coming due in 2017. We only take a salary of $50,000 a year from my wife’s company. Zero debt other than the two mortgages on the two properties. 336k with a 2.1 variable and the second at 322K with a 2.69 fixed. My wife is turning 34 in Feb and will be off work with our first child in Mar and I’m 36 in two weeks. I don’t take a wage, work on the mortgage investments and reno the properties.

“We have our personal residence up for sale, we’re getting close to an offer. Should we take it?”

Real estate investors, eh? Well, you suck at it.

The bottom line is you have debts of $658,000, at interest rates destined to rise. Plus, Edmonton’s a real estate dead zone with zero chance of any property appreciation. Complicating the situation, most of your liquid assets also at real estate risk, invested in residential mortgages – and Cory doesn’t have an actual job. Oh yeah, and Denise is about to check out to have a kid.

Sell the single-family house and rescue your fifty grand in equity. Wriggle out of the mortgages the moment they come due. Invest the funds properly. Then move into the duplex, broom the renovations, go find real employment and collect a little rent. You’ll have another mouth to feed soon, so get your priorities straight.

The moral of these two tales: real estate’s as much a disease as an asset class. Too easy to slip into, too facile to finance, too cloaked in misinformation, too often the choice of the naïve. The coming reset will bite.

114 comments ↓

#1 cto on 11.21.16 at 6:20 pm

Garth

for a guy and his girlfriend to be making 100 large by 32, in a city where the average family income is 80-90, why would he care how much money he is loosing.
With that 200k between the two of them, keep them both.
Randy buddy, don’t sweat the small stuff and build that career man!!!

#2 Alice on 11.21.16 at 6:25 pm

Real estate is a disease alright, and we’re treating it with pseudoscience. Foreign buyers might actually *make* more money with BC’s tax plan.

https://betterdwelling.com/bc-foreign-buyer-tax-might-actually-cost-canadian-taxpayers-billions/

The government needs to just raise rates to a normal level and watch it implode. It’ll be rough, but the bubble won’t inflate to astronomical levels.

#3 Lucy Team Rocket on 11.21.16 at 6:26 pm

What happened today? You and Mr. Lew stated that the Canadian dollar will depreciate against the Greenback. Today, it is valued at 74.6 cents, expecting to increase up to 76.5 cents after the OPEC deal.

Oil prices are set to rise this week to US$60/BBL. The Canadian dollar is forecasted to increase to 80 cents in December after the OPEC deal.

Trump’s mass spending can cause the Greenback to lose value against the major currencies. Canadian dollar will increase to 90 cents in early 2017 if that happens.

The Canadian economy is going to boom becoz of oil prices.

Adding into mass immigration, our proud human rights policies, demand for a stable economy, our highest standards of living in the world, the real estate industry in major cities in Canada such as Toronto are only going to go up.

Canada will recover the value of the dollar because it is now 74.6 cents in value as we speak. The trend is going up!!!

#4 Penny Henny on 11.21.16 at 6:31 pm

Excuuuuuuuse me. Coming through coming though.
Did someone forget that every mortgage payment on the rental is reducing the principle. So $400 per year is actually a lot more.

Just the facts ma’am.

#5 Polls R Phake on 11.21.16 at 6:31 pm

“We both make 100K each”

Hillary will win

You keep confirming that most of the people that visit this blog are Public Sector Workers.

#6 crowdedelevatorfartz on 11.21.16 at 6:37 pm

I cant believe these people are long time readers….

Denial is not just a river.

#7 Jungle on 11.21.16 at 6:42 pm

Cash flow NEGATIVE.
A few people in my circle think they can buy condo and rent it out now in t.o.

I try to tell them they will be subsidizing someone’s else’s living.

However it,s still EQUITy they say as tenant pays down mortgage. Really stupid way to gang wealth in is situation

#8 Millenial on 11.21.16 at 6:46 pm

Garth,
My retirement plan is the $12 I’ve got riding on this Wednesday’s $13 million 6/49 draw. Wish me luck!

#9 Kona on 11.21.16 at 6:58 pm

Gotta love these real estate investors. Guy in my neighbourhood bought a new build home 3 years ago for “investment”. House was about $375,000 and was advertised for rent for $1700 a month.

Mortgage payment, tax and insurance probably cost him about $1680 a month (20% down, 30 yr am).

Earlier this year decided to list the home for sale. No tenant. Always a good idea selling an empty house. Listed for $379k. Reduced to $369k. Four months later a For Rent sign appeared. House was rented a month later for $1700.

Perhaps now he has learned that selling a rental property isn’t quite the same as selling a stock.

#10 Market Is Changing in Toronto on 11.21.16 at 6:58 pm

I live on a pedestrian friendly street in Toronto, I take the dog out for a walk daily. I have been noticing that houses that are listed are NOT moving. Hardly anyone at the open houses either. A few months ago these properties would have sold in a day. These properties have been sitting and sitting. Looks like the peak happened a few months ago. I have also noticed the agents from a few months ago have kept their sold signs up for months. That too is new, the signs in Toronto were usually up for a week or two after and then taken down. Not now, I guess they still want to pretend things are moving quickly.

#11 Context on 11.21.16 at 7:17 pm

I wonder when Randy has inspected his condo in Toronto last? It only takes a door posting 24 hours in advance as the Landlord, to look around according to Ontario Law. It may have been trashed already for all he knows.

#12 Debtslavecreator on 11.21.16 at 7:18 pm

It’s about time we get a reset – we are likely to see more major changes to mortgages soon and I think we will see an across the board 10% min Down payment
We need a solid 20-30 % decline to reset the expectations of our fellow comrades. Way too many people who are completely deluded on housing

#13 Happy Housing Crash Everyone! on 11.21.16 at 7:20 pm

You can feel the fear in the air. Happy Housing Crash Everyone!

#14 Haha on 11.21.16 at 7:22 pm

We have ZERO debt except……..
Delusional is an understatement.

#15 bb on 11.21.16 at 7:25 pm

200k household income. 80% of homeowners would dream of that income.

They can easily sell 2 condos and buy a new house around 600-700k. Live on it rent free and pay off the mortgage in 5 years.

#16 Happy Housing Crash Everyone! on 11.21.16 at 7:25 pm

10 Market Is Changing in Toronto

You are bang on. Sold signs from last month or two are still up and the for sale signs don’t have sold signs when they would of sold. Toronto, GTA is a house of cards . Everyone knows that which is why they cry when the government wants to move towards an open and free market. If they would just allow that you happen housing would be 50-60% cheaper.

#17 bdwy sktrn on 11.21.16 at 7:37 pm

#141 Neil Armstrong on 11.21.16 at 3:09 pm
#129 NoName – Write this down: Battery storage efficiency and capacity per volume is doubling every few months. So is solar technology.
—————————
see the pic above.

pure garbage. perhaps the most scientifically ignorant comment ever posted here.

#18 Long-Time Lurker on 11.21.16 at 7:44 pm

Nice article, Garth.

I appreciate your insight.

#19 RiseandShine on 11.21.16 at 7:52 pm

These extreme examples illustrate very little. Based upon the surveys that this blog has undertaken most visitors here have a sizeable net worth….and from the comments section many have a well diversified portfolio. Yet….this blog has been heralding the bigvreal estate reset for over six years. In that time many have seen their properties double. The real message that people shouldn’t put all of their net worth in a single asset makes perfect sense. It seems like a big miss that Rj here isn’t a more balanced perspective with a focus on how to maximize returns and manage risk.

We currently have a stock market pricing in US growth at 4-5% next year and valuations are so far above the 200 DMA average that we should expect a pullback similar to real estate. We have a bond market that seems to be pricing in significant inflation – do we really expect that to happen. Since inflation is a measure of currency devaluation (it is not a measure of prices going up) you would think that there might be some analysis on he valuenof a core gold holding. However….apparently gold is useless and should be banned.

We get it…..real estate will correct….interest rates should rise…but there is a much bigger picture than just real estate is going to correct.

#20 cto on 11.21.16 at 8:01 pm

#3 Lucy Team Rocket

Hey Lucy!, is Emily on your team ???

#21 Herb on 11.21.16 at 8:05 pm

In trump We Trust –

https://www.youtube.com/watch?v=7xX_KaStFT8

He certainly is leading with his chin.

#22 ronh on 11.21.16 at 8:12 pm

Your home is not an investment. Repeat as needed.

#23 Chinese Investor on 11.21.16 at 8:20 pm

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#24 Context on 11.21.16 at 8:40 pm

Here is a hypothetical if Randy advertised his condo with an available date, a good location, and stated they would be relocating to Victoria in the near future. A nice married couple came to see it and a deal was made. It had to be furnished nicely so they bought it all at Ikea and made sure the kitchen was supplied with basics. Then they went home down the street and around the corner to upload with Airbnb the pictures taken and details for their short term tourist accommodation at just $80.00 per night with lots of cash rolling in to pay Randy his rent and pocket the difference.

#25 mike from mtl on 11.21.16 at 8:42 pm

Forget RE, what the heck is going on with the CA$? I was fully expecting a slow grind to 70 or so however the raise is weird. Short lived I guess..

At least AU$ is back below us as normal, which was strange seeing it briefly above CA$ in recent months.

#26 Freedom First on 11.21.16 at 8:50 pm

Thanks Garth! I feel so much better after reading your Blog today.

Especially like the “you suck at it” section.

God. Freedom is so underrated.

007
Freedom First
Freedomonics

#27 common sense on 11.21.16 at 8:58 pm

#3 Lucy

Please share the electric kool aid…

Why are the trolls women on this site or pretending to be???

#28 Scorpions on 11.21.16 at 9:00 pm

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#29 common sense on 11.21.16 at 9:01 pm

Any chance that it’s late fall that houses are not moving as fast in TO? It must have an effect on sales to some degree.

Ever try to move in the winter?

#30 Bank of Millenial on 11.21.16 at 9:08 pm

#10 Market Is Changing in Toronto

That is what happens when you stick the gears into 20% of the buyer market, as well as another 30%-40% people finally clued that there are cockroaches in the kitchen…

The minority 40% are stilling pumping up sold signs, I hope there is some mercy for them.

#31 Metaxa on 11.21.16 at 9:13 pm

My brother and I built a functioning business with rentals. Turns out it was a multi-million dollar business.

started out in the swamp of mouldy trailer homes in suspect parks, moved into mouldy condos in seedy parts of town and finally said screw this and sold the lot and bought a single home with a non-conforming basement suite. In a nicer part of town.

30+ years later and many, many ups and downs, we ended up with two commercial units in a strata building, two what you call executive rental homes in the best part of town and four homes.

Not houses, homes.

So, diversified and balanced in types of housing stock.
good cash flow, good tenants, good times mostly.

But it took 35 years to get there and during most of those years he and I were worker bees. He managed the lot as they were in in his town, I flew in periodically to help with a roof or a full paint or…

Took 35 years but he passed in a motor vehicle accident three years ago, I sold out and it would have made us both single digit millionaires if split. Lets not talk of the first fifteen years, the last fifteen and today…totally worth it. Except for the dying part…

So it can be done and done despite the ups and downs of interest rates, middle of the night tenant moves, and all the other stuff but you have to put in the time, effort, money and deferred gratification.

The two letter writers? They don’t have enough diversification in their real estate portfolio.

Garth says get out…I say go for it or get out.
Going for it is hard tho, do not let anyone tell you otherwise.

#32 Student of Garthenomics on 11.21.16 at 9:13 pm

A wise man once said, “Don’t invest in any thing that eats or needs paint”. Still another said, “The worst way to increase your wealth is by earning more income”. And rent earned is income. Garth has chronicled the liquidity, transaction cost, diversification, and tax advantages of owning financial assets over investment real estate. So invest and “let your money make money so you don’t have too”.

#33 Smoking Man on 11.21.16 at 9:16 pm

I’ve fired all my millenials. At keys me.

I gave the mind fd a chance. Every one gets a trophy.

Useless. Hired ed the drunk from chairman lounge.
He is a fallen old angel that belives in god. Would not go to garth for 8 percent. He’s fkd up stairs
He’s perfect.

An old bull shitter with connections . Nothing else matters .

We are going to take loot for the bad. Protect their secret.

#34 Neil on 11.21.16 at 9:18 pm

Garth

Not sure I understand your assessment

Toronto condo:
Worth: 350
Paid: 320
Mortgage owning:270
So made: 30
Investment was less than 50k
So gain over (assumed) 3 years on investment is at least 60% (annualized as ~17%/yr).

And that is worst case since presumably the mtg was rapaid over the 3 years via the rent so in reality more than made 30 and investment less than 50K and gain more in the 20%/year region.

V good investment. Not the middling 3% claimed.

#35 Self Directed on 11.21.16 at 9:19 pm

Cory and Denise… for being real estate investors and having ‘liquidated’ all but 2 properties, I’d love to know what they made (or lost) on the stuff already liquidated (bailed) on.

Agreed, Garth. Sounds like they are doing it wrong. But they know how to do the other thing!

#36 Classics on 11.21.16 at 9:24 pm

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#37 Rexx Rock on 11.21.16 at 9:30 pm

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#38 Mark on 11.21.16 at 9:33 pm

“Oil prices are set to rise this week to US$60/BBL. The Canadian dollar is forecasted to increase to 80 cents in December after the OPEC deal.”

Pretty aggressive set of ‘predictions’. Even though the CAD$ is likely quite undervalued, especially with house prices falling and consumers having little spending power (driving deflation), a 6 cent move in the CAD$ in a mere month is a pretty big move historically. As would be a ~25% increase in oil prices.

Earlier this year decided to list the home for sale. No tenant. Always a good idea selling an empty house. Listed for $379k. Reduced to $369k. Four months later a For Rent sign appeared. House was rented a month later for $1700.

Figure a 1% long-term maintenance allowance (ie: $3690/year), $2000/year in property tax, $1000 for insurance, and that’s a net of $13,710/year. Or a pre-tax ‘yield’ of 3.7% Throw on your typical 30% income tax rate, and that’s a 2.59% after-tax yield. Without even a dime allocated for management or vacancy.

Sure makes XIU, which currently has an after-tax dividend yield of 2.9%, with only 40% of the underlying profits paid out look like an awfully good deal in comparison.

#39 IM in C on 11.21.16 at 9:42 pm

Interest rates are not going to go up. There is a vast ocean of money out there, basic law of supply and demand. Besides, every government out there knows that if they allow interest rates to rise more than a tiny fraction, then the housing market will tank…and so will that government in the next election!!

Current market odds for rate hike Dec.14: 100%. — Garth

#40 common sense on 11.21.16 at 9:48 pm

Your a classic Classic…

#41 InvestorsFriend on 11.21.16 at 9:49 pm

CMHC proposed 10% down payment

It would of course be in CMHC’s best interest if people had more equity in the homes where CMHC is guaranteeing the payment of the mortgage to the banks.

But it is not going to happen because it is politicians that set that 5% number.

#42 InvestorsFriend on 11.21.16 at 9:52 pm

I Predict…

That Canadian Home prices will be closer to U.S. home prices in five years.

But it will be mostly due to the continued rise in U.S. home prices rather than any great decline in Canadian prices.

U.S. home prices are far too affordable. It’s unnatural.

#43 Context on 11.21.16 at 9:53 pm

#31 Metaxa :- Its almost 2017 so just what are they going for may I ask? Furthermore tell us what you are going for now as maybe I am missing out on something big?

#44 Smoking Man on 11.21.16 at 10:00 pm

#36 Classics on 11.21.16 at 9:24 pm
Here is Pink Floyd gem you all ight appreciate…

https://www.youtube.com/watch?v=UKnz81z0AgQ
…….
If I was a bit younger. That would have worked.
I’m an old bald basterds knowing that death is calling
Me soon.

I’m going with .

https://youtu.be/Tj75Arhq5ho

I’m a writer now.

#45 Neil , forgive Garth his numbers .. on 11.21.16 at 10:06 pm

had the real estate deal dead before it started

#46 The Electric Universe on 11.21.16 at 10:13 pm

#33 Smoking Man on 11.21.16 at 9:16 pm

I’ve fired all my millenials. At keys me.

I gave the mind fd a chance. Every one gets a trophy.

Useless. Hired ed the drunk from chairman lounge.
He is a fallen old angel that belives in god. Would not go to garth for 8 percent. He’s fkd up stairs
He’s perfect.

An old bull shitter with connections . Nothing else matters .

We are going to take loot for the bad. Protect their secret.

Speaking of old bull shitters with connections….I thought you moved to Boston to run a billion dollar hedge fund.. or did they fire your ass?

#47 Yuus bin Haad on 11.21.16 at 10:17 pm

I’m getting better at spotting the “Dear Garth” posts — tonight you lost me at “Well”.

#48 The new team members on 11.21.16 at 10:17 pm

The new team members: Steve Bannon

https://youtu.be/LNwf1B0qNMs

#49 Smoking Man on 11.21.16 at 10:18 pm

DELETED

#50 Smoking Man on 11.21.16 at 10:36 pm

When I meet the wife .

It’s In the book that no one bough

https://youtu.be/jsE7qTovxRs

#51 No Mercy on 11.21.16 at 10:37 pm

#34 Neil

I agree with you.

You invest 50K and get out 30K.

But if you sell … the realtor gets the profit.

You don’t sell … You keep paying the expenses.

Including the increasing interest rates.

This investment is a lemon.

Unless you hold for 30 years and get lucky.

#52 Smoking Man on 11.21.16 at 10:56 pm

DELETED

#53 Leda on 11.21.16 at 11:11 pm

Got a call from my landlord. Mortgage evaluation of the building. Hopefully, he’s locking it in and not selling. One thing about Vancouver is the pet by laws force many pet owners to buy, move or ditch the beasts.

Garth, curious what you think of the so called ‘tech’ boom in Vancouver. According to the media, business rentals in Vancouver are actually cheap compared to American cites. Perhaps, business properties reflect a more acurate cost? The crazy thing is keep hearing from people they bought a second property. Curious, if the ownership of multiple properties was a thing back in the 80s… i don’t see this ending well.

The imagined value of real estate is a fascinating subject.

#54 RIL on 11.21.16 at 11:12 pm

Off topic. Some employers are beneficent. A pal of mine serves on the volunteer fire department at an oil sands mine (better, bigger and more well equipped than most small municipalities in Canada). The firefighters responded to the Ft. McMerry unpleasantness in May. For every day he was sleeping on a cot at the rec centre or standing on a street with dozens of houses on either side going up in flames, whether 2 hours or 16, he was paid for 24 hours at triple time. $11K for a week.

#55 odious herodias on 11.21.16 at 11:16 pm

NIRP is coming…

http://www.zerohedge.com/news/2016-11-21/canadian-bank-starts-charging-negative-075-rate-most-foreign-cash-balances

#56 Bottoms_Up on 11.21.16 at 11:23 pm

#4 Penny Henny on 11.21.16 at 6:31 pm
#34 Neil on 11.21.16 at 9:18 pm
————————————
You both make it sound like condo imvesting is wise.

Please detail down payment, taxes, condo fees, special assessments vs. typical yearly rent (including months unrented).

Then, pretend you didn’t buy that condo but instead put your downpayment into a diversified investment earning 7%.

I look forward to seeing your analysis.

#57 That Guy on 11.21.16 at 11:26 pm

got a quote from one of the Big 5 for a commercial mortgage today (renewal) and its a full 1% lower than my current rate, but only a 3 year fixed… no chance I’m risking another renewal in 2020! I’d like to lock in for 10 years if I can.

This is it folks… the bottom of rates have already passed!!! Act accordingly

#58 That Guy on 11.21.16 at 11:30 pm

oh, for those who think earning no cash on a rental property but reducing your mortgage is the same as actually earning income, i have one (long) word for you: hahahahahahahahahahahahahahahahaha

#59 stage1dave on 11.21.16 at 11:41 pm

The Socialist Republic of Rachel, huh?

That’s pretty good…ensconced in north-central AB I usually feel like I’m trapped in the Eternal Dichotomy of the Continual Conservative Mind.

I’m not sure which description is more correct, but there sure is a pile of very vocal people out here that are extremely convinced that the government is just not giving them enuff money! Or enuff attention…or enuff respect…or, wait; is taking their money. (carbon tax) In the meantime, hopefully; Free Enterprise will rage onward.

I’m usually busy enuff (or keep myself busy enuff) that most of this rabble just flies by, but lately I find myself analyzing it a bit more closely due to a couple of personal experiences. (Firstly, I got caught in the traffic jam caused by one of the carbon protests haha)

I’ve mentioned before that my business day does not begin with any thought on my part as to who’s actually occupying the legislature (and barring it’s takeover by a bunch of mentally dim-gun nuts with bibles in one hand and pitchforks in the other) it probably never will.

Secondly, I have noticed a curious disconnect between the availability of corporate-owned vacant rental apartments (now well into double digits, percentage-wise) and the asking prices (escalating, 20% plus) compared to the prices being asked by smaller, privately owned properties and landlords.

I mentioned in a post a couple years ago that one of the potential effects of larger REIT’s was the danger of “local” rental markets being skewed by the needs of large pools of investors to see a reasonable ROI…and not the local rental market…that has apparently come to pass in this community. In a declining economy where the vacancy rate is almost three times what it was a couple years back, two corporate landlords are attempting to to get the rents above what they were at during the peak! In this town, anyway.

It would be a huge mistake to see rental units become commodified anywhere near the point that, say, WTI is…a “price that has very little to do with supply and demand”. It may be great for capitalism, but it makes for lousy communities.

I don’t really have a dog in this hunt other than as a bemused observer; at our income level it long ago became an issue not of what we can afford, but of what the wife and I choose to pay. But I do know a ton of people who are looking at cutting back on other expenditures to make up a sudden $2-300 rental increase. Again, in a downward market. (and no, none that I know smoke, drink, have addiction problems, are driving new vehicles, or are currently engaged in producing as many babies as possible)

I should mention that one of these large landlords has now laid of it’s financing of several thousand units off on CMHC (!) so maybe we all have a dog in this hunt now, huh?

Tangent: speaking of smoking, it has certainly become a huge issue here…for another 6 months, I will unfortunately be residing in a community where it is quite common for a resident to actually call the police when a person is suspected of smoking, or smoke is actually smelt on multi-family or apartment property.

(Why can’t they do that when some wingnut leaves his 1 ton diesel dually 4×4 crewcab – that apparently hasn’t seen a tuneup shop this decade – idle for 45 minutes in the parking lot?)

Anyway, how all of this will play out is interesting…I can actually see the corporate side of the rental market (and REITs) becoming better investments and more lucrative (increasing rents) not only because of the above reasons, but also because as mortgages become more expensive (increasing rates, tougher qualifying) it will push more people into the rental market. Occupancy (and rates) will rise in tandem.

In conclusion, Wifey and I refused the rent increase, and actually found a place cheaper than what we were paying the last couple years a few blocks away from a private LL…which has been vacant for 4 months. Our new LL says it’s the worst market she’s ever seen…all peaches n cream here, obviously!

#60 Bottoms-up on 11.21.16 at 11:45 pm

Umm, bottoms up– balanced portfolio earning 7%? …Better hope that Canadian real estate Market doesn’t tumble : look out below tsx, adjust asset allocation and keep your fingers crossed

#61 Metaxa on 11.21.16 at 11:58 pm

#43 Context:
#31 Metaxa :- Its almost 2017 so just what are they going for may I ask? Furthermore tell us what you are going for now as maybe I am missing out on something big?

No idea what they go for now…partner passed, I engaged a management firm, they were owned by a big property company (REIT, holding raw, shopping centers, apartments, acquisition dept, M&A dept, more) management firm impressed with the holdings asked for permission to bring this to attention of parent company, offer was so close to retail it was spooky so I took it.

Months later oil went boom, I got lucky and sold in Calgary just about at peak.

Now? I’m old, retired. We are talking about buying a winter place in either Portugal or New Zealand. I want to be served clams on a beach by Portuguese women, my wife wants to be served clams on a beach by Maori men. Who will prevail?

#62 WalMark of Sadkatoon on 11.21.16 at 11:59 pm

wanna live the dream? Just make partner at Goldman Sachs

https://www.quora.com/What-is-it-like-to-be-a-partner-at-Goldman-Sachs/answers/1723267

#63 Ransy on 11.22.16 at 12:37 am

Hey Dingbat. Canada has NEGATIVE interest rates! Your the tin foil hat wearing single grumpy old man.
http://www.zerohedge.com/news/2016-11-21/canadian-bank-starts-charging-negative-075-rate-most-foreign-cash-balances
EAT IT! Got GOLD???

#64 Brain dead on 11.22.16 at 2:23 am

I’ve got a different problem. I have a paid off house that I consider to have no set value because I need a place tsleep. Instead I’m fully invested in stocks and getting paid while I sleep. Appreciation of late has been amazing. My problem is that I am bombarded with dividend pmts monthly , quarterly, semester annually and annually. The money just piles up. I invest but now the market is toppy and everything selling for 52 week and record highs. Things like the CPD are rolling over and bonds are dead money. Global etfs are getting whacked. The 15000 mark is a sure signal the tsx will rocket higher. Any input? Should I just keep my balls engaged and grab the cash or go balanced and low profile.

#65 Bram on 11.22.16 at 3:26 am

#4 Penny Henny on 11.21.16 at 6:31 pm
Did someone forget that every mortgage payment on the rental is reducing the principle.

Quite right!

I just ran the numbers, and my mortgage payment is currently 38% portion is interest, and 62% portion is repayment.
(This ratio gets better by the week also, with the last payment at amortization being all principle and no interest at all.)

The repayment goes straight from your cash to your equity, so is neutral, wealth-wise.

The interest portion is lost forever, and you won’t see that ever again.
But the bulk of the mortgage payments come back to you when you sell the house.

If you want to compare rent vs buy, your should add up:
-interest paid
-prop tax
-maintenance
-loss in earning potential of your equity
And compare it with the rent.

The fact is, with these stupid low interest rates, a mortgage is quite cheap, as interest-portion is peanuts. That’s why buying is popular, despite getting ridiculed for it on this blog.

#66 Strange Kat on 11.22.16 at 3:58 am

With the market in nosebleed territory any thoughts on the ZWU? Pays 7% vs CPD 4.

#67 Tony on 11.22.16 at 4:28 am

Randy should read up on what happened to Miami Florida condos as he awaits his future. They fell about 80 percent on average. Toronto condos are much more overvalued than Miami condos ever were. Cory and Denise have their head in the clouds and may learn what happens when you try to rent out a 4-plex only to learn there’s no one to rent it to. Such is the case in ALL parts of Edmonton presently. If oil stays below the 80 dollar U.S. mark the higher the vacancy rate will go. Anyone thinking oil prices will rise in the second quarter of 2017 is dreaming. Both Calgary and Edmonton are presently in a free-fall in prices contrary to the fairy tales told from the CRA. Calgary is down about 20 to 25 percent from the October 2014 peak and Edmonton is down about 10 to 15 percent from the same October 2014 peak.

#68 Classics on 11.22.16 at 6:00 am

DELETED

#69 Wrk.dover on 11.22.16 at 6:23 am

The year end bonuses hinge on 40 more days.

All three major indexes last year, look at the charts, shed a double digit amount starting prematurely one tradeing day from the end of the year.

Toronto gained so much this year from that bottom, maybe if they can just keep up appearances until Boxing Day they will still get the year end bonuses in the corporate suites.

Gotta have that January slide, so they can get another year of gain/bonus

#70 Alice on 11.22.16 at 6:59 am

#38 Mark on 11.21.16 at 9:33 pm

The Canadian dollar is undervalued by what measure? It’s actually overvalued and BoC is likely going to weakened to become more compatible with the USD and higher interest rates there.

#71 No Trump, No KKK, No Fascist USA!!!! on 11.22.16 at 8:05 am

The economic and social disruption in the USA will be arriving here shortly. The cancelling of TPP is just he beginning. We are such dupes here thinking our real estate market is “different”.

#72 Sergi on 11.22.16 at 8:24 am

Real Estate is a disease?
Lenin, Trotsky, Stalin,Castro, Mao. Marx etc. would agree.
Land ownership in those regimes was a death sentence. No chance to get ‘liquid’, millions were just ‘liquidated’ by the state. The truth is not taught in schools.

#73 That Guy on 11.22.16 at 8:56 am

#65 Bram – You earn NOTHING until a property is SOLD. Paying back principal is important, but it’s NOT like earning income.

I’d love to see you take that paid-back principal and buy milk with it.

#67 Tony – Toronto condos are not “more overvalued” than Miami condos. All those Miami condos were investment properties and second homes, with WAY more built up than a rental economy could support.
I agree Toronto condos are overvalued (everything in Toronto currently is), but to suggest that they are more than Miami is simply not accurate.

#74 GFD on 11.22.16 at 9:02 am

#3 Lucy Team Rocket aka EmilyOne aka Elizabeth Smith is this about your new thongs or are you still in to Trudeau’s great leadership on anal pleasures.

#75 Ole Doberman on 11.22.16 at 9:33 am

You know how they say when even the shoe shine boy is talking about how well his stocks are doing that it’s time to sell.

Well in Calgary the RE moguls have approached the U of C MBA program to implement a specialized real estate section to the program saying it just makes sense since RE is the biggest part of the economy.

Is this an indicator it is surely time to sell?

#76 Three percent gain on 11.22.16 at 9:38 am

I agree with Neil!
Garth you do this many times on this blog you distort numbers to exaggerate the point.
Yes we all understand that housing is not a place to hold all your eggs.
However,
$30,000 gain on 50,000 even after commissions, and capital gains tax is still good.
And I think you assumed they put down $50,000 maybe they put down less.

#77 Canada is in trouble on 11.22.16 at 9:46 am

Sad. Elected a cartoon character. He’s fodder for trump . Real estate ?

That ship sailed. Do Canadians ever wonder why they are so dependent on USA? Just accept it?

No disrespect intended , just curious.

This blog is interesting . The author quit on politics , in itself speaks volumes

#78 Sergi on 11.22.16 at 9:53 am

Let’s not get paranoid . YOU need a place to live . Pay the rent …..bro

#79 traderJim on 11.22.16 at 10:17 am

Oil is rallying again (how many times is this? 20? 30?) on
talk of an OPEC production agreement. Freeze, cut, whatever, does anyone really believe it?

Quit likely OPEC will come to some kind of agreement, but then no one will stick to it, so supply and demand will rule the day in the long term.

Of course, if oil does somehow miraculously reach $60 then fracking ramps up, the oil sands become almost feasible and rig counts go up.

The one thing that really could make a difference is if Trump adds a few trillion to the US’s debt and manages to jump-start the economy.

I’m skeptical, but it’s possible.

I have to admit, Bannon’s idea that IF you are going to spend trillions on infrastructure or walls or whatever, the time to do it is when interest rates are negative.

#80 dosouth on 11.22.16 at 10:30 am

I guess you surmised that these “investors” thought they were smarter and savvier than most…. they will now have to lick their wounds as they just got FLAMED!

PS- Money says neither one will take the free advice and will continue on their losing ways. Just wanted their minute or so of fame on a your blog

#81 Ronaldo on 11.22.16 at 10:31 am

#57 That Guy on 11.21.16 at 11:26 pm

This is it folks… the bottom of rates have already passed!!! Act accordingly
——————————————————————
Not so sure about that. Markets in U.S. are flying high, global debt climbing and U.S. debt forecasted to continue higher. No need to raise rates. IMO, there will be no December rate hike. Markets will correct in the New Year. Your bonds will be just fine. Everything is so temporary. Where is Louis Rukeyser when we need him? I loved watching his show. He left way too early.

#82 Context on 11.22.16 at 10:34 am

#61 Metaxa:- The first rule in buying a property far from home is rent first before you buy anything and Portugal is off the page because the temperatures will be too cold there. My uncle held an important position overseas and every two years was given a two month vacation. My uncle and aunt travelled the world in style no less. His number one country was New Zealand and the temperatures will be good because our winter is their summer. Keep doing your homework.

#83 traderJim on 11.22.16 at 10:35 am

Loonie is holding up surprisingly well, all things considered. It’s likely the whole world is short, as it just seems such an obvious trade.

Negatives for the loonie are the Fed rate hike next month, renegotiation of NAFTA, protectionist trade policies to come, possibly the RE bubble bursting.

However, the loonie usually does well when the USA does well, following the overall CDN economy. So maybe that’s in play.

History tells me that currency moves almost always take longer to play out than expected, and the trends last many years, even decades.

You can have a lot of dead cat bounces and short relief rallies in that period.

Sticking with my short loonie position and still betting the trend is my friend and we will see under 70 cents a few months after Trump takes office.

#84 maxx on 11.22.16 at 11:00 am

#10 Market Is Changing in Toronto on 11.21.16 at 6:58 pm

“I have also noticed the agents from a few months ago have kept their sold signs up for months. That too is new, the signs in Toronto were usually up for a week or two after and then taken down. Not now, I guess they still want to pretend things are moving quickly.”

“We had to tell a realtard to remove his SOLD sign from a property we bought. As Tony Roma (Glengarry Glenross) says: “You make a close, this whole place stinks with your farts for a week.”

Realturds are predictable, in a genuinely soporific way. Most are congenitally dumb. They appear current, with buckets of plastic teeth, leased luxury cars, canned lingo, and almost always sporting a cheap, cobbled-together, ersatz designer look, à la: real designer bag with knock-off threads and for the boys, designer, chunky, flash watch, far too much after shave, ditto for the cheap threads and really stupid looking footwear.
And let’s not get started on the hair……
Just when you think you met a decent one, within a short period of time, the programming from their meetings and conventions ad nauseum comes spewing forth.

Volunteers at second-hand shops have far more class.

#85 traderJim on 11.22.16 at 11:07 am

One very positive thing that came out of the US election is that people now have a healthy skepticism of the press.

And the press found out, much to their horror, that they can’t always make or break a President.

Trump showed that facts are really not important (in an election), and that no one cares about policies (quick: Tell me what Hillary’s position on TPP was).

If you have not heard about the role of persuasion techniques and how they were used you are really missing out. Scott Adams is the best source for this, and entertaining to boot. I would never have understood the election without reading his blog and listening to his periscope chats.

Now I see people reading Adams’ and Robert Cialdini books everywhere I go, even here in South America.

And now when I see people scratching their heads over openly gay Peter Thiel possibly playing a role in a Trump admin (but but but Trump’s a racist homophobe!), I really understand what cognitive dissonance is.

#86 Bram on 11.22.16 at 11:45 am

#73 That Guy on 11.22.16 at 8:56 am
I’d love to see you take that paid-back principal and buy milk with it.

See it as a forced saving, you can’t get away from.
It will not buy your milk now, but it does buy you a whole lot of milk in a few decades time.

House prices go up and down.
But over a decade, it is EXTREMELY unlikely you will not at the least get your money back.

Show me a 10 year span in Canada where prices were lower than 10 yrs earlier.
So unlikely to happen, if it even happened at all.

Bram

#87 TurnerNation on 11.22.16 at 12:08 pm

Oil’s topped.

New saw: Spending like a Drunken Calgarian?

Ps. My pronouns are Him, His.

#88 Context on 11.22.16 at 12:13 pm

#66 Strange Kat:- ZWU raises a red flag as the yield is too high and they are using call options which is a gamble at best. Apparently the net distribution is taxable but don’t understand the final outcome. I don’t like it because the other one is the way to go as the resets over time will adjust for increasing interest rates and perhaps a capital gain going forward and would be the better buy as they are down a bit now.

#89 Context on 11.22.16 at 12:38 pm

This might become a trend in Ontario and a reason why I only buy Chapman’s frozen yogurt. A small town community has to close its only elementary school in Markdale, Ontario. Ashley Chapman the V.P. of the ice cream company will buy the school for $1 million cash and lease it back to the school board to rescue the community. Furthermore, will spend additional funds to renovate it all for the students. The Ontario Government is having discussions and what will the school board do?

#90 Polls R Phake on 11.22.16 at 12:46 pm

#71 No Trump, No KKK, No Fascist USA!!!! on 11.22.16 at 8:05 am
The economic and social disruption in the USA will be arriving here shortly. The cancelling of TPP is just he beginning. We are such dupes here thinking our real estate market is “different”.

_________________________________________

You need to change your name from Trump to Hillary being as how the Democrats invented the KKK, owned all the slaves and are the modern creators of socialism which is destroying the USA. Facts facts facts.

#91 Capt. Serious on 11.22.16 at 12:52 pm

The fact is, with these stupid low interest rates, a mortgage is quite cheap, as interest-portion is peanuts. That’s why buying is popular, despite getting ridiculed for it on this blog.

No, no, no. The mortgage is not cheap. The payments are low. There is a difference. Nobody has a 20+ year term, and most normal people are not paying off a mortgage in less than ten years. It’s almost certain some of that payback is going to happen at higher interest rates. And as pointed out, the initial years of a mortgage are interest payment heavy. Now is not the time to be taking on large mortgages with long amortizations. If one can find an affordable house that doesn’t take all your free cash flow and will not bankrupt you if rates triple over the mortgage life (6-8%), and the house will not be your only source of savings, then one can buy a house. A lot of people are not doing the math, and are exposing themselves to a financial meltdown.

#92 Mark on 11.22.16 at 1:12 pm

“The Canadian dollar is undervalued by what measure? “

Relative long-term trade positions. Relative long-term budget deficits. Relative long-term total debt. Relative long-term means for the currency pair. Between Canada and the USA.

For instance, Canada has a federal government debt of $650B, give or take. If you scale that to the USA, using the traditional 10:1 ratio, that’s only $6.5T. US National Debt is rapidly approaching $20T.

Canada has run trade surpluses a significant number of times over the past 30 years with both the USA and the rest of the world on average. The US has mostly only run deficits.

There are next to no Canadian dollars floating around outside of Canada to eventually place demand on the Canadian economy (ie: be sold). There are trillions of USD$ held offshore by foreign entities which eventually must be sold, suppressing the USD$ and eliminating the benefit of seignoriage to the US economy.

The factors that drove the USD$ to its all time high against the CAD$ (ie: very strong financial and tech sectors, and a depression in the commodities sector) will eventually give way to quite the opposite (ie: very weak financial sector and tech sector, and a bubble in the commodities sector, particularly with respect to the precious metals). Probably with higher interest rates (higher long-term interest rates destroy the FIRE sector!). Cyclicality created an extremity in one direction (ie: the $0.63 USD/CAD). Cyclicality will create an extreme in the other direction, ie: a $1.5 USD$/CAD$. Timeframes are hard to predict, but I know I will see it in my lifetime. The TSX may very well be worth 2X that of the Dow index (ie: currently 15k and 19k respectively) at such time as well, something which has happened before!

#93 Context on 11.22.16 at 1:35 pm

#10 Market Is Changing in Toronto:- The sold signs are kept up for months as bait for a greater fool to call the agent as he must be a star. In some cases the owners are paid who never had the house listed in the first place as a form of advertisement. These signs are rotated around certain areas and are time dated as cannot be kept up too long. The other scam they are pulling is paying people to display a for sale sign which is not even listed for suckers to call the agent. He says sorry as it has just been sold as my listings go fast, so list with me.

#94 oncebitten on 11.22.16 at 1:55 pm

polls R phake #90

You need to educate yourself on the Southern Strategy. Facts, facts, facts.

https://en.wikipedia.org/wiki/Southern_strategy

#95 jess on 11.22.16 at 2:01 pm

48 The new team members on 11.21.16 at 10:17 pm

By Pam Martens: July 22, 2014
“basket option, gaming regulation T
http://wallstreetonparade.com/2014/07/senate-renaissance-hedge-fund-avoided-6-billion-in-taxes-in-bogus-scheme-with-banks/

Bogus Scheme
https://www.math.nyu.edu/faculty/avellane/basket.pdf
ABUSE OF STRUCTUREDFINANCIAL PRODUCTS: Misusing
Basket Options toAvoid Taxes and Leverage LimitsMAJORITY AND MINORITY
STAFF REPORTPERMANENT SUBCOMMITTEE ON INVESTIGATIONS UNITED
STATES SENATE

According to Bloomberg News, Renaissance Technologies has yet to settle up with the IRS over this scheme.

The “Swamp”Group Behind Donald all seem to have come from Citizen united inc.
http://wallstreetonparade.com/

Sons and Daughters Program was nothing more than bribery by another name,”
Bribery and Corruption: JPMorgan Chase Paying $264 Million to Settle FCPA Charges (17 Nov 2016)
https://www.justice.gov/opa/pr/jpmorgan-s-investment-bank-hong-kong-agrees-pay-72-million-penalty-corrupt-hiring-scheme

Kara Brockmeyer, of the SEC, said the misconduct was “so blatant that JP Morgan investment bankers created ‘referral hires vs revenue’ spreadsheets” to track the money flow.

#96 conan on 11.22.16 at 2:08 pm

#90 Polls R Phake on 11.22.16 at 12:46 pm

“Democrats invented the KKK” ummmmm no.
Look it up, the Democrats of the civil war era are the republicans of today and vice versa.

They switched names around the turn of the 20th century.

#97 Context on 11.22.16 at 2:22 pm

I know that last part is confusing so must clarify a bit better as the shell games going on are numerous. Here is the context, as a for sale sign is put up for a few weeks as a bait and switch routine and the owner is being paid because the house has no listing. There might be an older couple in the area in discussions of selling so they drive around to ascertain selling activity and see a sign on a home very much like their home. So they call the agent to get the price which was much higher than expected and tells them it was just sold as his listings sell fast. They are amateurs on the phone with a shark as they explain why they called in the first place and he being a star tells them just come to my office and list with me.

#98 Rexx Rock on 11.22.16 at 2:28 pm

Wow baby!!Time to load the boat on your favourite oil stocks.TCK.B $34 was $ in the beginning of year.Almost as good as GTA or Vancouver house.Make your investments count.

#99 jess on 11.22.16 at 2:47 pm

Saudi Arabia said to investigate $4bn of money laundering cases

Suspects allegedly transferred large sums of money through fake bank accounts
By Staff writer

Sunday, 20 November 2016 10:20 AM

http://www.arabianbusiness.com/saudi-arabia-said-investigate-4bn-of-money-laundering-cases-653373.html

#100 Mark on 11.22.16 at 3:01 pm

“Show me a 10 year span in Canada where prices were lower than 10 yrs earlier.”

1990-2000 in Toronto. Meanwhile the TSX tripled, and nearly quadrupled with dividend re-investment.

“Smart” money rebalanced their excesses in RE into stocks in the early 1990s. And rebalanced their excesses in stocks into RE in the late 1990s.

One-asset strategy people suffered inferior results if you look at the 1990-2013 interval (ie: the two peaks of the Toronto RE, or a full cycle of RE underperformance and outperformance, stock underperformance and outperformance!). This is why Garth preaches balance. It augments returns and reduces volatility over the long term.

#101 baaabaaa on 11.22.16 at 3:29 pm

#82 Context on 11.22.16 at 10:34 am
.. His number one country was New Zealand and the temperatures will be good because our winter is their summer. Keep doing your homework.”

NZ has some of the worst weather on the planet year round, a bit like Scotland…..just ask the sheep!

#102 cK on 11.22.16 at 3:32 pm

#58: That guy

As a newbie can you please to me the flawed thinking of what you described?

#103 For those about to flop... on 11.22.16 at 3:37 pm

You can keep your political favours.

I only stay at this hotel for the sliders…

M42BC

http://www.chicagotribune.com/news/nationworld/ct-trump-international-hotel-20161119-story.html

#104 Penny Henny on 11.22.16 at 3:38 pm

New home prices DROPPING in Toronto.

Well sorta.

http://business.financialpost.com/personal-finance/mortgages-real-estate/toronto-new-home-prices-drop-but-only-because-youre-getting-less-house-for-your-money

#105 Ace Goodheart on 11.22.16 at 3:41 pm

RE: #10 Market is Changing in Toronto:

“I live on a pedestrian friendly street in Toronto, I take the dog out for a walk daily. I have been noticing that houses that are listed are NOT moving. Hardly anyone at the open houses either.”

What are the prices? Where I live a house sells in about 5 days, usually after the open house, which is always held on a weekend. We know when the sold sign will pop up as it is after the open house, so usually Monday or Tuesday depending on how fast they can get it up there.

This is Mount Dennis, where it is possible to purchase a detached house with two car parking, a huge backyard, three bedrooms, a full basement, for 600K.

Price appears to be the determining factor

#106 mike from mtl on 11.22.16 at 3:46 pm

#81 Ronaldo on 11.22.16 at 10:31 am
Markets will correct in the New Year. Your bonds will be just fine. Everything is so temporary.
///////////////////////////////////////////////

Agreed, timing might differ however I am not selling off all my bond holdings at all. Likewise I am not increasing my position on US equities any further. As Garth says balance..

IMHO all it takes is another 2001/2008 that would take years and years to get back. US markets are so overvalued it’s just a matter of time, a whiff of growth and all the dumb money piles in.

#107 jess on 11.22.16 at 4:21 pm

What has Canada done since released leaks?

Residency

Dozens of Fishermen Charged with Tax Fraud
By Vala Hafstað Society November 18, 2016 11:20Updated: November 18, 2016 11:22

http://icelandreview.com/news/2016/11/18/dozens-fishermen-charged-tax-fraud
===

France after Panama Papers
The budget office of the Finance Ministry said its experts have studied the leaked information and are now digging deeper into 560 specific cases.

lithuania investigates
These include offshore companies linked to the network of Roldugin /Pallas First Investments, a British Virgin Islands (BVI) /defunct Lithuanian bank Ukio Bankas

https://www.occrp.org/en/daily/5820-lithuania-number-of-panama-papers-investigations-doubles

#108 zero debt, ya rightttt on 11.22.16 at 4:45 pm

There is so much lol in those quoted examples. ‘OTHER THAN MORGAGE i have zero debt’ ahahahahahah. Never mind the couple of grand on your credit card, or maybe even remaining car loan that can be paid off on a spot – THE MORTGAGE is your biggest debt you idiots! Biggest and for many lasting a life time. How do these people get six-figure jobs….. i have no clue.

#109 Philburt on 11.22.16 at 5:16 pm

RE: real estate’s as much a disease as an asset class.
Gartho…you should say residential RE is a disease…or maybe crack?
I’ve watched the residential goofiness. 1-2 mil tear downs in Van… OMG fools….
My commercial /residential I bought for 2.275 mil (cant even build it for 3mil) and 1.7 mil down represents a solid inflationary hedge…Long term commercial tenant leases with built in increases and they pay all the tipple net. It pays a great yield offering safe return on leverage (back to real solid tenants that fix their own crap) locked in at dirt cheap rate with int thats tax deductible. Mortgage Paid out easily in 5 yrs.
Its where you buy and what you buy……

#110 InvestorsFriend on 11.22.16 at 5:41 pm

Forget About Predicting the Canadian Dollar level

Mark seemingly has great knowledge about where the Canadian dollar exchange rate is headed and exactly why.

#92 Mark on 11.22.16 at 1:12 pm said..
“The Canadian dollar is undervalued by what measure? “

Relative long-term trade positions. Relative long-term budget deficits. Relative long-term total debt. Relative long-term means for the currency pair. Between Canada and the USA.

…Cyclicality will create an extreme in the other direction, ie: a $1.5 USD$/CAD$. Timeframes are hard to predict, but I know I will see it in my lifetime

*****************************************
Yet he has been dead wrong on his call for the direction of the Canadian dollar and for his call that the TSX would out-perform. He made both calls when he first came to this Blog about three years ago and has continued that call.

FORGET trying to PREDICT the exchange rate and instead simply REACT to it.

The typical investor should not try to predict where the Canadian dollar is headed. Rather, simply have some U.S. dollar investments for both diversification and to hedge future spending in the U.S.

Say you decide on 25% U.S. investments. Rebalance periodically. (No more than every 6 to 12 months) This means you will be selling U.S. investments when they have outperformed Canada and/or when the Canadian dollar drops and causes the U.S. investments to rise much above 25%. And you will sell Canadian investments to buy U.S. when Canadian stocks outperform or the Canadian dollar rises causing the U.S. portion to drop below your target of say 25%.

This is known as buy low, sell high and will outperform most strategies.

Like all forms of rebalancing it is automatic and does not require the ability to predict the future.

#111 Rexx Rock on 11.22.16 at 7:16 pm

I get dinged $2 a month in $ 40,000 usd account with RBC with no interest.I guess its a negative interest account.

#112 Philburt on 11.22.16 at 9:36 pm

#111 Rexx Rock on 11.22.16 at 7:16 pm

Yup no interest for you but service charges apply. Ive got a lot more I ain’t gettin nothin for.
These floating currencies are absolute bullshit. NAFTA should also have pegged….their here to screw people.

#113 That Guy on 11.22.16 at 9:48 pm

#102 cK

I answered that on post 73… but until you sell youve made $0 on payback of principal… what if prices go down? what if you pay 2% or 1% commision when you sell? closing costs? what if it takes 3 months to sell, well you paid interest and property tax (and possibly condo fees)… too many variables and no cash in pocket means it is NOT income (would you report that incone to CRA?)

#114 ChickenLittle on 11.23.16 at 9:59 am

Edmonton real estate is a dead zone – Trump won’t win the election.

Here is my prediction: Real estate will rise in the next 25 years. Buy and hold and you will make out like a bandit.