Chill

The doctor is IN. Who’s first for the tough love?

(By the way, I do not make these letters up. Nobody could.)

“Hi Garth! Your blog has been a daily part of my life for the last five years and I remember you fondly from CTV.  My 11 year old daughter used you for her Famous Canadian project at school.  (She loves your dog photos.)”

Fine suck-up. You may continue.

Feel free to use my story for your blog, but many of my friends and co-workers read it, so try to adjust some of the facts if possible. My mother recently passed away.  Her house is next door to mine in Toronto.  It was bought in 2004 and I had to co-sign the mortgage as my mother was 81 when she bought the place.  I lived there for three years, then bought the other house.  My mother rented all her life until then and her house is mortgage free.  I have about $150K left on mine.  TFSAs are not maxed out.  They have about $40K each.  My RRSP isn’t maxed either.  I work on contract, my husband is retired.  We earn about $100K a year.

I would like to keep my mother’s house, for one of my kids, and would like to rent it out for the next 15 years or so.  I already have had several families approach me about renting.  Would it be beneficial to take a mortgage out on my mother’s house and pay off my mortgage?  How long would I have to keep the house empty before CRA won’t suspect that I’m trying to do a fiddle?  Should I take a mortgage for a large amount, pay off my mortgage and then use the extra to invest, as you’ve been suggesting lately?  It sure would be nice to have some extra income so that I could actually turn down the occasional contract.  (I love what I do, but when I sign some contracts, I know they’re going to be a stressful headache.)

Any suggestions would be appreciated. Keep up the great work!

Sorry about mom, but it sounds like she had a long run. Nice. As for the house, co-signing a mortgage that’s paid off does not mean you own it. In order for you to re-mortgage or rent it, you must have clear title. So I’ll presume mother had a will and left that asset to you, as a tax-free gift of a principal residence.

Sure, you can place a mortgage on it and use the proceeds to retire your own home loan. If the property was subsequently rented, interest would be deductible from income. But you’re also establishing a new cost base for the property, since (as a rental) future gains in value will be taxed.

There are two bigger issues.

First, it’s likely the house has doubled or tripled in value in 14 years. That’s a windfall you’d be foolish (in your situation) to sit on or hand off to your kid in 15 years. Rents are pathetic, given property valuations, and the income you receive will be 100% taxable at your marginal rate. In other words, this is a poor investment – especially when it is mortgaged, must be insured and maintained, and has an ever-increasing property tax bill. Why is this an option?

Second, your finances suck – a pittance saved and a retired spouse. Why would you not sell mom’s house pdq and invest the money to secure your own future? Why repeat the mistakes of your parent, who obviously had 100% of her net worth in one asset – that you had to help pay for? Take the blinders off. You’re staring at a gift horse.

Next!

“Hello Mr. Turner. My son is a big fan of yours and he reads your blog every day and quotes your wisdom frequently!  I have started doing the same (reading, not quoting, but maybe that will come). So when pondering what to do about selling my old home, or hanging on to it, my son said that you would be the perfect one to ask.”

Adequate praise. You may proceed.

So here goes:
This is a question about Vancouver real estate and I bet you have had a plethora of them. I have a 115-year-old house in a nice east Vancouver neighbourhood, 2 stories of living space, 960 square feet each, and there is an attic.  I have a small mortgage of $52,000 remaining. My quandary is about whether or not to put more money in the house (it will need a new roof and I have been advised that I have carpenter ants). In terms of lifestyle, I have a large garden (a hobby of mine) and I love my neighbourhood. But I do not need to live in a 4 bedroom house. So I could sell the house and get the capital and buy a townhouse and have money left over to help my kids get into the market.

But as you are no doubt aware, the Vancouver market is volatile. My house and land have been assessed at $1.6 million and most houses still sell over assessment. Last year people were writing offers on the sidewalks with no subjects. Things sold in a day or two. But because of actions by the government, now things have slowed down quite a bit with single family detached home sales.

My question is (at long last eh?) do you have a crystal ball? Haha, but seriously I am asking:
1.     What could happen to the market? Would it be better to sell the house now or wait a year or two? I know you cannot say with any certainty but I feel you would be better informed than me.
2.     Also I wonder should I list my house first before buying something else? Or should I find the dream townhouse I want and then hope to sell the house quickly?
3.     The third option is to sell the house and rent. Vancouver rents are outrageous and I am not keen on paying someone else’s mortgage for them. Also I like security of tenure, knowing that I can count on being in the same place for a few years. I am 65 and quite healthy and active. I am hoping to live the Canadian average span for a non smoking moderately imbibing woman.
But I would like to be mortgage free. And I would like to help one son pay off a student loan and give the other enough money to start his own business or get into the real estate market here.
My other option is to fix the roof and the ants and stay in the house as I like it so much. But an old house breaks down and I am a retired woman who is not necessarily handy and does not have limitless funds. My after tax pension income and part time work as an educational consultant yields around $60,000 per year. I have no debt beyond the mortgage and have around $100,000 in RRSPs and TFSAs. Thank you for your patience with my long windedness. I appreciate any response.

Seriously? You’re asking me if you should put more money into a $1.6 million, paid-for house with just $100,000 liquid at 65 years of age? How could you live more than six decades and be so confused? Glad your son sent you here, even though he probably knows what’s coming…

YVR real estate is going down. Comrade Premier Horgan will not rest until he has punished ‘rich’ people like you by sucking off equity with market-killing taxes upon taxes. The frenzied, absurd, unsustainable days of the past are not coming back. If you can bail now, do it. And no, don’t buy before you sell. Why take that risk? If the perfect place doesn’t materialise, rent until it does.

Pumping more money into the property when you simply don’t have it (and real estate values are softening) makes no sense. Let some other fool feed the ants. Get out. Invest the money and more than double your income while still growing the portfolio so you can throw money at your children. As for buying a townhouse, that’ll still cost you almost seven figures. Besides, you’d be selling into a weak market (for detached homes) and buying into a strong one (attached). Not smart. So, yeah, rent. Try life as a millionaire, for a change.

Note to Sonny: make sure she reads this. Your inheritance is riding on it.

102 comments ↓

#1 Dusty on 07.19.18 at 4:05 pm

Vancouver lady, Garth took it easy on you even though you suggested all the Garth Turner no no’s:
1) Giving money to the kid to get into the market, setting him up for indentured servitude.
2) Buying a second home before selling the first.
3) Saying that the Vancouver rents are outrageous while considering buying a town home. Seriously? So rents are outrageous but purchase prices are fine and dandy?
You have a 1.6 million dollar lottery ticket, now go cash it before it’s too late.

#2 Sam on 07.19.18 at 4:07 pm

Thanks for answering mom’s (long winded) questions Garth. I hope the advice sticks. For her sake, not just for mine.

#3 Larry B on 07.19.18 at 4:13 pm

Sorry Garth, the mortgage interest would NOT be deductible because the CRA would look at where the money from the mortgage went and it clearly went to pay off his other mortgage. This is a mistake many people are led to believe.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals/rental-expenses-you-deduct/interest-expenses.html

#4 Chrisk on 07.19.18 at 4:19 pm

First!!!

#5 NotLegalAdvice on 07.19.18 at 4:29 pm

“If the perfect place doesn’t materialise, rent until it does.” – Garth

This is the best advice. The perfect place is sometimes a place that is affordable and meets your needs and touches upon your wants.

– FIRST!

#6 Mattl on 07.19.18 at 4:35 pm

Two more people that would be screwed if they didn’t own homes. All these folks should sell but thank god they owned up to this point.

#7 AGuyInVancouver on 07.19.18 at 4:36 pm

Dear “poor” retired lady in East Van: the slowdown in Vancouver’s SFH market has nothing to with the provincial government and everything to do with the new federal B20 regulations and Xi Jinping choking off the outflow of capital from China.

Plus the speculation tax, the foreign buyer’s tax, the property surtax and the empty houses tax. Tax, tax, tax. BC will regret this. – Garth

#8 Jonathan on 07.19.18 at 4:37 pm

The MSM narrative of “real estate is not as hot and crazy as before” seems to be getting louder in voice lately… Of note is that when it was wild wild west before it was all “buy now or be priced out forever” “they dont make any more land” and now “market is approaching balanced” “buyers have more selections”

http://www.vancourier.com/real-estate/new-home-presales-plummet-in-lower-mainland-1.23372644

With the above article’s data my personal guess is that it will be spun by those with vested interest as “RE is highly local” (which is true) even though I recall same data was used during the high times as a supporting argument that market was red-hot in general

Anyways just some personal musings with no specific links to back up, hope everyone’s having a good day!

#9 jess on 07.19.18 at 4:42 pm

… was not motivated by “greed alone” but also the “satisfaction of being able to beat the system”.

Deutsche Bank trader jailed for five years for rigging lending rates
==============
Boo hoo

“Along with others, they manipulated the process used to set the rates in a bid to boost their employers’ profits and their own pay and bonuses. Bittar’s lawyer Alexander Cameron said he was described in character references as a man of “humility, modesty, integrity, loyalty, charity” and a “dedicated” father to his three children.

“He will never again be able to work in the job at which he legitimately excelled,” he added.

#10 Vancourerite on 07.19.18 at 4:46 pm

I like the idea of John Hoargans new taxes, especially the ones targeting satelite families. If you want to enjoy our social services-you have to pay your fair share of taxes.

#11 dakkie on 07.19.18 at 4:49 pm

Housing Market Collapse 2.0 Has Begun

http://www.investmentwatchblog.com/housing-market-collapse-2-0-has-begun/

#12 Tax Nerd on 07.19.18 at 4:51 pm

In order for interest to be deductible it must be interest pursuant to a legal obligation on a borrowed money (mortgage does qualify) used for the purpose of earning income from a business or property. A direct tracing test of the purpose of the money is applied. In this case, the money will be borrowed and then used to retire a personal debt and therefore the borrowed money was not used for the purpose of earning income from a business or property.

The mortgage in place on a rental property yields deductible interest. Period. – Garth

#13 Can You Dig It? on 07.19.18 at 5:02 pm

What a first world problem she has. A $1.6m home and income of $60k even after retirement.

WTH she complaining about? Go live life. Money ain’t everyrhing.

#14 Ubul on 07.19.18 at 5:10 pm

Did the Fukushima incident in 2001 leave its signature via the Cs-137 radioactivity in wines, mainly from the Nappa Valley?

https://arxiv.org/abs/1807.04340

#15 Damifino on 07.19.18 at 5:17 pm

Renters are never “paying someone else’s mortgage”. At most, they’re paying about half of someone else’s mortgage. Those who rent out second properties get stuck with the remainer and wallow in negative cash flow. That may have been acceptable when prices were rising sharply, but bad news as that comes to an end.

Even with clear title, they still eat opportunity costs on cash tied up in an asset that could be spinning off better income if invested properly, while footing the bill for taxes, maintenance and repair. Why would you want to do same?

The best action is to get your $1.6M working for you and rent from professionals who know how to manage accommodation properly without losing their shirts.

#16 Eating quinoa in vancouver on 07.19.18 at 5:21 pm

Re: selling before buying – don’t do it. Not sure if my last post went through but here it is again.
About 6 weeks ago My neighbour sold her townhome to a couple who had “sold” their house to a developer. Subjects were removed and my neighbour moved out two weeks ago and house is empty as new buyers wanted to paint etc.
They did not have a “subject to sale” clause in the contract. Now, developer has pulled out leaving the new buyers hooped. They can’t proceed and will forfeit their $50,000 deposit. Townhome is back on the market.
I’m sure there are a ton of similar examples including the huge one posted on this blog from the blog dog who’s sale fell through last spring resulting in a court case and big bucks lost by buyers reneging on contract.
As for “the perfect home” you can only buy what’s available at any given time. You will be in a much better position to negotiate and close a deal if you have cash in hand.

#17 LP on 07.19.18 at 5:30 pm

#10 Vancourerite on 07.19.18 at 4:46 pm

…If you want to enjoy our social services-you have to pay your fair share of taxes.

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

Then wouldn’t that be the exact same amount YOU pay in taxes for those same social services? Why should someone be taxed more than you are for those benefits?

#18 Reality is stark on 07.19.18 at 5:32 pm

When the tariffs hit full bore on Canadians good jobs will begin to disappear. For those of you living under rocks the job losses are real and just getting started.
Public servants will strike when the government gives them the good news that the money has run out.
Taxes will rise as government revenue falls.
House prices will continue to recede.
What part of this do you people not understand?
Trump is serious about making us socialists poorer unless we capitulate and sign a better deal for them.
We have been living too well for too long and if we don’t negotiate a slight cut we have to take a big cut.
Preserve your capital you are going to need it.
DO NOT BUY A HOUSE!!!!

#19 Keith on 07.19.18 at 5:35 pm

Old houses in Vancouver are money pits. All the construction trades and labour have been hoovered up by the development industry, so homeowners that need work done will pay handsomely for being a small job. At 1.6 million this house isn’t much more than land value, so staying in place will be expensive and financially risky.

The good news for this person is that even while living in a John Horgan/Gregor Robertson nightmare, there are a few pearls of good news for a few. In the case of the house rich 65 year old lady, the good news is that after two decades of near total inactivity, non market rental housing construction is being juiced with billions in public money and projects are being completed as we speak.

Townhouses in the River District are on offer at just over 2k per month. Not cheap, so you neighbors will be civilized folk with jobs, but with the kicker that rent will never go up. Start phoning the city and the province and put your name down on a brand new, affordable to you non market rental units designed for those who make 80 – 130k per year.

Sell. Invest. Rent from the godless socialists at a guaranteed rate. If the next housing crash is big enough, you might be able to buy back your old house for 500k.

#20 AuldEdwardBear on 07.19.18 at 5:45 pm

What is this crazy fetish to “loan” or give kids money to buy a house? If they can’t afford to get into the housing market they likely cannot afford to stay in it. They all immediately want the big F.O mansion, the top drawer furnishings and a brace of gilt edged German sedans. We have watched parents who could not afford the kid defaulting or to have the house flip underwater, eagerly co-sign or fund the kid’s mortgage via a HELOC on their own house. Mortgage slavery for the kid, the poor house for the parents. The same goes for Mar and Par paying the full shot for university. The kid should pay the lions share, some help here and there fine. We know plenty of people who literally dug ditches during the summer to fund their secondary education. Easy come easy go; when you earn it yourself you sure appreciate what you have.

#21 crowdedelevatorfartz on 07.19.18 at 5:54 pm

My Gawd!
I’m embarrassed to admit I’m a Boomer.
Now I understand SCM’s loathing of our generation.

Stumbling blindly into the light…….

#22 the ryguy on 07.19.18 at 5:56 pm

“Last year people were writing offers on the sidewalks with no subjects.”

Not that we will ever have another boom like this last one…If you see this type of behaviour for any asset, sell as fast as you can.

Seriously does anyone think this is normal? Good lord there is absolutely no common sense.

#23 Dolce Vita on 07.19.18 at 5:57 pm

Time to chime in again and piss Garth off.

4th Qtr begins, and in earnest, the largest ever Cdn. RE asset devaluation. The bigger the bubble in a city, the deeper the hole.

And with that comes the R word, hand in hand.

IF SO THEN:

East Van lady had better get out while the getting is good – wise advice from Garth.

Make it quick, YVR DOM are getting longer and longer.

Your tattered roof ant chomped home will be accompanied by the sound of crickets if you do not move your buttocks and list it right away.

As for the garden, go visit VanDusen Gardens or day trip it to Butchart…you’ll have the cash to do that every day.

As for the other guy, grab a brain, sell the damn place for the above reason and invest the money. The kid can take care of his or her self like you did.

And I’m sure our SJW Prime Minister will say or do something to piss Trump off, yet again.

And this time, Trump the vengeful will repay “targeted” petty Cdn. tariffs in Republican states with his brand of targeted tariffs in Federal Liberal voting ON (as in auto).

Quid Pro Quo if you are Trump (holding all the Kentucky made playing cards Canada has tariffed).

#24 TurnerNation on 07.19.18 at 5:58 pm

Give up on anyone using the Paying Someone else’s mortgage line. Their brain is washed…clean of thinking. An abacus would be their likely accessory.

#25 Nonplused on 07.19.18 at 6:05 pm

#17 LP

That’s not how socialist think. A way to put the socialist mindset would be: “What’s yours is mine and what’s mine is mine too”. Ultimately what they want to see is that anybody who has any more money than they do has it taken away, but only to that point they don’t want any of their own money taken away. All in the name of social justice.

#26 Linda on 07.19.18 at 6:22 pm

‘but rents are outrageous’. Well now, let us assume that the lady sells for assessed value (1.6 million) & ends up renting for $2,000 per month or $24,000 per year. Van City rents average about $1,550 per month so $2,000 should give her plenty of choice. The lady is 65 & likes to garden, so wherever she rents needs to have a place to putter. Alternatively find some community garden & rent a plot to putter in.

If the lady then invests her windfall of 1.6 million & gets an annual 5% rate of return, she’d have an income of $80,000 per annum. That handily covers the $24,000 per year rent with a generous amount left over for other expenditures. She should sell, invest & live out the remainder of her life enjoying every minute.

#27 jess on 07.19.18 at 6:39 pm

and one certainly doesn’t want to end up like this

large cohort of L.A.’s homeless population whose surge this year took some L.A. officials by surprise. While L.A.’s overall homeless population dipped slightly, Colucci’s age group, 62 and up, shot up 22%, to nearly 5,000 people.

The city and county have been slow to respond to the graying of the homeless population, advocates said. While some homeless people are aging in place, L.A.’s spiraling housing costs increasingly are driving people into homelessness for the first time at advanced ages, advocates said.

A fall, a job loss or a medical crisis pushes them over the edge.’

http://www.latimes.com/local/lanow/la-me-ln-homeless-older-adults-20180719-story.html

#28 Linda on 07.19.18 at 6:45 pm

#17 LP – right on. Now, #10 might be under the impression that ‘satellite families’ are foreigners. They may also be laboring under the impression that anyone can come to Canada & immediately have access to all our social services. First, only Canadian citizens & permanent residents are eligible for health care etc. Immigrants/refugees can get temporary coverage (up to 1 full year). That coverage is meant to ensure that immigrants/refugees are vaccinated & treated for conditions that could potentially infect others – in other words, we don’t want an outbreak of a readily preventable disease to occur because that would cost us one heck of a lot more than providing ‘free’ immunization to these folks.

If however #10 is referring to Canadians who are not permanent residents of BC, then yes, those fellow citizens DO pay taxes towards all the social services that BC residents enjoy. If the argument is ‘but they don’t pay BC taxes’ – well now. They for sure pay property taxes & last time I heard equalization payments were still alive & kicking.

#29 Long-Time Lurker on 07.19.18 at 6:57 pm

Chill
July 19th, 2018 — Book Updates — E-mail this blog post to a friend

…YVR real estate is going down. Comrade Premier Horgan will not rest until he has punished ‘rich’ people like you by sucking off equity with market-killing taxes upon taxes…

>He’s not done yet. Just yesterday: $1000 A DAY fine for AirBnB’ers.

https://www.news1130.com/2018/07/18/2724685/

Huge fines coming for violating strata short-term rental ban
LOCAL
by KAYLA BUTLER
Posted Jul 18, 2018 2:45 pm PDT Last Updated Jul 18, 2018 at 3:07 pm PDT

COQUITLAM (NEWS 1130) – Fines for having a short term rental against a strata’s bylaws are about to make a sharp jump. The province is making the change as a part of it’s efforts to make B.C. more affordable…

…Right now, strata councils can create and pass bylaws that either ban or limit short-term rentals and fine owners that don’t follow the rules. The maximum fine for breaking the rules is going up from $200 a week to $1,000 a day, starting at the end of November, to discourage short-term rentals…

#30 Tony on 07.19.18 at 7:22 pm

As the yuan devalues so will B.C. real estate.

#31 For those about to flop... on 07.19.18 at 7:22 pm

Recent sale report/Realtor assistance needed.

This East Vancouver house sold 7 days ago.

Only featured these guys last week, and it looks like the price reduction had immediate effect.

They purchased it for 1.99 at the detached peak of April 2016 and after the reduction the new ask was 1.88

Were they in a rush to get rich ,or did life just take a turn?

Tell me how fast the were traveling when they hit the Wall…

M44BC

2808 Wall Street,Vancouver.paid 1.99 April 2016 ass 1.76

Apr 25:$2,250,000
May 25: $1,998,000
Change: – 252000.00 -11%

Now asking 1.88

https://www.zolo.ca/vancouver-real-estate/2808-wall-street

https://www.bcassessment.ca/Property/Info/QTAwMDAwMlBLNQ==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#32 Danny Benshire on 07.19.18 at 7:25 pm

My mother passed away and never bought a house. She rented all her life but she did one thing right, she saved and saved and left those GIC’s, life insurance.

She left me at 75 years old and $1,000,000 life insurance and $500,000 in cash GIC’s. There was almost no taxes as she never believed in RRSP’s. She lived on her company pension, C.P.P, OAS of $3,750 a month quite well. She has not saved any money since her early mid 60’s and just let the investments accumulate.

That sounds sad. – Garth

#33 For those about to flop... on 07.19.18 at 7:41 pm

Recent sale report/ Realtor assistance needed.

This house in Coquitlam sold 16 days ago.

This case I featured a few weeks ago after a price reduction and they too rang the bell shortly after the drop.

The last ask was 2.29 and after paying 2.53 in July 2016 they probably only saw bigger losses down the line.

Their realtor told them they were buying a juicy Golden Delicious and ended up with a rotten Macintosh…

M44BC

941 Macintosh Street, Coquitlam paid 2.53 July 2016 ass. 2.42 now asking 2.29

Jul 4:$2,598,000
Jan 5: $2,488,000
Change: – 110000.00 -4%

2017-03-15 : $2,498,000
2017-07-04 : $2,598,000
2018-01-05 : $2,488,000
2017-05-29 : $2,698,000

Now asking 2.29

https://www.zolo.ca/coquitlam-real-estate/941-macintosh-street

https://www.bcassessment.ca/Property/Info/QTAwMDAzWE5HMQ==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#34 Life in Vancouver on 07.19.18 at 8:03 pm

What a dream.

100+ year old home. POS. Almost 2M. Corruption rearing its head at its finest.

Everyone I know in Langley have pulled their houses off the market. No sale!

And you should see the supply coming.

Wheww!!!

#35 Ouch on 07.19.18 at 8:05 pm

A report released today states that condominiums in Toronto cost about the same as a detached house did only 5 or 6 years ago.

When does all of this start making sense again? I mean seriously.

#36 For those about to flop... on 07.19.18 at 8:23 pm

Pink Lemonade Stand in Vancouver.

These guys have had a few whacks at the magic beanstalk.

Been up and down the price point vine, and the latest effort was a 140k reduction.

Planted the seeds back in April 2016 when they forked out 3.21

Now asking 2.99

What will the get out of this harvest?

Probably Jack…

M44BC

3821 w 22nd ave,Vancouver . Paid 3.21 April 2016 ass 3.16

Was 3.29

Then 3.12

Now asking 2.99

https://www.zolo.ca/vancouver-real-estate/3821-w-22nd-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAwMEhCUA==

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#37 Shawn allen on 07.19.18 at 8:28 pm

Perspective

Whether you are young or old there has certainly never been a better time in history for the average typical human to be alive. Same thing for the typical person on North America and getting better all the time.

We All won the birth lottery big time. Be grateful

#38 Here you go on 07.19.18 at 8:32 pm

#104 fancy_pants on 07.19.18 at 2:48 pm
#91 Smoking Man on 07.19.18 at 11:09 am

This forum is no place to express discord about your surroundings, you will be filtered.
—————-

It’s good to see some sort of intellect here finally.

#39 Axehead on 07.19.18 at 8:35 pm

I had carpenter ants. By the time you see them the place is infested. Get a professional in now to kill them and you must disclose this to potential sellers. The ants are in your house because you have a bigger problem – moisture. I.E. the house is rotten and rotting in the foundational structure. Might be too late.

#40 George Laplase on 07.19.18 at 8:36 pm

To Danny Benshire

My mother wanted to get a reverse mortgage for an additional $1,000 a month income gap. I showed her that with her $615,000 in RRSP’s and TFSA’s she was only earning 1.75% in 6 to 9 month GIC’s. She was only making $10,762 a year in interest.

I showed her that you are asking for financial disaster if you to do that. It is a good thing she communicates with me about this stuff.

We decided to take $215,000 of her RRSP and bought a 25 year term certain annuity which pays out a $1,000 a month.

The remaining $400,000 in her RRSP, TFSA we put it in 5 year 3.5% GIC’s and is making $15,015 a year interest. She is now much better off. She is not going to pay that high 6.78% a year interest more close to 10% a year after compounding for a reverse mortgage.

No debt and staying debt free is the key.

#41 Rental property math on 07.19.18 at 8:50 pm

So who do you guys prefer to rent from? In apartment buildings with the bed bugs or from the bipolar amature landlords who all flock to the exits after one bad year?

#42 crowdedelevatorfartz on 07.19.18 at 8:50 pm

@#33 Floppie
“Paid $2.5 now asking $2.29”
++++++

No no no.
You must be wrong.
Real estate only goes uppa uppa uppa.
Just ask Bdwy Sktrn

#43 the Jaguar on 07.19.18 at 8:51 pm

If anyone needs a distraction from the banality tonight, check out this live performance of the great Jackie Wilson. The Jaguar just wants to curl up at his feet.
https://www.youtube.com/watch?v=_Sr0Ih3HRD8

#44 Spectacle on 07.19.18 at 9:01 pm

Sir Turner, I wish You a Sainthood for vetting these people for us. Gosh…..

In other thoughts, I might suggest my wife comment on the lady , a sprit ley 65+ , $1.6 mill house on EAST Van side of town, hobbys include feeding her house to the Ants crumb by crumb, and Trying to Garden in YVR for all of 37 days a month.

Like when I asked her expertise , ” honey, how do I put Sunscreen on Baby M? “. Her reply “oh, easy, just grab him by the leg like and Angry Rackoon….”

Think I will solicit her opinion on such entitled stupidity, $1.6 mill lotto ticket and zero….. And get back to You.

#45 Ace Goodheart on 07.19.18 at 9:05 pm

Just got back from our community association meeting. Rowdy bunch tonight. Lots of politics. So many speeches. Haven’t met so many angry people since I went to hear about the Crosstown construction being extended by a year and everyone wanted to burn the place down and put people’s heads on spikes and parade them through town.

So our retail strip has been rotting for years. Only economic activity still there is power of sale and short term room rental. Only permanent inhabitants are the rats and the roaches.

We could do experiments on the dust inside our closed since Kodak left supermarket. That dust has been there undisturbed since the 1990s. It could give 25 years of climate data.

So the plan is raze the strip. Bulldoze. Assemble the land (which I own quite a lot of) into large parcels and then entice “developers” to come and build mixed use retail and condos. The term “35 stories” was tossed around. Our largest building right now is a church. We have nothing over 3 stories.

So the usual ruckus ensued.

We got to the point of figuring what the problem was.

Government gave us this massive transit hub (set to open up for business in 2021….no, wait, 2022 now …. and there’s a law suit about that).

We have a subway station. UPX. Go trains. About 20 bus routes will start and end here.

But, they all said, why?

There is nothing here. We are a thin strip of land, bordered by a railway on one side and a deep, undevelop-able flood plain/ ravine on the other.

It’s cool that they want all this transit here. I personally will ride the UPX downtown once a week (even though I don’t work there) and I’ll use the little subway LRT train just for fun as well.

But why did they put all this transit here?

Turns out…it was by accident. They got to Keele, ran out of ideas, and tossed a transit hub on the hill across the river.

We’re an after thought.

They actually elevated a subway, haphazardly, across a road that will now have a permanent bend put into It, just because there was nowhere else to go.

So a dead strip of stores that sold for pennies now is worth like billions.

And guess who owns a lot of it?

Yeah, life is good. Gettin better….

#46 Millmech on 07.19.18 at 9:35 pm

#6 Mattl
Your not seeing the big picture,they’re screwed because they own homes.

#47 will on 07.19.18 at 9:58 pm

“Why would you not sell mom’s house pdq”

PDQ – I know this acronym – it means “pretty darn quick” (in case anyone was wondering)

#48 Why doesn't this make news? on 07.19.18 at 10:14 pm

housing supply myth by Dr. Rose

https://www.kpu.ca/sites/default/files/The%20Housing%20Supply%20Myth%20Report%20John%20Rose.pdf

#49 MF on 07.19.18 at 10:29 pm

18 Reality is stark on 07.19.18 at 5:32 pm

The Democrats in the US are far more socialist than the average Canadian.

Most Canadians are centrists.

Trump’s policies are directed at his own domestic socialists more than anything else.

MF

#50 Wrk.dover on 07.19.18 at 10:31 pm

#32 Danny Benshire on 07.19.18 at 7:25 pm
My mother passed away and never bought a house. She rented all her life but she did one thing right, she saved and saved and left those GIC’s, life insurance.

She left me at 75 years old and $1,000,000 life insurance and $500,000 in cash GIC’s. There was almost no taxes as she never believed in RRSP’s. She lived on her company pension, C.P.P, OAS of $3,750 a month quite well. She has not saved any money since her early mid 60’s and just let the investments accumulate.

That sounds sad. – Garth

————————————-

A relative couple on DBP’s of 12 grand/mo clear total with a recent million inheiritence, paid for house and one shitty car, one PHD kid, invited us to a surprise 65th for the relations brother.

Potluck, bring food and your own beer.

What? No pig on a spit? No keg?

My wife knows better than to even take me there…I love her yet more every day.

#51 Rhett on 07.19.18 at 10:34 pm

Garth, permission to re-post please, also a note at the bottom for you… Thanks!

Example for REBEL,REBEL Article – of course not a financial advice – this is just entertainment thrown out there:

Before:
RRSP in Bank (must be self-directed) $300,000 (can be combined with spouse)
If your house has only $200,000 in mortgage, your (or combined) SDRRSP can be the mortgagor, and you still have $100K (total remainder) to invest in other stuff…

You will have out of pocket expenses – fees, lawyers, mortgage insurance, the works…. there’s always that, but when you sell (if it is a rental property), these

expenses can be deducted from the selling price.

The interest can only be tax deductible if this is in an income producing property – rental pretty much.
That makes it a really good double-edged sword… which I think many people here miss. Earn the interest tax deferred and at the same time (the same amount of

interest) deduct it in your regular income!!! There’s a downside of course, no HELOCs – a fav topic. If there was, that would be something awesome…

Today:
CMHC/Genworth/Other Insure-nanigans will not do it if you already have a rental property (REFINANCE) – $200 to anyone who can prove me wrong and point me to the right

bank who will do this for me as a refi.

You can only do it now in newly bought property – in this case you would need to put 20%++ because it is an investment property. I own a rental property currently,

and I have a hard time refinancing my own property with my own money (using the exact same method that worked just fine before). WOW! Banks and government are

really there to help you! Why, it’s for our own good! Isn’t that fantastic!

It’s a great example of – the banks wanting to give you their money so you don’t have to use yours. Of course, they get to keep the interest instead of you earning it.

And it’s always for our own good.

And, do you now UNDERSTAND why there is a limit in bank withdrawals? Fraud prevention they say. You agree of course. Right. It’s for your own good.
And all the other things that are placed out there… these are all presented for your welfare, your mind got convinced, and willingly accepted, that these are facts

in place for your own good…. what are those “other things”? I hear you say… ah your critical mind is working…that’s for you to find out.

Not a precious metal preacher here, but I think I UNDERSTAND why you should have some.

In summary, and all seriousness, they make it hard baby! And if you really think you have that much money in your RRSP – think again, it’s just there to boost your

confidence level! HAHAHA! I mean seriously, you have to PLAN WAAAAY Ahead just to GET a bigger portion of it! When you croak and you got lots of money there, cha-

ching for the gov’t coffers, you’re most likely in the highest tax bracket! You’ve “earned” them all that year.

I do have a plan to get it all…. but then again, LOTS Of planning.

TFSA Baby… you should be able to do this here as well, SDTFSA, the rules says you can pretty much do here what you can put in your RRSP… NO BANK does this, it’s

too good to be true….oh wait, they can easily change that with a slight of pen… taxable by 2xxx! Chaching!

GARTH, here’s a challenge for you or some reader-lawyer-banker-entrepreneur, since you just tore a vault out recently, maybe you or someone can create a bank/pseudo-

bank (branch of Turner Investments perhaps?) just doing this – self-directed TFSA and RRSP mortgage combined (with spouses) – that should be easier to carry a mortgage

inside these vehicles. IMAGINE. GARTH saving the day… You’d be CANADA’s greatest hero!!! Well, you probably pass for one already.

I’ll be the first in line to apply with the wifey… wait, what’s your rate, lol. Let’s discuss.

For those would-be entrepreneur you’d be in the top 1% IF you are able to establish something like this (pipe-dream). Imagine the beaureacracy and insurmountable hurdles that is in front of you. But then imagine the reward – charge 10% to whatever the total interest income is – per year! That’s a lot of cashflow. So a simple math, let’s say my TFSA/RRSP earned $5000 interest, you can get $500/year every year for each client. OF course that $5000 is small because mortgages are usually in the higher range. Customers lining up will only be the affluent and the sophisticated.

And if Garth with all his known connections being previously in politics and currently in finance be NOT interested with it, what are the chances of mere mortals be able to achieve this goal?

#52 prairie person on 07.19.18 at 10:35 pm

Allegations of inflated property values at centre of RCMP syndicated mortgage fraud investigation
Police say millions of dollars, including retirement savings involved

#53 TurnerNation on 07.19.18 at 11:32 pm

Well lads it’s that time again to load up on kaputs, gold and maybe even (shudder) shtcoin.
Tripping the light FANGtastic as Paul McC once did
All I need is a pint a day.

#54 Welcome to Slurrey on 07.19.18 at 11:32 pm

I watch sold listings all the time ……. those that bought 2016 and before are still winning ……. by a lot ……. just saying ……..

#55 Myra Andrews on 07.20.18 at 12:08 am

Garth, I used to work for Revenue Canada where I did small audits on rental properties and capital losses and no you absolutely cannot claim any interest expense on a rental property if the money was used for personal use.

Sure you can claim it and you might get away with it but if you get audited they would disallow it.

From the CRA website

“You were asking?

Q. I own and rent a semi-detached house. This year, I refinanced the property to increase the mortgage because I needed money for a down payment on my personal residence. Can I deduct the additional interest on the mortgage against my rental income?

A. No. You are making personal use of the funds you got from refinancing your rental property. As a result, you cannot deduct the additional interest when you calculate your net income or loss from your rental property.”

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income-2016.html#P387_37921

You are technically correct. But we live IRL. – Garth

#56 Bobby13 on 07.20.18 at 12:16 am

Bond bubble, RE bubble, stock bubble, invest where? Do you really think you can keep up or beat inflation pfft not likely for an average investor or money manager. Don’t be fooled this system isn’t made for you to get ahead of the game.

#57 Ponzius Pilatus on 07.20.18 at 12:33 am

#10 Vancourerite on 07.19.18 at 4:46 pm
I like the idea of John Hoargans new taxes, especially the ones targeting satelite families. If you want to enjoy our social services-you have to pay your fair share of taxes.
——
Amen

#58 Ponzius Pilatus on 07.20.18 at 12:43 am

#25 Nonplused on 07.19.18 at 6:05 pm
#17 LP

That’s not how socialist think. A way to put the socialist mindset would be: “What’s yours is mine and what’s mine is mine too”. Ultimately what they want to see is that anybody who has any more money than they do has it taken away, but only to that point they don’t want any of their own money taken away. All in the name of social justice.
———–
Buddy,
Like most of your illiterate right wing friends you confuse socialism with communism.

#59 Where's The Money Greedo? on 07.20.18 at 4:15 am

Re: #52 prairie person on 07.19.18 at 10:35 pm
Allegations of inflated property values at centre of RCMP syndicated mortgage fraud investigation
Police say millions of dollars, including retirement savings involved
++++++++++++++++++++++++++
This story covers projects in Ontario but there is other projects by them in Sask, BC and Winterpeg, all scams, imo.
https://www.canadianfraudnews.com/fortress-used-third-investors-money-commissions-fees-new-documents-show/
https://www.quora.com/Is-Fortress-Real-Developments-a-Ponzi-scheme

BDMC, FFM Capital Inc., FMP Mortgage Investments Inc. and FDS Broker Services Inc.-all related to Fortress.

“Mr. Forbes said that in 2013, Ms. Galati directed some BDMC staff to leave the company and help form three independent brokerage firms – FFM Capital Inc., FMP Mortgage Investments Inc. and FDS Broker Services Inc. – to act on behalf of people seeking to invest in syndicated mortgage projects.” And
“FAAN was appointed to oversee BDMC under the Feb. 7 agreement. But the arrangement fell apart this month after BDMC committed “multiple breaches” of the terms, FSCO said. FSCO moved on Friday to have the court appoint FAAN as trustee of BDMC, giving it far broader powers.”
I think we’ve heard this story before with US sub-prime mortgages, almost 10 years ago and the names….JP Morgan-Lehman Brothers
Here comes hell in a handbasket. It has started, the implosion:
Check out the movies:
Inside Job (2010, Dir. Charles Ferguson),
Too Big To Fail (2011, Dir. Curtis Hanson)
The Wolf of Wall Street (2013, Dir. Martin Scorsese),
99 Homes (2014, Dir. Ramin Bahrani),
The Big Short (2015, Dir. Adam McKay)
These will give you the lowdown on how corrupt World Financial Systems are and Ponzi Schemes meant to pay out commissions and bonuses, all off the investors’ backs.
Play the game at your peril !!!!!
Sorry Garth, but this country fails the smell test and it will implode soon.
Will we be able to get our money out of the banks with the bail-ins, not bail-outs?
I know you covered this before Garth, but the game has changed and not to the good for Canadistan.
Ontario on its way to destruction with appointment of Bilderberger Greedo Scampbell back to save the day for youse guys in TO.
I can’t wait for Greedo to tell Ontarians that they won’t recognize the place when he’s done with it, just like BC. He and his scummy protege, Crusty Clark, then proceeded to relieve every citizen of every last penny of surplus, sell valuable assets for pennies, allow major pollution to water that we are now in a battle with the US about, and indenturing us to 50+ years of slavery with sweetheart contracts on power generation and highways.
Then Greedo ran to London to hide like a coward, and with Clark most likely running to Calgary and her billionaire buddy Murray Edwards of Mount Polley spill disaster fame, hiding with Jim Shaw at Shaw Cable headquarters. Maybe she can show Shaw the connections to do their laundry since Shaw is bleeding cash…..
Murray’s hiding in London now, another coward!
I bleed for Ontario but at least he isn’t coming back to BC because I believe he will get lynched.

#60 Ace Goodheart on 07.20.18 at 6:45 am

RE: #58 Where’s The Money Greedo? on 07.20.18 at 4:15 am

This looks like a very well known “scam” in the high risk mortgage industry.

What happens is the “middle man” broker collects funds from a group of investors, for the purpose of investing those funds in mortgages.

The broker then takes those funds and lends them out to mortgagees.

As a condition of the mortgages written, the mortgagees must return a portion of the funds to the middle man broker, and that portion can be as high as 35-40% of the funds advanced, including fees and commissions.

The practice is technically illegal as the rate of interest being charged, including fees and commissions, is much higher than advertised to either the investors or the mortgagees.

In this manner, the broker transfers up to 40% of their investors’ money to themselves, through what amounts to a “kick back” transaction between themselves and the mortgagee.

These high risk mortgages usually fail, as the mortgagees cannot afford to service them. When that happens, the investors lose everything, as they are at the back of the line in terms of the bankruptcy.

The middle man broker makes off like a bandit, having already been paid with his investors’ money right at the beginning of the transaction.

#61 Oft deleted much maligned stock picker on 07.20.18 at 6:57 am

The lunatics are running the asylum. First we’ve Groper T regurgitating Obamas speeches about repopulating entire countries with those more deserving than the people who already live there….bwahahahaha. Then we’ve got his doppelgänger Gerald Butts telling us he’s got Trump by the nads and he will personally deal America a death blow for its colonial past and imperial arrogance….how Maoist can he get! Bit now, we’ve got the super loons squeezing out of the storm drains ….

https://www.bnnbloomberg.ca/get-to-what-really-hurts-unifor-s-dias-proposes-oil-water-tariffs-on-u-s-1.1111024

Unifor…..the civil service clown cart driver….says he’s going to cut off the flow of….wait for it…..WATER….yes….rivers and lakes….Dias is going to dam Lake Superior….to spite Trump!’ Oh….and he says he’ll cut off all Canadian oil exports….and that will hurt America…..bwahahahaha….gold….insane asylum gold. If your pension plan depends on these guys….you should be very afraid.

Bwahahahaha!!!’ Could this Liberal Loon salad get any more bizarre?

#62 Oft deleted much maligned stock picker on 07.20.18 at 7:14 am

And if I may add the ultimate in humor to my last comment about Dias, Butts and Groper t all ready to have us average Canadians foaming mad at Trump and ready to suffer for the cause….please remember that the irony here is that Groper, Butts and Dias all ride to work in secure limousines with guards at taxpayers expense. Only ones to suffer are working CNadians since we know it’s been Groper , Dias and Butts who have stopped progress on NAFTA with super silly segways into the mind of mad liberals

#63 Chico on 07.20.18 at 7:41 am

#41 Rental property math on 07.19.18 at 8:50 pm

So who do you guys prefer to rent from? In apartment buildings with the bed bugs or from the bipolar amature landlords who all flock to the exits after one bad year?

—————————————————–

I like the bi-polar…it brings back warm memories of an ex of mine. She might have actually been an OCD candidate, it’s tough to know for sure as I’ve blacked out most of those warm fuzzies.

#64 Gregory Stanze on 07.20.18 at 7:55 am

Socialism, Communism, Marxism etc. etc. are all the same insane way of keeping society in an equally poorer outcome.

Taking away from people does not take any real intelligence but trying to build, maintain, sustain and grow anything good in this world takes risk, guts, intelligence, effort and strength. Socialism and all their close ties are always a failure and will never succeed. Utopia does and never will exist. The truth hurts and you guys can’t handle it.

#65 IHCTD9 on 07.20.18 at 8:16 am

#117 LP on 07.19.18 at 5:11 pm
#112 IHCTD9 on 07.19.18 at 3:31 pm

“One of our tow motors” indicates that you had more than one. Rather than risk the life of an employee, male or female, why didn’t you hook one of the other TMs up to a chain and pull that sucker out?

If you really did want to put an employee in a hole under the wheel of a machine then you are a disgrace to good management.

———————

In fact, you can’t just send an employee down into even an empty hole without breaking a pile of laws. Nor can you get in an employee’s face and shout a bunch of ****’s at them either.

That story was just poking some fun at modern feminism by putting a Woman into a “non-traditional role”.

I used that example for jokes, but I’d bet just about any guy my age or older who ever got his hands dirty working for a living had to endure something very similar (or worse) at least once.

#66 young & foolish on 07.20.18 at 8:18 am

A lot of people I talk to bring up the subject of debt. Personal, corporate, or government, it’s all a concern. Many wonder about economic growth and sustainability in relation to what seem to be ever-increasing debt levels.

How about doing a blog post on this often misunderstood and anxiety provoking matter?

#67 Yet more evidence .. on 07.20.18 at 8:22 am

Of the piss poor education Canadians receive in financial planning -actually , we got zero .

Poor lady is sitting on 1.6 mill house at 65 with little savings and is unsure what to do ?

People head to financial advisors who take 1% of your money away EVERY year . Compounded its astounding the loss of wealth .

#68 Tater on 07.20.18 at 8:41 am

40 George Laplase on 07.19.18 at 8:36 pm
To Danny Benshire

My mother wanted to get a reverse mortgage for an additional $1,000 a month income gap. I showed her that with her $615,000 in RRSP’s and TFSA’s she was only earning 1.75% in 6 to 9 month GIC’s. She was only making $10,762 a year in interest.

I showed her that you are asking for financial disaster if you to do that. It is a good thing she communicates with me about this stuff.

We decided to take $215,000 of her RRSP and bought a 25 year term certain annuity which pays out a $1,000 a month.

The remaining $400,000 in her RRSP, TFSA we put it in 5 year 3.5% GIC’s and is making $15,015 a year interest. She is now much better off. She is not going to pay that high 6.78% a year interest more close to 10% a year after compounding for a reverse mortgage.

No debt and staying debt free is the key.
—————————————————————-

What a horrible idea. Please find a competent professional to help you.

#69 Penny Henny on 07.20.18 at 8:46 am

“Last year people were writing offers on the sidewalks with no subjects.”

On the sidewalk?
In chalk?

#70 FLHTK on 07.20.18 at 9:16 am

To letter number 2: wow 1.6 million and your not selling that place! OMG! Sell and walk away, pad your sore spots with $100 Bill’s. Geez I cant believe some people. I can see wanting to help pay off your kids student debt but let me tell you I had to move to fort mac to pay mine off….it took 7 months for 3 years of debt accumulation. Tell them to start job hunting in the mac. Most people work a life time to make 1.6 mill, do the smart thing sell find a place to rent outside vancouver and contact Garth to help you invest the money, 7% off 1.6 a year is huge. Dont br that greater fool Garth is always talking about!

#71 Tony Smythe on 07.20.18 at 9:18 am

Tater, George’s financial moves about his mom are not the greatest but I would disagree that they are horrible.

If his mom took on more debt or reverse mortgage of $215,000 at current 6.78% it would cost his mom at $227,000 total interest in 11 years. This more than doubles the debt and a huge cost to his mom of $20,636 a year, 9.6% rate in accumulated interest. You see it is not really 6.78%. People don’t look at the real math. This is not only horrible but a real scam.

These reverse mortgages are scary and we live in a low interest rate environment. Imagine if rates were more normal at 4.5% to 5% mortgage rates.

#72 crowdedelevatorfartz on 07.20.18 at 9:30 am

@#69 Penny Henny
“On the sidewalk?
In chalk?”
+++++

Nah, more like mortgage debtor’s blood.

#73 Duke on 07.20.18 at 9:58 am

#71 Tony Smythe on 07.20.18 at 9:18 am
Tater, George’s financial moves about his mom are not the greatest but I would disagree that they are horrible.

If his mom took on more debt or reverse mortgage of $215,000 at current 6.78% it would cost his mom at $227,000 total interest in 11 years. This more than doubles the debt and a huge cost to his mom of $20,636 a year, 9.6% rate in accumulated interest. You see it is not really 6.78%. People don’t look at the real math. This is not only horrible but a real scam.

These reverse mortgages are scary and we live in a low interest rate environment. Imagine if rates were more normal at 4.5% to 5% mortgage rates.

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

What???? It will grow to $228k in one year, and it will be so much more after 11 years. I have to say you are stupid as hell.

#74 Mattl on 07.20.18 at 10:28 am

#6 Mattl
Your not seeing the big picture,they’re screwed because they own homes.

I know right? If only the were renters….sure they would have half to a quarter of the same net worth, but they wouldn’t have to change furnace filters or mow the lawn. Or god forbid spend some of the insane appreciation the picked up on the house on a new roof. And I know I would concede on 800K net worth to not have wait 60 days to sell my house.

And think of all the great rental houses they missed out on moving too and from!

#75 Ben on 07.20.18 at 10:38 am

You’re not paying someone else’s mortgage when you rent. The landlord actually takes all the risk (bad tenants, maintenance, tying up capital in a dying market when it can be deployed elsewhere). Your 1.6 million, when cashed out, can be invested in a safe, simple index fund XEI, and generate 6400 a month, way more than enough to cover rent and living expenses in Vancouver, especially if you live frugally. So really, your landlord is subsidizing your life, not the other way around. (Or, take a bit of a risk and invest it in VFV and have it grow faster but collect less dividends).

#76 Renter's Revenge! on 07.20.18 at 10:49 am

What? You’re 65 and you don’t have BOTH a million dollar house AND a million dollar portfolio?? You ONLY have a million dollar house??? What a bunch of first world LOSERS with first world PROBLEMS! /sarcasm

#77 Stan Brooks on 07.20.18 at 10:50 am

https://ca.finance.yahoo.com/news/canada-annual-inflation-hits-six-124354431.html

Canada annual inflation hits six-year high of 2.5 percent in June.

Read 8.5 % (in terms of real inflation numbers).

#78 taxed2death on 07.20.18 at 10:51 am

#55 Myra Andrews on 07.20.18 at 12:08 am
Garth, I used to work for Revenue Canada where I did small audits on rental properties and capital losses and no you absolutely cannot claim any interest expense on a rental property if the money was used for personal use.
=====================================
Let me see if I understand this?

If I have $800K and I buy a rental property with an $600K mortgage and $200K down, the interest on the mortgage is deductible against rental income. And I can freely invest the remaining $600K as I see fit with no consequence (other than tax on any gains on the $600K).

But if I buy the property for cash ($800K) and then take out a $600K mortgage, I can’t deduct the interest on the $600K from rental income. Furthermore, if I then simply sell that house for the original cost, and buy a $800K house just down the street for $200K down, I can now deduct the interest on my new $600K mortgage again?

The only way this makes sense is if they decide you can’t deduct mortgage interest on a rental property unless you are broke.

Strange rules.

#79 IHCTD9 on 07.20.18 at 11:03 am

#32 Danny Benshire on 07.19.18 at 7:25 pm

My mother passed away and never bought a house. She rented all her life but she did one thing right, she saved and saved and left those GIC’s, life insurance.

She left me at 75 years old and $1,000,000 life insurance and $500,000 in cash GIC’s. There was almost no taxes as she never believed in RRSP’s. She lived on her company pension, C.P.P, OAS of $3,750 a month quite well. She has not saved any money since her early mid 60’s and just let the investments accumulate.

————-

That’ll be me probably. 2 X OAS’s, 2 x CPP’s, and two small DBP’s courtesy of HOOP and OMERS (if it’s still around in 20 years). Maybe 5k per month.

I just can’t see spending any more than that unless we have a health meltdown. We’ll be drawing down the RRSP side of our portfolio, and stuffing it into TFSA’s and taxable investments for a clean as possible transfer to the kids.

I might do a couple “one time” splurges with the pile we’ve saved over the years. Maybe there will be a brand spanking new F350, a side by side, and a few trips in my future; but that’s about it.

The main value of investing to us is the security, both now and later. I’ll bet your Mom felt the same way. It’s there if we need it, but neither of us feel happy or content by blowing money on “stuff”.

Frankly, I’d be more than happy with 50 acres of forest to play in, and a steady diet of very old; very heavy yellow iron toys to restore and enjoy.

#80 Shannon Dyson on 07.20.18 at 11:05 am

Duke is mathematically challenged and can’t comprehend that well but I have a feeling he can name all his favorite sports players and movie stars.

#81 Duke on 07.20.18 at 11:37 am

#80 Shannon Dyson on 07.20.18 at 11:05 am
Duke is mathematically challenged and can’t comprehend that well but I have a feeling he can name all his favorite sports players and movie stars.

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

I admit that I had comprehension problem. My apologies.

#82 LP on 07.20.18 at 11:54 am

#65 IHCTD9 on 07.20.18 at 8:16 am
#117 LP on 07.19.18 at 5:11 pm
#112 IHCTD9 on 07.19.18 at 3:31 pm

Years ago on CBCs “Radio Noon” there used to be a recurring guest who spoke about employment issues and hiring practices. I don’t remember his name.

One day he was asked about his views around hiring females in non-traditional trades. He related a story about the time he was to hire a plumbing apprentice. He had interviewed a few males and asked them all the same question: “What would you do if you were sent on a call for a broken washing machine and when you got to the house, the machine was full of water AND was inside one of those cement curbs on the basement floor (that used to be quite common; my mom’s was like that)? He got various answers mostly said the guy would call for help lifting out the machine.

He had a female applicant to whom he posed the same question. “Well, she said, first I’d bale out the water.”
She was the one he hired.

#83 Tater on 07.20.18 at 12:06 pm

#71 Tony Smythe on 07.20.18 at 9:18 am
Tater, George’s financial moves about his mom are not the greatest but I would disagree that they are horrible.

If his mom took on more debt or reverse mortgage of $215,000 at current 6.78% it would cost his mom at $227,000 total interest in 11 years. This more than doubles the debt and a huge cost to his mom of $20,636 a year, 9.6% rate in accumulated interest. You see it is not really 6.78%. People don’t look at the real math. This is not only horrible but a real scam.

These reverse mortgages are scary and we live in a low interest rate environment. Imagine if rates were more normal at 4.5% to 5% mortgage rates.
—————————————————————-
There are more options than just a reverse mortgage or an annuity.

With a balanced portfolio she should be able to pull out 24k per year with out diminishing her buying power. Forever. Seeing as she doesn’t need all of that, she could leave half to continue to grow.

Locking into an annuity with rates at historical lows is just dumb. Reverse mortgages are also dumb. Choosing from just 2 dumb options is…….not smart.

#84 Smoking Man on 07.20.18 at 12:12 pm

Perfect Storm:

1. Canadians feel superior to USA
2. @realDonaldTrump hellbent to move Canadian Auto to Michigan
3. Trudeau totally inept -polls ⬇️-seeks easy Trump-Hate votes
4. Media to vindicate 24/7 Hate-Trump narrative chooses Trudeau over saving Economy
5. Recession
………..

How long have I been saying to get the hell out of dodge…
Hum about 8 months before T2 won. I saw it coming from a tea leaf at the bottom of an empty bottle of bourbon.

#85 Ogopogo on 07.20.18 at 12:30 pm

From the second letter:

I am not keen on paying someone else’s mortgage for them

Any time you read this hackneyed realtor cliché you know you’re dealing with a lobotomized financial illiterate.

#86 Fish on 07.20.18 at 12:57 pm

RE:18 Reality is stark on 07.19.18 at 5:32 pm
When the tariffs hit full bore on Canadians good jobs will begin to disappear. For those of you living under rocks the job losses are real and just getting started.
Public servants will strike when the government gives them the good news that the money has run out.
Taxes will rise as government revenue falls.
House prices will continue to recede.
What part of this do you people not understand?
Trump is serious about making us socialists poorer unless we capitulate and sign a better deal for them.
We have been living too well for too long and if we don’t negotiate a slight cut we have to take a big cut.
Preserve your capital you are going to need it.
DO NOT BUY A HOUSE!!!!

******
agree

#87 Mattl on 07.20.18 at 1:31 pm

#85 – historically this is true. And you can’t deny you are paying a portion of his mortgage. Where you and I live, rents for SFH’s are around the cost of a mortgage a purchase from 2000-2016. Numbers have changed the last two years, but let me know what you pay for rent, and what you live in and I can show that you are paying a large portion of your landlords mortage…that is if he has one at all.

#88 Where's The Money Greedo? on 07.20.18 at 1:36 pm

Re: #60 Ace Goodheart on 07.20.18 at 6:45 am
RE: #58 Where’s The Money Greedo? on 07.20.18 at 4:15 am

This looks like a very well known “scam” in the high risk mortgage industry.
+++++++++++++++++++++++++++++++++++++++++
Very good info explained thoroughly to us non-literate plebes sir.
Why can’t the gov’t regulatory institutions (OSC, BCSC) vet these scams BEFORE the sheep get shorn.
Oh yeah, doesn’t fit into the plan to relieve all citizens of their hard earned cashola, gov’t’s real agenda.
I’m so tired of past the post regulatory investigations.
3rd world banana republic, run by lick-spittles to the Bilderberg-Illuminati-Khazarian mafia scum.
Just have a look at the NDP gov’t in BC, kow-towing to the south asian cabbie mafia, refusing to let Uber-Lyft run in BC until at least the end of 2019 and by the same rules as cab.
How the eff is that better?
No matter the party in power, they’re all corrupt.
Time for proportional representation, 1st past the post has to go! The only non-violent way to stop this insanity.
My choice would be guillotine……

#89 Mattl on 07.20.18 at 1:49 pm

To add to my previous comment, a 30 year mortgage on 500K would cost $2200 a month to service. Assuming 100K down, that gets you a 600K house. For 600K in Kelowna you can buy a move in ready 3brdm 2200 sqft home that would rent for between 2200-3000.

There are obviously other costs to owning a home, and a new purchase in a crazy market like YVR skews the results, but “my renter is paying my mortgage” in most cases is probably true.

In my case our mortgage is $3200 (accelerated, could be as low as $2500) and we have 2 acres, lakeview, 3700 sqft house with a suite. And we bought recently, 2 years earlier, same mortgage on this house would have been 300 cheaper. No way I could rent anything comparable, mortgage (only) below rent payment.

This home below is for sale under 600K and you could easily cover the mortgage (only) with the rent:

https://www.royallepage.ca/en/property/british-columbia/west-kelowna/3561-lansbury-way/8166406/mls10164414/

To be clear I’m not arguing that rental homes are good investments, I have no interest myself in playing in that space, but lets drop the canard that most renters are getting one over on their landlord.

Of course they are. The rent (which you are inflating) barely covers mortgage payments and doesn’t compensate for property taxes, insurance, maintenance, closing charges or the opportunity cost of the downpayment. Plus the mortgage may renew at a higher rate (which rent does not) and, in smoky Kelowna, rising property values are anything but assured. You are, therefore, subsidizing your tenant. – Garth

#90 Just wondering on 07.20.18 at 2:11 pm

Trump doesn’t like rate hikes. Now this. We’ll see how much higher rates go?

https://www.cnbc.com/2018/07/20/trump-poised-to-take-control-of-the-federal-reserve.html

#91 Newcomer on 07.20.18 at 2:19 pm

I find it weird when people say “You’re paying your landlord’s mortgage,” as if that makes you a fool. It’s like saying, “You’re paying your restauranteur’s grocery bill,” or “You’re paying Microsoft’s payroll.” If you go around refusing to enter into transactions that also benefit the other party, you’ll end up living in a cave, eating groundhogs.

#92 crowdedelevatorfartz on 07.20.18 at 2:37 pm

@#89 Mattl
“and we have 2 acres, lakeview,….”
++++++

How’s the air quality with all the forest fires on both sides of the Lake these days?

https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahUKEwjk1Linqa7cAhUHjlQKHTftDa0QqOcBCDIwAg&url=https%3A%2F%2Fglobalnews.ca%2Fnews%2F4339833%2Fforest-fire-forces-closure-of-highway-between-summerland-and-peachland%2F&usg=AOvVaw1K0Q5UfiSwGDk9-kmE9ADo

#93 Reddy on 07.20.18 at 2:39 pm

I hesitate to write this, but I enjoy all the ‘renting is great’ posts… . As a (probably amateur) landlord, I am making money from day 1 with my rentals.. (so please keep on renting) . As someone posted earlier, Ya we are taking big risks: the biggest being tenants who either don’t pay or destroy the place (happened to me before). You would hope everyone would have enough respect for each other but this is almost never the case on my experiences.. My 2c

Nobody who bought recently is making money on single-family rentals. Prove me wrong. – Garth

#94 James on 07.20.18 at 3:28 pm

#84 Smoking Man on 07.20.18 at 12:12 pm
Perfect Storm:
1. Canadians feel superior to USA
2. @realDonaldTrump hellbent to move Canadian Auto to Michigan
3. Trudeau totally inept -polls ⬇️-seeks easy Trump-Hate votes
4. Media to vindicate 24/7 Hate-Trump narrative chooses Trudeau over saving Economy
5. Recession
………..
How long have I been saying to get the hell out of dodge…
Hum about 8 months before T2 won. I saw it coming from a tea leaf at the bottom of an empty bottle of bourbon.
___________________________________________
1. Superior old man? No just ambivalent to their way of living in the USA. I’m not much of a gun toting rebel rouser who wants to pay contemptible sums for medical care. Oh and I don’t have to point out everything that’s great about my country whilst wearing a flag. My country is great already.
2. I got news for you old man Canadian jobs wouldn’t move to Michigan they would moving much further south than Detroit. Wake up old man.
3. That is a slim possibility old man. But I must admit Trudeau deserves just as much hate for his inaction’s.
4. Not sure where you’re going with this one old man. Perhaps the booze has kicked in to your foggy old man brain.
5. Sure why not we’ve had them before old man. BTW how many recessions have you gone through? Say five, six, maybe seven?
BTW Dodge has been so much more polite since you left this town, and cleaner too, no more old man smell.

#95 FOUR FINGERS WATSON on 07.20.18 at 3:55 pm

#92 crowdedelevatorfartz on 07.20.18 at 2:37 pm
@#89 Mattl
“and we have 2 acres, lakeview,….”
++++++

How’s the air quality with all the forest fires on both sides of the Lake these days?

https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahUKEwjk1Linqa7cAhUHjlQKHTftDa0QqOcBCDIwAg&url=https%3A%2F%2Fglobalnews.ca%2Fnews%2F4339833%2Fforest-fire-forces-closure-of-highway-between-summerland-and-peachland%2F&usg=AOvVaw1K0Q5UfiSwGDk9-kmE9ADo
…………………………

It is one of the things that the Kelowna real estate pumpers forget to tell you. Air quality in the summer is awful. Last summer was horrible. This year fire season has just started.

For the second day in a row Environment Canada has issued a special air quality statement for all of the Okanagan.

Smoke from numerous wildfires in our region is causing poor air quality and reducing visibility.

A Smoky Skies Bulletin has been issued for Central Okanagan including Kelowna, West Kelowna and Peachland; South Okanagan including Penticton, Summerland, Naramata, Keremenos, Oliver and Osoyoos; North Okanagan; Kinbasket including Kinbasket reservoir south of Valemount; and Yellowhead including McBride and Valemount and all communities within the southern half of the Robson Valley.

A Smoky Skies Bulletin is continued for Vanderhoof and surrounding areas as well.

Air quality ratings today according to the BC Air Quality website are moderate for now and expected to move from a 2 rating (as of 5 a.m.) to as high as 6 later this afternoon.

Individuals may experience symptoms such as increased coughing, throat irritation, headaches or shortness of breath. Children, seniors, and those with cardiovascular or lung disease, such as asthma, are especially at risk.

#96 Yvrmc on 07.20.18 at 4:34 pm

Wow James , that is some venom you are releasing on Smoking Man ….. feel better ?

#97 Victor V on 07.20.18 at 5:00 pm

Canadian inflation hits highest level since 2012 as gas prices surge

https://www.bnnbloomberg.ca/canadian-inflation-hits-highest-level-since-2012-as-gas-prices-surge-1.1111471

The reports, a reverse of last month’s weather-related disappointment in sales and inflation data, will bolster expectations for continued interest rate increases this year from the Bank of Canada. The retail sales report in particular, which indicates consumer spending is ticking along, will be taken as a positive signal for the underlying strength of the country’s economy. Sales excluding car dealers were up 1.4 per cent, versus a 0.5 per cent forecast…

…The Canadian dollar jumped 1.1 per cent to $1.3132 against its U.S. counterpart at 9:07 a.m. Toronto time. Yields on two year government bonds climbed 4 basis points to 1.97 per cent. Investors are now pricing in about a 60 per cent chance of a quarter-point rate increase at the central bank’s October meeting, up from 50 per cent before the data release.

“Traders are going to increasingly price in a third Bank of Canada hike this year,” Mendes said. “That’s still contingent on the evolution of data moving forward. We knew the second quarter was going to look pretty healthy. The question is, how much does it tail off in the second half of the year,” he said, citing questions over business investment, trade policy and the impact of rising interest rates in the economy.

#98 Shortymac on 07.20.18 at 5:02 pm

I wonder if person 1 could:

1) Not pay off their mortgage (seriously a few years left)

2) Take out a mortgage of say 300k on Mom’s House and max out their investments

3) Let renters pay off mortgage for 15 years.

4) If kiddo wants the house, can buy it off you for a similar price, fund more retirement. 300k is a song for a place in Toronto, even after the price adjustment.

Some people get attached to family property. My Grandma in law could sell her place for 500k easy in Alliston, On but she doesn’t want to. Thankfully, she is still very active and has great investments thanks to grandpa-in-law (RIP).

#99 Living The Dream In Kelowna on 07.20.18 at 6:34 pm

#95 Four Fingers Watson

Keep up the good work of telling people Kelowna and the Okanagan are detrimental to their health. We thank you for it. It also rains all the time, the housing is too expensive and there are no jobs. Don’t know where you live but apparently it’s ‘apocalyptic’ in Northern Ontario right now with their forest fires. Gotta go put on my gas mask.

https://www.cbc.ca/news/canada/thunder-bay/red-lake-smoke-forest-fire-1.4753945

#100 Scott Cordier on 07.21.18 at 6:34 am

Tater

In the 1990’s many financial advisors we dealt with never talked about a balanced portfolio which really keeps changing. They never implemented it with many of my friends, family members.

They shun government bonds and GIC’s. This is even though buying long term government bonds in 6% to almost 9% was a great opportunity but everyone was too greedy and delusional that they thought 15% to 30% annual returns ii equities, stock based investments were going to last forever.

Also, I remember during RRSP season alot of overpromised projections were made too by advisors that 11.5% to 12% is the historical return for the next 30, 40 years. I remember a $100 a month for 40 years would create a $1,000,000 RRSP. It is all pie in the sky.

Now, from the financial industry and advisors they keep using that 5.5% to 7% a year return should be used for projections for retirement and other future planning. Using these figures now, the same $100 a month only gets you only $235,000 in a 40 years RRSP. Going by this, it is now $425 a month that is required to reach $1,000,000 RRSP in 40 years.

Who knows when we have another great downturn of 25% to 50% in equities, stock markets, real estate etc, what will happen to those projections. It probably will be not much more than 3% to 4% a year as they were cut down back in 1990’s to 2000’s to today. This is not much more than bonds, GIC’s in the 3% to 3.5% these days that can locked in for as long as 30 years if needed.

The real deal that I ever heard from someone that told me like it is, whatever they tell you to save every month, for example, $500 a month, double to triple it within reason and take the RRSP tax refund and reinvest that too. This way you will have a decent amount of money and don’t have to rely on high in the pie projections from anyone. Reality these days is a bitter pill for many to swallow.

Your comments lack context. Rates of return on invested assets generally swell in periods of inflation, economic expansion and rising interest charges and decline when things contract. It’s the real return you need to focus on – the spread between what investments pay and the prevailing inflation rate (cost of living). Blaming others for your lack of perspective is unwise and misleading. – Garth

#101 Dan Crawford on 07.21.18 at 11:27 am

I don’t think he is blaming anyone. He is just telling people don’t go by projections that seem too high or unrealistic.

The part where he says save double or triple every month is a cautious perspective and it seems too many people these days are too optimistic and end up by or near retirement in dire straits. The recent Angus Reid information shows how people are having a tough time getting it right financially.

#102 Jerry Dubpjeet on 07.22.18 at 2:23 pm

I had mutual funds that I bought in 1994 and after 15 years they were worth less than what I paid for them. They then stick you with mutual fund distributions for tax purposes and that cost me alot in taxes.

I would of been better off in a savings account earning 3% to 4% during that time or better yet, 5% to 6% GIC’s. It was a balanced fund too. How come this can happen to people.