Losing your head

Hank and his wife have been mulling a lot in Vancouver. Thirty feet of undeveloped dirt. The goal is to erect a structure that can house them plus contain a rental suite and a laneway apartment. Hank figures this could all generate four grand a month in rent – enough to finance the plan and live for about what they now pay in rent ($3,000).

And maybe it will.

But here’s the reality: “Assessed value is $1.7 Million. List price started at $1.65-ish. Dropped to $1.5-something, then $1.49. Now they dropped it to $1.425M. Our realtor is a friend, who is very aggressive. He wants to start at $1.2, but thinks they are thinking $1.3. Properties in our neighbourhood have dropped several times in the last few months. This seems like the time to strike. What do you think?”

That’s easy. It’s ridiculous. Makes you wonder how we ever got to this point of financial absurdity – and what can possibly come next. Hank can’t pull this off without a big load of debt from his credit union, without hoping mortgage rates stay low for decades, nor without taking on market risk, construction risk or tenant risk. It’s a lot for a guy with a full-time job and a family to ponder.

My advice for him would be to forget it, move to Victoria and buy a great house for the price of the dirt in Van. But people grow roots. It immobilizes them and infects their logic. The suggestion would be lost.

This brings me to Aaron, Hank’s son. He’s 28, renting, working, dating and saving. Here’s why I hope he’ll look at his father and completely reject the choices his old man is making. Aaron’s world in twenty or thirty years could bear no relation to that of his parents.

Why? And what should he do about it?

Previous generations have lit the fuse of a debt bomb and thrown it into the future. Huge debt means big servicing costs, lower economic growth, reduced government services and higher taxes. How could it be otherwise?

In Canada the current government has just gone through four years of sustained economic growth, low rates, low inflation and high job growth, and run fat annual deficits. What happens when a slowdown comes? And as the national debt mushrooms higher, interest costs mount so politicians either spend less or tax more. In the States a right-wing, conservative leader in power during a time of record markets and rising GDP is presiding over the first trillion-dollar budget shortfalls during a time of prosperity. How did that happen?

Aaron also faces a workplace dramatically unlike his dad’s. Automation, online services and AI will erase a ton more jobs than they create. Manufacturing work has migrated. Defined-benefit pension plans are disappearing. The developing gig economy means  employers want just-in-time workers who don’t hang around. Employees with benefits turn into contractors with none. Meanwhile social programs may be under pressure as governments at all levels struggle to shoulder debt and finance the pensions of their Boomer retirees.

Already the cracks are showing, as this blog has catalogued. The savings rate has cratered. Household debt is at an historic level. RRSP season is gone. Four in ten people are retiring with mortgages or inadequate reserves. And yet we have a 70% homeownership rate. What a screwed-up place.

But there is hope. And it doesn’t lie in spending a fortune for a few meters of dandelions.

First, Aaron, underspend. Live small. Second, don’t borrow from the future. Eschew debt. Even at a time when the cost of money is low, don’t succumb to the temptation to grab what you cannot afford. Third, minimize tax. You’ve been blessed with the TFSA, which is a Millennial Money Machine – use it. This allows for tax-free compounding and all of the cash flowing out is untouched by government, not even counted as income. But to make the most of this, fourth, you must invest. No high-interest savings accounts. No GICs. No cash emergency fund. Pump your savings into diversified growth assets and, five, go long. Get good ETFs and hang on to them. Ignore volatility and use balance to control it by adding in fixed income as you age.

Six, get real estate if you really need it, but don’t mistake this for a financial plan. That was sometimes the saviour of the last generation. It could be the destruction of yours. In an indebted world there is more chance of asset deflation than inflation. The future will belong to the liquid, not the mortgaged. Housing will revert to being a home, not an investment.

And in doing all of this, Hank will think you’re nuts. Try to understand. You may end up supporting him.

About the picture...

“I’ve been reading your blog for years now and enjoy it very much,” says Kim, “so thanks for the great advice and daily laughs. I attached a silly photo of our dog Blue. She is peeking through the cat door”

93 comments ↓

#1 Party on Garth on 09.09.19 at 4:42 pm

The link will take you to a graph on the Federal Reserve Bank of St. Louis’s website of the USA’s all sectors; debt securities and loans versus their gross domestic product, from 1975 to the end of 2018.

To view this chart you have to have cookies enabled on your computer.

https://fred.stlouisfed.org/graph/?g=oGWL

#2 Swanson on 09.09.19 at 4:50 pm

I have been contemplating whether I could afford a town home in the suburbs of Vancouver the last few days, as I’ve seen some places where the rent to buy ratio is around 20 (I know, still high). This post slaps me back into reality.

#3 paracho on 09.09.19 at 5:06 pm

Another great blog piece .
Full of common sense which has become grossly uncommon today .
Thank you Mr. Turner ( not a suck up )

#4 The Wet One on 09.09.19 at 5:11 pm

Some days, I still feel uncomfortable about my home purchase.

1700 sq. ft. 500K E-town.

Then I read insanity like this (or the $600K garage on a tiny lot in the Big Smoke) and I realize, while I may not be a genius, I’m not completely stupid either.

I worked with a woman who’s family decided to rent rather than buy in my same town. I don’t work with her anymore, and I suppose it works for them. I considered that option as well, but it didn’t seem ideal to me.

Time shall tell if I chose well or poorly.

#5 Jason on 09.09.19 at 5:28 pm

The savings rate has not cratered. You have a responsibility to understand the data you reference. Sigh… sometimes old dogs just can’t learn new tricks. You accuse people of bad behaviour on this blog, and I’m accusing you of intellectual laziness.

Go blame Stats Canada. And learn some manners. – Garth

#6 Smartalox on 09.09.19 at 5:30 pm

Ha! I see stuff like this all the time.

A frumpy house on a tiny lot, needs a new roof, exterior upgrades, and landscaping. Inside however, all new laminate floors, builder’s white everything, ready to flip.

Asking $1 750 000. Not selling. Also posted for rent (same pictures) at $1.93 a square foot, in a neighbourhood where the competition is below $1.50.

Price to Rent? Above 30.

Well, we’ll see how long it can sit empty except for the staging company’s furniture.

#7 Bytor the Snow Dog on 09.09.19 at 5:30 pm

Hank? Aaron? Sounds like a home run.

#8 I’m stupid on 09.09.19 at 5:35 pm

Capitalism cannot exist if AI is created. If a machine can make a human obsolete in terms of work then only 2 possible outcomes will happen;

1. Work will be a thing of the past
2. The first person who invents it will own all the assets

Just my opinion.

#9 crowdedelevatorfartz on 09.09.19 at 5:50 pm

“Our realtor is a friend….”

++++
Who is probably starving…..

#10 conan on 09.09.19 at 5:59 pm

Your newly renovated bank/office basement stayed dry?

Love that vault. – Garth

#11 tccontrarian on 09.09.19 at 6:04 pm

#7 Bytor the Snow Dog on 09.09.19 at 5:30 pm

Hank? Aaron? Sounds like a home run.

/ / / /

Good one! LOL

Although, if Hank succumbs to the ‘pressures’ of being indebted just as a large chunk of Canadiana, it will be a walk – straight into debt-servitude.

TCC

ps. glad you survived the Wrath of Dorian, Garth (we almost named our son ‘Dorian’ – now we’re glad we didn’t)

#12 Eaglebay on 09.09.19 at 6:08 pm

#8 I’m stupid on 09.09.19 at 5:35 pm

AI still has a long way to go. We haven’t seen anything yet. Watch the coming of practical Quantum computing in a decade or so. Talk about power with no limitations. The classical computers can only go so far.

#13 AGuyInVancouver on 09.09.19 at 6:16 pm

“…But there is hope. And it doesn’t lie in spending a fortune for a few meters of dandelions.

First, Aaron, underspend. Live small. Second, don’t borrow from the future. Eschew debt. Even at a time when the cost of money is low, don’t succumb to the temptation to grab what you cannot afford…”
_ _ _
So in other words Aaron should don hairshirt and live a miserable, pennypinching life now so he can afford a daily cup of McD’s coffee when he is a wrinklie. Sounds like the kind of advice that turned young people in Hong Kong into protestors.

#14 short horses on 09.09.19 at 6:37 pm

#8 I’m stupid on 09.09.19 at 5:35 pm

“Capitalism cannot exist if AI is created. If a machine can make a human obsolete in terms of work then only 2 possible outcomes will happen;

1. Work will be a thing of the past
2. The first person who invents it will own all the assets”

I would bet dollars to doughnuts that you already carry a personal AI device around with you in your hip pocket.

#15 Cto on 09.09.19 at 6:50 pm

Yup, when housing starts fading, that will all the excuse Bank of Canada needs to start dropping interest rates again.
They’ll drop the rates they’ll give away money for hoses to do everything they can to keep this train running because it’s all Canada has.
The Boomers will get it in the end when rates go negative and stay there.

#16 expat on 09.09.19 at 6:51 pm

I can’t believe there are still suckers around believing in Re speculation?

The cycle has ended man.

The smart money has left the room and all that is left is chihuahuas yapping……

Why would anyone want to the be last sucker in the room?

People the RE game is over.

It’s time to preserve capital until the next game is introduced…

We could be on the verge of a several debt crisis again
Corporate, Sovereign, etc.

You are way out on your skis here imho
Sheesh

#17 pay your taxes on 09.09.19 at 6:54 pm

All the doom and gloom of the zero guys! It’s fine to outline the worst case scenarios, but why not the positive ones too? Imagine the same situation back in 2008 and the different outcomes based on the decision. One decision would have made the man rich, while the other would have him paying ever increasing rental fees and locked out of the housing market until he was too old to be relevant. His children would become permanent members of the landless underclass.

Nobody knows what the future holds, but I’ll bet it isn’t higher interest rates.

#18 Cottingham a bargain on 09.09.19 at 6:54 pm

Pretty sure that you have heard about the “garage” on the Danforth for 599k.

I agree with the “ industry experts” this time at least , that much like Cottingham was a bargain, so too is this.

I’m not a builder but a simple “ do it yourselfer “ kind of guy when buying my RE but for a builder this 20 by 100 footer is a layup for a 3 to 500 k profit.

Good luck not needed to the “ brick licker” who buys that piece of news.

#19 Cto on 09.09.19 at 6:54 pm

Honestly the tightening cycle was to 1.75%
Next recession we’re going negative.

#20 James Sears on 09.09.19 at 6:57 pm

DELETED

#21 Freedom First on 09.09.19 at 7:00 pm

#13 AGuyinVancouver

Stick around. Eventually you’ll learn. Hopefully.
——————————————————————
Garth, from 1 of your many appreciative daily readers.

Thankyou,

Freedom First

#22 Spectacle on 09.09.19 at 7:17 pm

#9 crowdedelevatorfartz on 09.09.19 at 5:50 pm
“Our realtor is a friend….”

++++
Who is probably starving…..
+++++++++++++++++++++++

“Was” a Friends……. : )

#23 CJohnC on 09.09.19 at 7:20 pm

#19. James Sears, and the New Constitution Party of Canada is a hate anti Semitic hate organization. All you really have to know is:
In November 2017, Sears and St. Germaine were each charged with two counts of wilful promotion of hatred under the Criminal Code.[19] They were accused of promoting hatred against women and Jews.[20] Both were found guilty on January 24, 2019.[21] The Crown asked that Sears be given one-year jail sentence and an additional three-years probation during which Sears would be prohibited from publishing any material.[22] On August 22, 2019, Sears was sentenced to one year’s imprisonment, consisting of six months for each charge, served consecutively, the maximum sentence available.[4][22][23] He is currently out on bail, pending appeal.[5] On August 29, 2019, St. Germaine was sentenced to one year of house arrest.

Should be banned Garth

#24 CJohnC on 09.09.19 at 7:22 pm

More interesting facts re #19 can be found at
https://en.m.wikipedia.org/wiki/James_Sears

#25 FreeBird on 09.09.19 at 7:26 pm

Good videos on quantum computing for the dataphiles/nerds. All short:

Explaining using deck of cards?
https://youtu.be/yy6TV9Dntlw

DWave
https://youtu.be/9G5N_U0xVcI

Future of
https://youtu.be/kEJBxotcxRw

#26 Scott Perrier on 09.09.19 at 7:36 pm

Deflation will happen when we get another ice age. It is bunk.

#27 akashic record on 09.09.19 at 7:43 pm

#14 short horses on 09.09.19 at 6:37 pm
#8 I’m stupid on 09.09.19 at 5:35 pm

“Capitalism cannot exist if AI is created.

Watch when AI learns the concept of BANNED and DELETED. For the betterment of mankind, of course.

#28 Dina Deacon on 09.09.19 at 7:44 pm

Pay your taxes, they already ripped everyone off with $1 million houses, high property taxes, high hydro rates, high garbage fees, high water rates, carbon taxes and other environmental fees, taxes, high insurance rates etc. etc.

You know the future holds, more high interest rates for everyone that is a loser from 18% to 600% a year from credit cards to payday loans and other borrow from cars to RV’s to personal possessions. Canadians are such losers.

#29 Flop... on 09.09.19 at 7:45 pm

Stuff it.

I told Garth I was gonna take a break after all the imposter nonsense, and a poster decided to disrespect Boom.

I will put my 15,000 post record, on here, up against anyone.

Helping out 99% of the time.

Kicking a little ass the other 1% of the time.

So yeah, I’m a one percenter.

If these guys are gonna do it lets help them out.

The original details are possible for a miniscule amount of Westside blocks of land.

Seen a few go below 1.5

If they are talking Vancouver proper, they are talking East Van.

Hank, there has been blocks of land go for as low as 750k in the last year or so.

More often you are going to be looking around the million mark.

Why waste another 300k?

Some of the ones that are development contenders have beaten up old houses on them so let’s allow 100k for demolition and removal.

Possibly leaving even a little bit towards the dig out.

There are others I could have chosen that are lower but let’s examine what these guys have got to possibly offer you.

https://www.zolo.ca/vancouver-real-estate/2919-east-54th-avenue

So it’s on for 1.16

Here’s the kicker, they paid 975k just recently in July 2019 and decided to put it back on the market.

Maybe backed out because upon reflection the numbers didn’t make sense, think before you leap.

When they purchased it from the previous owners they were asking a similar price as now and the market continues to deteriorate.

Someone recently just bought a bulldozer in my hood for 880k.

If you are going to do it Hank, don’t pay more than a million.

Save 200/300k and buy me a beer instead…

M45BC

#30 Nonplused on 09.09.19 at 7:48 pm

Reading this post for some reason I was struck with the idea that it seems strange that the CPR was completed in 1885, a relatively short 134 years ago, and at that time it was financed by selling the land of the west at $10 a section (can’t find a citation, I am going off memory). Of course they used a gold standard back then so one should say at least $7,490 today. And now a piece of land in Vancouver the size of a camping spot in a provincial park is worth $1.3 million today? Land, at least some land, has been a great investment over the years. If a section of land were now worth $1.3 million the appreciation was 4% per year, but those camping spot sized lots in Vancouver much have increased at a much faster rate than that.

#13 AGuyInVancouver

I’m not actually able to figure out the flaw in your logic because I can’t follow your argument, so I will say this:

A penny saved today is always available for spending tomorrow, even if you just pile them up (I guess we have to use nickles now). Invested at 6% our saved penny becomes 2 pennies in 13 years (not counting taxes). So saving money today even if you do it by piling up nickles in the basement does not reduce the money you have available over your life, it just changes when you spend it, and investing the saved money can greatly increase the total money you have over the course of your life.

Based on your comment, I don’t think you have any special insights into what caused the protests in Hong Kong. It does not seem to be financial. Hong Kong is far richer per capita than China. They aren’t protesting to be more like China, they are protesting against China trying to make Hong Kong more like China.

Instead I would hazard a a guess that you think one should live for today, and live as if tomorrow will never come. A lot of people think that way, which is why everyone is so up to their eyeballs in debt not just personally but at every level of government. Even the frickin’ school boards have unpayable levels of debt. The idea is to “eat, drink and be merry, for tomorrow you may die”. But when that was inserted into the bible the conditions for obtaining a loan were very different than they are today. They weren’t handing out free credit cards at football games, with a free tee-shirt if you signed up. You actually were expected to pay your debts off in short order or have your assets seized, and no loans would be made for the purposes of “eat, drink and be merry”. That had to be paid cash.

I had a bit of an argument with my grandfather when I was quite young (say 12) after he was showing me his new volt-ohm meter he got for 50% off, and talking about how it is best to wait for sales if you can. I was like “well you didn’t save money, you spent less”. He rightly schooled me in stating that by paying half the list price, he had half the money left for other things. Unfortunately it has created in me a compulsion to buy all kinds of things if they are on sale, even if I don’t need them immediately. Put it on sale, and I will buy it. Even if I already have one, but the new one is better.

I had no intention to upgrade my iPhone 6, it was already packed with more features than I have time or need to use. But Bell said they were having a sale on the iPhone 8. Details: iPhone 8 is FREE, you get 7 gigs more data for FREE, and we are going to reduce your monthly by $10. See that is how you buy things. Ya sure they have me locked in again for 2 years, which was their goal, but I have more for less.

Whenever possible buy what you need on sale or used. Save the rest. Invest once the pile of nickles becomes significant.

(Side note: I really can’t tell the difference between my iPhone 6 and my iPhone 8. The 8 actually fits perfectly in my old case. Is it really an 8? What did they change? Well the touch button now sucks and there is no RCA 3.5 jack but I don’t see those changes as improvements. We have great older stereo equipment that makes great sound from a 3.5 jack but doesn’t have blue tooth that I am not going to replace, but now I need an adapter.)

#31 Lost...but not leased on 09.09.19 at 8:00 pm

Crowdedflat-ewe-lance man comments are prime..

Do the exact opposite and double down…

#32 Cto on 09.09.19 at 8:03 pm

Garth
Can you do a piece on how you think negative interest rates are going to affect the equities markets.
It is my understanding that negative interest rates could be detrimental to Pension funds of all kinds including defined-benefit. Even lower interest rates now are making defined benefit funds unsustainable.
What do you think is going to happen…?

#33 James Sears on 09.09.19 at 8:12 pm

DELETED

#34 acdel on 09.09.19 at 8:34 pm

Completely off topic; but for those around my age group who grew up watching in black and white “Friendly Giant”can relate to this, just an appreciation to a great Canuck that changed/entertained the lives of so many children in my generation.
RIP Friendly Giant! https://www.cbc.ca/news/entertainment/obit-coneybeare-cbc-friendly-giant-1.5275900

#35 ShawnG in TO on 09.09.19 at 8:51 pm

> #8 I’m stupid on 09.09.19 at 5:35 pm
> …

possibility 3: (most likely) a company achieves practical ai, it will own the world.

– google seems to be ahead of everyone else by 10000 miles. it has the researchers, process, and the hardware (google cloud).
– facebook may have some tricks up its sleeves. it is the sneaky one.
– maybe a dark horse company invents the proper software. but it can’t take over the world without computing hardware, like the cloud companies (amazon, ms, or google). it will probably end up getting bought, and that’s that.

#36 rental property math on 09.09.19 at 8:54 pm

Hey remember me? I sold one property last year, one this year, one coming up in october that’ll hopefully close in 2020 and i’m also moving into one of my rentals while selling my primary residence.

Pretty much out of the business. If you guys think renting is the way to go, just ask my tenants who are getting the boot to make me for me to move in.

Landlording sucked. I caught a real estate bull run so it was ok.. but otherwise it really sucked. I can’t imagine renting from me was a whole lot better.

#37 Building A Home on 09.09.19 at 9:24 pm

What a coincidence, because had just finished detailing the steps needed to construct a home on a piece of land. The land needs to be bought before the process can proceed for construction. Its all a nightmare from beginning to end. My friend changed his mind rather quickly.

#38 SoggyShorts on 09.09.19 at 9:35 pm

#13 AGuyInVancouver on 09.09.19 at 6:16 pm
“…But there is hope. And it doesn’t lie in spending a fortune for a few meters of dandelions.

First, Aaron, underspend. Live small. Second, don’t borrow from the future. Eschew debt. Even at a time when the cost of money is low, don’t succumb to the temptation to grab what you cannot afford…”
_ _ _
So in other words Aaron should don hairshirt and live a miserable, pennypinching life now so he can afford a daily cup of McD’s coffee when he is a wrinklie. Sounds like the kind of advice that turned young people in Hong Kong into protestors.
********************************
So extreme. What’s wrong with a perfectly reasonable suggestion for someone to live within their means?
Flip it around, are you really recommending the opposite?
Your advice would be to spend more than you can afford? Seriously?

#39 Mikeshouse on 09.09.19 at 9:35 pm

#34 acdel RIP Friendly Giant.
Ed Sullivans Topo Gijio was a particular favorite of mine as well.
Here’s to simpler times

#40 mark on 09.09.19 at 9:37 pm

#32 Cto on 09.09.19 at 8:03 pm

Garth

Can you do a piece on how you think negative interest rates are going to affect the equities markets.
It is my understanding that negative interest rates could be detrimental to Pension funds of all kinds including defined-benefit. Even lower interest rates now are making defined benefit funds unsustainable.
What do you think is going to happen…?

“of course low or neg rates will impact markets, and pension funds, how can you make money on a negative bond in your pension fund!
Still lowers volatility but the funds are crippled by low fix income rates.
Don’t expect your defined benefit plan projection of the amount your suppose to get to be accurate if the above happens, stock up on dog food, may need it, and ya not for the dog…..”

#41 acdel on 09.09.19 at 10:12 pm

#39 Mikeshouse

I forgot about that; true, here’s to simpler times! Look up, look way up and seat yourself into that comfortable rocking chair! :)

#42 Lost...but not leased on 09.09.19 at 10:52 pm

#23 CJohnC on 09.09.19 at 7:20 pm

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

IMHO..and based on REAL research…you simply regurgitate the Cultural Marxist line.

If you can’t handle an objective contrarian view….let alone someone waxing philosophically….go back to Kindergarten.

Garth should censor YOU and your ilk…as simply propaganda arms of DEEEEEP State.

#43 Steven Rowlandson on 09.09.19 at 11:03 pm

With all due respect to Hank and his wife both of them should knock it off and be content with a place to live.

Real estate is a place to live. It should never be an investment otherwise people will be living in their vehicles, card board boxes, tents, homeless shelters or in banks because real estate costs too much.

#44 Steven Rowlandson on 09.09.19 at 11:16 pm

Good news for #26 since 2014 we have been in the Eddy minimum mini ice age. As for the big one be patient all comes to he who waits.

#45 Ponzius Pilatus on 09.09.19 at 11:44 pm

Flop is back.
Boring

#46 DON on 09.09.19 at 11:47 pm

“In an indebted world there is more chance of asset deflation than inflation. The future will belong to the liquid, not the mortgaged. Housing will revert to being a home, not an investment.”

Not much more has to be said. A whole debt filled world ahead of us. Living simpler will be easy for some but judging by the way comment # 5 Jason reacts things are peachy. Hey J, why not provide your own proof on the savings rates. Have you read the surveys of others living cheque to cheque? If you are so sure where are the stats. Stats Can is problematic but at least they are in the range of believable (well maybe not before an election) but that’s what amendments are for.

People that are so sure of themselves most often are the ones who lack knowledge and experience but most still manage to have manners.

#47 DON on 09.10.19 at 12:08 am

#13 AGuyInVancouver on 09.09.19 at 6:16 pm

“…But there is hope. And it doesn’t lie in spending a fortune for a few meters of dandelions.

First, Aaron, underspend. Live small. Second, don’t borrow from the future. Eschew debt. Even at a time when the cost of money is low, don’t succumb to the temptation to grab what you cannot afford…”
_ _ _
So in other words Aaron should don hairshirt and live a miserable, pennypinching life now so he can afford a daily cup of McD’s coffee when he is a wrinklie. Sounds like the kind of advice that turned young people in Hong Kong into protestors.
*****************

If you’ve paid 1 million + for a house anywhere in Canada hopefully it included an outdoor pool and indoor surround sound theatre.

Guy… I guess you missed the point, why go into that much debt when you are that one. His dad most likely didn’t…think about it? It’s all about context and right now the context is ripe for a bite in the ass… a big bite. Owning a home is out of reach for most…just a matter of time until the new generation )on the home buying ladder) are denied and/or turn away in disgust. Backpacking to Europe will be cool again, that or summer in Artic resorts soon to be coming online. My young adult family members think the Millennials are old.

#48 Smoking Man on 09.10.19 at 1:22 am

DELETED

#49 Smoking Man on 09.10.19 at 1:47 am

Getting wasted every night with no consequences.
Love my wife.
Millennials good luck finding one these.

You chicks. Teacher taught. It won’t work out for you..
You traded your human nature instinct for a freek show professor that never made a bet.

#50 DON on 09.10.19 at 1:53 am

#13 AGuyInVancouver on 09.09.19 at 6:16 pm

“…But there is hope. And it doesn’t lie in spending a fortune for a few meters of dandelions.

First, Aaron, underspend. Live small. Second, don’t borrow from the future. Eschew debt. Even at a time when the cost of money is low, don’t succumb to the temptation to grab what you cannot afford…”
_ _ _
So in other words Aaron should don hairshirt and live a miserable, pennypinching life now so he can afford a daily cup of McD’s coffee when he is a wrinklie. Sounds like the kind of advice that turned young people in Hong Kong into protestors.
******************

Different time…different context. How indebted were the average buyers in 2008?

#51 DON on 09.10.19 at 2:09 am

#34 acdel on 09.09.19 at 8:34 pm

Completely off topic; but for those around my age group who grew up watching in black and white “Friendly Giant”can relate to this, just an appreciation to a great Canuck that changed/entertained the lives of so many children in my generation.
RIP Friendly Giant! https://www.cbc.ca/news/entertainment/obit-coneybeare-cbc-friendly-giant-1.5275900
***************

“Look up … waaaaay up!” and the Giant would thus invite everyone to come visit his castle, telling them that he’ll meet them there after letting the drawbridge down and opening the front doors. The traditional tune “Early One Morning”

Here’s a cozy seat for two near the fire.

Nice acdel nice…

#52 DON on 09.10.19 at 2:18 am

https://www.tricitynews.com/one-in-five-millennial-home-buyers-commits-mortgage-fraud-survey-1.23940996

“One in five Millennial home buyers commits mortgage fraud: survey
Nearly 20 per cent of young buyers inflate income on mortgage application, and nearly a quarter of Millennials say that’s OK, finds Equifax”

Yikes…! Bad boys bad boys whatcha gonna do when they come for you.

#53 Doom and Gloom on 09.10.19 at 5:37 am

1) 4 years of growth under the Liberals? Gluuurggggle, spit, wipe , flush. Vomitous nonsense say economists.

2) Move to Victoria? Those mushroom eaters are just as deluded as Vancouverites. No value there. Sellers ain’t selling and buyers ain’t buying. Victoria is Granda Granda Pa country where the residents would eat grass clippings before they’d sell below what the neighbour got two years ago. Dead money in a dead market.

3) He expects $4000 grand a month out of $1.3 million, huh? Judas Priest , he should be near cracking five figures. What the hell is wrong with these people.

5) There’s no basement to the real estate decline. The goose is cooked. The few Chinese billionaires left are members of the Communist Party and they’re driving up a nationalist fury which doesn’t include foreign real estate. Kids ditto. Retail in China is baked. Millions have lost billions in the stock market crash. Even the tourist numbers show this. Crash crash crash. Trump is winning.

Hong Kong is wrung out of people who can afford million dollar homes in Canada. They are going to Taiwan and Malaysia.

BC is a hot mess of overpricing. Go out as far as the Rockies and they’re asking a million for a partial view of Schuswap . It’s insane. Buyers are insane. The stock market is on fire and people are moving into the hinterlands? That’s nuts. When you’re out so far that the prettiest girl at the diner has no teeth , you’ve officially lost your mind.

#54 NoName on 09.10.19 at 6:39 am

Oh, you old people what were you thinking. Luckily song is a about drummer… Or is it?

https://youtu.be/Un3zGsN1DYk

#55 MF on 09.10.19 at 7:19 am

#42 Lost…but not leased on 09.09.19 at 10:52 pm

Well researched?

I read that guy’s stuff, and it was offensive with no place on this page or anywhere close.

It was basically a rehashing of historical tropes.

There is a contrary point of view and there is hate prapaganda, and no they are not the same.

MF

#56 Dharma Bum on 09.10.19 at 8:07 am

#36 rental property math

Landlording sucked. I caught a real estate bull run so it was ok.. but otherwise it really sucked. I can’t imagine renting from me was a whole lot better.
——————————————————————–

I hear you.

Been there, done that.

However, I was the proverbial “nice guy” landlord, and all it got me was taken advantage of by lowlifes, scroungers, rounders, welfare cheats, grifters, alkies, druggies, chronically habitual liars, and hideous creatures with really bad teeth.

I learned a few things over time, and toughened up a bit, so I had my fair share of evictions and wage garnishees to deal with, but, hey, it taught me a good lesson the hard way.

I played the landlord game over 12 years, and for the most part it was pretty much a financial wash after maintenance, repairs, and legal expenses were factored in. If there was a way to monetize the cost of aggravation and the exposure to human depravity, it would have been a loss.

If not for the luck of one of the properties having a long term steady paying tenant throughout the entire time, the whole landlord venture would have been a total loss. That one property skyrocketed in value with relatively little maintenance and repair costs over the decade, so I finally abandoned the “nice guy” landlord act, gave the tenant an N12 form, kicked them out, and sold the joint.

That’s the real landlord tenant relationship at the end of the day.

Just sayin’.

#57 crowdedelevatorfartz on 09.10.19 at 8:16 am

@#31 Lost…of course.
“Do the exact opposite and double down…”

******
Riding the elevator a lot these days are we?
Your drivel is getting more nonsensical….if that’s possible.
Oxygen deprivation might explain it.

#58 crowdedelevatorfartz on 09.10.19 at 8:19 am

@#42 Lost…the lease….repo’d

“If you can’t handle an objective contrarian view….let alone someone waxing philosophically….go back to Kindergarten.”
+++++

When YOU Graduate from kindergarten….please provide proof.

#59 crowdedelevatorfartz on 09.10.19 at 8:21 am

@#45 Ponzie Prattle
“boring”

+++++

Self diagnosis Ponzie?

#60 T on 09.10.19 at 8:48 am

#55 MF on 09.10.19 at 7:19 am

There is a contrary point of view and there is hate prapaganda, and no they are not the same.

—-

Not dissimilar to an anecdote and opinion.

Regurgitate much?

#61 NotLegalAdvice on 09.10.19 at 9:01 am

Hi,

Do you think it’s worth it getting a house for 550k and putting 20% ($110k) down? I have about double that saved up with NO debt.

Combined my partner and I take home $8000 after taxes. This way, we can still continue to keep our TFSAs maxed out and invested. What do you think?

#62 Sail Away on 09.10.19 at 9:13 am

#56 Dharma Bum on 09.10.19 at 8:07 am
#36 rental property math

Landlording sucked. I caught a real estate bull run so it was ok.. but otherwise it really sucked. I can’t imagine renting from me was a whole lot better.
——————————————————————–

I hear you.

I was the proverbial “nice guy” landlord, and all it got me was taken advantage of by lowlifes, scroungers, rounders, welfare cheats, grifters, alkies, druggies, chronically habitual liars, and hideous creatures with really bad teeth.

I played the landlord game over 12 years, and for the most part it was pretty much a financial wash

That’s the real landlord tenant relationship at the end of the day.

———————————–

Dharma, you’ve also posted about corporations being profit-obsessed devils that should be eliminated.

A question for you: If capitalist corporations are corrupt and should be destroyed, and your experience as a landlord indicates normal people are also liars and cheats, what is left? Do we give up as a society and adopt pure communism? Won’t the people still be the same?

#63 Geoffrey on 09.10.19 at 9:37 am

Excellent advice Garth!

#64 IHCTD9 on 09.10.19 at 9:53 am

“Six, get real estate if you really need it, but don’t mistake this for a financial plan. That was sometimes the saviour of the last generation. It could be the destruction of yours. In an indebted world there is more chance of asset deflation than inflation. The future will belong to the liquid, not the mortgaged. Housing will revert to being a home, not an investment.”
___

This is the humdinger right here. A gear change from the boomers to the Mils, and probably the Z’s too. We’re solidly in the danger zone right now, so fearing severely overpriced RE (ie GTA/YVR) is the right thing to do.

Too many balls in the air these days – can’t really count on anything, or expect long term stability. It’s a good time to hope for the best/plan for the worst. 3-4X income max, or forget about it.

Govern yourselves accordingly…

#65 Ponzius Pilatus on 09.10.19 at 10:01 am

#59 crowdedelevatorfartz on 09.10.19 at 8:21 am
@#45 Ponzie Prattle
“boring”

+++++

Self diagnosis Ponzie?
———–
Quite testy this morning.
Aren’t we?
Traffic through the Tunnel is worst ever, I hear.

#66 JJ on 09.10.19 at 10:07 am

If real estate doesn’t appear to have a great future, and there are no interest-bearing investments, does that mean the stock market and bond market are the only investments left?

I’m in Edmonton, debt free, no mortgage, was considering buying a rental property so everything I have is not in the stock market. But if the future of real estate may be bleak (and it sounds like the renters kind of suck too), then where does one put extra cash?

#67 Dahrma Bum on 09.10.19 at 10:07 am

#62 Sail Away

Dharma, you’ve also posted about corporations being profit-obsessed devils that should be eliminated.
—————————————————————–

I never meant to say that corporations should be “eliminated”. I was as critical of unions as I was of corporations, and I was only opining on the state of affairs such that unions, as horrible and corrupt as they are, ultimately serve as a counterbalance to the effects of unfettered corporate greed.

I am totally in favour of the profit motive and free enterprise for generating capital.
However, corporations need to be regulated to some reasonable degree in order to control the inherent nature of their existence, which is to perpetually generate profits for their shareholders, whether they be private or public.

Left to their own devices, corporations (actually, those that control and direct them) would, for the most part seek the path of least resistance toward the goal of ever increasing profitability, which very often comes at the expense of employees and the public good.

The examples of this phenomenon throughout the history of industrialization are myriad and too numerous to cite here. One can easily look this up.

I never suggested socialism or communism as an alternative. I believe in free enterprise but also recognize the negative effects of unadulterated growth and greed.

Capitalism in its current form, which is essentially a moderately regulated system of free enterprise that allows for tweaks by government bodies and legislation that has given workers at all levels some semblance of fairness (i.e., we are not complete slaves), still seems to be the best option for societies at this point.

As a landlord, I was regulated by provincial legislation with respect to my power over tenants. If I was not, I would have locked out the horrible tenants at the first sign of trouble (i.e., unpaid rents, property damage, bad attitudes, etc.). I would have raised rents to what I believed was better for me to cover my increasing costs and make more money, and not just by the 2% or so that the government regulation permitted.

So, similarly, as with labour unions and legislation protecting workers and the general public from corporate motives, there is regulation to protect tenants from greedy and abusive landlords (who, more often than not, would raise rents incessantly to what the market would bear and toss bad tenants at the drop of a hat if they could).

It’s the regulation, the legislation, and the unions that create the pushback to what would otherwise end up as 100% owner, corporate, and landlord control.

The golden rule still pretty much (like about 83%) applies though (he that has the gold, makes the rules).

And that’s alright with me, Jack.

#68 Canadian Suckers on 09.10.19 at 10:13 am

The Climate Change Liars aren’t even trying to hide the bullshit line about climate change any more. Flat out, it’s a tax grab to finance UN pet projects .

https://www.bbc.com/news/science-environment-49635546

It said so in the original documents and our politicians are slop feeding a bunch of brainwashed climate zombies and assorted suckers.

#69 IHCTD9 on 09.10.19 at 10:18 am

#53 Doom and Gloom on 09.10.19 at 5:37 am

…The stock market is on fire and people are moving into the hinterlands? That’s nuts. When you’re out so far that the prettiest girl at the diner has no teeth , you’ve officially lost your mind.
___

A few years back, I went to a rodeo out in the middle of nowhere Ontario. I sat there for 10 minutes or so before I started noticing the Women around me in the stands. Simply put, boatloads of them were RIDICULOUS. Knockouts!

It seemed like every other Female in view was an 8-9 out of 10. I just couldn’t believe it. Never experienced anything like it. Garth “edited” me last time I tried to fully describe these ladies – so I can’t really get the full message across :).

I know you were making a joke, but it was a fine excuse to bring those supermodel backwoods female rodeo fans up again :).

#70 crowdedelevatorfartz on 09.10.19 at 10:37 am

@#65
Ponzie platitudes
“Traffic through the Tunnel is worst ever….”
=======

I wouldnt know.
I’m not working in “Ditchmond” today :)

#71 Ponzius Pilatus on 09.10.19 at 10:44 am

Ihtc
Just wanted to respond to your posts extolling the virtues of cheap (mostly female) offshore workers.
But then I read your post #68.
No further comments required.

#72 Bobby13 on 09.10.19 at 10:47 am

Got to spend some time with a FCC loans officer who just left RBC as well as the FCC head manager. They know full well both land and housing real estate is over priced they also mentioned credit was going to tightened up soon as they are getting worried about the amount of loans they have given out and the difficulty the borrowers are facing repaying them. They both seemed puzzled on forward interest rates uncertainty in the office no doubt. Question remains how long will central banks be allowed to keep entering the market to keep rates low no one else really would want the low rates of return you would get by buying up this debt as an investor.

Stats Canada high paid welfare.

Cheers

#73 Mattl on 09.10.19 at 10:49 am

#53 Doom and Gloom on 09.10.19 at 5:37 am
BC is a hot mess of overpricing. Go out as far as the Rockies and they’re asking a million for a partial view of Schuswap . It’s insane. Buyers are insane. The stock market is on fire and people are moving into the hinterlands? That’s nuts. When you’re out so far that the prettiest girl at the diner has no teeth , you’ve officially lost your mind.

——————————————————

The Shushwap is not in the rockies, it is in the Okanagan. And you can get an acreage, water view, nice home for well under a million in the Okanagan. Starting at 500K in places like Salmon Arm. Neighbour below me is asking 995k (will prob sell low 9s) for 1 acre, pool, custom but slightly dated home, 180 degree water view, walk to the beach. 25 minutes to downtown Kelowna, 25 minutes to Vernon.

There is a ton of value if you don’t mind being 20-30 mins outside a place like Kelowna, Vernon, Nanaimo etc. Hardly the hinterland, ride your bike to a winery.

And the doomers need to consider that you can borrow money at rates slightly above inflation. And have been for almost a decade. So ya, borrowing 800K may seem insane but how insane is it at 2.5%? When rents are increasing 5% per annum, and inflation is at 2%. As long as you can ride out the price fluctuation, and make your payments, it seems like a really good way to play the system.

I wish I had this perspective 10 years ago. Rather then being conservative I would have borrowed to my limit. Probably still wouldn’t have, but those that had the guys to stretch have done very well the past 15 years.

Now, not sure that applies today, but people are seriously underestimating the value of cheap money. I think the lane house + main house + suite, over the next 20 years, will do very well.

#74 The Totally Unbiased, Highly Intelligent, Rational Observer on 09.10.19 at 10:58 am

You might recall that even the former Canadian Prime Minister Stephen Harper got fooled and intimidated into banning the incandescent light bulb in Canada to try to appease some crazy people. It was a most unfortunate dark spot on his career. They hated him anyway. Sad.

Meanwhile, in the United States of America, that incredibly stable genius, President Donald J. Trump, is like a beautiful incandescent light bulb in a world full of darkness. Voting for The Donald versus voting for the Demonrats is quite literally like the difference between voting for light versus voting for darkness. What a bright future it will be under The Donald! He will make the incandescent light bulb great again and let it shine.

From BREITBART:

Donald Trump Defends Bringing Back ‘Better’ Incandescent Light Bulbs

#75 Lee on 09.10.19 at 11:11 am

Newest polls suggest Liberals will win a majority. Only about 10 of their expected ridings are close calls.

#76 IHCTD9 on 09.10.19 at 11:53 am

#70 Ponzius Pilatus on 09.10.19 at 10:44 am

…But then I read your post #68.

No further comments required.
___

So Ponzie, you think acknowledging the presence of outstandingly beautiful Women is – bad?

How are your T levels?

#77 Remembrancer on 09.10.19 at 12:09 pm

#70 Ponzius Pilatus on 09.10.19 at 10:44 am
Ihtc
—————–
If you read his posts, he is consistent at least…

#78 Jesse on 09.10.19 at 12:29 pm

In a world of negative interest rates, how will pension funds manage? Is the 60/40 balanced portfolio doomed?

There are no negative rates in balanced portfolios. – Garth

#79 Damifino on 09.10.19 at 12:37 pm

#74 Lee

Newest polls suggest Liberals will win a majority.
———————————–

Yeah, probably. Sad though.

I still entertain hopes of a Conservative minority propped up by a desperate Jagmeet Singh.

It would be a lot more interesting.

#80 Renter's Revenge! on 09.10.19 at 1:00 pm

#75 IHCTD9 on 09.10.19 at 11:53 am

So Ponzie, you think acknowledging the presence of outstandingly beautiful Women is – bad?

How are your T levels?

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

I think you’re on to something with the T levels.

Some interesting articles on hormones and sex appeal:

https://www.psychologytoday.com/us/blog/the-human-beast/200907/sex-hormones-and-womanly-passions

https://www.apa.org/monitor/2011/03/hormones

https://jezebel.com/cowboys-are-good-in-bed-and-dont-ever-get-the-blues-311657

http://healthland.time.com/2012/02/27/the-secret-to-guys-sex-appeal-low-stress-high-testosterone-strong-immunity/

#81 Asterix1 on 09.10.19 at 1:06 pm

How do these “economists” get so much MSM coverage without anyone analyzing their self serving garbage?

…Robert Hogue, senior economist at Royal Bank of Canada, is declaring the correction in Canada’s housing market over. “The recovery is on,” Mr. Hogue says.”

Ridiculous quote! And false!

#82 Shawn Allen on 09.10.19 at 1:35 pm

Irony on display…

Because Asterix1 disagrees with the economist’s view it is apparently clearly ridiculous and false and should be challenged by the main stream media. Which by very use of the MSM label is clearly not trusted anyhow.

Predictions, including those of gloom caused by debt are difficult. Anyone making frequent strong predictions about the future either has to admit they were often wrong or simply refuses to admit it.

#80 Asterix1 on 09.10.19 at 1:06 pm
How do these “economists” get so much MSM coverage without anyone analyzing their self serving garbage?

…Robert Hogue, senior economist at Royal Bank of Canada, is declaring the correction in Canada’s housing market over. “The recovery is on,” Mr. Hogue says.”

Ridiculous quote! And false!

#83 SimplyPut7 on 09.10.19 at 2:30 pm

While renting in YVR and GTA have become very difficult for the poor or lower-middle-class people with kids, it highlights how unaffordable homeownership is in these cities. Renting is still much cheaper than owning.

Why did investors buy $1.8 million to $2.5 million houses only to rent the entire house out for $3500 to $4700 a month? Even the condos purchased in the last 5 years are losing in some cases $1000 a month and that’s assuming they put 20% down to purchase the unit.

What was the plan? When there are 69,000 condos under construction in the GTA (https://www.theglobeandmail.com/real-estate/toronto/article-toronto-condo-builders-changing-their-presale-game/), another 37,389 waiting to be constructed with 86% of them already sold (https://www.urbanation.ca/news/223-condo-construction-surpasses-60000-units-first-time).

When rent is too high and much cheaper newer condos come to market, what do landlords think they will have to do keep their tenants? Or did everyone think they were just going to sell their condos at the same time when they realize it’s no longer economically feasible to subsidize your tenants living expenses?

#84 SimplyPut7 on 09.10.19 at 2:31 pm

While renting in YVR and GTA have become very difficult for the poor or lower-middle-class people with kids, it highlights how unaffordable homeownership is in these cities. Renting is still much cheaper than owning.

Why did investors buy $1.8 million to $2.5 million houses only to rent the entire house out for $3500 to $4700 a month? Even the condos purchased in the last 5 years are losing in some cases $1000 a month and that’s assuming they put 20% down to purchase the unit.

What was the plan? When there are 69,000 condos under construction in the GTA (https://www.theglobeandmail.com/real-estate/toronto/article-toronto-condo-builders-changing-their-presale-game/), another 37,389 waiting to be constructed with 86% of them already sold (https://www.urbanation.ca/news/223-condo-construction-surpasses-60000-units-first-time).

When rent is too high and much cheaper newer condos come to market, what do landlords think they will have to do keep their tenants? Or did everyone think they were just going to sell their condos at the same time when they realize it’s no longer economically feasible to subsidize their tenants living expenses?

#85 Jesse on 09.10.19 at 2:32 pm

#79 Renter’s Revenge! on 09.10.19 at 1:00 pm
#75 IHCTD9 on 09.10.19 at 11:53 am

So Ponzie, you think acknowledging the presence of outstandingly beautiful Women is – bad?

How are your T levels?

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

I think you’re on to something with the T levels.

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

Men’s testosterone levels have been dropping for 75+ years, and are still dropping (oddly, testosterone is rising in women age 30-40). There have been several studies into why this is happening, but so far no conclusion. If this trend continues, men won’t have enough T and sperm left to reproduce!

link: https://www.gq.com/story/sperm-count-zero

#86 IHCTD9 on 09.10.19 at 2:40 pm

#79 Renter’s Revenge! on 09.10.19 at 1:00 pm

I think you’re on to something with the T levels.

Some interesting articles on hormones and sex appeal:

https://jezebel.com/cowboys-are-good-in-bed-and-dont-ever-get-the-blues-311657
______

Well I’ll be damned – that Jezebel piece by Anna Holmes explains why there were so many 9/10 ladies at the Rodeo I attended:

According to Ms. Holmes: COWBOYS ARE SEXY! They wrestle with large animals, wear leather chaps with tassels, and are ripped from head to toe from working sun up till sun down.

How DARE Ms. Holmes talk so brazenly about Men!?!
She’s a total pervert!!

***Let her have it Ponzie!!!!***

#87 IHCTD9 on 09.10.19 at 2:57 pm

unfortumissy:
Anna Holmes
10/17/07 1:20pm

“I went to a rodeo in Wyoming this summer and had the best make-out session I’ve had to date. Just sayin’.”
____

^ First comment from the steerage section on that Jezebel Cowboy article.

Ponzie, you’d better get on these degenerates ASAP!!!

#88 Bad Omen on 09.10.19 at 3:18 pm

Its just been announced that our PM will announce the kickoff for the election tomorrow morning. This will be on September 11th, and now am getting nervous about it all. Maybe this was fake news, or maybe not.

#89 n1tro on 09.10.19 at 3:46 pm

#81 Shawn Allen on 09.10.19 at 1:35 pm
Irony on display…

Because Asterix1 disagrees with the economist’s view it is apparently clearly ridiculous and false and should be challenged by the main stream media. Which by very use of the MSM label is clearly not trusted anyhow.

Predictions, including those of gloom caused by debt are difficult. Anyone making frequent strong predictions about the future either has to admit they were often wrong or simply refuses to admit it.
————-
First, that isn’t the definition of irony.

Second, I think Asterix1’s in pointing out the huge conclusion that the correction is “over” using the questionable numbers from CREB over a 1 month change.

#90 IHCTD9 on 09.10.19 at 3:47 pm

#83 Jesse on 09.10.19 at 2:32 pm

Men’s testosterone levels have been dropping for 75+ years, and are still dropping…
___

Plastics, ingredients in toiletries, office work, bad low fat/meat diets, not enough sleep, – all kinds of things are in on it. Scary stuff though for sure.

#91 Gravy Train on 09.10.19 at 3:49 pm

#67 Canadian Suckers on 09.10.19 at 10:13 am
“The Climate Change Liars aren’t even trying to hide the bullshit line about climate change any more. Flat out, it’s a tax grab to finance UN pet projects. It said so in the original documents and our politicians are slop-feeding a bunch of brainwashed climate zombies and assorted suckers.”

Hey, genius-baby. How much did you have to pay on your last two-month power bill? I got a credit of $127.96 to be carried forward to a future power bill (just for using solar panels), and an $8,000 rebate on the initial purchase of the solar panels. :)

Hey, Flop, am I just being mean now? I suppose I shouldn’t bother trying to teach these ‘deplorables’. I’ve tried six ways from Sunday to show them how to make money from the current carbon tax regime, but I can’t penetrate their cerebral cortices. Is it a lost cause? I think even you tried to educate them a few months back! :)

#92 James on 09.10.19 at 3:54 pm

#49 Smoking Man on 09.10.19 at 1:47 am

Getting wasted every night with no consequences.
Love my wife.
Millennials good luck finding one these.

You chicks. Teacher taught. It won’t work out for you..
You traded your human nature instinct for a freek show professor that never made a bet.
__________________________________________
Consequences? Ask your liver?

#93 Gotta Get Out of Calgary on 09.10.19 at 5:28 pm

Mr. Turner, thank you for this excellent post (one of your many excellent posts). A concise and useful summation of the basic financial plan worthy of being printed and posted on the fridge for a daily reminder…..and being forwarded to a few folks I know in need of this info.

Glad to hear you, Mrs. Turner and Bandit survived the hurricane safely. Hopefully, there was little or no damage to your properties.

I have never experienced a hurricane but a colleague was stranded in the Caribbean a couple years ago when Cat 5 Hurricane Irma passed through. He summed up the experience as “five people hunkered down in the dark inside the bathroom while a freight train repeatedly rammed the building for 16 hours”.