The plunge

Buying a house is the ultimate human cocktail.

Emotion boils. Because real estate is a social marker, everybody wants some. Since most people are financial illiterates, property is the ultimate and only strategy. It’s the one asset the bulk of people even know how to buy. Culture factors in, too, creating an irresistible parental pull, despite the cost. Add in recency bias – we’re had a decade of house inflation, therefore people think it will rise forever. So greed looms large. Plus, the sheer ignorance of words like ‘rent is throwing away money’ are repeated, even as owners flush away fortunes in interest, property tax, insurance, repairs and transaction costs.

Real estate is the nation’s religion. It’s made some people considerable money. It has led millions into historic levels of debt. As house prices go up, our savings rate falls. Now the median nest egg of retirees without a corporate pension is merely $3,000, and their income under $30,000. They probably have a house, but the result is a few thin final decades of life.

Well, this blog won’t change the mentality of millions who think life’s goal is property. But it will always tell you to keep a balanced life. There is utterly no shame in renting. Only shame on those who make you believe so.

Thus, when it comes to that decision – usually faced in marriage – about how much house one can afford, confusion reigns. Even among the chosen few we know as blog dogs.

Like Chris:

My question is on the topic of what constitutes a reasonable amount of house to purchase? I know you’ve talked about your rule of 90, and buying if you can afford it, but there seems to be a myriad of different information/opinion about what “affording it” actually entails.

I’ve heard of spending 30% of your income on housing, but there seems to be no clear consensus on if that is gross income or net income? When I run the numbers with a handful of mortgage affordability calculators they tell me we can afford a house ranging from ~$970,000 all the way to ~$1,600,000. So I’m curious as to your opinion. What would be reasonable? A mortgage of 4x our household income? Spending 30% of our net income on housing? Or is there another way you recommend to assess reasonableness. The last thing I want is to overextend ourselves and be house poor. As always, very much appreciate you and your daily blog for all of the help and advice you provide.

Plus Adrian:

I’d really like to thank you for the daily dose of sanity. I landed in this beautiful country three years ago at 27 and have been reading your blog ever since. It is a breath of unbiased air with views on everything from dogs to macro economics.

Since you’re doing a piece on How much real estate you can afford tomorrow, I thought I’d write to you. That’s a question I’ve been mulling over for some time now.

Work in finance. Started at $60k but have worked my way up to a job that pays $150k a year including bonus. Wife (30) is employed as well and brings in about $50k a year. We’ve been renting a 1 bed room condo for $1,500/mo in the suburbs of GTA for over two years.  Over these years, we’ve maxed out our TFSAs at about $45k. I’ll be topping up my RRSP to $35k. In addition, I’ve about $65k sitting in cash. (I know I lost all your respect here)

Like any other immigrant, I’m planning to bring my parents here, start a family and get a bigger place. Any decent house I find is going for $750k-$800k even in the suburbs. The monthly carrying costs of these properties is going to be at least $3,500. I don’t plan on touching my TFSA. I can use $35k from the RRSP, $55k from my cash and the remaining $80k I can get as a loan from my family through their line of credit.

Now the ultimate question. How much can I really afford? I don’t want to jeopardize my finances and put all my money into four walls just so that I can call it my own when it actually belongs to the bank. One last thing, two years ago, I drove by the Belfountain store in the summer and saw you tidying the place up. Should’ve stopped and said hi but I was too reluctant. Biggest regret.

Well, gentlemen, there’s no single answer to this eternal question. It’s all a matter of how much risk you want to swallow, how much leverage you’re willing to shoulder, and what you think the benefit is from doing so. The economic answer is not the emotional one. Here are some considerations…

  1. A house is not a financial strategy. You have no control over where the market goes. At some point in your life you may have to turn it into income. Trading a $1,500 rental for a $3,500 monthly nut – and a pile of debt – is a huge move, especially when it means you stop saving.
  2. Have kids? Want them? After that decision’s made, family is your highest financial obligation. Children care not if you rent. But they do care if you can’t afford to help them get educated. Never buy a house because you’re pregnant.
  3. Real estate costs a ton to buy and own. Far more than renting. Owners are gambling the asset will rise in value and cancel out those additional costs. This is a risk you must accept. Doesn’t always work out.
  4. Understand the tax rules. If you flip, gains will be taxed as income. If you rent property out, profit will be taxed as capital gains. If you reno and lease a portion of your home, you could lose much of your tax exemption status.
  5. The ‘how-much-can-I-afford?’ question is not just about cash flow. It’s about the future. Do not put so much into real estate that you can no longer save or invest. That is a total toss. Ultimately we all need income more than a roof.
  6. Follow industry formulas for cash flow guidelines. The total debt service (TDS) ratio should be 42 or less. To calculate add all payments (house, car, loans, utilities, insurance, taxes) then divide by gross monthly income and multiply by 100. Rule of thumb – keep house costs to 30% of net income.
  7. Don’t be fussed about paying off a cheap mortgage with money that can be invested for far greater growth. Almost all published advice is wrong on this point. In a low-rate world you’re better off to grow investment accounts and use gains to pay down a home loan principal upon renewal.
  8. Adhere to my Rule of 90 for life guidance. The amount of total net worth in residential real estate should equal 90 less your age. That means young people can afford more leverage. Oldies should have way less. The rest of your net worth should be liquid.

The most important rule: stop emailing me seeking financial justification for something your spouse, your guilt, your mom, your friends or your hormones is making you do. I almost don’t care.

103 comments ↓

#1 G on 02.14.20 at 2:12 pm

Chinese Doctor on how to stay safe
Feb 14 10min
(Dr HU(Who), Proper hand washing and other simple things you can do, especially if COVID-19 is not contained.)
https://www.youtube.com/watch?v=i4vCHM2c4X0

‘It’s Coming’: CDC Director says to prepare for coronavirus to become widespread in America
on CNN Feb14 2min
https://www.youtube.com/watch?v=XLxTetlif9o&feature=emb_logo

The extremely virulent coronavirus which is sweeping through China’s Hubei province like wildfire will eventually gain a foothold in the United States – becoming a ‘community virus’ this year or next, according to CDC Director Dr. Robert Redfield.

“We don’t know a lot about this virus,” Redfield told CNN’s Dr. Sanjay Gupta. “This virus is probably with us beyond this season, beyond this year, and I think eventually the virus will find a foothold and we will get community-based transmission.”

“Right now we’re in an aggressive containment mode,” said Redfield.

#2 Classical Liberal Millennial on 02.14.20 at 2:15 pm

First! But probably not.
House costs to be 30% of net income… I wager close to nobody abides by that rule right now.

#3 Damifino on 02.14.20 at 2:16 pm

They probably have a house, but the result is a few thin final decades of life.
———————————–

A chilling turn of phrase.

I have witnessed it. Zero cash flow at 65. Depressing.

#4 Mattl on 02.14.20 at 2:18 pm

Good post. I believe in home ownership for the masses, but it isn’t for everyone, and it shouldn’t be taken lightly.

Our approach to buying has always been conservative; If I have to pay attention to what day my mortgage comes out, I’m over extended (I’m not).

We also only buy properties that have good bones. New(ish) roofs, solid foundations, etc. I don’t care about hot water tanks, landscaping and paint – these are all easily updated. I hear all of these horror stories about ongoing maintenance but my experience has been different – lots of time put into our homes, but to improve them, not maintain current standard. If you buy a 100 year old home with old plumbing and electrical it should be no surprise when those systems fail.

We also lean towards having the worst home in the best neighborhood as opposed to the best home in a crappy hood. Have no interest in living beside people that don’t have time or money to maintain their properties, or hoods where everyone has a basement suite.

Lots of respect for renters but it’s not for us, we have dogs, and love having the stability and flexibility home ownership offers. But it sure isn’t cheap, most things worth having aren’t.

#5 Highlander on 02.14.20 at 2:28 pm

“I almost don’t care.” Thankfully you care enough to keep this awesome blog going !

#6 HoweStreet.com on 02.14.20 at 2:29 pm

Ross Kay on HoweStreet.com Radio:
Seeding FOMO in Buyers Minds.
What a 10% GTA price gain forecast means.

https://www.howestreet.com/2020/02/real-estate-seeding-fomo-in-buyers-minds-ross-kay/

#7 Stan Brooks on 02.14.20 at 2:48 pm

#175 Stan Brooks on 02.14.20 at 11:36 am posted:

#171 IHCTD9 on 02.14.20 at 10:44 am

Oil, gas and nitrate fertilizers are the main reason for the ‘extravagant lifestyles’ that we ‘enjoy’. The IT and knowledge boom is direct result of people’s free time increased by those.

*******************
Stan please insert a line or something so I can know if you are quoting someone or writing your own words. That way it will be faster for me to know which part to ignore.

Dear Shawn,

I gave up trying to influence logical reasoning in your empty brainwashed head long time ago.

So you are mistaken assuming that I wrote something for you to read.

We know that debt and banking is what drives progress according to you, no need to repeat that constantly, we know that you are alone, have no family (for a reason)
and reflect everything through your own egocentric value system that is disconnected from reality.

You objected nothing from what I wrote above with specific arguments or logical elaboration, just resolved to basic character attack which only sadly confirms my opinion of you.

Relax, get laid and have a drink.

Cheers,

#8 Stan Brooks on 02.14.20 at 2:50 pm

the above was a reply to:

187 Shawn Allen on 02.14.20 at 1:50 pm

#9 Sold Out on 02.14.20 at 3:01 pm

Despite no mortgage, we pay 17% per Garth’s formula. I’m pretty sure that no one buying a home today (except very few high earners) in BC is under 30%.

I think what Garth’s formula is telling us is, “If you didn’t buy a house before 2006, you can’t afford one, ever”.

Nah, just move to Castlegar. – Garth

#10 Dups on 02.14.20 at 3:04 pm

I think it is time for Trudeau to fold and resign. Canada is becoming a joke under his watch. These are times when we should have a leader like Trump to show the citizens that break the law, are not awarded with maple syrup and read citations over the tracks by scared female police officers. They say to hit us where we hurt! Why? I thought we all were Canadians trying to build a country in the 2020’s. Seems like Canada is a bunch of separate cultures surrounded by a border and no respect for a common flag. No one dares to put the US flag on the train tracks or hang the flag backwards in America. Why is that ok to be done in Canada? Shame to such acts!!!

#11 NotLegalAdvice on 02.14.20 at 3:09 pm

I have an issue with this: “Follow industry formulas for cash flow guidelines. The total debt service (TDS) ratio should be 42 or less”. – G.T.

Even while renting, my ratio is significantly over this because of the high rental costs in the GTA.

Is moving the only option?

#12 FreeBird on 02.14.20 at 3:11 pm

Children care not if you rent. But they do care if you can’t afford to help them get educated.
———————
Very true. And that their parents spend time with them. Hard to do when your spending extra hours at work to help pay for/maintain the place you own and or spending many hours a week commuting to afford more space to own and more stuff…for you and the house/condo. And many weekends doing fixes or updates. Sounds corny but the most valuable gift you can give your grand/kids (outside of education and feeling safe) is your presence.

#13 Donald Williams on 02.14.20 at 3:27 pm

#9 Sold Out on 02.14.20 at 3:01 pm
Despite no mortgage, we pay 17% per Garth’s formula. I’m pretty sure that no one buying a home today (except very few high earners) in BC is under 30%.
I think what Garth’s formula is telling us is, “If you didn’t buy a house before 2006, you can’t afford one, ever”.

Nah, just move to Castlegar. – Garth

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

Move to Castlegar … haha, awesome response! I was born 20 minutes from there under the shadows of the big smoke stacks. When I moved my parents into a seniors home some years ago I could only get them $30,000 for their little shack.

#14 AGuyInVancouver on 02.14.20 at 3:28 pm

Rather than eliminate the Capital Gains tax exemption for a primary residence, maybe we should just eliminate it for all on-residents Canadians, as Australia is doing:

https://www.domain.com.au/news/sydney-homes-of-expats-hit-the-market-to-beat-looming-cgt-deadline-928963/?utm_campaign=strap-masthead&utm_source=smh&utm_medium=link&utm_content=pos5&ref=pos1

You are obsessed. BC real estate costs too much because of people who live in BC. Get over it. – Garth

#15 Don Guillermo on 02.14.20 at 3:29 pm

#10 Dups on 02.14.20 at 3:04 pm
I think it is time for Trudeau to fold and resign. Canada is becoming a joke under his watch. These are times when we should have a leader like Trump to show the citizens that break the law, are not awarded with maple syrup and read citations over the tracks by scared female police officers. They say to hit us where we hurt! Why? I thought we all were Canadians trying to build a country in the 2020’s. Seems like Canada is a bunch of separate cultures surrounded by a border and no respect for a common flag. No one dares to put the US flag on the train tracks or hang the flag backwards in America. Why is that ok to be done in Canada? Shame to such acts!!

********************************************
Even his old man had a “just watch me moment”

#16 Leo on 02.14.20 at 3:43 pm

I read an interesting article in the FP… (it’s been a while since they have written anything of interest… so many opinion pieces, but I digress)
https://business.financialpost.com/opinion/william-watson-if-anti-pipeline-blockades-continue-much-longer-we-need-to-ask-who-governs-canada

I don’t understand how Canadians and their government allow foreign funded Organizations to influence the opinion/media/policy and even politics of our great dominion.
Are politicians aware of where the money is coming from for these groups?

#17 Abby on 02.14.20 at 3:52 pm

Needed to hear this today. Thanks Garth! Nice reminder to stay the course. Some days it is hard. My kid came home yesterday really upset from kids teasing him that he was poor because we rent. I left an abusive situation and walked away from everything. I listened and have saved every extra cent and we now have just over $250,000 saved in a B&D portfolio. Not a lot but from where we came from I feel rich. Still wish I could kick those kids in the shins though! ;-)

#18 mark on 02.14.20 at 3:56 pm

Off topic, but those struggling with asset allocation and all the other “noise” of investing a good tool is linked below, just remember a scalpel in expert hands can SAVE your life or in inept hands kill ya use accordingly.
Its got some cool visual charts that may help people, only drag is preferred’s are not listed in the asset mixer!

portfoliocharts.com

enjoy.

#19 david on 02.14.20 at 4:15 pm

so if I don’t have any non mortgage debt, is it OK if I spend the full 42% on just housing ie I don’t need a car, and don’t have credit cards. what is so magical about this 30% limit for housing costs

#20 Sold Out on 02.14.20 at 4:28 pm

#9 Sold Out on 02.14.20 at 3:01 pm
Despite no mortgage, we pay 17% per Garth’s formula. I’m pretty sure that no one buying a home today (except very few high earners) in BC is under 30%.
I think what Garth’s formula is telling us is, “If you didn’t buy a house before 2006, you can’t afford one, ever”.

Nah, just move to Castlegar. – Garth

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

Move to Castlegar … haha, awesome response! I was born 20 minutes from there under the shadows of the big smoke stacks. When I moved my parents into a seniors home some years ago I could only get them $30,000 for their little shack.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Yeah, but the Pb poisoning is free!

#21 the Jaguar on 02.14.20 at 4:31 pm

Observations:

“mortgage affordability calculators they tell me we can afford a house ranging from ~$970,000 all the way to ~$1,600,000. ” —— These numbers represent real dollar debt. These aren’t fake news numbers. You are talking about taking on a liability of a million dollars. This isn’t chump change. Run the mortgage calculator again, but this time increase the mortgage rate by 5%. Maybe have a pair of clean underwear nearby before you run the numbers.

“Never buy a house because you’re pregnant.”—– Not only have I seen this many times, but also buying a real expensive home when newly graduated from school and more or less not yet established financially or in choice of career, and with gobs of student debt. Usually parents have provided the down payment.

“They probably have a house, but the result is a few thin final decades of life.”—–So true, because they are unable to grasp the idea that sometimes to keep your home you must give up your house. Do it before you fall, break a hip and Mr. Reality makes your decisions for you. Enjoy the time you have left with the people you love. Sell, rent, invest.

#22 the Jaguar on 02.14.20 at 4:33 pm

Happy Valentine’s Day, Bandit.

#23 G on 02.14.20 at 4:49 pm

“Switzerland, one of the world’s leaders in the rollout of 5G mobile technology, has placed an indefinite moratorium on the use of its new network because of health concerns,” The Financial Times reports.

#24 Don Guillermo on 02.14.20 at 4:53 pm

#20 Sold Out on 02.14.20 at 4:28 pm
#9 Sold Out on 02.14.20 at 3:01 pm
Despite no mortgage, we pay 17% per Garth’s formula. I’m pretty sure that no one buying a home today (except very few high earners) in BC is under 30%.
I think what Garth’s formula is telling us is, “If you didn’t buy a house before 2006, you can’t afford one, ever”.
Nah, just move to Castlegar. – Garth
*****************************************
Move to Castlegar … haha, awesome response! I was born 20 minutes from there under the shadows of the big smoke stacks. When I moved my parents into a seniors home some years ago I could only get them $30,000 for their little shack.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Yeah, but the Pb poisoning is free!

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

I know, we were frequently tested. Fair skinned people seemed to be more susceptible to getting leaded. Cominco loved the Italians. I was in heaven when I moved to the Oil Sands.

#25 Shawn Allen on 02.14.20 at 5:02 pm

#194 Dr V on 02.14.20 at 3:08 pm posted:

190 Shawn

“Still business people howl about that while Garth has to
pay 54%!”

Ever been in business Shawn?

*********************************
Stood behind the cash register at the family Motel business (actually just a cash drawer in the very early days) for the first time at about age 9 in 1969. Been in business continuously (my family first and then on my own) since then but with day job in government.

People in business can usually get a lower tax rate than those on salary. If not, find a new tax adviser.

How about you? Got a lot of business experience?

#26 Yukon Elvis on 02.14.20 at 5:15 pm

Nah, just move to Castlegar. – Garth
……………………

Castlegar. Yes! Party with the Doukhobors. Bonfire every weekend. Bring yer own weenies. Good luck making a living.

#27 Shawn Allen on 02.14.20 at 5:19 pm

Who’s got a nest egg?

Garth said: Now the median nest egg of retirees without a corporate pension is merely $3,000, and their income under $30,000.

****************************
I’m willing to bet that people with pensions average a LOT higher nest egg despite less need for it.

Who can afford to put money into RRSP and TFSA and RESP? Those with good jobs with pensions typically can. (RRSP is limited but usually still some room is granted) Many without pensions are lower income which is part of the reason for the tiny nest egg.

P.S. Glad to see Stan is still a member of my fan club.

I’m in Tampa this week at the (extended) Allen family compound. Escape from the Edmonton weather. We’ve had a beach head here for 20 years. Rain this morning so I had time to post more. The house here was bought with stock market profits at the time of the financial crisis. Short sale it was called. Seller got an amount short of what they owed the bank. Fun times – for buyers.

#28 Shawn Allen on 02.14.20 at 5:22 pm

Pension Facts

Did you all know you can retire and live in Florida and collect all your CPP and old age pension and government DB pension just as if living in Canada. And if you just stay winters you can remain a Canadian resident and still get the free health care.

I know many of you will be extremely happy to know it.

#29 Sold Out on 02.14.20 at 5:25 pm

#24 Don Guillermo on 02.14.20 at 4:53 pm
#20 Sold Out on 02.14.20 at 4:28 pm
#9 Sold Out on 02.14.20 at 3:01 pm
Despite no mortgage, we pay 17% per Garth’s formula. I’m pretty sure that no one buying a home today (except very few high earners) in BC is under 30%.
I think what Garth’s formula is telling us is, “If you didn’t buy a house before 2006, you can’t afford one, ever”.
Nah, just move to Castlegar. – Garth
*****************************************
Move to Castlegar … haha, awesome response! I was born 20 minutes from there under the shadows of the big smoke stacks. When I moved my parents into a seniors home some years ago I could only get them $30,000 for their little shack.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Yeah, but the Pb poisoning is free!

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

I know, we were frequently tested. Fair skinned people seemed to be more susceptible to getting leaded. Cominco loved the Italians. I was in heaven when I moved to the Oil Sands.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Anyone who thinks OH&S is a commie plot should talk to the men who unknowingly tracked home toxic amounts of lead, consigning their children to a life of diminished IQ.

Trail lead babies were well known in the medical field, back in the day.

#30 Piano_Man87 on 02.14.20 at 5:25 pm

Another consideration is the immense amount of work it takes to properly maintain a home. Almost no one does it:

Shingles – replace every 10-20 years.
Windows – once the seals go, replace before winter hits.
Caulking in bathrooms and kitchen – replace as needed. Every year ish.
Some floors needs waxing. Carpets need steam cleaning. Once a year ish.
Furnace – replace every 10 years
Furnace ductwork – clean out every year
Furnace filter – replace every month or so
Painting – every few years.
MDF baseboards – if you take them off to paint, need brand new ones
Siding – if wood, must be painted every so often. Same with window/door trim.
Fences – painting/staining
Decks – painting/staining.
Driveways can slump, need to be lifted.
Basements can slump too, need concrete repoured.
At the 100 year mark, joists are sagging, need to be fixed up. Concrete should be resupported.
After 10-20 years, everything looks out of date, so better remodel. Get ready to drop 50-100K to do anything significant.
Shoveling
Watering the lawn
Raking the lawn
Mowing the lawn
Fertilizing the lawn
Gardening
Is your driveway made of funny material? May need to be resealed every year.
Move the snow away from your house to reduce risk of flooding.
Check the attic every year for signs of leaks.
Hot water heater every so often.
Basements can flood.
Foundations crack, letting in water.

Wow, sign me up! I totally understand why this is a dream for everyone!!

#31 Shirl Clarts on 02.14.20 at 5:41 pm

“4. Understand the tax rules. If you flip, gains will be taxed as income. If you rent property out, profit will be taxed as capital gains.” – Garth
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Typo. House proceeds are taxed as capital gains, and rental income is fully taxed at marginal rate.

Profit, not income. No typo. – Garth

#32 Shawn Allen on 02.14.20 at 5:45 pm

Business opportunity in home maitenance

#30 Piano_Man87 on 02.14.20 at 5:25 pm
Another consideration is the immense amount of work it takes to properly maintain a home. Almost no one does it:

Shingles – replace every 10-20 years.
(see the list above)

*****************************
I’ve often thought of this as a business opportunity. Professional property management for single family houses. Why not? Sign people up on a subscription basis. Many can’t afford but many can.

Okay, enough from me for tonight (and don’t bother begging me to keep posting)

#33 Dutchy on 02.14.20 at 5:54 pm

Still wondering……..
Who are all these RE investors willing to lose all that money ???? (by renting to us)

#34 Sask to AB on 02.14.20 at 5:55 pm

re #30 Piano_Man87 on 02.14.20 at 5:25 pm

So, so true………

#35 Sask to AB on 02.14.20 at 6:03 pm

Other things to consider:

Replace dishwasher (ours just died at 10 years)
Water backup in the basement from tree roots (ours just did that in December, City told us to call in 2 years and get it rooted out again)
Gutters need replacing.
Trees need pruning ($300 to cut down top 12 feet of our dying birch tree)
Fertilizing lawns and trees 2 times a year.
Garage door springs, every 5 to 10 years(only one ever breaks, but if you don’t replace both, your door will snap and break the other spring because it is unbalanced)
replacing washer and dryer every 10 years or so.
The list goes on and on!!!!

There is no place like home…….

#36 Linda on 02.14.20 at 6:06 pm

#17 ‘Abby’ You go, girl! Too bad your kid is being picked on because you rent, but – kids do that. Pick on others. For whatever reason or no reason, just to be part of ‘the group’. I doubt those kids have any idea of what their parents true financial situation is. They could easily be living in lavish digs, with new stuff every day of the week & it could all of it be on credit. Nothing owned, only borrowed. You don’t have to go into detail about your family finances with your child, but you might want to point out to that child that looks can be deceiving & that most likely it is a bank that owns the houses those other kids live in. A mortgage is just a ‘rent to own’ agreement, just like buying furniture on credit. Except in your case, no bank can suddenly demand you pay the mortgage in full regardless of whether you have the financial resources to do so.

#37 Mattl on 02.14.20 at 6:09 pm

#30 – nice try, you have either never owned a home or are the worst home owner ever.

Shingles every ten years? Try 25-30.

Caulking bathroom every year? Well thats an easy job but one I haven’t done yet in 15 years of owning homes. I mean that has to be once every 5-10.

Paint in a non smoker home is an easy decade.

Repour a basement?wtf did you come up with that one.

Foundation every hundred years….ok, will give you that. So my home is next due in 2080. Will make a note to check back in 2075.

I know these lists make you feel better but I don’t know anyone that struggles with regular home maintenance but we don’t do our roof every decade so there is that.

And if home ownership is so cumbersome, renters must have their landlords on site 24/7 doing repairs. I suspect though you rarely see him, because homes are pretty easy to maintain.

#38 N on 02.14.20 at 6:09 pm

Here’s another tip on what’s the right cost to own a home.

Cost of home is “lesser than or equal to” the cost of rent.

#39 DantheMechanic on 02.14.20 at 6:14 pm

The net worth rule still doesn’t quite make sense to me.

Let’s use easy math. If someone is 35 years old, the rule of 90 implies they can have up to 55% of their net worth in real estate. If they are currently worth $100,000, they can afford up to $55,000 of their net worth in real estate.

But, property goes in the asset column and mortgage goes in the liability column. Technically speaking, if the person puts down $55,000 and buys a $1MM property, they are still within the rule of 90 as only 55% of their net worth is tied up in the property (i.e. the equity portion). The calculation doesn’t really change if it’s a $400,000 property or a $1MM property as the equity piece stays the same.

Garth, would you be able to clarify how you should calculate the real estate affordability given your rule of 90?

Thanks,
DAN

#40 yorkville renter on 02.14.20 at 6:18 pm

The easiest buy vs rent argument to make is this:

(double land transfer tax + interest paid in first 5 years)/monthly rent = a decade of rent.

using $1mm with 10% down… $33k LTT + $129k interest = $162k or 5 years rent at $2600/mo

doesnt include closing costs, property tax, possible condo fees, repairs, insurance, opportunity cost of $100k downpayment… and if rates go to 5% at renewal you’ll pay another $175k in interest to the bank.

yikes

#41 jsto on 02.14.20 at 6:18 pm

“There is utterly no shame in renting. Only shame on those who make you believe so.”

To be fair, the whole system is geared to keep the distinction based on the superior “worthiness” of Owners vs Renters… Go ask for a loan, credit card, car lease, line of credit, you name it….

#42 Josh Lambden on 02.14.20 at 6:20 pm

#30 Piano_Man87 on 02.14.20 at 5:25 pm,
A little over the top on some of those items, but the point is well taken. There is an annual maintenance budget when you own. Some years more, some years less. It’s better if you DIY, but that takes time and effort too.

I’ve been an owner for a long time and definitely consider it to cost more than renting, but it comes with benefits too.

I think the first hurdle should be, do you plan to stay in one place for at LEAST 5 years. If you can’t honestly say that will be the case then you should consider renting instead. Especially if you’re young. Value your flexibility. If you decide to go travelling for a year it’s way easier to do if you’re renting.

#43 Bezengy on 02.14.20 at 6:27 pm

Received an email from Hydro One today asking if I wanted a quote to switch to electric heating. This must be SPAM. They cannot be serious, not when they are charging 21 cents per/kwh can they? One 1500 watt heater running constantly can cost almost $200 per month, and here in Timmins (-33% today) they never shut off.

#44 Ustabe on 02.14.20 at 6:53 pm

#30 Piano_Man87: …long list of supposed home expenses…

As some here recall from prior posts my brother and I built (over 30+ years) a moderately sized property management firm.

The last decade before I sold out we held 5 homes, one a duplex; 2 commercial units and 2 executive rental homes fully leased by the University of Calgary. Total rental income was just below $20,000 per month or $240,000 per year.

I don’t recall our repairs and maintenance annual spend being much over $30,000 in any year and that would have been an extraordinary year with major replacement/repairs. I think we spent on average maybe $15-20,000 per year.

Call it 10% of the income on R&M.

My personal home has seen an average of $2,400 per year over 25 years spent on R&M. This is a 50 year old house that has been fully renovated, in and out, with wiring, insulation, siding, roofing, windows all replaced.

Am I doing something wrong?

#45 Abby on 02.14.20 at 6:54 pm

#36 Linda – Thanks for the support. I might have teared up a bit with your post ;-)

You’re right. Lots of illusions of wealth in our neighbourhood, I’m sure. For all the talk of no bullying it is so rampant in our schools. In the end, I believe my child with have more empathy for others as he grows up because he hasn’t had everything given to him. Still hurts your heart a bit when he’s such an amazing kid.

Because of Dr. Garth’s advice about “time is most important currency” we have lots of time together and he knows he is loved. That’s the currency that matters.

Wishing you a nice evening and thank again for sending your words of support. It means a lot.

#46 Raging Ranter on 02.14.20 at 6:57 pm

@#17 Abby, There’s a good chance you’ve got more money than those kids’ parents. And even if you don’t now, you might someday if you stay the course. Stand up straight and hold your head high. As Jordan Peterson says, compare yourself to who you used to be, not to others. If you’re further ahead than where you used to be, you’re going in the right direction. That’s the only yardstick that matters.

#47 Maintaing a SFH ... on 02.14.20 at 7:07 pm

is pretty cheap if you can do it yourself. Would not consider owning if I couldn’t. Parts and paint are dirt cheap compared to labour. That’s expensive. And the taxes you have no control over … but out west here they can be deferred. Good deal for some.

#48 I’m stupid on 02.14.20 at 7:09 pm

#3 Damfino

I saw a guy who was turning 65 in six month stand up at my union meeting saying he’s turning 65 and doesn’t have enough money to retire. It was sad, especially considering he was making over 100k a year in the 80s. Think about that, a Ferrari 308 cost about 85k. This guy made over 3million in his carrier and has nothing to show for it.

#49 BlogDog123 on 02.14.20 at 7:11 pm

Houses cost money to run, and your local municipality knows you’re trapped…

They may also have these sneaky ‘new’ taxes come into effect:

– Mississauga’s new ‘stormwater charge’ $100/year
– Peel is tinkering with charging more for garbage collection
– Water rates can go up
– Municipalities adding to the gas pump
– Creative ways to limit free parking in your neighbourhood

30% of your city portion of the property tax bill goes towards public transit. That’s to pay people to drive around in mostly empty buses at 10pm and Sundays.

#50 earthboundmisfit on 02.14.20 at 7:15 pm

With respect to the “protesters” at Tyendinaga, please don’t disparage all First Nations people over this latest issue. They are not at all representative of the majority of band members or their elected councils. For the most part, these “protesters” are a very small minority of troublesome n’ere-do-wells, calling themselves the Mohawk Warrior Society, looking for any fight they can find. To wit: Caledonia. A good number of them are very well off, courtesy of illicit tobacco and alcohol. F350s and GM3500 series trucks aren’t cheap. They also have ample support, both vocal and financial, from the eco-warriors of the Tides Foundation, who now have entrenched membership in the PMO. Butts is gone (or so most people believe), but he, Jonathan Wilkinson, Sara Goodman, and Katie Telford are still pulling the Prince of Papineau’s strings. Our so called PM is not bright enough to think for himself. This bunch is determined to destroy Canada’s energy industries and they are using FNs to that end.

#51 Nonplused on 02.14.20 at 7:16 pm

#30 Piano_Man87

I agree with some of the other posters that your maintenance schedule is pessimistic. Also there are some (rather expensive) decisions you can make to extend the life of some aspects of the house. I won’t go point by point but here are some:

– Furnaces typically last 25 years.

– Hot water tanks typically start leaking before they burst so if it is still working don’t replace it.

– Asphalt shingles can last 20 years, but if you get tile or rubber or metal shingles they may never need to be replaced (although they cost twice as much).

– Stucco lasts pretty much forever with little maintenance. Also expensive.

– Oak or other solid woods last much better than MDF, and are much more beautiful. My whole house, including the fridge, is finished in oak. But if you have MDF, you can tape it to paint.

– Most landlords only provide a fridge and stove, maybe a dishwasher. If you want a washer and dryer that is usually on you.

– If you rent a house, you are usually responsible for lawn maintenance and snow removal.

#52 Linda on 02.14.20 at 7:18 pm

#42 ‘Josh’ – right on. If you are not planning on a long term stay or have good reason to suspect you won’t be living in your current locale long term then renting is definitely the way to go. Also, take the opportunity to explore living options while renting. Condo vs. house. Country vs. city. Living without a car vs. commuting. Be a bit of a downer to fork over a pile of cash & then discover you hate the lifestyle that comes with it.

#53 NoName on 02.14.20 at 7:19 pm

Here is one video on change, just for climate crusaders.

Very interesting, most interesting part is when he say something like if woble it axis of earth rotation is changed could lead to climate change. I just can’t remember who build bam that affected both of those two things…

https://youtu.be/R7nLMLnObiU

#54 Remembrancer on 02.14.20 at 7:21 pm

#39 DantheMechanic on 02.14.20 at 6:14 pm

Dan man, how are you calculating net worth? I’m old fashioned and define it as assets minus liabilities

Assets: $55000 in equity, $45000 cash
Liabilities: $945000 in mortgage debt

$100000 – $945000 = – $845000

I’ll leave the % for rule of 90 as an exercise, good idea keeping some cash on hand, might need a roof or new furnace, congrats on the 5% down mortgage, what’s the interest rate?

#55 Hydro One on 02.14.20 at 7:28 pm

#43 Bezengy

And I thought my hot tub was expensive to run! Mind you it isn’t -33 every day.

But yes I agree that unless you live someplace like BC or Quebec where there is a lot of Hydro natural gas is a way cheaper way to heat. Electric heaters may be 99% efficient once the electricity gets to the element, but 50% of the original heat source is lost to thermodynamics and line loss in generating and transporting the electricity. And that is considering combined-cycle natural gas. If using coal, 70% of the heat is wasted before the electrons get to your heater. That is why, where possible, you heat with gas. With a modern gas furnace 95% of the available heat ends up in your house. That 95% number only counts the gas not the electricity to run the fans, but older furnaces have fans too.

#56 Nonplused on 02.14.20 at 7:30 pm

#48 I’m stupid

Well, if there was a divorce with kids in there, I’m not surprised.

#57 Stone on 02.14.20 at 7:31 pm

#25 Shawn Allen on 02.14.20 at 5:02 pm
#194 Dr V on 02.14.20 at 3:08 pm posted:

190 Shawn

“Still business people howl about that while Garth has to
pay 54%!”

Ever been in business Shawn?

*********************************
Stood behind the cash register at the family Motel business (actually just a cash drawer in the very early days) for the first time at about age 9 in 1969. Been in business continuously (my family first and then on my own) since then but with day job in government.

People in business can usually get a lower tax rate than those on salary. If not, find a new tax adviser.

How about you? Got a lot of business experience?

———

If you need a day job, then your business is not actually a business. A real business should sustain you entirely. Otherwise, it’s just a hobby.

And if this “business” is typing out an overabundance of pointless comments on a certain blog, it’s not even a hobby then. More like a cry for help. I count 4 so far at the time I write this. How many more will there be before tomorrow’s blog?

No comment for Stan though. He’s a lost cause.

#58 Nonplused on 02.14.20 at 8:04 pm

#39 DantheMechanic

The “rule of 90” isn’t as simple to understand as it might seem, especially if there is a mortgage.

Also the “rule of 90” can be hard to maintain over long periods of time. Your house and your portfolio may go up and down but you don’t want to be buying and selling every year to “re-balance the portfolio” as you would with your investments. Real estate transactions are just too expensive and moving is a pain.

But on a simple reading of the “rule of 90” it would seem that a 30 year old person should have no more than (90-30=60) percent of their total assets in the house. So if they have $500,000 in total assets the house should be worth $300,000. Not sure how the mortgage figures in.

But in any case this mathematically challenged rule of thumb is designed to drive home the point that as said person approaches 60, they should have more savings and not necessarily more house. A 60 year old with $500,000 in assets should have a $150,000 house. Which is an RV.

#59 NoName on 02.14.20 at 8:18 pm

#55 Hydro One on 02.14.20 at 7:28 pm
#43 Bezengy

And I thought my hot tub was expensive to run! Mind you it isn’t -33 every day.

But yes I agree that unless you live someplace like BC or Quebec where there is a lot of Hydro natural gas is a way cheaper way to heat. Electric heaters may be 99% efficient once the electricity gets to the element, but 50% of the original heat source is lost to thermodynamics and line loss in generating and transporting the electricity. And that is considering combined-cycle natural gas. If using coal, 70% of the heat is wasted before the electrons get to your heater. That is why, where possible, you heat with gas. With a modern gas furnace 95% of the available heat ends up in your house. That 95% number only counts the gas not the electricity to run the fans, but older furnaces have fans too.

Funny thing you mention that, no one is talking
about it. Few months back i was at an event, my family was sharing table with some other family, and dudes job was related to power generation and transmission, very interesting dude. He did mention idea of micro grids and something along those lines is being mentions and thrown in a book of ideas. So that’s a good thing.

here is interesting
https://www.youtube.com/watch?v=PNh6PO3aM4s

#60 Diversified in Oakville on 02.14.20 at 8:22 pm

Great advice, past, present, and hopefully long into the future.
Retiring in a month, sold my house last week, downsizing to our condo which was a rental unit, rule of 90 and all other investment advise taken, and flush with enough cash flow for the next 30 – 40 years. 5 years earlier than could have been possible without Garth’s advise.
I just don’t understand why commenters think they know better.
Oh yeah, and visited Lunenburg last summer. Awesome.
Thanks.

#61 yorkville renter on 02.14.20 at 8:25 pm

#40 – I realize I said a decade of rent and my example was 5 years… oops

#62 Abby on 02.14.20 at 8:27 pm

#46 Raging Ranter Thanks for the support!! Love that quote and you’re so right. Just wrote it on my board as a reminder.

I’ll share one of my favourite back “You show your worth by what you seek.”

Have a nice evening and thanks again for the support ;-)

#63 Mr Canada on 02.14.20 at 8:39 pm

If you poll all the people commenting on these posts, I suspect most of you own your houses and have done well especially in terms of tax free capital gains and have enjoyed living and raising the family ….life is short people, enjoy it….wherever you live…

#64 Barb on 02.14.20 at 8:43 pm

Abby,
Agree entirely with Linda’s comment.
Hold your head high, especially for having the courage to get out of a bad situation.

You are your child’s hero…

#65 LP on 02.14.20 at 8:51 pm

#17 Abby

Good on you…stay the course. You will raise a good person in your son if he follows your example.

#66 Raging Ranter on 02.14.20 at 8:59 pm

@ #57 Stone, it’s just his daily humble brag. Boasting of personal wealth while exuding smarmy leftist dogma is a particularly Red Tory proclivity. Ustabe will be along shortly to lecture us on some aspect of progressive thinking whilst sliding in a reference to his own personal wealth.

99.9% of comments on the internet boasting of wealth and investing prowess are left by unemployed losers without two nickels to rub together. We should feel blessed and grateful that Shawn Allen, Ustabe, et. al. are the 0.01% real deal, and willing to share their wisdom.

I’m not rich myself but I know a few rich people. NOT ONE of them has the time or inclination to comment regularly on the Internet. Not one. We are in exceedingly rare company here. Think about that.

#67 Damifino on 02.14.20 at 9:18 pm

#48 I’m stupid

I don’t want to single out nurses as particularly inept with money but I’ve known several of them who were paid quite well during most of their careers. And yet, an aging, fee-hungry condo is about all they’ve got to show for years of steady employment. They seem to have no idea where the money went but practically none was saved or invested. Fortunately some of them have, or will have, decent pensions.

#68 VicPaul on 02.14.20 at 9:21 pm

#3 Damifino on 02.14.20 at 2:16 pm
They probably have a house, but the result is a few thin final decades of life.
———————————–

A chilling turn of phrase.

I have witnessed it. Zero cash flow at 65. Depressing.

*********

Chilling indeed.
When I moved into my lovely ’50’s era suburban Victoria neighbourhood four years ago, I noticed two houses with blue/orange tarps on each roof – I assumed they had discovered a leak and were covering until the roofers came to repair….four years later, there are three in the neighbourhood – same two OG’s and a new one. All could fetch 700K+ in their state of disrepair, but….weird.

M56BC

#69 Abby on 02.14.20 at 9:21 pm

#64 Barb
#65 LP
Hi Barb and LP – Thanks!! Your supportive words mean the world to me. Single parenthood is probably the most isolating experience. Add coming from trauma it is hard to be open. You are both examples of showing kindness because sometimes you never know what the person beside you is really going through. I will pay it forward. Wishing you a wonderful night.

#70 Sail Away on 02.14.20 at 9:28 pm

#30 Piano_Man87 on 02.14.20 at 5:25 pm

Another consideration is the immense amount of work it takes to properly maintain a home. Almost no one does it:

Shingles – replace every 10-20 years.
Windows – once the seals go, replace before winter hits.
Caulking in bathrooms and kitchen – replace as needed. Every year ish.
Some floors needs waxing. Carpets need steam cleaning. Once a year ish.
Furnace – replace every 10 years
Furnace ductwork – clean out every year
Furnace filter – replace every month or so
Painting – every few years.
MDF baseboards – if you take them off to paint, need brand new ones
Siding – if wood, must be painted every so often. Same with window/door trim.
Fences – painting/staining
Decks – painting/staining.
Driveways can slump, need to be lifted.
Basements can slump too, need concrete repoured.
At the 100 year mark, joists are sagging, need to be fixed up. Concrete should be resupported.
After 10-20 years, everything looks out of date, so better remodel. Get ready to drop 50-100K to do anything significant.
Shoveling
Watering the lawn
Raking the lawn
Mowing the lawn
Fertilizing the lawn
Gardening
Is your driveway made of funny material? May need to be resealed every year.
Move the snow away from your house to reduce risk of flooding.
Check the attic every year for signs of leaks.
Hot water heater every so often.
Basements can flood.
Foundations crack, letting in water.

Wow, sign me up! I totally understand why this is a dream for everyone!!

—————————–

Big deal. IH calls that Saturday afternoon.

#71 TurnerNation on 02.14.20 at 9:33 pm

I don’t get it. My immigrant parents didn’t feel the need to bring their soon to be elderly parents into this country. Said elders had their own lives and were independent.
Elderly folks and not working would have an immediate and taxing effect upon our already strained health care system. Everyone gets unlimited free health care once they step over the border.
With the demographic time bomb of Boomers –> Wrinkling what are we in for?
Ironically your best bet might be Medical Tourism into 2nd World counties.
What is this country all about now? I don’t get it.
How’s my future looking here.

#72 Sail Away on 02.14.20 at 9:37 pm

#66 Raging Ranter on 02.14.20 at 8:59 pm

@ #57 Stone, it’s just his daily humble brag. Boasting of personal wealth while exuding smarmy leftist dogma is a particularly Red Tory proclivity. Ustabe will be along shortly to lecture us on some aspect of progressive thinking whilst sliding in a reference to his own personal wealth.

99.9% of comments on the internet boasting of wealth and investing prowess are left by unemployed losers without two nickels to rub together.

I’m not rich myself but I know a few rich people. NOT ONE of them has the time or inclination to comment regularly on the Internet.

———————————

Guilty as charged. I feel so exposed.

Sure wish I had another nickel. Can I borrow one, Rage? And a job?

#73 Reality is stark on 02.14.20 at 9:38 pm

The main risk of a real estate investment is divorce. If you purchased a home for $300,000 and it went to $600,000 when you invited the spouse in that is now the matrimonial home. If you then have children and the house is now worth 1 million after 7 years of marriage when things normally dissolve you can kiss your house goodbye.
The judge will not likely force the sale of the house if your spouse does not work.
A portfolio on the other hand is easier to liquefy so you will at least end up with something.
Now that they initiate 80% of all divorces it is something to think about.
Even when you “win” with real estate you can lose it all with no fault divorce.

#74 Ustabe on 02.14.20 at 9:41 pm

@ #66 Raging Ranter

huh?

You feel a need to rag on me because at the age of 70+, after decades of work, I’ve managed to acquire some measure of wealth?

Be better.

And, I participate on another forum focused on something entirely different and one of the significant contributors there is the son of one of the founders of Alaska Air…he’s probably richer than all of your rich friends who have no time for blogs. So much for your parting shot.

Cause I can tell you this, being rich gives one the time to do whatever one feels like. Including dicking around on the Internet.

Lastly, anyone who uses “whilst” when “while” is perfectly cromulent is trying too hard.

#75 TurnerNation on 02.14.20 at 9:42 pm

Fine how about Sienna Seniors home REIT or Chartwell REIT also for oldsters homes.
We Gen X folks will require more health care in 10 years time too. Let’s home the government comes through. Cough cough.

#76 oh bouy on 02.14.20 at 9:45 pm

@#30 Piano_Man87 on 02.14.20 at 5:25 pm

__________________________

lol, that’s some serious OCD you have about home maintenance.

#77 Sail Away on 02.14.20 at 9:47 pm

#66 Raging Ranter on 02.14.20 at 8:59 pm

I’m not rich myself but I know a few rich people. NOT ONE of them has the time or inclination to comment regularly on the Internet. Not one. We are in exceedingly rare company here. Think about that.

——————————–

Garth is rich.

Please share more thoughts. They are illuminating.

#78 Russ on 02.14.20 at 9:58 pm

Nah, just move to Castlegar. – Garth

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

Move to Castlegar … haha, awesome response! I was born 20 minutes from there under the shadows of the big smoke stacks. When I moved my parents into a seniors home some years ago I could only get them $30,000 for their little shack.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Yeah, but the Pb poisoning is free!
———————————————————-

Hey Soldie,

You’re confusing Castlegar with Trail.

Castlegar has the Pulp Mill.
And they’re hiring.
So if anyone is looking for a job but not looking for work, there’s your place.

Cheers, R

#79 oh bouy on 02.14.20 at 10:20 pm

@#66 Raging Ranter on 02.14.20 at 8:59 pm

I’m not rich myself but I know a few rich people. NOT ONE of them has the time or inclination to comment regularly on the Internet. Not one. We are in exceedingly rare company here. Think about that.
_______________________________________

when they retire they’ll probably be on here boasting all day like everyone else. for all you know they probably have a few burner accounts on here already lol.

#80 Treasure Island CEO - 165,343,234.88 Offshore on 02.14.20 at 10:26 pm

A guy in finance working his way up to 150 and has no idea how much he can afford? WTF.

There are a lot of strategies to employ, but I personally think the single detach with rental capability is your best bet. You rent part of it out paying itself off or put aging parents in it. Impossible for this asset class in Vancouver / GTA at this point unless getting the inheritance, but still very doable in most other cities.

Who wants to share walls in a strata that will suck the same GDS or TDS of your earnings.

The answer to these questions today is you take the risk that solves the best possible cash flow outcome. It has nothing to do with asset appreciation or depreciation anymore (although appreciation is great) it is all about cash flow.

And as proven by the spike in delinquencies the hardest hit in Canada have been renters who are having half their incomes stolen by high rents, and as a renter you can’t go down the ladder more. Out the door homeless / bankrupt if you don’t cut it. That is where the risk comes in for ownership and if the cash flow position from ownership is better than renting, take the risk, if not, obviously rent.

#81 Yuus bin Haad on 02.14.20 at 10:34 pm

I headed down to the protest to see if I could score an honorarium, but all the good spots were taken so I just went to the local burger joint instead.

#82 Steven Rowlandson on 02.14.20 at 10:59 pm

Settle down people your home is just a place to live.
It isn’t an investment and it should be bought as cheaply as possible and the payments should be a minor portion of your annual earnings.

#83 Drinking on 02.14.20 at 11:20 pm

#1 G

https://www.dailymail.co.uk/news/article-8005931/British-scientist-leading-coronavirus-fight-says-forecasts-400-000-UK-deaths.html

#84 Ponzius Pilatus on 02.14.20 at 11:27 pm

In 2018, the Flu killed 56,000 Americans and 3,500 Canadians.
If we extrapolate by 10x, the Canadian healthcare system is about 40% superior.
Oh Canada.

#85 Dr V on 02.15.20 at 12:21 am

25 Shawn

“People in business can usually get a lower tax rate than those on salary. If not, find a new tax adviser.

How about you? Got a lot of business experience?”

Yes, coming up 25 years.

I purchased this business after working for the owner for 3 years. It was an incorporated company. As such, any dividends, when combined with the corporate tax, adds up to what you would pay as a salaried employee.
it’s rigged that way so there is no straight forward advantage. You also get double ended on the CPP, and with that cost increasing, a “CPP holiday” becomes more enticing, though of course your benefit could be reduced.

When I could split the income evenly with Lily, that
helped a lot, though you had a “double double’ with
CPP but of course extra benefits down the road.

So incorporating probably isnt worth it for anything that doesn’t generate over $100k in a cheap locale where you can live on far less. the trick of course is not
having to realize the income, but re-investing in the
business prudently, growing it cautiously but steadily,
and investing any excess. And don’t get greedy. Book value of mine right now is good, considering I still have
retirement savings and non-reg.

#86 fishman on 02.15.20 at 4:23 am

Don’t dismiss the Great Gartho’s Castlegar comment so flippantly. Like a few others this is ahead of its time & right on the money. Any place along the Columbia & its tributaries is a winner. Gazillions of gallons of pure potable water. First 60 years we’re storage dams for Americans generating massive Hydro for their industries. Next 60 years we get first crack at generating our own hydro. Great climate, good land, top outdoor recreation. And did I mention gazillions of gallons of the most precious valuable resource of the future.
Across the line, along the river & tributaries & their lakes formed from their massive hydro dams fed by our storage dam releases R/E prices are high. Driven by fleeing middle & upper middle class from increasingly unliveable American big cities. We’re next. The dribble will turn into a torrent. For a young canucklehead wanting a shot at quality of life this area is as good as it gets. And its gonna get better.
The treaty is up in 2024. Of course the Feds will try to sell us out like they did 60 years ago. Not so easy now. Churchill Falls & Columbia River Treaties were long before the internet & blogs. First time fooled their fault. Second timed fooled our fault.

#87 Maddie McWest on 02.15.20 at 8:05 am

Garth, Can you write an article on your opinion on Corona Virus and #ShutdownCanada and advise if we should be doing anything with our portfolio holdings regarding this, or do you think this is just “noise” ?

#88 crowdedelevatorfartz on 02.15.20 at 8:09 am

@#48 I’m stupid.
“I saw a guy who was turning 65 in six month stand up at my union meeting saying he’s turning 65 and doesn’t have enough money to retire.”
+++++

Yep.
Unfortunately, he’s the rule, not the exception.

Financial illiteracy is the #1 problem in Canada.
Just look at Trudeau.

#89 DrC on 02.15.20 at 8:18 am

30% of my income? No thanks. I will keep spending 11% of my income on rent. To be honest I’m really thinking about renovating the apartment I rent and staying here a little longer.

#90 crowdedelevatorfartz on 02.15.20 at 8:24 am

@#36 Linda
“Too bad your kid is being picked on because you rent, but – kids do that. Pick on others. For whatever reason or no reason…”
++++

I’m shocked, SHOCKED I tell you…that after all the anti bullying messages, the millions of pink T-shirts, ….its come to this…..Some kids are still bully’s.
Perhaps the social justice warrior funding could be spent on having the little darlings scrub the school cross walks clean in preparation for the rainbows to be repainted this Spring.
Or better yet.
Give the money to the school districts to pay for fewer Pro D Days to get the bully brats back in school to learn STEM subjects before China’s economy completely takes over the world.
Bully the bully’s with homework.

#91 Shawn Allen on 02.15.20 at 8:46 am

In Business

Dr V at 85

In business 25 years etc.

*****************
Well done. And I acknowledge that in the comment you responded to where I noted the low tax on small business I did not include mentioning the tax on the owner when corporate profits are taken out.

I was in a position to let my small corporation earnings compound and not pay much out at all. That deferred taxes. In the business I buy stocks for capital gains and hold those deferring corporate tax also.

#92 Felix on 02.15.20 at 8:52 am

A sad pic, again illustrating the low IQs of canines and their human acolytes.

Listen, people, it’s perfectly natural to want to euthanize your stupid dogs, they’re just not worth it.

But to viciously drop them in snowbanks to try to suffocate them and cause death by hypothermia is just so inefficient and cruel.

Next time, just call a vet. Some even do house calls and bring all the needles and body bags with them to take away your useless pooches once expired.

Then adopt a cat.

^ ^
oo

#93 Huh? on 02.15.20 at 9:01 am

#86 fishman on 02.15.20 at 4:23 am
Don’t dismiss the Great Gartho’s Castlegar comment so flippantly. Like a few others this is ahead of its time & right on the money. Any place along the Columbia & its tributaries is a winner. Gazillions of gallons of pure potable water. First 60 years we’re storage dams for Americans generating massive Hydro for their industries. Next 60 years we get first crack at generating our own hydro. Great climate, good land, top outdoor recreation. And did I mention gazillions of gallons of the most precious valuable resource of the future.
Across the line, along the river & tributaries & their lakes formed from their massive hydro dams fed by our storage dam releases R/E prices are high. Driven by fleeing middle & upper middle class from increasingly unliveable American big cities. We’re next. The dribble will turn into a torrent. For a young canucklehead wanting a shot at quality of life this area is as good as it gets. And its gonna get better.
The treaty is up in 2024. Of course the Feds will try to sell us out like they did 60 years ago. Not so easy now. Churchill Falls & Columbia River Treaties were long before the internet & blogs. First time fooled their fault. Second timed fooled our fault.

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What the heck are you talking about?

#94 Huh? on 02.15.20 at 9:03 am

#86 fishman on 02.15.20 at 4:23 am
Don’t dismiss the Great Gartho’s Castlegar comment so flippantly. Like a few others this is ahead of its time & right on the money. Any place along the Columbia & its tributaries is a winner. Gazillions of gallons of pure potable water. First 60 years we’re storage dams for Americans generating massive Hydro for their industries. Next 60 years we get first crack at generating our own hydro. Great climate, good land, top outdoor recreation. And did I mention gazillions of gallons of the most precious valuable resource of the future.
Across the line, along the river & tributaries & their lakes formed from their massive hydro dams fed by our storage dam releases R/E prices are high. Driven by fleeing middle & upper middle class from increasingly unliveable American big cities. We’re next. The dribble will turn into a torrent. For a young canucklehead wanting a shot at quality of life this area is as good as it gets. And its gonna get better.
The treaty is up in 2024. Of course the Feds will try to sell us out like they did 60 years ago. Not so easy now. Churchill Falls & Columbia River Treaties were long before the internet & blogs. First time fooled their fault. Second timed fooled our fault.

___________________________________________________

What the heck are you talking about? Are you sure that water is as clean as you claim?

:p

#95 Shawn Allen on 02.15.20 at 9:07 am

Who pays corporate taxes anyhow?

Are they passed on to customers?

I would say, sometimes yes but sometimes they can’t be. Depends on the state of competition on price.

Business tends to argue if tax rates are higher they will be passed on. But the tax cuts in the U.S. almost all fell to the bottom line (due to little competition on price, I would say).

US unemployment is at a 50-year low. Record hiring. That’s where most of the money went. Sheesh. – Garth

#96 akashic record on 02.15.20 at 10:01 am

#95 Shawn Allen
US unemployment is at a 50-year low. Record hiring. That’s where most of the money went. Sheesh. – Garth

No wonder Canadian lefties consider it devil. Losing grip on government dependency of voters would be a deplorable situation.

#97 Dharma Bum on 02.15.20 at 10:14 am

The Rule of 90

This “rule” is meant to be a general financial guideline.

What is it that makes the low-income-low-assets-real- estate-obsessed cohort so confused about this?

It’s simply a gauge for measuring the level of LIQUIDITY an individual (couple?) should have throughout various points in their limited lifespan.

Don’t overcomplicate it with technicalities and number crunching.

If you are young (like, in your 20’s to mid 30’s), you still have TIME to earn money and invest and thereby increase your proportion of liquid assets to allow for freedom and flexibility in the prime of your life. So, you can tolerate the risk of having a relatively high proportion of your assets in an illiquid item, like real estate, when you’re young.

As you age, however, (i.e. run out of time on this side of the ground), your opportunities for investment growth and income earning start waning (55 year olds have a harder time getting a job than 35 year olds). Your TIME ALIVE STARTS RUNNING OUT. Therefore, the ratio of liquid assets (diversified investment portfolio) to non-liquid assets (real estate) should increase the older you get. More MONEY. Less real estate. Proportionally.

This is common sense.

Most people have no common sense, so they don’t follow this advice.

That’s why society ends up with a ton of old farts with paid off houses in relative disrepair (that they refuse to part with), and virtually zero money and a paltry income.

Get it? Hardly anyone does.

#98 Shawn Allen on 02.15.20 at 10:31 am

Corporate Tax

But the tax cuts in the U.S. almost all fell to the bottom line (due to little competition on price, I would say).

US unemployment is at a 50-year low. Record hiring. That’s where most of the money went. Sheesh. – Garth

***********************************
Okay, money goes around. The tax cuts boosted economic activity and jobs.

I simply point out the fact that the S&P 500 earnings spiked dramatically on the Trump tax cuts. Way way more than the revenue growth.

The tax cuts fell to bottom line earnings. I had thought that price competition would lead to much of the tax cuts getting reflecting in lower prices since companies could make the same profit at lower prices. I was wrong.

Well it probably did happen with say grocery stores which are very price competitive.

But it did not happen much overall for the S&P 500. Apparently most did not face much competition on price.

And yes, a bit of the tax cuts did go to higher wages. Not much given that the profits jumped so dramatically in 2018.

I was not making a judgement on whether the tax cuts were good or bad.

I was simply saying that the evidence there was that corporations (share holders) not customers effectively pay the income tax (and benefit from cuts).

If there was intense competition on price then I would think that income taxes would impact prices a lot more directly. (Sheesh!)

#99 Raging Ranter on 02.15.20 at 11:16 am

Sail Away, my apologies. I was going to list you along with the other two, but typing with my big clumsy thumbs on this tiny little phone, I opted for brevity. You needn’t feel overlooked.

#100 Sail Away on 02.15.20 at 12:20 pm

#99 Raging Ranter on 02.15.20 at 11:16 am

Sail Away, my apologies. I was going to list you along with the other two, but typing with my big clumsy thumbs on this tiny little phone, I opted for brevity. You needn’t feel overlooked.

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Thanks. I’ve worked hard on this identity.

#101 Kim on 02.15.20 at 12:40 pm

Abby, I wanted to let you know that your comments really connected with me. I know how much you love your child, it comes through in your posts. You are doing the right things financially for your family and time with your child is the most important thing for both of you. All my best wishes from another Mom

#102 Sail Away on 02.15.20 at 12:44 pm

#77 Sail Away on 02.14.20 at 9:47 pm
#66 Raging Ranter on 02.14.20 at 8:59 pm

I’m not rich myself but I know a few rich people. NOT ONE of them has the time or inclination to comment regularly on the Internet. Not one. We are in exceedingly rare company here. Think about that.

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You don’t know that. I bet Warren Buffett trolls the internet as ‘Bitcoin Bandit’

#103 Sail Away on 02.15.20 at 4:45 pm

#91 Shawn Allen on 02.15.20 at 8:46 am
In Business

Dr V at 85

In business 25 years etc.

*****************
Well done. And I acknowledge that in the comment you responded to where I noted the low tax on small business I did not include mentioning the tax on the owner when corporate profits are taken out.

I was in a position to let my small corporation earnings compound and not pay much out at all. That deferred taxes. In the business I buy stocks for capital gains and hold those deferring corporate tax also.

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???

How is that beneficial in a corp? If there’s pure capital appreciation on equities, a non-reg account does the same.