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The other day a reader sent me this article on the CBC talking about the experience buying a home right now for some hapless Canadian buyers. Basically, this couple bought a pre-construction property in Whitby (a suburb of Toronto) last year and were shocked to learn that new people buying into the development right next to them were paying up to $90,000 less than they did. All in a matter of months.
To come back a year later and see the same house that we bought is now $90,000 cheaper, that’s not cool,” Thompson, 52, said in an interview.
Awwww, they’re not happy. It’s not cool. Poor little Home Boners.
Alright, so what the Hell happened here?
Smarter Than Americans, Huh?
As Canadians, one of our favourite pastimes ever is to point out how much smarter we are than Americans. We would never have elected Trump. We have health care and gun control figured out while Americans spin around in a circle. And we absolutely, definitely would never pump housing prices up to a dangerous level and cause a housing crash.
And then we went ahead and did exactly that.
We fucking gorged on debt. At the height of the 2008 housing crisis, Americans’ debt-to-income ratio, which is a measure of how much debt they carried relative to how much they made, hit a high of 147%.
Canada’s debt-to-income ratio right now?
Statistics Canada said Thursday that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter.
~Canada’s debt-to-income ratio rises to 171 per cent, Stats Can says, The Toronto Star
Eep.
In many ways this is even more bone-headed given that we knew exactly what happened in the US 10 years ago. They had no idea that a housing crash could ripple through a country’s economy as strongly as it did. We do. And we still did it!
But, many people argued, the US housing crash was brought about by sub-prime loans. Payments doubled overnight because of those shitty low-teaser-rate mortgages. Absent a catalyzing event like that, Canada’s housing market shouldn’t correct, right?
Well, we now have that catalyzing event.
In January 2018, the Federal government brought about a new regulation called B20. Basically, this regulation forces buyers to qualify for mortgages with a +2% stress test added onto the bank’s posted rate. 5-year mortgages last year were around 2.5%. Now, combining the Bank of Canada gradually increasing interest rates and the new +2% stress test. That makes a mortgage effectively around 5%.
There’s your doubling of interest rates.
Leverage Leverage Leverage
I love Home Boners. There’s just so bad at mathing shit up. Whenever we try to break down the numbers and show that hey maybe you shouldn’t be going into >$1M in debt for a house, they just say “Leverage leverage leverage,” as if that somehow makes everything OK.
Well, here’s how leverage works. In a rising market, if you buy a $1M house and it goes up 10% to $1.1M before you take possession, yet you only put down a 10% down-payment, then your gain would be $100k/$100k = 100% up! Woohoo! You’re such a genius!
But it can go the other way too, as this couple just found out. They put down a down-payment of $90k to secure their spot on the lot. And now their neighbours’ houses are selling for $90k less. That means they just took their $90k and set it on fire. -100% return. Do not pass Go. Do not collect $200.
And I know, the Home Boners are probably going to say “Well, the stock market just dropped 666 points in one day! So stocks aren’t safe either!”
Which is correct. The stock market is volatile, but you don’t typically go into leverage to invest in it. If my portfolio dropped $100k because of the stock market, that’s OK. I still have over a million dollars in that situation, plus my portfolio is paying me money via the Yield Shield which I then use to fund my nomadic lifestyle. A house pays you nothing. It just costs you money.
But when your house goes down 10%, and you bought it on 10% leverage? It’s all gone. And judging from this couple’s inability to add to their down payment to get their home price reduced, I suspect that $90k was their entire life savings.
I was watching the movie The Big Short on Netflix the other day about the Great Financial Crisis and there’s this scene where Steve Carrell went to a strip club and asked one of the dancers about their real estate exposure. Turns out, the stripper had 3 investment properties. That’s when Steve started getting alarmed.
But fortunately, we’re not that bad yet. Here’s another story about another woman in the same housing development who was shocked to realize that her house just went down $100k.
She says she paid $955,000 for a 2,749-sq.-ft. detached house. Last month Mattamy began selling the same model on a similar lot for about $859,000 in Queen’s Common Phase 2.
“I wish I could walk away from it because it’s just too much money,” Thompson said.
~Price drop crushes pre-construction home buyers’ dreams, The Toronto Star
But how could she have known that was going to happen? It’s not like she had warning signs…
When she went back, there were only two lots still available and Boni ended up spending $899,000, plus additional money for upgrades, exceeding her target price of $500,000 to $600,000.
~Price drop crushes pre-construction home buyers’ dreams, The Toronto Star
Uh…
Although she owns a home already, she said Queen’s Common would be a better place to raise her son.
“No one understands until they’re in your shoes. At the time it was rushed. I have a 3-year-old. I’m thinking about his future, I’m thinking this is a good investment. It’s going to go up in price, I’m going to do something nice for my child,” she said.
~Price drop crushes pre-construction home buyers’ dreams, The Toronto Star
This is her second property? Yuh-oh…
Thompson, a bus driver, bought her two-storey, detached house as a nest to share with her husband, her children and grandchildren.
~Price drop crushes pre-construction home buyers’ dreams, The Toronto Star
God. Dammit!
The Landing
Back in the 80’s, my Mom used to be a real estate agent in Toronto (so you can imagine how our dinner conversations typically go), and after 1989 there was a long, protracted 7-year period of housing declines. I was 7 years old at the time, so I didn’t really pay attention to it back then, but I later asked her what it was like to be a real estate agent during that period. She told me (and I’m paraphrasing here), everyone’s always happy when prices are going up. It’s when prices are going down that you really reveal the fractures of a couple’s relationship.
Because even back then, the decision to go into massive mortgage debt is usually not made by the couple equally. Typically, one partner bullies the other one into it. And when shit hits the fan, the one who felt bullied lashes out at the one who talked them into it.
Many times, she would sell a house to a star-eyed couple in love, only to be called back a few months later to handle the fire sale due to a divorce.
So what can these people expect after buying right at the top and seeing their money evaporate almost overnight?
I don’t know. But when they finally take possession, and the mortgage payments start up, and they’re surrounding by neighbours reminding you of your mistake every single day, and one person says “This was all your fault!”
Uh…Hope you have a good marriage counselor…
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Worst. Hot. Potato. Game. EVER.
Wife and I were fortunate to buy in November 2010, just as the market was approaching rock bottom. I can’t imagine the stress to our relationship if we’d been in a position to buy and inclined to do so in early 2007. It’s much easier to just feel a bit guilty when friends who bought on our block two years ago discover what we paid. 😛
New construction is just a whole different ballgame, too. Yikes.
Canada, you guys, learn from our mistakes. You’ve been pretty good at it through most of the last few decades — quit screwin’ around with this one.
Oh yeah, it’s always easier to be the one who happened to buy at rock bottom. Good job (or at least, good timing!)
There is nothing worse than being house poor! I own a house, and enjoy it.
But, I could pay off the mortgage anytime-no sweat.
Your house is not an investment. Shouldn’t be looked at as so. It’s a liability.
There you go, that’s the right way to do it. Maybe we should be taking lessons from the Americans.
Well…not in EVERYTHING. But this, at least.
I think you guys are doing just fine!
You do seem to know a lot about the American financial/tax system though.
Thanks for the links, Wanderer. I can’t help but shake my head at some of these stories. People can be so emotional and misunderstand Econ 101: Prices are based on supply and demand. But the biggest thing that gets me is targeting 500-600k and then “rushing” to spend over 900k! Where’s the discipline and analysis?
I’m thankful that we live in London Ontario, well outside the Toronto bubble. Our prices rise and fall from time to time as one would (SHOULD?) expect, but in much smaller absolute dollar amounts. You can pick up a 4-bdrm double garage McMansion on a large lot here for less than a small, dark townhouse in Calgary!
She’s a bus driver. She never took Econ 101.
That’s the stupid thing about housing. Uneducated people flood into the market making horrendously risky bets without understanding what they’re doing. They should make everyone thinking about buying a house take a course or something.
I have said that so many times! You know how many books I had to read on personal finance to train my brain to learn delayed gratification. It took years.
I am shocked that a budget went from $500-600k to $900k. It makes no sense. No planning in this decision.
I also agree that everyone is always happy in the beginning of anything. That first 90 days is wonderful. Same goes for dating. It’s called the honeymoon phase. Once it ends, the dust settles, the sun sets and people take off the rose-colored glasses ? all you are left with is ash and tears.
I think all couples should be required to take finance 101. Don’t be seduced by credit. The problem with seduction is that you have a hand in your own downfall. I want you to run from debt, but walk to fiscal freedom.
I love how when housing makes ridiculous tax-free gains, buyers brag about how much money they made and how smart they are, but when it declines, all of a sudden it’s not fair, and someone should do something to help these poor people.
I believe the effect you’re referring to is what the Boomers call “special snowflakes”
I live in “houses are almost free” land so these numbers are shocking. And it’s no surprise to see small changes in regulation/interest rates/market making huge ripples in the price of houses. Around here things have almost doubled in value in the past 5 years but that’s from recession era lows. Going back 14 years to when we bought our house and the house has only gone up about 4% per year (in other words, just beating inflation by a bit).
But yeah, you gotta be a dum dum to not realize house prices CAN go down or stay flat for years or a decade (or more!). I always suggest to people doing the rent vs buy calculations to assume zero real growth in house price and take any appreciation above zero as free money like winning the lottery.
I can’t wait to jump ahead one year and see what things are like, I have no worries, as we have paid down our mortgage, making extra payments each month, and locked in at 2.7%.
My nephew and wife have stars in their eyes, just got an offer accepted on a 3BDR in Victoria, for $900,000, and how are they making up the down payment? By refinancing the existing 2bdr cabin in the woods. His father, (my brother) cannot see the harm in any of this.
Over the long term, (20 years) stocks and real estate average about 6-8%, but that doesn’t help if you in short term calculations. A look back at select 10 year periods, actually show negative growth, or minimal at best in capital gains, you can not predict, so putting some skin in the game, ALWAY’s has a risk of capital decrease.
I lived thru 82 and as people dropped their keys in the mail slot and drove away, and remember in 80 when they were jumping for joy to have gotten financing at 18% and secured their dream home. Listened to the regrets of people that bought in 90, only to watch the market tank for 9 years, and sell at a loss. history will repeat itself, its human nature.
Anybody calls me Grampa, I’ll run you over in my wheelchair…
And that’s why you’re a multi-millionaire, Justin, while these people are…uh…not.
You know it. I’d be a renter in just about every single one of these high housing COL cities. No way I’d drop a million bucks on a regular house/condo when I could rent for $2000-3500 just about everywhere and take zero risk.
This is exactly us. People call us crazy. But our rent is less than their interest payments on the mortgage. And we have no repair costs etc.
Rent until we move or it makes sense. Right now it just doesn’t.
The richest man I know, owns a computer company. When I met him in 93, he was renting a beach front house, 4000 sq ft, for about $2500/month, when I asked why he would rent this instead of buying, he told me the mortgage on this same house would be
4000-5000, and he was actually saving a ton of money. He would later buy a lake front lot and build his dream home.
I am shocked to see how much young couples are willing to pay for new houses these days! I visited model homes this week-end (because it’s fun!) and average price was $1M!!! Almost sold out and all younger couples! How will they ever be financially independent???
Oh, they won’t. They’re screwed. Once a house goes underwater you can’t even reverse out of the deal. You have to PAY the bank to wind up back at $0.
Easy: a) either they sell their house and significantly downsize or rent, or b) they will never be financially independent. It seems like a lot of people have the mentality these days that a mortgage is something that you will never pay off – almost like paying perpetual rent to the bank. As well, shockingly, people seem to treat their home equity like an ATM even further reducing the chance that they will become financially independent.
I came across the article on the weekend. None of it was very surprising, except the story where they spent 400K above their top range. My brain did a ‘does not compute’ on their actions.
I know it’s not uncommon for people to offer above asking process, or stretch their finances to get a property, but I’m still always shocked. I would never get that far. I’d be hyperventilating my way out the office hearing the price of the last two properties.
FIRECracker started banging her head on the kitchen table when she read that part too.
sounds terrifying to have so much debt.
i was reading some of your posts from the last couple weeks and had a question about the backdoor roth. if you’re somewhere in the 120-130k (approx range) where it is unclear how much you can contribute to a roth unless you do yet another complicated calculation, does it make more sense to just do the trad–>roth maneuver instead of doing the calculation (and ending up with less than the max in the roth anyway)? thanks for your work!
Hi guys, sorry for deviating from the main topic, I just read the new post from canadian coach potato
Vanguard’s One-Fund Solution
http://canadiancouchpotato.com/2018/02/05/vanguards-one-fund-solution/, I’m on the edge of making my first purchasing of ETFs (50k at stake) and I was wondering if you think that is a good idea to put it in this one fund. thanks.
Hi Jeremy.
I think the blog post you posted covers a lot of the ups and downs of a one-fund-strategy. I’ll add a few thoughts about how to proceed.
I was exactly in your situation about a year ago. I have been learning about investments for a while, saved up a bit and was ready to go ahead and do something with it. I read the CanadianCouchPotato blog (as well as many others) and was considering what is the best option. So here are some of my conclusions and lessons from the last year, 2017 being the first year I ever did my own investment. Towards the end I will tie it specifically to the decision you are trying to make regarding the one-fund-strategy.
1) Don’t fret about “the best” or the “most efficient” strategy to take. As mentioned in most blogs, your saving rate is significantly more important than the specifics of your investment. (https://www.millennial-revolution.com/invest/499/). It’s not that what you buy and how you structure your portfolio doesn’t matter at all, it’s just not as important quite yet.
I spent far too many hours (and days, and weeks) thinking which funds I should buy. (is 0.06% MER in a lower-performing fund better than the 0.12% MER in a comparable fund which did slightly better?!?)
It doesn’t matter, at least not now. In your first year with 50K what matters now is to learn discipline, structure, patience and saving.
2) Chosing a one-fund-strategy or multiple funds heavily depends on the kind of person you are:
If you are the kind of person who want to take control of your own finances and plan to manage it all the way to your retirement years, you probably are interested in educating yourself and learning from experience. If this is the case than having a 1-fund strategy will not give you any opportunity to learn re-balancing, tax efficiency, withdrawing strategies etc. On the other hand, if you really just want to do something quick and cheaper than a Mutual-Funds sales guy, than a 1-fund strategy might be for you.
My guess is that if you interact on this forum you are more likely the first kind of person.
3) Looking at returns only for a second, the one-fund-strategy does not allow you to do any tax efficiency planning, while under the hood it has the exact same ETFs that you will otherwise purchase. Like the spud mentioned in his post, a 1-fund strategy will be inefficient once you start using your non-registered (taxable) accounts. This alone is a good enough reason for me not to go down that route, but I think this is a scondary reason at your stage (the main reason being the lack of learning opportunity).
My advice would be to follow the investment series on this blog to the letter for 1 year. It is am amazing learning resource. Such a course should cost a lot of money and yet you have it for free here. The reason for following it with it’s 5 funds structure is that it will teach you, as you go, the main lessons of patience, consistency and re-balancing. As you go over the posts many more topics are covered such as withdrawing from your account, how to react to financial news etc. Doing the single fund strategy will not be asking you to think about it too much and I think as a new investor learning to think about your investments is what you need to achieve now. Make the little ‘mistakes’ or adjustments now, with 50K, and be ready for 10 or 20 years from now where every action is more scary with 500K or more.
Here are the steps I took and what I recommend you do. I am very happy I did this workshop for the whole year.
a) I went over all of the investment related posts on this blog for general familiarity. (go to the “binge read” section in the header of this blog, scroll down to the “invest” section, and start reading from the bottom up).
b) I went over the asset allocation post to set my general division of assets
(https://www.millennial-revolution.com/invest/asset-allocation-slicing-the-pie/) I went with an 80/20 division, but you will find your own.
c) Start reading the investment workshop from the beginning and set up all your accounts, until you get to the 7th installment (“time to buy”).
d) At this point I would recommend you keep reading those the order they were published, at about the pace they were published. (they were published once a week, I suggest you read two posts once every two weeks, here is why and how:
On your calendar go and mark a “buy day” every two weeks. doesn’t really matter what day-of-the-week it is since the whole workshop is done now. Mine was Thursday since the investment workshop buy days used to be published on Wednesdays.
Take your 50K and divide into 26 chunks, as the workshop goes for a year with 26 buys (once every two weeks). This is about 1900$ per buy.
Every two weeks when your buy day arrives read the posts between the last buy day and the current buy day on the workshop (including the discussion in the comments, where a lot of the learning takes place) , then execute your buy.
I wouldn’t read it all at once since it is overwhelming and often times you need some context in order to understand it all. Reading on a schedule will create this context for you.
What will you achieve by doing that?
1) Excellent understanding of your different accounts, of the movement in value of the different asset classes (fixed income/equities), re-balancing.
2) Working on a schedule and performing unemotional buys. You are in the accumulation stage. you need to be disciplined and following it for a year, at the slow pace (instead of reading all the posts in one evening and then investing the 50K) will create the habits you need.
3) Dollar Cost Averaging (DCA). This is a two-edged sword. It’s great in a declining market, worse in a soaring market. The whole point of being disciplined is to *not* follow the trend but keep buying like clockwork. DCA is not historically the ‘right’ thing to do – you are usually better off jumping all in, but it is scary and creates nagging hesitations. “Is it the right time to put it all in?” DCA will let you sleep well. Be prepared for disappointment in case markets rise in 2018 and you lost some of this for DCA, but it will let you sleep better at night in case markets are going down a bit.
(I know people might debate this point of DCA, but I think buying on a schedule for a year is great for create the habit. For more on DCA listen to this podcast, at the last section:
http://canadiancouchpotato.com/2018/01/16/podcast-14-make-millions-in-bitcoin-not-really/).
Good luck! don’t be afraid, just get started.
Hi NewB, thanks a lot for your advice. Indeed I do prefer to take control of my finances, so I think I would go to the funds mentioned in the investment guide (I agree with you, it is priceless), although I have considered using the three ETF portfolio recommended by coach potato http://canadiancouchpotato.com/wp-content/uploads/2018/01/CCP-Model-Portfolios-ETFs-2017.pdf
As for the DCA, I agree with you that it helps to get the discipline of the new investors. However my account is in RBC not questrade and they charge 10$ for each transaction, so I was thinking I would buy with the lump sum (3 transactions or 5 depending on the portfolio chosen, meaning 30 or 50$ in fees at the beginning) and then rebalance once a year. Anyways, good to know that other people followed the advices of firecracker and wanderer and they are still alive
Thanks again.
Why not just open a Questrade account? It’s free.
Moving forward, the hope is that once your 50K are invested you will continue to invest on a regular schedule. You won’t be able to do that with 10$ per transaction.
Plus, the bank doesn’t deserve this money. 10$ just so you can log in and buy an ETF? That’s outrageous.
Its interesting..it looks like under the hood the same ETF’s being used. Well lets leave it to the guru’s to comment on
“The new family of asset allocation ETFs are built using seven other ETFs. The Vanguard Conservative ETF Portfolio (VCNS) holds 40% stocks and 60% bonds, while the Vanguard Balanced ETF Portfolio (VBAL) uses the opposite proportion. The most aggressive version, the Vanguard Growth ETF Portfolio (VGRO), is 80% equities. All three ETFs carry a very competitive management fee of just 0.22%.”
I presume this fund is for generating passive income in retirement.
The answer is time in the market is the MOST IMPORTANT THING. Every week that passes worrying is an opportunity lost. When you retire it will be compounding that pays your bills and every minute you are not compounding is opportunity lost.
The most efficient way to buy if you have $50K is put it all in at once. If you “dollar cost average” a lump sum you are actually changing your asset profile. Let’s say you choose the 60/40 mix but only invest 25K and keep the other 25K out for “dollar cost averaging” what you really have then is a 30% stock/20% bond/ 50% cash portfolio which is way more conservative than 60/40. The way you get rich is to become an owner. The way you get rich is to engage in commerce. The way you get rich is through diverse consistent investing and this fund satisfies those conditions. Sitting on a pile of cash is like burning the money you could be compounding. $50,000 today will become almost $300K in 30 years of which 83% will be interest on your initial investment.
It looks like the disadvantage may be tax efficiency. The second most important thing is how much you get to keep after the Government finishes working you over. Different parts of the portfolio can receive different and therefore more efficient tax treatment improving the % you get to keep. Bonds should be held in a “pre tax” account with the coupon reinvested where as a “stock ETF” like SPY or VTI is usually pretty tax efficient and can be held pre tax or post tax.
You should always analyze your portfolio as a whole or unity This is the third most important thing. Use an aggregator like Personal Capital to track your entire portfolio. If you don’t look at the full picture it’s impossible to understand your risk even with this all in one kind of fund.
Just keep stoking that star making machinery every week and you too will be rich as hell. You can fine tune it later as you come to a greater understanding of the subject.
This is just one spin on the situation that paints a sympathetic picture for these people, puts a face on them and lets you know of their hardships and why it is so sad that this happened to them but an different article could be written about the exact same thing from a very different perspective. A lot of foreign buyers purchase pre-construction properties. If the media wrote and article about a residential tower that was completely bought up by foreign buyers and now phase 2 prices has dropped by tens of thousands of dollars, people would be amused at all the nameless, faceless foreign buyers who “got screwed” and they’s say it serves them right.
Sure it is sad when this happens to people who put their life savings into buying a property they actually plan on living in and then get trapped in a deal that would completely screw them over financially if they had to move before the market went back up but that is the risk you take and it is on you if you entered the deal not really knowing what you were getting into.
As an American, I respect strength, and I do not pity the weak. The personal aspect of the story does not lessen my amusement.
I am one of your American readers. I really get a kick out of you “dissing” the US. You are so accurate. Can you adopt me?
Ouch, this is a toughie. I feel really bad for these people, but you can’t get mad about price comparison like that.
For example, my grandparents used to own and run a gas station. Back in the day, they let people buy gas on credit, and they could then pay it back later. Naturally, gas prices fluctuated. So many customers would be upset that they had to pay for gas they bought a month ago at a higher price, when gas was at a lower price. (Obviously these weren’t the brightest people in the world)
But this is a similar mindset. You can’t be mad that someone else got a better deal because of timing, their dealings, aliens taking over the Earth, etc.
I’m a firm believer in the idea that if you want to buy a house you save up enough assets to pay for it BEFORE you buy.
It’s OK to leave those assets in higher earning places like stocks, but going a million dollars in debt when you rely on an employer to keep paying you?
Crazy like a fox.
In many places in the work it is effectively impossible to save enough for a house. Especially where rents are too high to leave anything for saving and the carrying costs are not significantly higher than renting. I am with you on the point of taking on too much debt, but I also recognize that with house prices being so high in some markets saving is a no-starter and large debt is the only way for ownership.
That meant to say “many places in the world”…
I don’t think the woman in the article is $1 million in the hole despite her paying $400k above her initial budget (which is insane). Bus driver’s don’t make enough money to carry such a large amount no matter how low interest rates are. She either had lots of equity in her existing home or had a large sum of money from another source. She’s raising a child on top of it all. Very little about her situation makes much sense.
As for the other couple, it’s anyone’s guess where things are going. The market may be in the brink of a severe correction (and if so, it’ll hit bottom years from now even if it starts today). Or prices may pick up again the spring and hold steady.
I bought a triplex income property in the summer when prices started falling at a price range that provides me with cash flow. I’m actually hoping for a further market correction in order to scoop up another property. Land value in the City of Toronto proper is a lock, in the long run, regardless of what happens in the short term.
Well, I am so glad I only cringe when my rental community gives a better deal to my neighbor. I can’t imagine the plight of people whose property has devalued by $100K.
As an immigrant on a work visa, I am used to getting sympathized from those who have bought a house the moment they have their permanent residence (“it is too bad you cannot buy a home and need to waste your money on rent”). I used to get deflated now I just smile and wish them all the best (“in signing their 30-year bondage”).
Wow that bites about the Toronto housing market. I wonder how many Canadians will come to the U.S. to buy a house? Kidding…..kidding…kidding.
OUCH
balanced portfolio got hammered. NO place to hide. 2008 again? prayer?
signed,
poor landlord collecting monthly rent
Do you come here to discuss and encourage people to learn and take control of their finances, or do you come here to gloat about your success and make people feel bad about their situation?
So you have some rental properties and it is working well for you. This is great, it is one of the paths for FI that people employ. It works great where (or when) RE prices are not stupid high and when you can manage them well. Not everyone has access to such markets.
There are other paths for FI which are just as great, a large diversified portfolio is one of those, and it is working for the authors of this blog (and many others). Why hate on them for choosing a different path for FI? Do you also hate on people who started their own business? On people who worked same job for 40 years and now enjoy their pension?
In the main cities in Canada buying RE in the last few years was not a smart and reasoned financial decision. This has nothing to do with the markets today, nothing to do with 2008, it is a simple calculation of whether one can afford it. This is the point of criticizing people who took too much debt to buy RE – it is nuanced and rational critique, not a simple hate-on.
If all you want is to troll and gloat that you managed to make money from RE this is kind of sad. It actually gives you a kick to write those lines hoping that you will make someone sad by reading them. Pathetic, sad and lonely.
If you have something to contribute, why won’t you share your knowledge of how to identify a good RE investment, how to go about making good cash flow on it, how to mitigate risk etc. This blog is dedicated to encouraging people to better their lives, not to make them feel down.
Mr. Market give you a new price everyday for your stocks.
There is no one on your porch every day making you an offer. It doesn’t mean Real Estate doesn’t fluctuate.
This is a very inneficient market.
How much does it cost to rent in Canada? In the UK renting is so expensive that the average mortgage works out cheaper than renting. So for us, the idea that one should deliberately continue to rent is pretty much financial blasphemy, particularly in London!
I agree, NewBInvestor, and I think we make the mistake of pitting one strategy against the other, when both can and do work under particular circumstances. The people in the articles are not investors – they’re ordinary home buyers who think that merely owning a home is a great investment. They’re more like the amateur stock investor that doesn’t have a clue about index investing and instead loses his money buying individual stocks because he thinks he’s a guru that can figure out how to beat the market.
There are plenty of these people on both sides but there are more homebuyer types because living somewhere is a necessity, and for many, having the freedom to customize their living space any way they want, and knowing that they can’t be kicked out by a landlord is an ideal living situation.
It’s an unenviable position to be in but these folks will just have to weather the storm in whatever form it takes. Losing equity is not the end of the world unless you have to sell. If you’re going to stay put your equity will build up again. There are winners and losers in every cycle and yet, practically everyone finds there way out when the smoke clears.
Folks in the US might have thought the world blew up in 2008, and it did, but we all survived.
Once again thank you for reminding how the greed factor impacts one’s finaces.
Now, I am in bit of dilemma. could any one care to provide some suggestions.
I have 200k mortagage and 200k in savings
(100k in TFSA-CIBC MF+100k in Savings @2.4% interest with Tangerine)
Few months back, we have decided to pay off the mortgage and adopt semi retire life (have some rental income to cover the expenses) and contribute to QT portfolio when I work on and off.
Now, My 100k with CIBC MF has come down to 94k with recent downturn of the markets,
I am in dilemma to renew my mortgage and leave the TFSA to recover when the market bounces back (not sure how long will it take)
OR
With draw the TFSA with what ever loses I have and pay off the mortagage as my new renewal rate nothing less than 3% for sure.
appreciate the inputs from FI savvies.
when do you need to decide? The consensus is the market will correct in a week or 2.
cheers
my renewal is in august 2018.
I feel bad because this type of stuff always makes me laugh. I remember a story in 2008 about a lady that made $15 an hour and had 2 $500k mortgages and she was wondered about how she was going to pay them. Uhh… you won’t. The end. It’s a shame since most of these folks just take the bait… hook, line and sinker.
Home boner…haha!
I still got one, a moderate sized one. A house, that is.
Awesome post.