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Old 04-27-2012, 04:54 PM   #41
bizaro86
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Would an acceptable income shelter be to incorporate before buying a rental property, and paying yourself to manage said property, ensuring roughly $0 in profits, and thus, less taxation?
You'd have to pay income tax on the money you pay yourself, since its wage income.
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Old 04-27-2012, 04:59 PM   #42
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You aren't maxing out your RRSP's? The investment return isn't even the best part of that investment, it's the tax man giving you almost half of the amount back again in cash. Plus you get the money that investment may make tax free.

Use the bigger tax return to buy a Kayak. If your wife gives you the look buy one from Kijiji. Or, if you really need to, re-invest the tax return.
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Old 04-27-2012, 05:22 PM   #43
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It's impossible for anyone to provide proper advice without more information. You might want to spread this money you won't be putting to the mortgage into RRSPs of TFSAs for either your your spouse, or both. It depends on incomes, your retirement plan, etc. You could also use it for travel, etc., but plan carefully. Congrats. You beat me by two years in paying off the mortgage. I'll stress planning this out. You want to make sure to do the right things.
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Old 04-27-2012, 05:30 PM   #44
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Wow. 37? Good for you. Congrats!
I'm 33 and we have 14 years left on our mortgage. But that's if we don't upgrade to a bigger house (which we will) and interest rates stay low (which it won't).
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Old 04-27-2012, 07:14 PM   #45
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The lesson I will take away from this thread, is the most important part of paying off your mortgage faster and being debt free is picking the right wife.
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Old 04-27-2012, 07:34 PM   #46
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The lesson I will take away from this thread, is the most important part of paying off your mortgage faster and being debt free is picking the right wife.
She is motivated, I will give her that. I don't know if the term "Tiger Wife" has been coined yet, but.. that's pretty much it.
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Old 04-27-2012, 07:36 PM   #47
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The first question would be Do you want a bigger house or do you want to live in your current house for the next x years?

The second question is do you want to vacation in the same spot every year? If you do than a vacation property might make sense but if you don't it is cheaper to just stay in hotels. They are generally very poor investments.

So if the answer is no to the above 2 questions than your just looking for investment advice. So rental property, stocks, mutual funds, bonds, etc are just various types of investments for you to consider each with their own risks and benefits.

I think the first thing you need to do is make the two emotional decisions: Bigger house, Vacation house or none first. Once those are answered you can make an investment decision on what to do for the remainder of your money
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Old 04-27-2012, 08:41 PM   #48
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I would caution against doing nothing for a while. If you suddenly have an extra mortgage payments worth of funds in your account every month you may find yourself getting used to it and that will make it harder to commit later.

As for rental properties, I kept my last house when we moved and have been renting it out for a few years now. I pay a property manager 10% to take care of everything and finished last year with a cash loss of $3500 and a paper gain of $8500. ie I spent more than I took in, but most of that money went to reducing the principle on the mortgage. I should be cash positive at some point, but the mortgage is being paid down so I look at it as a savings account.
One thing to consider that has been mentioned a bit above is that if you don't have significant assets outside your residence and your future rental property then you will have an investment portfolio that isn't diversified at all. It might be more prudent to borrow against your house to invest in dividend paying funds for the tax break or just direct the value of your mortgage payment to an investment account every month if you dislike paying interest.
So were you happy with the choice of investing in a property? The way I kind of see it, is that you'll end up with an asset at the end of it, whether you paid for the whole thing or a renter contributed to paying the mortgage down. As long as I am comfortable paying the mortgage on a property and bills on a property even if I had no tenant in it, then I don't mind. But I'd like to feel comfortable knowing that I could walk away from it and not suffer a large loss.

We don't have anything huge in terms of investments outside the house. There's probably about $100k in RRSPs, mostly from the wife because her company did the 100% matching and so she always maxed hers out every year.

Without going into all of the huge details here is a bit of a snapshot for my wife and I so feel free to pick away. So as of next year, the mortgage payments will be gone, and one kid will be out of daycare, so that's an additional $900, which will probably go into some after school activities and stuff.

Income before taxes: ~$170,000.
RESP contributions: 2 kids * $210 / month.
RRSP contributions: $1200/month total.
Expenses:
Mortgage: $2000 / month
Childcare: $1800 / month
Bills (phone/internet/tv/enmax): $500 / month
Vehicles (gas): $300 / month.
Assets:
2 vehicles
1 house
RRSPs value ~$100k.
RESPs value ~ $20k.

Last edited by Wormius; 04-28-2012 at 10:40 AM. Reason: brain fart
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Old 04-27-2012, 09:04 PM   #49
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The first question would be Do you want a bigger house or do you want to live in your current house for the next x years?

The second question is do you want to vacation in the same spot every year? If you do than a vacation property might make sense but if you don't it is cheaper to just stay in hotels. They are generally very poor investments.

So if the answer is no to the above 2 questions than your just looking for investment advice. So rental property, stocks, mutual funds, bonds, etc are just various types of investments for you to consider each with their own risks and benefits.

I think the first thing you need to do is make the two emotional decisions: Bigger house, Vacation house or none first. Once those are answered you can make an investment decision on what to do for the remainder of your money
I don't want a larger house, but a house in a location closer to downtown. So, it would be downsizing in size, and upsizing in cost. I would like to move, but my wife wants to stay in this house for another few years. She has emotional attachment to the house, I'd just like the sell it while the prices are still high. My worst case would house prices here go down, and where I want to move they stay the same.

The vacation property, would be cheap - I am thinking < $200k for a cabin somewhere around the gulf islands or vancouver island. We like it there, and I could see myself spending large amounts of time there. It's not something that is a priority, but I don't know how things will be 30 years from now if property will still be unobtainable for a sane price. But you're right, it would be cheaper to spend money on a hotel up to some certain point. We only have so many weeks of vacation anyway.

So in short, the answer to the above questions could be considered "no". So maybe the best bet is going the investment route.
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Old 04-27-2012, 09:10 PM   #50
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Wormius,

my wife and i are planning on having the same 'problem' as you in 1.5 - 2 years

our plan after that is to just enjoy not having to pay a mortgage and begin saving for the next house
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Old 04-27-2012, 09:24 PM   #51
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Just one note. You said your TFSA isn't earning you very much interest. Your TFSA can be used for more than just a high interest savings account. Get a financial advisor and get that money producing some nice tax-free gains in a well balanced portfolio. Between you and your wife, you currently have $40,000 in room, and that will increase by $10,000 each year.
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Old 04-27-2012, 09:29 PM   #52
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Wormius,

my wife and i are planning on having the same 'problem' as you in 1.5 - 2 years

our plan after that is to just enjoy not having to pay a mortgage and begin saving for the next house
That's definitely what I am not sure of. Should I be content and satisfied and just not think too much about it anymore? Just tuck whatever we don't need into RRSPs and live life knowing that as long as we can pay the bills we'll be coming out okay. It's not like winning a lottery or anything that would let you retire instantly, but it's still a weight being lifted. One less financial obligation in the way to retirement someday, and at least comfort knowing that you`ll have someplace to live regardless of your current job or financial situation (barring some extraordinary event).
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Old 04-27-2012, 09:32 PM   #53
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Enough about me, let's talk about me...
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Old 04-27-2012, 09:39 PM   #54
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Enough about me, let's talk about me...
How is stacey today?
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Old 04-27-2012, 10:05 PM   #55
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Enough about me, let's talk about me...
We missed you at the playoff draft
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Old 04-27-2012, 10:10 PM   #56
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I have an Asian wife who absolutely abhores debt of any kind.

By the way, we bought our house over 6 years ago. It was a lot cheaper back then.
Asian wife is the key to making money
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Old 04-27-2012, 10:19 PM   #57
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I've always used the philosophy of investing in something which you can enjoy now, and have it appreciate at the same time. Now that you have your house paid off, I'd probably go with investing in a recreational property.
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Old 04-27-2012, 10:21 PM   #58
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Refi the house and buy about 20 doors in the US and enjoy you life as a slumlord making 15-20% cash on cash pre capital appreciation.
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Old 04-27-2012, 10:41 PM   #59
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Asian wife is the key to making money
Want to get married?
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Old 04-27-2012, 11:41 PM   #60
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Want to get married?
I think Girly is taken and bakin'.
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