I can't wait until this real-estate market collapses.......

[housejunk]

Ever since the recent property assessments have come out, I've heard nothing but positive responses from my friends/co-workers. They're all super pupmed that their condos/houses have gone up by X amount of dollars. I'm the opposite. Who cares? The only people who benefit from high property values are people like my parents, who own numerous properties and paid them off years ago. For young people like me who own a single home, my expensive house looks great on paper, but if I sell it what am I stuck with? I have to find somewhere else to live, which will cost exactly the same or more unless I'm willing to live out in the boonies. It's an artificial wealth. The only thing that comes with high property values are higher taxes. I can't wait for this market to collapse.

[Sylvanfan]

The only thing that comes with high property values are higher taxes. I can't wait for this market to collapse.

Well than why don't you sell high now, wait for this collapse and buy in again when they're giving houses away in the future? Or you could look to move somewhere else where housing is more affordable with a bunch of money in your pocket, couldn't you? Sounds to me like your perspective on things needs to be adjusted.

[FlamesKickAss]

not to mention the people that are trying to buy their first house.

[Flames in 07]

Ever since the recent property assessments have come out, I've heard nothing but positive responses from my friends/co-workers. They're all super pupmed that their condos/houses have gone up by X amount of dollars. I'm the opposite. Who cares? The only people who benefit from high property values are people like my parents, who own numerous properties and paid them off years ago. For young people like me who own a single home, my expensive house looks great on paper, but if I sell it what am I stuck with? I have to find somewhere else to live, which will cost exactly the same or more unless I'm willing to live out in the boonies. It's an artificial wealth. The only thing that comes with high property values are higher taxes. I can't wait for this market to collapse.

Your right, you only cash in if you move to Black Diamond. But don't hold your breath, this might be the cheapest you ever see. Vs many other centers this is very cheap.

[jolinar of malkshor]

Just wait till Dion gets in....then you will have your housing crash.

[Superflyer]

not to mention the people that are trying to buy their first house.
This is why I am hoping that the bottom falls out soon, but I am not holding my breath. I know that as soon as I buy a house it is going to fall out and then I am stuck with a $500,000 morgatage with a $250,000 house.

[FireFly]

This is why I am hoping that the bottom falls out soon, but I am not holding my breath. I know that as soon as I buy a house it is going to fall out and then I am stuck with a $500,000 morgatage with a $250,000 house.

Then can you hurry up? I'd like to buy a house too, and if I need to wait for you to buy yours so it crashes, I wish you'd get on that... I'm sick of paying rent. :p

[RedDeerFan]

Your right, you only cash in if you move to Black Diamond. But don't hold your breath, this might be the cheapest you ever see. Vs many other centers this is very cheap.

I doubt it. I think there is a very good chance the market will bust or at least level off in the near future.

[housejunk]

Or you could look to move somewhere else where housing is more affordable with a bunch of money in your pocket, couldn't you? Sounds to me like your perspective on things needs to be adjusted.

I've got a place in Kensington, and I'm happy where I am. I'm born and raised in Calgary and it's one of the few locations in this city where I get the feeling that I'm living in a major city and not part of some nameless subrub that could be anywhere. My property has gone up insanely, but I'm not willing to cash-in and move into a pre-fab place halfway to Okotoks just to pocket some money. All I'm saying, is that this recent market increase does virtually nothing for your average, single-home owning Calgarian.

[Claeren]

The only thing that comes with high property values are higher taxes.

While a common preception of reality, it is in fact false.

Taxes do NOT go up with home values.

Taxes go up for a home owner when (A) the city raises taxes or (B) their home appreciates by more than the average home in the city.

So if the city sees 40% home price growth and your house went up 40% in value then your taxes should stay roughly the same. If it went up 60% then your taxes will go up and if it went up 'only' 20% they will likely go down.

The base amount of taxes is simply split among home owners based on home value compared to the city average.

Of course that base amount itself does go up, usually by ~4%/year, but this is quite reasonable when you consider that inflation is about the same (and inflation for the city, whose 'basket of goods' is different then the average consumer, sees inflation of 5%-7%/yr+).

(Income taxes by comparison take a set percentage of your wage as it goes up, and as such grow with inflaiton without seeming to have been raised directly.)




Calgary also has some of the lowest property taxes in Canada.



Claeren.

[housejunk]

While a common preception of reality, it is in fact false.

Taxes do NOT go up with home values.

Taxes go up for a home owner when (A) the city raises taxes or (B) their home appreciates by more than the average home in the city.

So if the city sees 40% home price growth and your house went up 40% in value then your taxes should stay roughly the same. If it went up 60% then your taxes will go up and if it went up 'only' 20% they will likely go down.

The base amount of taxes is simply split among home owners based on home value compared to the city average.

Of course that base amount itself does go up, usually by ~4%/year, but this is quite reasonable when you consider that inflation is about the same (and inflation for the city, whose 'basket of goods' is different then the average consumer, sees inflation of 5%-7%/yr+).

(Income taxes by comparison take a set percentage of your wage as it goes up, and as such grow with inflaiton without seeming to have been raised directly.)




Calgary also has some of the lowest property taxes in Canada.



Claeren.

Your explanation was unecessary. The number this year was 43% I believe? That being said, I'm not of aware of anyone whose property tax hasn't increased. Over a 5 year period, (for myself) its been ridiculous. Plus, I'm a Calgarian so I'm not concerned with what other Canadian municipalities are doing in relation to their own property tax algorithims. From my perspective the return I've seen relating to property tax and services over the time I've owned my home are far from congruent.

[skins]

That being said, I'm not of aware of anyone whose property tax hasn't increased.

my parents own a condo in kensington, and their property tax actually went down.

[JiriHrdina]

not to mention the people that are trying to buy their first house.

{Waves his hand}

It is frustrating isn't it. I've been in a situation where I couldn't buy something for a number of reasons, but now I want to and I don't know if I can afford to do so. One starts to think hard about leaving this city simply because I don't know if I can afford to be a home owner here.

But I'm not whining about it - its the nature of the market, and I made choices that got me to this point - none of which I regret. But it does make looking around for your own place a bit frustrating.

[Claeren]

Your explanation was unecessary. The number this year was 43% I believe? That being said, I'm not of aware of anyone whose property tax hasn't increased. Over a 5 year period, (for myself) its been ridiculous. Plus, I'm a Calgarian so I'm not concerned with what other Canadian municipalities are doing in relation to their own property tax algorithims. From my perspective the return I've seen relating to property tax and services over the time I've owned my home are far from congruent.


But it has nothing to do with city wide home price increases as you asserted and seem to still believe. (So i can only conclude that it is in fact a needed explanation, for even if it falls on deaf ears in your case others may benefit from not falling for the same logical fallacy that you have.)

It is funny that i just left a thread where people were talking about how surprised/pleased they were to have their home go up 30% in value this year and have their taxes DROP - but by all means, keep believing that home price growth and tax increases are tied together.

Further, how then are your property taxes more painful then any other taxes you pay? Compared to inflation they have been going down, not up. You cannot say that about income taxes... where they take an absolute percentage of your 10% raise, even if inflation is only 4%.

Lastly, IF your home is in fact seeing higher taxes that means it is growing in value at a rate GREATER than the rest of the city. So your entire post about home price growth being meaningless (as you state it is a zero-sum game for a single home owner) makes no sense. YOU are apparently the prime example of someone who is benefitting more than the average Calgary home owner. Your home value growth is FAR FAR FAR greater than your taxes - if your taxes are going up so much as you yourself state.







Claeren.

[Flames in 07]

I doubt it. I think there is a very good chance the market will bust or at least level off in the near future.

Keep hoping. And prey for $27 WTI while your at it.

Some of the stuff on the outside of the city might not grow as fast, but we are creating millionaires faster than any city in this countries history. Central and large houses will run at a similar pace, outside suburbs value might slow down, but it won't go down so long as WTI prices keep everyone busy.

[housejunk]

But it has nothing to do with city wide home price increases as you asserted and seem to still believe. (So i can only conclude that it is in fact a needed explanation, for even if it falls on deaf ears in your case others may benefit from not falling for the same logical fallacy that you have.)

It is funny that i just left a thread where people were talking about how surprised/pleased they were to have their home go up 30% in value this year and have their taxes DROP - but by all means, keep believing that home price growth and tax increases are tied together.

Further, how then are your property taxes more painful then any other taxes you pay? Compared to inflation they have been going down, not up. You cannot say that about income taxes... where they take an absolute percentage of your 10% raise, even if inflation is only 4%.

Lastly, IF your home is in fact seeing higher taxes that means it is growing in value at a rate GREATER than the rest of the city. So your entire post about home price growth being meaningless (as you state it is a zero-sum game for a single home owner) makes no sense. YOU are apparently the prime example of someone who is benefitting more than the average Calgary home owner. Your home value growth is FAR FAR FAR greater than your taxes - if your taxes are going up so much as you yourself state.







Claeren.

Again, thank you for your long-winded diatribe relating to the inherent infalliability of the municipal property tax system. There is no logical fallacy involved with my initial post. You, for some reason chose to take an out of context throw-away comment to launch into some sort of doctoral dissertation that was not, and is not needed. Unfortunately, after attending engineering, masters and law school I have had far too many encounters with the type of indivdiual that you are; the unlikeable know-it-all who never fails to attempt to assert their percieved knowledge over the percieved ignorance of the unwashed masses.

Let a fella complain about his taxes if he wants.

EDIT: I was wondering why you insisted on coming across like such a wanker, and then I remembered! You're that anti-pet insurance/good christian guy I was telling my friends about a few weeks ago. Yowza.

http://forum.calgarypuck.com/showthread.php?t=35823

[KTown]

I don't see this real estate marketing crashing any time soon. So don't wait forever.

I've been thinking of taking advantage of the boom and moving to Texas or Lousiana, I got a few companies looking for my services. I could buy a nice house, and have no mortgage with what I sell mine for. Not bad for a 27 year old.

The only problem is I never could afford to move back here until the market did crash.

[HelloHockeyFans]

Ottawa might be the last major city in Canada with "affordable" housing prices. But even they're going up out there.

[MoneyGuy]

While a common preception of reality, it is in fact false.

Taxes do NOT go up with home values.

Taxes go up for a home owner when (A) the city raises taxes or (B) their home appreciates by more than the average home in the city.

So if the city sees 40% home price growth and your house went up 40% in value then your taxes should stay roughly the same. If it went up 60% then your taxes will go up and if it went up 'only' 20% they will likely go down.

The base amount of taxes is simply split among home owners based on home value compared to the city average.

Of course that base amount itself does go up, usually by ~4%/year, but this is quite reasonable when you consider that inflation is about the same (and inflation for the city, whose 'basket of goods' is different then the average consumer, sees inflation of 5%-7%/yr+).

(Income taxes by comparison take a set percentage of your wage as it goes up, and as such grow with inflaiton without seeming to have been raised directly.)

I'm a civic politician. This guy gets it.

[browna]

Your explanation was unecessary. The number this year was 43% I believe? That being said, I'm not of aware of anyone whose property tax hasn't increased. Over a 5 year period, (for myself) its been ridiculous. Plus, I'm a Calgarian so I'm not concerned with what other Canadian municipalities are doing in relation to their own property tax algorithims. From my perspective the return I've seen relating to property tax and services over the time I've owned my home are far from congruent.

Mine did, by 40$, as our house went up 42.5%.

And last year it went up from the previous year by $24. So still net $16 over 2 years ago, on a house now valued (assesed) over 380$K.

[prarieboy]

The only thing that comes with high property values are higher taxes. I can't wait for this market to collapse.

Actually, my house went up $140,000 in the assesment this year and my taxes went down about $20 a month.

[housejunk]

I'm a civic politician. This guy gets it.

It's not a complicated notion. I'm glad he gets it and I'm glad he felt the need to explain it (with examples and bold!). The thread is/and/was never intended to be about property taxes but the current state of the real estate market.

[ricoFlame]

lord i hope it does some day, i'm sick of throwing away money renting, but i can't afford to get f'd over with one of there ridiculous newfangled mortgages for a junky house whose value is way too high.

[prarieboy]

It's not a complicated notion. I'm glad he gets it and I'm glad he felt the need to explain it (with examples and bold!). The thread is/and/was never intended to be about property taxes but the current state of the real estate market.

That being said I couldn't agree more. If I had waited even two months I couldn't have afforded the house I'm in now.
Houses that were worth $20,000 30 years ago are selling for $400,000 now. Does that mean our kids will be paying $8,000,000 in 30 years time??
I doubt it. The market has to correct itself at some point but it's anybody's guess when that will be.

[Wookie]

I've got a place in Kensington, and I'm happy where I am. I'm born and raised in Calgary and it's one of the few locations in this city where I get the feeling that I'm living in a major city and not part of some nameless subrub that could be anywhere. My property has gone up insanely, but I'm not willing to cash-in and move into a pre-fab place halfway to Okotoks just to pocket some money. All I'm saying, is that this recent market increase does virtually nothing for your average, single-home owning Calgarian.

I'm a little confused.

What's the problem? Would you prefer if your house hadn't increased in value and you had no extra "perceived" equity in your house? Then you could do what..?

You'd be in the same position except at a lower price level, which, would be no change..

[housejunk]

Actually, my house went up $140,000 in the assesment this year and my taxes went down about $20 a month.

That's fantastic for you. From what I've seen in my circle of friends/acquantinces, we apparently live in areas of the city in which the assessment is higher than the average of 43%. Generally houses around the downtown core, Kensington/West Hillhurst. Its known as the "Lawyers ghetto". Don't get me wrong, I'm blessed and fortunate to live in a desirable area of town, but over the last few years I haven't seen anything that justifies the outrageous prices that some of the houses have been getting in the area.

Also, with the price of the houses the way they are, there's a certain gentrification in the neighborhood which I find sort of repulsive. When I moved in a few years ago my neighbors were far more interesting than they are today.

[prarieboy]

Also, with the price of the houses the way they are, there's a certain gentrification in the neighborhood which I find sort of repulsive. When I moved in a few years ago my neighbors were far more interesting than they are today.

The only people that can move into such a desirable area now are people with alot of cash in hand. I'm not suprised your area is changing.
I would love to buy one of those tiny un-insulated cabins and rip it down to build something more modern but I just don't have the dough.

[housejunk]

I'm a little confused.

What's the problem? Would you prefer if your house hadn't increased in value and you had no extra "perceived" equity in your house? Then you could do what..?

You'd be in the same position except at a lower price level, which, would be no change..

Yeah, I guess you're right there. I suppose I just get sick of people coming to me and raving (let's call it what it is...bragging) about how much their home has gone up in value when in my mind (as a single home owner) I don't see how much it benefits us. Don't get me wrong, I'm glad my home is valued what it is, but unless you got into the market early, or own a few places that you can flip without losing your primary residence, I don't see what's so great about it. I've got lots of friends who are smart, well-educated and in fantastic jobs who are having the toughest time out there landing an affordable place. As a lifelong Calgarian, I don't see the appeal of pricing out young people looking to start their lives here.

Personally, I love my place and I plan on sticking here for a long, long time. I honestly wouldn't care if my house dropped in value if it meant making this city a little more affordable. I started my career in Vancouver, and its terrible seeing how people have to mortgage their lives away. I'm starting to see that a lot more here.

[Wookie]

Yeah, I guess you're right there. I suppose I just get sick of people coming to me and raving (let's call it what it is...bragging) about how much their home has gone up in value when in my mind (as a single home owner) I don't see how much it benefits us. Don't get me wrong, I'm glad my home is valued what it is, but unless you got into the market early, or own a few places that you can flip without losing your primary residence, I don't see what's so great about it. I've got lots of friends who are smart, well-educated and in fantastic jobs who are having the toughest time out there landing an affordable place. As a lifelong Calgarian, I don't see the appeal of pricing out young people looking to start their lives here.

Personally, I love my place and I plan on sticking here for a long, long time. I honestly wouldn't care if my house dropped in value if it meant making this city a little more affordable. I started my career in Vancouver, and its terrible seeing how people have to mortgage their lives away. I'm starting to see that a lot more here.

Yeah, I agree with you, the nouveaux rich based on an increase in home equity **** me off to. However, it can be used well, I've been reading about something called the smith maneuver which sounds interesting. But the morons who think they're rich don't quite get that they're staying on par with everyone else in the city and can only capitalize on a sale by finding a great deal, putting the equity to work at a good return, or leaving the province.

Congrats on having a home in kensington though, that's pretty impressive, I have no idea what I'm going to do for a place to live in the next 12 months.. I'm about to get a really good job and still feel priced out of the market. I'd be content to move, and the new job will give me this opportunity, but in 5 or so years.

Ah well..

[Resolute 14]

{Waves his hand}

It is frustrating isn't it. I've been in a situation where I couldn't buy something for a number of reasons, but now I want to and I don't know if I can afford to do so. One starts to think hard about leaving this city simply because I don't know if I can afford to be a home owner here.

But I'm not whining about it - its the nature of the market, and I made choices that got me to this point - none of which I regret. But it does make looking around for your own place a bit frustrating.

Could be worse. I had a chance to buy a jr 1 bedroom condo late 2005 at the London condos on MacLeod. At the time, I had no clue what the market was like, but because of debtload and the fact that if you are single, you are screwed when it comes to a mortgage, I couldn't get a larger one I wanted, and decided to spend the next year saving and paying off debt, then buying into phase two.

Queue the bubble. So, after spending a year knocking my debt down from $10,000 to $5,000 (and will be paid off entirely by the end of summer), and increasing my savings from $800 to $8000, I've fallen behind $100,000 on a bloody jr 1 bedroom by the market boom.

It was frustrating and incredibly depressing to look at the prices for phase 2 when they came out.

[photon]

Yeah, I guess you're right there. I suppose I just get sick of people coming to me and raving (let's call it what it is...bragging) about how much their home has gone up in value when in my mind (as a single home owner) I don't see how much it benefits us. Don't get me wrong, I'm glad my home is valued what it is, but unless you got into the market early, or own a few places that you can flip without losing your primary residence, I don't see what's so great about it.

You just answered your own question. Rather than complaining about the strongest economy this country has ever seen in its entire history, take advantage of it. Take some equity out of the house, invest it in some other real estate, and profit from it. It's not like this kind of economy or opportunity comes along very often. There's tons of people who will give you a 50% stake in real estate and you have to do nothing other than invest your cash.

Because the crash you hope for isn't coming, not for a good while at least.

[algernon]

I don't see this real estate marketing crashing any time soon. So don't wait forever.

I've been thinking of taking advantage of the boom and moving to Texas or Lousiana, I got a few companies looking for my services. I could buy a nice house, and have no mortgage with what I sell mine for. Not bad for a 27 year old.

The only problem is I never could afford to move back here until the market did crash.


Why not keep your house here, rent it out to cover the mort., utilities,and possibly taxes? Then, buy a 100,000 house (or whatever the going rate is) down in Lousiana or where ever? The payments on 100 G can't be that bad (especialy on a 50 yr mort.), and you could move back home when ever, and still own property.

[JiriHrdina]

Could be worse. I had a chance to buy a jr 1 bedroom condo late 2005 at the London condos on MacLeod. At the time, I had no clue what the market was like, but because of debtload and the fact that if you are single, you are screwed when it comes to a mortgage, I couldn't get a larger one I wanted, and decided to spend the next year saving and paying off debt, then buying into phase two.

Queue the bubble. So, after spending a year knocking my debt down from $10,000 to $5,000 (and will be paid off entirely by the end of summer), and increasing my savings from $800 to $8000, I've fallen behind $100,000 on a bloody jr 1 bedroom by the market boom.

It was frustrating and incredibly depressing to look at the prices for phase 2 when they came out.

Yup. Exactly - I'm just keep kicking myself in the rear for not doing something a year ago as well. I'm not one to get caught up in regret because its a pretty useless emotion - but its hard not to right now.

Course I didn't aniticipate either what the market would do nor how my situation with my current place would change.

Ah well.

[photon]

Course I didn't aniticipate either what the market would do nor how my situation with my current place would change.

Pretty much no one did. I knew people what were predicting a run up due to the economics of the province, but not the 40+% we saw.

This year is going to be similar as well, January saw a 5% increase in single family homes in Calgary already. CMHC (who is usually ultra-conservative in their predictions) is even calling for 38% for 2007.

November and December saw a bit of a downswing (as it always does), and that would have been a decent time to buy. Otherwise I don't think anyone would be making a mistake even if they bought now.

[Cowperson]

The only people who benefit from high property values are people like my parents, who own numerous properties and paid them off years ago. For young people like me . . . . .

Your parents were in exactly the same position as yourself at one point . . . . and probably saying the same thing as you were.

They put in the time, eventually paid off their mortgage, levered their extra savings into other properties . . . . and thirty years had passed.

You're not willing to put in the time. You want it now. Impatience. That's your problem.

Cowperson

[SeeGeeWhy]

Your explanation was unecessary. The number this year was 43% I believe? That being said, I'm not of aware of anyone whose property tax hasn't increased. Over a 5 year period, (for myself) its been ridiculous. Plus, I'm a Calgarian so I'm not concerned with what other Canadian municipalities are doing in relation to their own property tax algorithims. From my perspective the return I've seen relating to property tax and services over the time I've owned my home are far from congruent.

My taxes dropped this year and held steady last year and I live in Mission/Connaught on 14th Ave and 5th St. That said, the property assesment on my condo is nowhere near the market value...

Don't have to be so bitter chap. So you pay a couple hundred dollars extra a year to live in one of the most desirable communities in Calgary? Woo.

You can always take out a line of credit for 75% of the difference between your bank assessed property value and the balance remaining on your mortgage... that is how you can make the money 'real' without moving. Yes, it is not the full value and you pay a (low) interest rate, but if you do something productive with it, it is worth your while.

[fredr123]

{Waves his hand}

It is frustrating isn't it. I've been in a situation where I couldn't buy something for a number of reasons, but now I want to and I don't know if I can afford to do so. One starts to think hard about leaving this city simply because I don't know if I can afford to be a home owner here.

But I'm not whining about it - its the nature of the market, and I made choices that got me to this point - none of which I regret. But it does make looking around for your own place a bit frustrating.

The wife and I were in a similar situation. Both of us had a lot of school debt and I was still in school. We almost bought a condo in the Beltline area but pulled out at the last minute. I don't regret that situation because I don't think we would have been happy there. And making the mortgage payments at that time would have pretty much taken all of our income. Money would have been tight for sure and if interest rates went up or one of us couldn't work...

Now we've managed to pay much of our student and other loans down. I'm working full-time and will probably be getting a much nicer salary by the end of the summer. My wife has a decent job and makes a good wage too (though she's going on maternity leave in a week). We don't have enough savings to make a dent on the huge cost of home ownership nor do we earn enough to qualify for a large enough mortgage. We probably can't even afford that dumpy condo in the Beltline area any more.

But what do you do? I'm not in oil and gas so being in the City isn't totally necessary but my job does directly benefit from the boom. Plus we love Calgary. Sigh...

[photon]

Just to give some perspective.. Demographia International does a study where they find out how many years of salary an average home costs. Regina was the cheapest in Canada where it took 2 years of the average salery to buy the average home. Edmonton was 3.5, Calgary and Toronto were 4.4. Vancouver led the country at 7.7!

Internationally, Regina was one of the world's most affordable cities at 2.0, and Canada overall was one of the most affordable countries with a median of 3.2, compared to other countries such as Australia at 6.6, Ireland at 5.7, and the UK at 5.5. The US was 3.7.

For individual cities Calgary still compares favorably at 4.4 vs major cities in the above countries at high multiples like 7 to the highest of 11.4 in Orange County in LA.

So while I agree that for individuals trying to buy their first home it is very difficult right now, big picture Calgary and Canada are still relatively affordable when compared to a lot of the world, which means people are still going to move here.

Both Edmonton and Calgary are projected to add a population equal to the size of Red Deer by 2012. That's a lot of people, and they all need a place to live.

EDIT: Of course that doesn't help people trying to buy now, just talking about some of the drivers of the economics.

[SeeGeeWhy]

The one thing I do agree with you on, housejunk, is that the current economic conditions have whipped this Province into a frenzy for acquisition... and we seem to be losing our character in the name of winning the game.

I'm also a born and raised Calgarian and I am disappointed in the way this city is going.

[Bring_Back_Shantz]

Again, thank you for your long-winded diatribe relating to the inherent infalliability of the municipal property tax system. There is no logical fallacy involved with my initial post. You, for some reason chose to take an out of context throw-away comment to launch into some sort of doctoral dissertation that was not, and is not needed. Unfortunately, after attending engineering, masters and law school I have had far too many encounters with the type of indivdiual that you are; the unlikeable know-it-all who never fails to attempt to assert their percieved knowledge over the percieved ignorance of the unwashed masses.

Let a fella complain about his taxes if he wants.

EDIT: I was wondering why you insisted on coming across like such a wanker, and then I remembered! You're that anti-pet insurance/good christian guy I was telling my friends about a few weeks ago. Yowza.

http://forum.calgarypuck.com/showthread.php?t=35823

Given the choice between reading the thoughts of a "Unlikeable know-it-all" and yours, I'll take Clareen every time. At the very least he thinks through his position thorourhgly and logically, instead of mentioning how many degrees he has.

[I-Hate-Hulse]

I think I get what you're trying to say here housejunk, but your thread title comes across as ugly and bitter, given that a market crash would probably mean that many Calgarians would be under water financially. A crash would also mean the economy here has taken a dive which kills the entire town. I fail to see how any of this makes Calgary a better place....

It comes across as further bitter and ugly when you say you own a detached house pre-boom in freaking Kensington, which means your place is worth 600,000 - 800,000 right now at least. Boo-hoo..... As mentioned above, there plenty of ways to extract your current house wealth, some that don't require you to leave the Kensington area.

Rather than be amazed at housing prices... I'm more amazed at what some people are bringing home in salaries now....

[Sylvanfan]

Your parents were in exactly the same position as yourself at one point . . . . and probably saying the same thing as you were.

They put in the time, eventually paid off their mortgage, levered their extra savings into other properties . . . . and thirty years had passed.

You're not willing to put in the time. You want it now. Impatience. That's your problem.

Cowperson

The thing is that the longer a place like Canada is settled and established the more difficult it will become to afford housing. If I went to the UK and wanted to buy a house good luck to me. People over there who are land owners usually require some type of help from their families who have been established there for 5 or more generations accumulating wealth.

Chances are that housejunk will stand to benefit from the fact that his parents own a lot of property's one day and saw a large increase in value. It's been happening in other countries for century's where they keep moving the wealth forward to the next generation.

Young people today do have a tough time getting into their first house especially with today's prices. Theres also so many other things out there to take your money from you like cars, credit cards, cell phones, student loans, loans to go to Mexico, interest free loans for T.V. etc. It's as if creditors are too willing to put people into debt for their own good. I compare myself to other people I know who are my age and think I'm doing well. I had more than 10% down on my house, I only have one vehichle loan and it's a 4 year loan, and just took a L.O.C. to do a few home renovations. But than I realize I'm probably further in debt than my parents ever were in terms of total dollars. Still that doesn't mean I can't have it all paid off in 10 years. I might have to pay more to get things, but I also have a lot more knowlege and information available to me in terms of how to build wealth than they did too.

[firebug]

Your parents were in exactly the same position as yourself at one point . . . . and probably saying the same thing as you were.

They put in the time, eventually paid off their mortgage, levered their extra savings into other properties . . . . and thirty years had passed.

You're not willing to put in the time. You want it now. Impatience. That's your problem.

Cowperson

My father frequently tells the story of the near divorce their first Calgary home purchase caused.

He could see no reason how a home could be worth that much money, and the deposit cheque was the most difficult one he ever wrote.

The deposit was $500 for a $20,000 home in Lake Bonavista in 1972.

I also recently heard that over a 15 year period that calgary's average annualized growth in home prices was not that extreme and ranked 9th in Canada.

~bug

[SeeGeeWhy]

I think I get what you're trying to say here housejunk, but your thread title comes across as ugly and bitter, given that a market crash would probably mean that many Calgarians would be under water financially. A crash would also mean the economy here has taken a dive which kills the entire town. I fail to see how any of this makes Calgary a better place....

It comes across as further bitter and ugly when you say you own a detached house pre-boom in freaking Kensington, which means your place is worth 600,000 - 800,000 right now at least. Boo-hoo..... As mentioned above, there plenty of ways to extract your current house wealth, some that don't require you to leave the Kensington area.

Rather than be amazed at housing prices... I'm more amazed at what some people are bringing home in salaries now....

I didn't want to be the one to say it, but you hit the nail right on the head.

[Sample00]

for what its worth,
here is something that some of you might want to check out.

http://www.albertarein.com/

[fredr123]

for what its worth,
here is something that some of you might want to check out.

http://www.albertarein.com/

Are you involved with this program? No offence, but the website looks like a scam. Or possibly a scammola. You sure I wouldn't be better off just sending one dollar to Happy Guy? ;)

[fredr123]

Okay, rather than just bitching about how I've missed out on the real estate boom maybe I should do something about it.

How does a mid-20's guy with a wife and a baby on the way with about $50k in combined student loans, 3.5 years left on a car loan, living in a basement suite, making a combined yearly income of about $75k (until maternity leave at least) turn things around and get on board in today's hot real estate market in Calgary?

Oh, and please don't say work hard, save money, invest wisely and be patient. I want a solution now, dammit!

[Slava]

Okay, rather than just bitching about how I've missed out on the real estate boom maybe I should do something about it.

How does a mid-20's guy with a wife and a baby on the way with about $50k in combined student loans, 3.5 years left on a car loan, living in a basement suite, making a combined yearly income of about $75k (until maternity leave at least) turn things around and get on board in today's hot real estate market in Calgary?

Oh, and please don't say work hard, save money, invest wisely and be patient. I want a solution now, dammit!


I think that the key here is how much money you can put on a down-payment. If you can scrap this together somehow then you can get into the market. Chances are that while the cost of a home is more than renting, it doesn't have to be much more. I moved to Calgary from a smaller city, and when we made the purchase it hurt. But over time it gets easier and you make due by living within your means.

[Sample00]

Are you involved with this program? No offence, but the website looks like a scam. Or possibly a scammola. You sure I wouldn't be better off just sending one dollar to Happy Guy? ;)

ahh nope, not a scam.
it provides very good information about the Alberta Real Estate market.

[Cowperson]

The thing is that the longer a place like Canada is settled and established the more difficult it will become to afford housing. If I went to the UK and wanted to buy a house good luck to me. People over there who are land owners usually require some type of help from their families who have been established there for 5 or more generations accumulating wealth.

Chances are that housejunk will stand to benefit from the fact that his parents own a lot of property's one day and saw a large increase in value. It's been happening in other countries for century's where they keep moving the wealth forward to the next generation.

Young people today do have a tough time getting into their first house especially with today's prices. Theres also so many other things out there to take your money from you like cars, credit cards, cell phones, student loans, loans to go to Mexico, interest free loans for T.V. etc. It's as if creditors are too willing to put people into debt for their own good. I compare myself to other people I know who are my age and think I'm doing well. I had more than 10% down on my house, I only have one vehichle loan and it's a 4 year loan, and just took a L.O.C. to do a few home renovations. But than I realize I'm probably further in debt than my parents ever were in terms of total dollars. Still that doesn't mean I can't have it all paid off in 10 years. I might have to pay more to get things, but I also have a lot more knowlege and information available to me in terms of how to build wealth than they did too.

I'd have more sympathy for that argument if my father hadn't started at absolutely zero - our family once lived in a small shack that later became our one (1) car garage - and if I hadn't started at absolutely zero myself.

My father built a duplex in a small Alberta town in 1962 for the seemingly outrageous price of $13,000 . . . . he needed a long, long mortgage for that one.

It's all relative.

And no, if I have wealth today in my hilltop aerie southwest of the city, I don't feel that its an "illusion" since its certainly real and certainly more than zero . . . and I certainly remember what zero looks like. It's also worth more than the house I originally owned in Wildwood in Calgary in the 1990's just as that was certainly worth more than the house I owned in Grande Prairie in the 1980's.

Scratch and claw, make your priorities, put in the time . . . . I also remember the early 80's when it seemed like everyone around me was getting rich when I wasn't. I know all about that feeling.

Sorry, I'll acknowledge its a tight market right now but I really don't have much sympathy for this at all.

Put in the time.

Cowperson

[fredr123]

ahh nope, not a scam.
it provides very good information about the Alberta Real Estate market.

Well then they're keeping overhead low by resisting the allure of fancy, well-designed websites...

[Lurch]

As a counterpoint hinted at by some, home ownership is on the rise in Canada and has been for the 30 years that I could find statistics. Home ownership is at 67% today, compared to 63% in 1991. Perception does not fit the reality in this case. Further, home ownership is actually higher in many European countries than Canada and the US (Spain, UK, Ireland, and Belgium are near 80%.)

[Slava]

I have to say that I agree with Cowperson here. I am young and in the middle of building something from nothing....it certainly has its moments!

But the fact is that there are a lot of people my age or younger who think that they should have a nice home with all of the toys and be able to take a vacation every year and not have to put in the time to get there. The reality is that while your parents afforded this type of luxury they took years to get to that point. If you own a home now with hundreds of thousands of dollars in equity then you have an enormous advantage to do what you want to do in life.

[Tron_fdc]

Man, I feel sorry for people who aren't in the market. I can't imagine trying to put together enough cash to buy nything right now.

My sister has been trying to buy a place for a year now, and it's at the point where she might have to split a mortgage with 2 other people in order to raise enough money to do it, seeing as they can't find a house that's "OK" for less than 350. I bought my first condo with a friend 6 years ago for $120k......the same condo right now is almost 3 times that amount. I thought $120 was robbery at the time.

If I was a mid 20's bachelor I think I might work up north for a year, save some cash, and then take off to somewhere more affordable. Even the interior of BC seems cheper right now! Move to Elko or something, or into an old home in Sicamous. Even with all the BC tax it's gotta be a cheaper place to live than here.

[Lurch]

If I was a mid 20's bachelor I think I might work up north for a year, save some cash, and then take off to somewhere more affordable. Even the interior of BC seems cheper right now! Move to Elko or something, or into an old home in Sicamous. Even with all the BC tax it's gotta be a cheaper place to live than here.

Interestingly, this is exactly how my grandfather purchased his first house and quarter section, except it took 3 years not 1. Three years in a remote logging workcamp, supporting a wife and kid back home who he never saw for months at a time. But I guess that's the point - it was never easy as much as people want to believe otherwise.

[JiriHrdina]

Pretty much no one did. I knew people what were predicting a run up due to the economics of the province, but not the 40+% we saw.

This year is going to be similar as well, January saw a 5% increase in single family homes in Calgary already. CMHC (who is usually ultra-conservative in their predictions) is even calling for 38% for 2007.

November and December saw a bit of a downswing (as it always does), and that would have been a decent time to buy. Otherwise I don't think anyone would be making a mistake even if they bought now.

No and that's my mindset - that if I don't buy now, a year from now it'll be even worse.

Basically the decision point I'm at is buy now, or come to terms with the fact that I will be leaving Calgary in the next few years to become a home owner elsewhere.

My main concern right now is that if I do this now, I will leave myself with little to no margin of error. I work in an industry that is highly unstable and I could find myself out of work without much notice (and I realize that job stability is very uncommon now so this is nothing particulary unique) - that concerns me, when I will have to basically take my nest egg down to virtually nothing to make this happen.

If I choose instead to rent for a year, I can add to my savings and then sometime down the road in the next couple of years take that savings and take it to another market where I can get way more house for my buck.

Decisions decisions.

[4X4]

You just answered your own question. Rather than complaining about the strongest economy this country has ever seen in its entire history, take advantage of it. Take some equity out of the house, invest it in some other real estate, and profit from it. It's not like this kind of economy or opportunity comes along very often. There's tons of people who will give you a 50% stake in real estate and you have to do nothing other than invest your cash.

Because the crash you hope for isn't coming, not for a good while at least.


Listen up people... This guy gets it.

As for the crash, don't hold your breath Housejunk. Prices aren't coming down because all they did and are continuing to do is adjust themselves to where they should be.
I was going to go on about prices in Vancouver and Toronto, but photon done went and beat me to it.

Photon, my crystal ball tells me that you're going to be well off by the time you retire (and that'll probably be younger than guys like housejunk).

[Bring_Back_Shantz]

No and that's my mindset - that if I don't buy now, a year from now it'll be even worse.

Basically the decision point I'm at is buy now, or come to terms with the fact that I will be leaving Calgary in the next few years to become a home owner elsewhere.

My main concern right now is that if I do this now, I will leave myself with little to no margin of error. I work in an industry that is highly unstable and I could find myself out of work without much notice (and I realize that job stability is very uncommon now so this is nothing particulary unique) - that concerns me, when I will have to basically take my nest egg down to virtually nothing to make this happen.

If I choose instead to rent for a year, I can add to my savings and then sometime down the road in the next couple of years take that savings and take it to another market where I can get way more house for my buck.

Decisions decisions.

The thing is though, that if you believe that the housing market will continue to be strong, then job security shouldn't be that big of an issue.

If you lose your job at least you have increased equity in your home which you could presumably sell at a profit and take with you somewhere else. If you don't lose your job then you are still going to save money on your home now, and if you decide to move elsewhere anyway, you still have the increase equity in your home to take with you.

[ken0042]

How does a mid-20's guy with a wife and a baby on the way with about $50k in combined student loans, 3.5 years left on a car loan, living in a basement suite, making a combined yearly income of about $75k (until maternity leave at least) turn things around and get on board in today's hot real estate market in Calgary?

My cousin and his wife just bought a house with no money down. For the first 12 months his mortgage payments are something crazy like $1800, then they settle down to $1400. They bought in November, and their house value has easily gone up by $30K.

Talk to your parents or grandparents. Do they have money they have sitting there waiting for them to pass away to will to you? Would they be willing to part with some of it, or give you some sort of loan to get you on your feet?

I watch prices where I live in McKenzie Towne, and they are already back on their way up. Do whatever you can now to get in on the ground floor, and then you are insulated.

[fredr123]

No and that's my mindset - that if I don't buy now, a year from now it'll be even worse.

Basically the decision point I'm at is buy now, or come to terms with the fact that I will be leaving Calgary in the next few years to become a home owner elsewhere.

My main concern right now is that if I do this now, I will leave myself with little to no margin of error. I work in an industry that is highly unstable and I could find myself out of work without much notice (and I realize that job stability is very uncommon now so this is nothing particulary unique) - that concerns me, when I will have to basically take my nest egg down to virtually nothing to make this happen.

If I choose instead to rent for a year, I can add to my savings and then sometime down the road in the next couple of years take that savings and take it to another market where I can get way more house for my buck.

Decisions decisions.

We found a really nice basement suite for really cheap. We've decided, at least for the time being, to continue being renters. Because of the cheap rent, we've been able to pay down our debts a lot faster than many. We haven't put much at all into savings but focused on reducing debt. Our hope is that as our debt goes down, savings will go up as will my income. At some point we'll be in a position to enter the market... just not for a couple years.

[photon]

Photon, my crystal ball tells me that you're going to be well off by the time you retire (and that'll probably be younger than guys like housejunk).

Heh, well that's the plan anyway.. and I feel better now after 2-3 years of at least doing something to try and make that dream reality rather than just working a day job hoping something happens to me.

[SeeGeeWhy]

Okay, rather than just bitching about how I've missed out on the real estate boom maybe I should do something about it.

How does a mid-20's guy with a wife and a baby on the way with about $50k in combined student loans, 3.5 years left on a car loan, living in a basement suite, making a combined yearly income of about $75k (until maternity leave at least) turn things around and get on board in today's hot real estate market in Calgary?

Oh, and please don't say work hard, save money, invest wisely and be patient. I want a solution now, dammit!

Financing for your house is the biggest issue. Your debt is going to hurt your ability to generate a mortgage if you don't have any other assets. So the first place to start is to think of ways to reduce/eliminate your debts and/or increase your assets in order to put you in the best position when going in to request a mortgage.

Can you sell your car, or are you restricted by the terms of the loan? Do you absolutely need it for work? Can you find a place to rent that will allow you to go to work without driving? Will the value of the car pay off the loan and leave you with enough cash to pick up a beater you can use for day to day transport if not?

The student loans are something that you will not be able to eliminate quickly. Just keep making your payments on time to keep your credit rating in check.

Chop up your credit cards, or put them in the freezer in a tub of water. Make sure their balance is $0 as soon as you can.

Run a credit report with the credit houses (i.e. equifax, etc) to make sure there are no outstanding issues that is hurting your ability to take a loan out. For example - a payment on a credit card may have defaulted due to a clerical error at some point, which may have been sorted out, but those sorts of things will stay on your report unless you dispute them.

Now, work out what you think your monthly cashflow (Income minus expenses) is going to be when your wife is on maternity leave as this will be the least amount of money you will have to work with. If you can make it work then, you will be able to make it work when she is back earning a paycheque. Include everything except for 'mortgage payments'... Even include a little something for savings, entertainment, clothes. The baby is going to be expensive at first, so make sure you account for all of the increased monthly bills (diapers, food, furniture, etc). What you are then left with is what you can afford on a month to month basis for a mortgage payment.

Beg your parents for help with a down payment. This will help immesurably. Have them fill out a gift letter for the bank if you need to.

Take this information, along with anything you have available as a down payment, to a mortgage specialist at your bank. They will be able to come up with a maximum mortgage that you can sustain.

Now it's time to go house hunting.

Try to find something close to work and other amenities (esp a school) so you can minimize transportation costs.

Sacrifice and do what makes sense for your lifestyle rather than buying into the mentality of needing a big house and a yard with hardwood floors and all the trimmings just 40 minutes from the Rockies.

Area is the most important thing. Get a general feel for what will work for you logistically, then start to look at the average cost in each area. Obviously, you shouldn't even look at an area that has an average price that is higher than what the bank will be able to loan you.

Once you get down to an area, look at the individual house level. Try your best to get into an area that is turning over (i.e. renovations, tear-downs, road construction, new school, etc) so the potential for an increase in value is there. Get a house that you can do a bit of renovating on to improve your property value. Better yet, get your hands on a lot with zoning that would lend itself to future development (i.e. and "R2" lot with one house can be developed to have two narrower houses, which will both sell for the price of the original house). All of these factors are attractive to investors and increase the potential value of your property in the future.

You should probably be ready at this point to make on offer on a house.

Oh... and make sure you have a good real estate agent that understands your needs and what you are looking for. They will help your search immensely.

Do be prepared to take time. Yes, there is a housing boom, and there is a feeling of "GET IN NOW!!!" but your credit rating needs to be shined up before you think about taking on a mortgage. You need to have a budget established or else you will be finding yourself in deeper and deeper debt. There will always be a house that works well for your situation, so don't rush it.

Consider that if all that you are going to be able to afford is rent plus paying your loans off on top of all the new baby costs, that is okay. Being able to live like that on your paycheque rather than taking out loan after loan after loan to acquire what you need is a much better situation for you in the long run.

[photon]

Are you involved with this program? No offence, but the website looks like a scam. Or possibly a scammola. You sure I wouldn't be better off just sending one dollar to Happy Guy? ;)

Lol I know, their site looks quite bad in that respect. However I can also attest that they aren't a scam. They aren't free, but they are legit. Don Campbell has a couple of books out that are worth a read to get an idea of what it's about.

The nice part about them is they actually do the financial analysis on different cities and provinces and give the real info. They bring in the provincial economists to give the straight goods. They say when the market in an area is good, and they tell you when they think you should get out.

They are a little heavy on the motivational stuff for me (they'll bring in Lester Hewitt to speak for example), but there's enough meat about the economy, technical and legal info on how to do deals, etc, that I find value in it.



My main concern right now is that if I do this now, I will leave myself with little to no margin of error. I work in an industry that is highly unstable and I could find myself out of work without much notice (and I realize that job stability is very uncommon now so this is nothing particulary unique) - that concerns me, when I will have to basically take my nest egg down to virtually nothing to make this happen.

If I choose instead to rent for a year, I can add to my savings and then sometime down the road in the next couple of years take that savings and take it to another market where I can get way more house for my buck.

Decisions decisions.

I agree with another poster, I think in this market your risk is mitigated a bit as worst case scenario you can sell the property and make a bit of money.

You could also maybe look into getting something with a suited basement to rent out to help with the mortgage payments, I've seen zero down deals in the past few months where after renting the basement suite out for a reasonable amount the mortgage payment is quite reasonable.

Not the ideal situation (not everyone wants to be a landlord), but still gets you into the market.

[I-Hate-Hulse]

But the fact is that there are a lot of people my age or younger who think that they should have a nice home with all of the toys and be able to take a vacation every year and not have to put in the time to get there.

Isn't this the truth? I seem to know a lot of young (mid 20's) 1st time buyers that are going after all the bells and whistles....
Granite
Stainless Steel appliances
2,000+ sq ft of innercity living, detached
Infill so it's brand new.
Nice new luxury import car/SUV for the garageWhatever happened to starting small and working your way up? Have the newer generations really succumed to "I want it all, and I want it now"?

[Sylvanfan]

I'd have more sympathy for that argument if my father hadn't started at absolutely zero - our family once lived in a small shack that later became our one (1) car garage - and if I hadn't started at absolutely zero myself.

My father built a duplex in a small Alberta town in 1962 for the seemingly outrageous price of $13,000 . . . . he needed a long, long mortgage for that one.

It's all relative.

And no, if I have wealth today in my hilltop aerie southwest of the city, I don't feel that its an "illusion" since its certainly real and certainly more than zero . . . and I certainly remember what zero looks like. It's also worth more than the house I originally owned in Wildwood in Calgary in the 1990's just as that was certainly worth more than the house I owned in Grande Prairie in the 1980's.

Scratch and claw, make your priorities, put in the time . . . . I also remember the early 80's when it seemed like everyone around me was getting rich when I wasn't. I know all about that feeling.

Sorry, I'll acknowledge its a tight market right now but I really don't have much sympathy for this at all.

Put in the time.

Cowperson

The thing is did you start with zero....or zero dollars?

My dad didn't exactly start with a lot himself, but he spoke English and had a highschool education when he was 18. Also having grown up on a farm around machinery and the like he had the chance to learn a lot of other skills. He had a lot more going for him at that age than his dad did at the age of 25 when he came to Canada with no education and not knowing a word of English and having been farm workers in Europe. Now that we're onto the 3rd generation of Canadian born people on both sides of my family we have it far better today than our parents ever did. The longer that my lineage has been in the country the better established we've become, and it's easier for the people from my generation to own property than it was for previous generations. I fully admit that I received a lot from my parents that they never had to become a home owner. If I ever have kids, I'll be sure to try and pass on even more to that generation. Thats something that I attribute to time and establishment in the country. Making life better for future generations.

[GreenTeaFrapp]

Just to give some perspective.. Demographia International does a study where they find out how many years of salary an average home costs. Regina was the cheapest in Canada where it took 2 years of the average salery to buy the average home. Edmonton was 3.5, Calgary and Toronto were 4.4. Vancouver led the country at 7.7!

Internationally, Regina was one of the world's most affordable cities at 2.0, and Canada overall was one of the most affordable countries with a median of 3.2, compared to other countries such as Australia at 6.6, Ireland at 5.7, and the UK at 5.5. The US was 3.7.

For individual cities Calgary still compares favorably at 4.4 vs major cities in the above countries at high multiples like 7 to the highest of 11.4 in Orange County in LA.

So while I agree that for individuals trying to buy their first home it is very difficult right now, big picture Calgary and Canada are still relatively affordable when compared to a lot of the world, which means people are still going to move here.

You can't really compare US prices with Canadian prices since Americans get tax breaks, like writing off mortgage interest, that Canadians don't get which allows them to spend more on a house. Because they can spend more, their housing prices are inflated compared to Canadian prices.

The other countries you've listed differ from Canada because they have a lot less usable land for housing then Canadians do.

[Sylvanfan]

way up? Have the newer generations really succumed to "I want it all, and I want it now"?

That or they maybe aren't willing to look back a few years or think back to what they used to have.

My wife is bad for this because her sister and husband are extremely wealthy and she can spend whatever she wants whenever she wants. She'll come home and cry how it's not fair that her sister can spend that type of money and she can't. What my wife doesn't realize is that 10 years ago when her sister was her age she couldn't spend like that either because they didn't have much wealth than either. People tend to dwell too much on not being like the Joneses as opposed to finding out what the Joneses did to get where they are.

[SeeGeeWhy]

Real estate is an interesting subject and certainly method to create wealth. But in order to get very rich, you need to be playing the game at a very high level, and it is demanding.

At this point in time, I am more concerned about building cashflow in my portfolio right now (aggressive growth) though business acquistion, and will add a conservative touch to my holdings with things such as real estate as my wealth grows and my need for cashflow decreases.

At any rate, it is all about keeping as much of what you acquire in assets that can be transferred from generation to generation - this is true wealth in my eyes. Oh, and there is that little gem about paying as little taxes as possible, that always helps.

[fredr123]

Financing for your house is the biggest issue. Your debt is going to hurt your ability to generate a mortgage if you don't have any other assets. So the first place to start is to think of ways to reduce/eliminate your debts and/or increase your assets in order to put you in the best position when going in to request a mortgage.

Can you sell your car, or are you restricted by the terms of the loan? Do you absolutely need it for work? Can you find a place to rent that will allow you to go to work without driving? Will the value of the car pay off the loan and leave you with enough cash to pick up a beater you can use for day to day transport if not?

The student loans are something that you will not be able to eliminate quickly. Just keep making your payments on time to keep your credit rating in check.

Chop up your credit cards, or put them in the freezer in a tub of water. Make sure their balance is $0 as soon as you can.

Run a credit report with the credit houses (i.e. equifax, etc) to make sure there are no outstanding issues that is hurting your ability to take a loan out. For example - a payment on a credit card may have defaulted due to a clerical error at some point, which may have been sorted out, but those sorts of things will stay on your report unless you dispute them.

Now, work out what you think your monthly cashflow (Income minus expenses) is going to be when your wife is on maternity leave as this will be the least amount of money you will have to work with. If you can make it work then, you will be able to make it work when she is back earning a paycheque. Include everything except for 'mortgage payments'... Even include a little something for savings, entertainment, clothes. The baby is going to be expensive at first, so make sure you account for all of the increased monthly bills (diapers, food, furniture, etc). What you are then left with is what you can afford on a month to month basis for a mortgage payment.

Beg your parents for help with a down payment. This will help immesurably. Have them fill out a gift letter for the bank if you need to.

Take this information, along with anything you have available as a down payment, to a mortgage specialist at your bank. They will be able to come up with a maximum mortgage that you can sustain.

Now it's time to go house hunting.

Try to find something close to work and other amenities (esp a school) so you can minimize transportation costs.

Sacrifice and do what makes sense for your lifestyle rather than buying into the mentality of needing a big house and a yard with hardwood floors and all the trimmings just 40 minutes from the Rockies.

Area is the most important thing. Get a general feel for what will work for you logistically, then start to look at the average cost in each area. Obviously, you shouldn't even look at an area that has an average price that is higher than what the bank will be able to loan you.

Once you get down to an area, look at the individual house level. Try your best to get into an area that is turning over (i.e. renovations, tear-downs, road construction, new school, etc) so the potential for an increase in value is there. Get a house that you can do a bit of renovating on to improve your property value. Better yet, get your hands on a lot with zoning that would lend itself to future development (i.e. and "R2" lot with one house can be developed to have two narrower houses, which will both sell for the price of the original house). All of these factors are attractive to investors and increase the potential value of your property in the future.

You should probably be ready at this point to make on offer on a house.

Oh... and make sure you have a good real estate agent that understands your needs and what you are looking for. They will help your search immensely.

Do be prepared to take time. Yes, there is a housing boom, and there is a feeling of "GET IN NOW!!!" but your credit rating needs to be shined up before you think about taking on a mortgage. You need to have a budget established or else you will be finding yourself in deeper and deeper debt. There will always be a house that works well for your situation, so don't rush it.

Consider that if all that you are going to be able to afford is rent plus paying your loans off on top of all the new baby costs, that is okay. Being able to live like that on your paycheque rather than taking out loan after loan after loan to acquire what you need is a much better situation for you in the long run.

Thanks for all the tips. There's some gold there, for sure.

FWIW we just got rid of our beater about a year ago and got a new Mazda3. I wanted the wife and kid to have something reliable to drive in. The old beater was going to be the death of someone. She needed it to get to work (shift work, buses didn't run late/early enough). I can take the bus to work from where I am. I suppose we could get rid of the car but I don't think that would make the Boss happy. Plus the payments are pretty reasonable.

I went to university for 7 years. My wife went to college in an accelerated program for 13 months. She's paid off all her student loans with the exception of abut $2300 from the government. I've still got about $50k to go. Most of it was from a student line of credit (since my parents wouldn't help out my education expenses and I couldn't get a government student loan).

Anything extra we have each month goes towards those loans. Zero to nothing has been going to savings. Credit card use is minimal and balances are paid off every month in full.

Rent is rediculously cheap (~$600/mo plus utilities). Don't tell the landlord!

I'm due for a raise this summer (or a different job entirely) so at that time I think we'll speak to a mortgage professional and see where they think we stand.

It seems really sucky to have to put so much time and effort into getting these things we want out of life. I take pride in knowing that pretty much everything we have, we earned ourselves.

[Sample00]

Take this information, along with anything you have available as a down payment, to a mortgage specialist at your bank. They will be able to come up with a maximum mortgage that you can sustain.



the only thing I would change is this.
take this information to a Mortgage Broker. they work for you, not the bank!:)

[Mr.Coffee]

Isn't this the truth? I seem to know a lot of young (mid 20's) 1st time buyers that are going after all the bells and whistles....

Granite
Stainless Steel appliances
2,000+ sq ft of innercity living, detached
Infill so it's brand new.
Nice new luxury import car/SUV for the garageWhatever happened to starting small and working your way up? Have the newer generations really succumed to "I want it all, and I want it now"?

:rolleyes: Let's be realistic here. If the newer generations are "I want it all, and I want it now" its in large part thanks to the baby boomers who taught us that. And not to derail the thread into a old vs. young whine fest, the fact of the matter is that most young people fully realise that they can't afford those types of luxuries out the gate and will absolutely have to build from the ground up. I just find it amazing that some of the very people who have created the most consumptuous population in world history look condescendingly at young people for "wanting it all" when they were the ones who started that trend to begin with! Remember that because many people are living longer, and the large majority of Canadians haven't saved enough for retirement and are going to need even more social assistance, our young generation is going to keep many old Canadians afloat.

As for the theme of the thread, I perceive housejunk's frustration as more developed out of ignorance and materialistic values of his neighbours then of true frustration about the type of real estate market Calgary is. I agree with him... there's just so many people that have there priorities ****ed up. Money > Family, Friends, Health....anything.

[SeeGeeWhy]

the only thing I would change is this.
take this information to a Mortgage Broker. they work for you, not the bank!:)

ha! Well, that's what I mean. I speak with a mortgage broker that sets up shop at my bank. Your bank likes your business, so if you are a good customer they are usually willing to give you small breaks if you ask for them.

[Claeren]

Again, thank you for your long-winded diatribe relating to the inherent infalliability of the municipal property tax system. There is no logical fallacy involved with my initial post. You, for some reason chose to take an out of context throw-away comment to launch into some sort of doctoral dissertation that was not, and is not needed. Unfortunately, after attending engineering, masters and law school I have had far too many encounters with the type of indivdiual that you are; the unlikeable know-it-all who never fails to attempt to assert their percieved knowledge over the percieved ignorance of the unwashed masses.

Let a fella complain about his taxes if he wants.

If you didn't want a response why post on an internet website? You are making fun of me for being a geek but at least i know what i am in for. You go and post something that is ######ed and backward - essentially complaining about an extra few dollars in taxes you now owe thanks to your (unfortunate?) rise in home values that have likely left you with an additional $200k-$500 in equity and do so based on flawed logic and we are supposed to 'just let a guy complain'? Guess what, when you do something so unbelievably insulting to all of us without such good fortune you are going to get called on it. If you want to complain, go beak off to your little elitist friends and leave us alone then.

Second, if you have a Law degree and a Masters AND a B.Eng and whatever else behind your name what the hell are you doing here looking for validation? IS it because when you complain like this with your own educated friends they too point out the error in your logic? Maybe you just like finding people you see as below you to talk down to?

What kind of clown has ~8 years of education (more?), is likely looking at at LEAST $120k in yearly earnings (and that is if he is a moron) with earning potential basically unlimited, living in a home that has gained hundreds of thousands in value for him, and looking at a life of relative ease and luxury then comes on an internet forum and complains about $40 in extra taxes based on flawed logic - and THEN gets upset when someone points out the lack of validity of his complaint?! Do you really need that outlet? Do you REALLY need us here for you? Do you really need our ear and our pity?



EDIT: I was wondering why you insisted on coming across like such a wanker, and then I remembered! You're that anti-pet insurance/good christian guy I was telling my friends about a few weeks ago. Yowza.

http://forum.calgarypuck.com/showthread.php?t=35823

Funny you would bring that up, since i was railing against pets (out of boredom) in much the same way you are now doing so against taxes. (Although i didn't complain when people disagreed with me; that is what makes this place interesting.) I am certainly not Christian (good reading comprehension though!) and i certainly do not take anything here as seriously as you*... except maybe what line Yelle plays on...

(You seem to think that because i am bored at work and come here to post, and then spend the time to back what i post up, it means i take it seriously. But i am WELL aware of the fact this is just the internet, and that this is not reality. I would never go spouting off about what degrees i have, telling people what find of person they are because of what they post or go on about how i make fun of people on here with my friends in the 'real world' - because i know EVERYTHING here has to be taken with a grain of salt and is just a small window into the world.)

It seems you want to be the know-it-all as much as i do > You just ****ed up right off the bat and now you are on the defensive. Why should we sit here and 'just let you vent' when you are venting about something that doesn't make sense?

"Oh boo-hoo, i just won the lottery but now i am earning SOOOOoooo much interest on my winnings that the government wants more taxes then they got before!! Stupid government - all they do is raise taxes!! boo hoo hoo!!!" :whaa:



Claeren.

[Sample00]

ha! Well, that's what I mean. I speak with a mortgage broker that sets up shop at my bank. Your bank likes your business, so if you are a good customer they are usually willing to give you small breaks if you ask for them.

ya I gotcha!:)
Mortgage Brokers deal with many financial institutions and are willing to go the extra mile cause they get paid commission on the deal. Banks that are dealing with mortgage brokers know they are competing for business and are more inclined to give bigger breaks.
They are hoping to attract your other business as well, which is why they are will to provide your mortgage as a loss leader:whistle:

[FireFly]

This thread has made me want to get out there and really search for a new job. Perhaps not one that makes me a tonne more money, but one with the opportunity for more money. I need something I can advance in if I'm going to be able to afford a house at any point in the future. I'm working on debt reduction... the trip to Pittsburg won't help though! I really just need to get my ass in gear!

[Sample00]

. I'm working on debt reduction... the trip to Pittsburg won't help though! I really just need to get my ass in gear!

no, no, the Pittsburgh trip is a really good idea!!!;)

while on the trip you might actually sit next to a real estate investment guru who will give you a good idea on how to become incredibly wealthy!!!:D

[Tron_fdc]

Out of curiousity, what's the rental market like right now? Still pretty tight? I'm considering buying another house and renting it, but I want to be sure I can cover the mortgage payments.

[Claeren]

Isn't this the truth? I seem to know a lot of young (mid 20's) 1st time buyers that are going after all the bells and whistles....

Granite
Stainless Steel appliances
2,000+ sq ft of innercity living, detached
Infill so it's brand new.
Nice new luxury import car/SUV for the garageWhatever happened to starting small and working your way up? Have the newer generations really succumed to "I want it all, and I want it now"?

I somewhat agree but often it is just a matter of getting more for your money. (Want of value v. want of luxury.)

EVERY condo/home out there is expensive right now, so if you can get all of those luxury items for only a fraction of the home price more - and in turn insure high resale values compared to less optioned neighbours, it is a pretty good bet.

Further, most condo builders (in particular) are targeting only that market. Even if you want a 'no option' condo it is pretty hard to find and even if you do you don't save much in the buy-in (but as said earlier) potentially lose out big on the resale.

Lastly, having been in a number of those downtown condos many of the options they sell pre-sale turn out to be not that nice really (IMO). The upgraded cabinets are often just a nicer veneer over the same sort of particle board as the entry cabinets, the appliances are stainless steel but still standard models, etc.



Claeren.

[Sylvanfan]

ya I gotcha!:)
Mortgage Brokers deal with many financial institutions and are willing to go the extra mile cause they get paid commission on the deal. Banks that are dealing with mortgage brokers know they are competing for business and are more inclined to give bigger breaks.
They are hoping to attract your other business as well, which is why they are will to provide your mortgage as a loss leader:whistle:


One thing about Mortgage brokers though is that they're not always the best choice if you have an existing mortgage and want to change houses. I made that mistake the first time I moved going back to the mortgage broker again who got me the same mortgage but I had to pay the 3 months interest payout on that mortgage to move to the next one.

The last time I moved I went directly to the institution that I had my mortgage with and was able to get the new mortgage and had the three months interest credited back to me. A friend of mine was looking to upgrade his house recently and his mortgage broker told him he'd have to pay out the penalty on his mortgage and get a new one. I told him to go talk to the loans manager at the institution and try to negotiate it so they could get out of that and he was able to do so. Now the key is to get that and still get the best mortgage product out there for you. If you're switching the type of mortgage you have than probably no dice.

[FireFly]

no, no, the Pittsburgh trip is a really good idea!!!;)

while on the trip you might actually sit next to a real estate investment guru who will give you a good idea on how to become incredibly wealthy!!!:D

See that's the problem, I know how to do it, I just haven't. Not that I'm in horrible straights or anything, I've paid off one credit card completely, I have a plan for the others, (one at a time starting with the highest interest rate,) I make my student loan payments on time, even putting extra down each month. I've just been lazy about getting a new job and really buckling down on my credit stuff. I keep saying that I should call my credit card company but I never do. I'm going to do that right now. It'll make me feel like I've accomplished something. (Other than the two resumes I just fired off!)

For such a long time, CP was a demotivator... now it's motivating me! Thanks CP!

[SeeGeeWhy]

Firefly, people always think they need a higher paying job in order to get ahead, but it is not the case. You need to manage your money properly and put it into investments that make you more money, rather than make you pay interest. Establish passive income, and work to pay as few taxes as possible.

Tron, rental vacancy is at 0.5%, tied with an all time low. I think you can say that it is tight. How much do you have to put towards a second house?

[4X4]

Organizations like REIN are not too bad for people whose savvy is not necessarily in real estate. BUT they aren't necessary for those same people to make money in real estate.

You know all those infills going up in the inner city? They're expensive. Know what else? They're being built by guys like my uncle, my dad, and now that I'm back from italy, me.
Guess who funds it?
People like photon who know what to do with the equity in their house.
The profit on their investment is more than most people make in a year.

Then there's the buy and hold. The landlord business. While its not the most enjoyable way to make money, money it sure does make. Well, it used to. Properties that carry themselves are few and far between these days. Hell, a decent bi-level (suite potential) in dover is pushing $300k.
Sounds bad, but look at the upside:

Say you bought a bungalow or bilevel in dover for $275 and it had a suite. On a conventional 25 year mortgage, you're looking at a down payment of $68000, mortgage payments of ~1200 - 1300 (depending on interest rate) and a tax bill of ~1200 per year.

Find some solid tenants and rent the top for 950 and the bottom for 650. Here you've got a positive cashflow, (probably more than enough to pay the interest on the HELOC) plus you're gaining equity as well. And if the CMHC and CREB predictions are anywhere close to correct, you'll have made a year's salary in equity gain by this time next year.

And where do you get this 68grand? From the house you bought just 5 years ago, that you paid $150 for and now is worth $275.

There are so many ways for 9-5ers to put their equity to work, but most people think that its just for rich people.
Rich people are rich for a reason, and they started somewhere.

I'm not going to crack on the stock market, but I will say that IMHO, stocks is a crazy way for young people to make money. Sure, there are alot of success stories, I've got a friend that has made 60k in stocks over the last 3 years. He's a sharp one, however. He reads stock stuff like we read calgarypuck. Boring. And risky.

The real estate market in calgary is the reason I came back from italy. It's feast time. The years from 2003 till now and for the next bunch of years are going to produce alot more wealthy people than this province has ever seen. And it's going to be made in real estate. Oh, and I suppose oil and gas.

[FireFly]

Firefly, people always think they need a higher paying job in order to get ahead, but it is not the case. You need to manage your money properly and put it into investments that make you more money, rather than make you pay interest. Establish passive income, and work to pay as few taxes as possible.

Tron, rental vacancy is at 0.5%, tied with an all time low. I think you can say that it is tight. How much do you have to put towards a second house?


Oh I know, I'm putting some of my cash in investments, but it's awfully difficult when my takehome pay is $1900 a month and my bills are $1600 of that... I still need to eat, man! New bank accounts and better credit card rates are a start, making more money will also help.

[Resolute 14]

A better job can make a huge difference though. The one thing I found talking with ScotiaBank is that even after a year of reducing my debt and increasing my savings tenfold, the mortgage their computer would give me hadnt increased a penny. And not only that, but their computer said the maximum monthly payment I can afford is roughly what I pay in rent now - and I have enough money at the end of the month to put $250 into my RRSP, $130 into my savings, and $100-200 into debt. So yeah, don't waste your time with a bank, talk with a mortgage broker.

However, according to the bank, income is a key factor. A person making $50,000 is going to be better able to afford a place than a person making $40,000. Making more money, coupled with being smart with your money can make all of the difference.

And if I had learned that lesson at age 25 rather than age 26, I wouldn't be stuck here at age 27. That's the problem with experience... it often comes too late. ;)

[Resolute 14]

Oh I know, I'm putting some of my cash in investments, but it's awfully difficult when my takehome pay is $1900 a month and my bills are $1600 of that... I still need to eat, man! New bank accounts and better credit card rates are a start, making more money will also help.

If you have a lot of credit card debt, try to convert it into a line of credit. I found that when I did that, my interest payments on the LoC were less than half of my credit cards - and at $10,000, that made a significant difference.

[Tron_fdc]

You know all those infills going up in the inner city? They're expensive. Know what else? They're being built by guys like my uncle, my dad, and now that I'm back from italy, me.
Guess who funds it?
People like photon who know what to do with the equity in their house.
The profit on their investment is more than most people make in a year

I'm curious....do you have guys that are doing the entire build (everything from the engineering to booking all the trades), or are they buying the unit from the builder, sitting on it waiting for it to be finished, and flipping it on the day of posession?

[photon]

Out of curiousity, what's the rental market like right now? Still pretty tight? I'm considering buying another house and renting it, but I want to be sure I can cover the mortgage payments.

The vacancy rate is basically zero. Officially it's like half a percent, but there's always a bit due to reno's, people who are satisfied with keeping a vacant property, etc..

Rents are still going up and I hear stories every week of insane rents, like basement suites renting for $1400 and such. It's easier to make the mortgage when you buy a house that you can rent the main floor, basement, and detatched garage all seperately.

A good realtor should be able to help you find what the market rents are for whatever you are buying.

Organizations like REIN are not too bad for people whose savvy is not necessarily in real estate. BUT they aren't necessary for those same people to make money in real estate.

Definately true. But I find the economic info I get very valuable (helps to comfort myself knowing I'm making a good decision, and helps win over partners and investors as well), plus the networking is nice. It also has the added benifit of keeping me focused a bit, when it's a rough tenant month or something it's easy to lose focus.

[4X4]

My family is the builder. Investment comes in two forms: my uncles have a mortgage investment corporation that funds alot of projects, and then there is a direct investment by an individual or two or three individuals.
The money they put in pays for the land, (and they are the title holders) and the bank finances construction.

Most of the time, the people who buy the finished product intend on living there, but I have seen them get flipped. The 4plexes get flipped more often.

[Tron_fdc]

Are people still buying new homes from a builder, waiting the 12 months for them to be built, and flipping them? It seemed like the thing to do a few years ago.

[4X4]

Yeah, people are doing that... Actually, I'm kind of forecasting a little fluctuation in the market in about a year or so. There are quite a few big towers going up that are going to be finished over the next while. There'll be alot of suites on the market being sold by speculators who bought up the presales. The presales that snakeeye wanted.

[photon]

Are people still buying new homes from a builder, waiting the 12 months for them to be built, and flipping them? It seemed like the thing to do a few years ago.

I've got one like that going on right now. For a while builders stopped allowing it (they'd require a signed affidavit saying you were going to move in), but things have slowed enough that it's possible to do again. We're looking at maybe doing another one, we've got our names in for a condo as well though I'm starting to wonder if they'll ever do anything.

It's not the best return on investment for that money, but it certainly is a hassle free way as long as the build is near where you live. No worrying about tenants or anything.

[FireFly]

If you have a lot of credit card debt, try to convert it into a line of credit. I found that when I did that, my interest payments on the LoC were less than half of my credit cards - and at $10,000, that made a significant difference.

I've tried that. They want a cosigner and I don't want my parents to put up a million dollars worth of land on a $10,000 LoC. It's stupid. I'm going to go to the bank tomorrow though and see what they say.

[Resolute 14]

I've tried that. They want a cosigner and I don't want my parents to put up a million dollars worth of land on a $10,000 LoC. It's stupid. I'm going to go to the bank tomorrow though and see what they say.

Odd. When I went in for one, my car was used as the collateral (it was paid off, thankfully), and I was able to get a $10,000 LOC without issue. The only condition was that of my two credit cards at $5k each, one had to be cut up, and the other its limit lowered to $3k, which I had no issue with. Typically, the bank offered to double my limit two months after that... *******s.

If you believe that you can maintain the payments without problems, and if your parents trust you to do the same, then see if they will co-sign. In my case, it meant an extra $50-60 a month that I wasnt spending on interest, and an extra $600 per year that went to reducing debt.

[FireFly]

Odd. When I went in for one, my car was used as the collateral (it was paid off, thankfully), and I was able to get a $10,000 LOC without issue. The only condition was that of my two credit cards at $5k each, one had to be cut up, and the other its limit lowered to $3k, which I had no issue with. Typically, the bank offered to double my limit two months after that... *******s.

If you believe that you can maintain the payments without problems, and if your parents trust you to do the same, then see if they will co-sign. In my case, it meant an extra $50-60 a month that I wasnt spending on interest, and an extra $600 per year that went to reducing debt.

I have no collateral. My parents would have no problem doing it, except that their credit isn't the greatest because they also refuse to put the land up as collateral. I know I can make the minimum payments, it's the principle of the thing. Everyone else can do it alone, I can too....

[Resolute 14]

I have no collateral. My parents would have no problem doing it, except that their credit isn't the greatest because they also refuse to put the land up as collateral. I know I can make the minimum payments, it's the principle of the thing. Everyone else can do it alone, I can too....

Being one of the most stubborn people in a very stubborn family, I can respect the feeling. :) Though at some point, you do have to suck it up and ask for a little help. I know in my case, the Bank of Mom allowed me to keep from going under, allowing me to be in a place now where most of my spare money is going towards my goals, rather than my debt.

I'm not sure why they would have to put the land up as collateral though, especially if they have a car or something close in value to the LoC.

Though, these are the banks we are talking about. The same clowns that will happily give you a platinum Visa card with no collateral, but make it challenging to get a LoC.

[housejunk]

Funny you would bring that up, since i was railing against pets (out of boredom) in much the same way you are now doing so against taxes.

Claeren.


In my initial post I was never really complaining about the taxes and that’s why I found your “explanation” to be so condescending. My primary focus was on the real estate market, and I’ve been more than receptive to the criticisms/comments relating to that. I politely mentioned that your response was unnecessary in relation to property taxes, yet you still continued to “explain things” to me. In my eyes you came across as the sort of arrogant, self-absorbed individual that I frequently have to deal with, and eat **** from on a regular basis. I was just here to complain about what I perceive to be a problem in Calgary. You can agree or disagree with me on that level, as many have done.

Admittedly, I’m in a great position, and I would never, ever complain about my station in life. I recognize my good fortune, but at the same time I’m concerned with the direction that the recent real estate craze is taking us. As mentioned, I worked in Vancouver for a few years and still do business there on a regular basis. To me, its unfortunate that hard-working, intelligent people have been priced out of Vancouver proper, and are forced to live in outlying areas such as Port Co. and Port Moody. I see the exact same thing happening here and its disturbing. I might not have articulated that as diplomatically before, but in effect there it is. Real-Estate is not my primary practice area, and perhaps I’m coming across as naïve, but I think it’d be beneficial to our community to see some more affordable ownership options in this city, particularly for those seeking that elusive first home. In that sense, yeah, I can’t wait for this market to collapse.

[return to the red]

I read somewhere that Lethbridge is going to be the next hotbed of real estate and it is starting to show. We are currently building our new home (down near Paradise Canyon if anyone knows the area) 1500 sq ft bungalow, and we upgraded everything total contract price 375k. The house we are living in now is about 1000sq ft no garage and a pretty basic cookie cutter house. We bought our current house for 136k bank just recently appraised our existing house at 220k! Hell one month after we signed our contract the Bank Appraised our new house at an additional 5,000.

If anyone is looking to buy in Lethbridge and use it as a rental property or has kids coming to school down here, I will be selling in the Summer ;)

[ken0042]

In my initial post I was never really complaining about the taxes and that’s why I found your “explanation” to be so condescending. My primary focus was on the real estate market, and I’ve been more than receptive to the criticisms/comments relating to that.

Just keep in mind that your opening post looks to most people to be somewhat confrontational. The discussion has taken on several different angles, and that isn't surprising given this particular subject.

The fact that somebody has offered an explanation on a subject shouldn't be taken as condescending. I haven't read the posts in that manor.

[Reaper]

That being said I couldn't agree more. If I had waited even two months I couldn't have afforded the house I'm in now.
Houses that were worth $20,000 30 years ago are selling for $400,000 now. Does that mean our kids will be paying $8,000,000 in 30 years time??
I doubt it. The market has to correct itself at some point but it's anybody's guess when that will be.
We were in the same situation when we put our deposit on our condo in August 2005. The best part of it was that our sales agreement included no clause for price increases being allowed due to rising costs. So, the developer took a bath on our condo. We paid $129,000 for our upper level corner unit. Just recently, a lower level corner unit which sold for $10,000 less than ours on pre-build sale closed at $273,000. I estimate that our condo could sell for $300,000 now and there would be no way for us to afford that kind of price. Timing is everything.

[housejunk]

Just keep in mind that your opening post looks to most people to be somewhat confrontational. The discussion has taken on several different angles, and that isn't surprising given this particular subject.

The fact that somebody has offered an explanation on a subject shouldn't be taken as condescending. I haven't read the posts in that manor.

Fair enough. Its not an issue involving anyone else, but in my eyes it appeared condescending as they still do. Especially the second post after I politely explained that the thread was not meant to be about the property tax scheme.

[photon]

We were in the same situation when we put our deposit on our condo in August 2005. The best part of it was that our sales agreement included no clause for price increases being allowed due to rising costs. So, the developer took a bath on our condo.

I know a guy that just got out of a legal battle with a builder over that.. they wanted to increase the price even though there were no provisions for it in the purchase agreement. Of course he won, took a while but he's happy.

[wpgflamesfan]

If the market ever did colapse so many people would be royally ****ed (i.e. herd some guy talking on the phone about having a 1.2 million dollar morgage). What happens to him when he's stuck with a 1.2 million dollar morgage on a 600 000 house?

[Cowperson]

If the market ever did colapse so many people would be royally ****ed (i.e. herd some guy talking on the phone about having a 1.2 million dollar morgage). What happens to him when he's stuck with a 1.2 million dollar morgage on a 600 000 house?

He does what thousands in Calgary did in 1980 . . . . he throws the keys on the counter and walks out the door and lets the bank have the problem.

Cowperson

[photon]

He does what thousands in Calgary did in 1980 . . . . he throws the keys on the counter and walks out the door and lets the bank have the problem.

That, or they sell it to me at low low prices! :D

[I-Hate-Hulse]

He does what thousands in Calgary did in 1980 . . . . he throws the keys on the counter and walks out the door and lets the bank have the problem.

Cowperson

I knew a guy who scooped up a whole pile (10 or so I think) of those infamous $1 houses back in the 80s. Just now he's finished unloading them the last of em. Voila - retirement nest egg.

[/me grumbling at my office desk]

Not that it wasn't a lot of work juggling those financial eggs in the time of 20%+ interest.... Luckily he had access to cheap capital back then.

[Red]

reply to the guy living in the basement with his wife.

You wanna buy a house, pay it off and have a nice and unstressful life? Here are a few pointers on how to get there. Things your parents had to do to get their finances in order.

Stay out of the Mall. If you don't see it you don't need it.
Get rid of all your credit cards, just keep one for hotels, car rentals etc. Never use it to buy consumer goods.
Stop spending money in general, pay your bills and save the rest. Set an entertainment budget and live within it.
Stop thinking in "monthly payments". It bugs me when people look at a car to buy and only mention the monthly payment instead of the actual price.

Few other golden rules of life that some people overlook.

You're not saving money when you buy things on sale. Because you're still spending money.
Pay yourself first. Save first, live off of the rest.
A dollar spent = 3 dollars earned. Taxes, living expenses etc, basically, it's a lot easier to earn 1000 than to save it.
A dollar spent on credit today = 5 dollars not earned in the future. Buy on credit today, spend tomorrow's earnings to pay for it thus having less and less disposable income coming in.

And as Cowperson already mentioned, be patient.

[Slava]

I knew a guy who scooped up a whole pile (10 or so I think) of those infamous $1 houses back in the 80s. Just now he's finished unloading them the last of em. Voila - retirement nest egg.

[/me grumbling at my office desk]

Not that it wasn't a lot of work juggling those financial eggs in the time of 20%+ interest.... Luckily he had access to cheap capital back then.

There were a few scams as well. Something about "buying" the property and renting them out, but not paying the mortgage. By the time the property was foreclosed upon the guys had pocketed some pretty good money. I don't know all of the details (obviously) but this is basically what I've heard.

[return to the red]

reply to the guy living in the basement with his wife.

You wanna buy a house, pay it off and have a nice and unstressful life? Here are a few pointers on how to get there. Things your parents had to do to get their finances in order.

Stay out of the Mall. If you don't see it you don't need it.
Get rid of all your credit cards, just keep one for hotels, car rentals etc. Never use it to buy consumer goods.
Stop spending money in general, pay your bills and save the rest. Set an entertainment budget and live within it.
Stop thinking in "monthly payments". It bugs me when people look at a car to buy and only mention the monthly payment instead of the actual price.

Few other golden rules of life that some people overlook.

You're not saving money when you buy things on sale. Because you're still spending money.
Pay yourself first. Save first, live off of the rest.
A dollar spent = 3 dollars earned. Taxes, living expenses etc, basically, it's a lot easier to earn 1000 than to save it.
A dollar spent on credit today = 5 dollars not earned in the future. Buy on credit today, spend tomorrow's earnings to pay for it thus having less and less disposable income coming in.

And as Cowperson already mentioned, be patient.

Good rules to live by. Something my family has always stressed to me growing up is paying stuff off ASAP. My wife and I save for what we need and when we don't need anything we save and put it on the mortgage or car loan. As it stands now I'm 27 and she is 25 and the only debt we have is 1 car payment and our mortgage. We never carry a balance on our credit cards and student loans have been paid off. It makes it much easier to save and contribute to RRSP's when you aren't paying off 4 or 5 different loans

[fredr123]

reply to the guy living in the basement with his wife.

Dude, I have a name. And the way you phrase it, I don't know, doesn't sound much better than a van down by the river ;)

I get it. I rack disciprine, sorta. When discussing our future money plans, the Basement Wife and I tend to disagree on the whole savings vs. paying down debt debate.

BW says pay down debt: Why put $10 in a savings account or GIC or whatever earning X% interest when you have loans that need to be paid down and are costing X=Y% interest?

I think there's gotta be a middle ground. At some point you're going to get good future value out of your money by putting some away in a safe place AND paying off your debt. Where that happy balance lies is anybody's guess. If I could find it, I might be able to score some points in the debate.

[GreenTeaFrapp]

Get rid of all your credit cards, just keep one for hotels, car rentals etc. Never use it to buy consumer goods.

I don't agree with this. I make all my purchases on my credit card for three reasons.

1) I don't like to carry around enough cash to cover what I might purchase.

2) It's more secure then a debit card with all the scammers trying to steal your debit card info.

3) I get 2% back towards the purchase of a car. That's 2% free money considering I always pay the full amount at the end of the month.

[photon]

LOL @ Basement Wife

I like debt, I keep trying to find more of it but eventually the banks want to stop giving it to me :(

[Flames_Gimp]

i dont want my house to go down..

[Red]

Dude, I have a name. And the way you phrase it, I don't know, doesn't sound much better than a van down by the river ;)

I get it. I rack disciprine, sorta. When discussing our future money plans, the Basement Wife and I tend to disagree on the whole savings vs. paying down debt debate.

BW says pay down debt: Why put $10 in a savings account or GIC or whatever earning X% interest when you have loans that need to be paid down and are costing X=Y% interest?

I think there's gotta be a middle ground. At some point you're going to get good future value out of your money by putting some away in a safe place AND paying off your debt. Where that happy balance lies is anybody's guess. If I could find it, I might be able to score some points in the debate.

LOL, sorry, I had the post already up and realized that I forgot to qote you so I just added that line, and yes, I forgot your name :-)

Basement wife :D

[Sylvanfan]

I like debt, I keep trying to find more of it but eventually the banks want to stop giving it to me :(

Debt is fine if you do the right thing with it. It can be what separates the wealthy from the working schmuck. My boss carry's as much personal debt as they'll allow him too. Thing is that he (like you I assume) doesn't use it to pay for his car, go on trips, buy furniture. No, he's used it to build two office buildings and own 25 rental properties.

Most people don't have that vision, discipline, or risk tolerance though. If they did people like you wouldn't be able to keep making money off those folks!

[Red]

I don't agree with this. I make all my purchases on my credit card for three reasons.

1) I don't like to carry around enough cash to cover what I might purchase.

2) It's more secure then a debit card with all the scammers trying to steal your debit card info.

3) I get 2% back towards the purchase of a car. That's 2% free money considering I always pay the full amount at the end of the month.

Yes, yes and yes, but 95% of people will abuse the card and be in a hole instead of reaping benefits.

[SeeGeeWhy]

BW says pay down debt: Why put $10 in a savings account or GIC or whatever earning X% interest when you have loans that need to be paid down and are costing X=Y% interest?

I think there's gotta be a middle ground. At some point you're going to get good future value out of your money by putting some away in a safe place AND paying off your debt. Where that happy balance lies is anybody's guess. If I could find it, I might be able to score some points in the debate.

Well, when x = y it is a wash, but consider that you can liquify savings or lend against other investments whereas bad debts just get you more interest payments.

It is a very rare case that interest on a loan is less than or equal to what you would be able to earn by holding your money in a GIC, so it is usually best to pay off all of your loan debts first.

The other thing I don't get is why people accelerate their mortgage payments. If the debt is good and cheap (as Photon mentions above), then why do you want to get rid of it? Take more on and leverage it into greater wealth.

[SeeGeeWhy]

I don't agree with this. I make all my purchases on my credit card for three reasons.

1) I don't like to carry around enough cash to cover what I might purchase.

2) It's more secure then a debit card with all the scammers trying to steal your debit card info.

3) I get 2% back towards the purchase of a car. That's 2% free money considering I always pay the full amount at the end of the month.


I think the point is to not spend more than you have, which is something that you do not do, by the sound of it.

Most people abuse credit cards.

[fredr123]

LOL, sorry, I had the post already up and realized that I forgot to qote you so I just added that line, and yes, I forgot your name :-)

Basement wife :D

No worries. Just don't tell her I talk about her like that on the internets. She'd cut off my allowance for sure...

[Red]

No worries. Just don't tell her I talk about her like that on the internets. She'd cut off my allowance for sure...
or your testies :-)

[looooob]

I knew a guy who scooped up a whole pile (10 or so I think) of those infamous $1 houses back in the 80s. Just now he's finished unloading them the last of em. Voila - retirement nest egg.

.no doubt...grumbles at millionaire next door in office next door. oh well good on them both

[Mr.Coffee]

Well, when x = y it is a wash, but consider that you can liquify savings or lend against other investments whereas bad debts just get you more interest payments.

It is a very rare case that interest on a loan is less than or equal to what you would be able to earn by holding your money in a GIC, so it is usually best to pay off all of your loan debts first.

The other thing I don't get is why people accelerate their mortgage payments. If the debt is good and cheap (as Photon mentions above), then why do you want to get rid of it? Take more on and leverage it into greater wealth.

I suppose I'm a simpleton because I don't understand how you can "leverage" your debt into greater wealth. Wouldn't paying off the debt completely so that you have 0 debt be the ultimate goal?

Please try and explain like you would to a student?

[fredr123]

Well, when x = y it is a wash, but consider that you can liquify savings or lend against other investments whereas bad debts just get you more interest payments.

It is a very rare case that interest on a loan is less than or equal to what you would be able to earn by holding your money in a GIC, so it is usually best to pay off all of your loan debts first.

The other thing I don't get is why people accelerate their mortgage payments. If the debt is good and cheap (as Photon mentions above), then why do you want to get rid of it? Take more on and leverage it into greater wealth.

I meant X+Y%. Missed the <shift> key there.

It would be awesome if I could take my money, make the normal payments on student loans and then invest the rest in something that will bring a return greater than the interest I would be paying on my debts. Unfortunately, we're not talking about a lot of money to invest right now and it's a lot easier to find ways to incurr a debt with a high interest rate than it is to find a way to secure an investment with an even higher interest rate...

[fredr123]

I suppose I'm a simpleton because I don't understand how you can "leverage" your debt into greater wealth. Wouldn't paying off the debt completely so that you have 0 debt be the ultimate goal?

Please try and explain like you would to a student?

I think what he means is if you have, say, a mortgage with low interest rate and payments that you can handle, it doesn't make sense to try and pay off that nice debt faster. Take the extra amount that you would be putting into paying off the nice debt and put it into something else. For example, use it to get a new mortgage on some other investment property or something.

[photon]

Most people don't have that vision, discipline, or risk tolerance though. If they did people like you wouldn't be able to keep making money off those folks!

I think most would if they were educated about the whole thing. I grew up in a family that never had money, managed it terribly, and started out on my own with defaulting on credit cards and messing up my credit. Eventually I learned, but if this kind of stuff was taught earlier on then I think more people would do it.

I suppose I'm a simpleton because I don't understand how you can "leverage" your debt into greater wealth. Wouldn't paying off the debt completely so that you have 0 debt be the ultimate goal?

Please try and explain like you would to a student?

We're making the assumption that the debt in question is actual cash; for example borrowing against the equity in your house or something like that, something that gives you cash in hand.

So then it simply comes down to numbers.. if you invest that cash (which you borrowed) in an investment that gains you more than the cost of borrowing it (the interest rate on the borrowing), then you come out ahead.

If you are paying 5% interest a year on $100,000, but you are making 20% interest on it, you are making $15,000 a year.

Whereas if you had worked hard to get your debt to zero, then started saving, you would have had to save $1250 a month of your own money a month to end up with that same $15,000.

In the case of the house, the faster I pay down a house the more of my own money is in that house and the less of the banks money is in that house, so as the value appreciates it's my own money working for that appreciation, when my goal is to have other people's money working for me.

[SeeGeeWhy]

Mr.Coffee - Photon explained it pretty well.

Good debt is money that you get from other people for a cheap price. It is hard to come by so you should take it while you can and never pay down the principle, because it wasn't yours in the first place. A lender like a bank is typically happy to sit and collect interest on their money, and an entrepreneur like yourself is happy to take the difference on their annual return.

The point is to try to invest in assets that will give you a sustained return, or passive income, year on year. That way, the bank will continue to get it's cut while you continue to take in the difference until you are ready to sell and pay off the balance of the loan.

Some people like to go for one time hits, which is not a bad strategy, but with things like real estate, the longer you sit on something the more value it will have when you finally do sell. It is the cashflow you create in the time inbetween that makes the difference.

It all depends on your goals, the amount of time you have to dedicate to such plans, and your risk tolerance... but good debt should never be turned down.

[Slava]

The only thing to add to the "leverage your debt" point is that if you are investing this debt into the right things then you can also write off the interest, so you really don't even need to earn as much to make it worthwhile (don't need to be as risky).

[Sylvanfan]

I think most would if they were educated about the whole thing. I grew up in a family that never had money, managed it terribly, and started out on my own with defaulting on credit cards and messing up my credit. Eventually I learned, but if this kind of stuff was taught earlier on then I think more people would do it.



The thing is if everybody did it, there would be no one to sucker into selling it to and hence no market. If theres no market to sell it to you can't make any money.

I do think that money tends to get that taboo label and people don't like to talk about it. Which is really too bad because being able to manage money is something that I think is important. Odd thing is my wife's parents have a fair bit of money and have managed their money pretty well from what I can tell. Mine didn't have a great deal of it and didn't manage it nearly as well as they could have. But mine would talk to me about money and at least tried to set me up with good habits. My wifes parents never bothered to teach her anything about it.

[fredr123]

No one taught me a buttload of crap about money either. Anything to do with finances, anything at all, has been a complete mystery to me. I've done my best to ask friends and respected colleagues and really tried to learn how things work. I've come a long way but am probably 2-3 years away from overtaking Donald Trump at this point...

[housejunk]

There were a few scams as well. Something about "buying" the property and renting them out, but not paying the mortgage. By the time the property was foreclosed upon the guys had pocketed some pretty good money. I don't know all of the details (obviously) but this is basically what I've heard.

I'm not sure, but I think you may be referring to an old tax scam/shelter that's pretty legendary. It involves an indivdiual with a large outside source of income buying a rental unit basically on borrowed money with a ridiculous interest rate. Over time, the interest payments and other costs (like dramatic renovations) associated with the unit creates a loss which he can deduct off of his primary source of income. Later, he can sell the place at a large return, and in effect he's made back his initial investemnt over that period without having to pay any income tax on his primary source of income. Eventually he will have to pay some taxes on the capital gain, but the difference in deferred taxes and income tax results in a significant gain for the indivdiual.

The scheme was used quite often, but the government closed the loophole on it awhile back. However, it always takes them a few fiscal years to catch on to the new "scheme" that's in favor.

[SeeGeeWhy]

The only thing to add to the "leverage your debt" point is that if you are investing this debt into the right things then you can also write off the interest, so you really don't even need to earn as much to make it worthwhile (don't need to be as risky).

Shhhh! Don't tell them EVERYTHING! :D

Just kidding. I totally forgot to mention that point, good pick up.

[SeeGeeWhy]

The thing is if everybody did it, there would be no one to sucker into selling it to and hence no market. If theres no market to sell it to you can't make any money.

I am not sure what you mean by the "its" in the quote above... clarification?

I am with Photon. I think our economy would be quite interesting and healthy if a majority of people were more educated in money matters. Kiyosaki has made an empire out of fiscal education, and it is something that he is very passionate about.

[Red]

Shhhh! Don't tell them EVERYTHING! :D

Just kidding. I totally forgot to mention that point, good pick up.

He didn't tell them everything. He forgot to mention that most casuals lose money on the markets, are too knee jerk to sustain any flactuation, are not disciplined enough to make it work and for most part would never come ahead.

Only a few are willing to invest borrowed (against their home) money and even fewer can actually make money on it.

[JiriHrdina]

Should we be teaching some of this money management stuff in school? I recall taking CALM (Career and Life Management) and the education amounted too:
- Credit cards are evil
- Invest a percentage of your income into mutual funds and by the time you're 45 you'll be stinkin' rich
- Now here's an egg, go run off and pretend its a kid.

Are we teaching our youth anything about real estate, mortgages, and for that matter other money management/investment strategies?

Seems to me that we are focused on one path - the RRSP one. Which is really just a part of the bigger puzzle.

Course this is all based on what I remember learnin' maybe there was more there than I recall.

[SeeGeeWhy]

He didn't tell them everything. He forgot to mention that most casuals lose money on the markets, are too knee jerk to sustain any flactuation, are not disciplined enough to make it work and for most part would never come ahead.

Only a few are willing to invest borrowed (against their home) money and even fewer can actually make money on it.

Have a story to share with us, Red?

I know for a fact that I don't have the stomach for real estate right now, so I stay out of it.

[fredr123]

Should we be teaching some of this money management stuff in school? I recall taking CALM (Career and Life Management) and the education amounted too:
- Credit cards are evil
- Invest a percentage of your income into mutual funds and by the time you're 45 you'll be stinkin' rich
- Now here's an egg, go run off and pretend its a kid.

Are we teaching our youth anything about real estate, mortgages, and for that matter other money management/investment strategies?

Seems to me that we are focused on what path - the RRSP one. Which is really just a part of the bigger puzzle.

Course this is all based on what I remember learnin' maybe there was more there than I recall.

There was also a section on balancing your cheque book. The confused looks of many of my classmates was priceless. Debits? Credits? Like the cards?

[Sylvanfan]

Should we be teaching some of this money management stuff in school? I recall taking CALM (Career and Life Management) and the education amounted too:
- Credit cards are evil
- Invest a percentage of your income into mutual funds and by the time you're 45 you'll be stinkin' rich
- Now here's an egg, go run off and pretend its a kid.

Are we teaching our youth anything about real estate, mortgages, and for that matter other money management/investment strategies?

Seems to me that we are focused on what path - the RRSP one. Which is really just a part of the bigger puzzle.

Course this is all based on what I remember learnin' maybe there was more there than I recall.

Well RRSP's are hardly bad. In fact to save for your first house they might be one of THE best options out there. You make your contribution, get a a tax credit back to yourself and the money in the RRSP grows tax free. For a first home you can borrow out of your RRSP for your down payment interest free so long as you pay it back to yourself within a specified amount of time.

So for someone like fredr123 this is probably the best way to go about making savings. With this you can get interest free growth on the money, AND should get a tax refund which your can either put into the RRSP for next year, use to pay down some debts, or do a bit of both.

[JiriHrdina]

Well RRSP's are hardly bad. In fact to save for your first house they might be one of THE best options out there. You make your contribution, get a a tax credit back to yourself and the money in the RRSP grows tax free. For a first home you can borrow out of your RRSP for your down payment interest free so long as you pay it back to yourself within a specified amount of time.

So for someone like fredr123 this is probably the best way to go about making savings. With this you can get interest free growth on the money, AND should get a tax refund which your can either put into the RRSP for next year, use to pay down some debts, or do a bit of both.

Didn't mean to imply RRSP's are bad, but you've highlighted all the ins and outs that I don't recall being covered.

Maybe its because its too complex? Not sure. But I would rather them spend more time teaching youth how to get their financial **** together rather than a lot of the other material that was in there instead.

I recall spending an entire class where we had to brainstorm all the different slangs for various body parts and sexual acts. Funny stuff when you are in high school, but hardly valuable from an education standpoint.

[Ace]

One thing about Mortgage brokers though is that they're not always the best choice if you have an existing mortgage and want to change houses. I made that mistake the first time I moved going back to the mortgage broker again who got me the same mortgage but I had to pay the 3 months interest payout on that mortgage to move to the next one.

The last time I moved I went directly to the institution that I had my mortgage with and was able to get the new mortgage and had the three months interest credited back to me. A friend of mine was looking to upgrade his house recently and his mortgage broker told him he'd have to pay out the penalty on his mortgage and get a new one. I told him to go talk to the loans manager at the institution and try to negotiate it so they could get out of that and he was able to do so. Now the key is to get that and still get the best mortgage product out there for you. If you're switching the type of mortgage you have than probably no dice.

A good mortgage broker will do this for you...

[Sylvanfan]

Have a story to share with us, Red?

I know for a fact that I don't have the stomach for real estate right now, so I stay out of it.

So what are you investing your money in than to make more interest than what you're paying to borrow it?

I'm also a bit chicken on real estate these days, but the stock maket can be everybit as volatile. I'll put my long term savings there but I don't know if I'd want to put my home equity and long term savings into it. Today the prime lending rate on secured credit is anywhere from 5.5-6%. So if you write 50% of that off you still need to get 10% returns just to equalize what paying down my mortage really is. Plus you also have to pay tax on earnings. At the end of the day it comes out as being a safer more conservative route for me to go. If the real estate and stock market crash my house is still a place that I can live. If I own it than all I have to do is stand outside with weapons and fend off the savages and not worry about the bank chasing me out!

[photon]

The thing is if everybody did it, there would be no one to sucker into selling it to and hence no market. If theres no market to sell it to you can't make any money.

That's making the assumption that the prices in the market are driven by suckers who are overpaying, which I don't really think is the case.

You could still make money if every single person was a savvy investor. In real estate, you don't even have to make any money beyond inflation, because of the leveraging your ROI is 4X whatever the increase is, so if you only make 3% / year on property value increase, you're still making 12% on your money. And that's not taking any tax benifits or mortgage paydown by your tenants into account.

So everyone could make good returns just by holding their properties that grow at inflation until they sell them to new young investors :D

[SeeGeeWhy]

So what are you investing your money in than to make more interest than what you're paying to borrow it?

I am a member of a group that purcahses established businesses through the method of vendor take back.

[Incinerator]

BW says pay down debt: Why put $10 in a savings account or GIC or whatever earning X% interest when you have loans that need to be paid down and are costing X=Y% interest?


Listen to the boss, she can't be any more correct. The money you leave rotting in your GICs and saving accounts will devalue over time due to inflation AND it will never catch up with the interest on your loans!

[Red]

Have a story to share with us, Red?

I know for a fact that I don't have the stomach for real estate right now, so I stay out of it.

I know people that lost. Not huge money, but still. Maybe they'd be ahead by now, but for them it was easier on their health to get out and cut their losses. It's an amazing feeling when you're losing a lot of money day after day and you have no control over it. It takes a toll on people. Of course, you'll never read that in any of the get rich quick books. They focus on positives only.

My take on this is this; investing is not for everyone. I've seen way to many Danald Trumps around lately spewing crap they read in the latest Rich Dad Poor Dad release. These Trumps have no idea what kind of stress is involved in having the equity of your home trying to beat the market. It's ugly, but some people don't mind the pressure and make money on it. Most are just not cut out for it.

[Sylvanfan]

Maybe its because its too complex? Not sure. But I would rather them spend more time teaching youth how to get their financial **** together rather than a lot of the other material that was in there instead.

I recall spending an entire class where we had to brainstorm all the different slangs for various body parts and sexual acts. Funny stuff when you are in high school, but hardly valuable from an education standpoint.

Well the thing is in highschool they seemed to stress that everyone needed to learn how to speak French, or What happened in 1400's Europe. But you could goof off in Bussiness education (at least thats what they called it when I was in school). When I was in grade 10 they made it into a mandatory course, but they also assigned the shop teacher to teach the class (although he probably was the only teacher who had relevant real world skills so he probably was best suited to teach that class!) and more or less gave the impression like it wasn't an important class. I used to do my work first, than I would do my sales copy which wasn't as good and had blatent mistakes. Than I'd duplicate that copy and sell it to the other kids. Than the teacher would get me to mark all the work for him because we usually had 4 classes to do what was like a half hours work.

[photon]

He didn't tell them everything. He forgot to mention that most casuals lose money on the markets, are too knee jerk to sustain any flactuation, are not disciplined enough to make it work and for most part would never come ahead.

Only a few are willing to invest borrowed (against their home) money and even fewer can actually make money on it.

And only a few will ever go beyond having a job as their primary source of income until they retire and depending on the government and/or family to live out their years. We're not talking about those people.

I would never suggest someone borrow against their house and use that money to play the stock market themselves; unless they had a proven track record of success at it, why on earth would they try it?

Always have professionals helping at every stage, be it a mortgage broker, a financial planner, tax accountant, or professional real estate investor.

The resources are out there to go beyond. For the majority who have very low risk and no appetite for getting their hands dirty, there are still options. I know of lots of poeple who will give a 50% ownership position in real estate just for putting up the down payment, no hassle, no tenants, no details, just quarterly reports and ROI.

[photon]

I know people that lost. Not huge money, but still. Maybe they'd be ahead by now, but for them it was easier on their health to get out and cut their losses. It's an amazing feeling when you're losing a lot of money day after day and you have no control over it. It takes a toll on people. Of course, you'll never read that in any of the get rich quick books. They focus on positives only.

My take on this is this; investing is not for everyone. I've seen way to many Danald Trumps around lately spewing crap they read in the latest Rich Dad Poor Dad release. These Trumps have no idea what kind of stress is involved in having the equity of your home trying to beat the market. It's ugly, but some people don't mind the pressure and make money on it. Most are just not cut out for it.

That stress doesn't come from having the equity in their home being used in another property, the stress comes from not knowing if they've done the right thing, not having any idea at all if their investment is going to grow or shrink.

That's the kind of investor that's simply rolling the dice and hoping for the best. Of course investing home equity in that situation is stressful! If I bet my house on black, I'd be stressed too.

Investors are people who've taken the time to understand their chosen area and find and use the methods that work. I couldn't do what SeeGeeWhy does; I don't understand businesses and all the things around them. Choosing one to buy would be like rolling the dice for me and would cause me no end of stress.

However with real estate I've done lots of research. I know the economic fundamentals that are driving the current boom in Alberta. I associate with others who are more experienced than me at it and have been successful for the right reasons, I find out what they did and why it worked, and reproduce it.

I'm not a big fan of Rich Dad Poor Dad and those books. While they are good motivation and are good for getting the point of how to look at money across, I don't necessarily think they're that great from an investors advice point of view. There's a lot of crap advice out there, and a LOT of people wanting to sell you their advice. It's better to work with people who actually do it, rather than people who want to sell you how to do it.

[brownie]

That stress doesn't come from having the equity in their home being used in another property, the stress comes from not knowing if they've done the right thing, not having any idea at all if their investment is going to grow or shrink.

That's the kind of investor that's simply rolling the dice and hoping for the best. Of course investing home equity in that situation is stressful! If I bet my house on black, I'd be stressed too.

Investors are people who've taken the time to understand their chosen area and find and use the methods that work. I couldn't do what SeeGeeWhy does; I don't understand businesses and all the things around them. Choosing one to buy would be like rolling the dice for me and would cause me no end of stress.

However with real estate I've done lots of research. I know the economic fundamentals that are driving the current boom in Alberta. I associate with others who are more experienced than me at it and have been successful for the right reasons, I find out what they did and why it worked, and reproduce it.

I'm not a big fan of Rich Dad Poor Dad and those books. While they are good motivation and are good for getting the point of how to look at money across, I don't necessarily think they're that great from an investors advice point of view. There's a lot of crap advice out there, and a LOT of people wanting to sell you their advice. It's better to work with people who actually do it, rather than people who want to sell you how to do it.Just wondering if there are any good books out there on these topics???

[photon]

On which ones, investing in general? Or real estate specifically?

[brownie]

On which ones, investing in general? Or real estate specifically?Real estate.

[photon]

Hm, I haven't read many on it lately that I'd recommend, at least beyond this one: http://www.amazon.ca/Real-Estate-Investing-Canada-Create/dp/0470835885/sr=8-2/qid=1170894135/ref=pd_ka_2/702-8746441-9620032?ie=UTF8&s=books

[Flames in 07]

Folks, the thing is, nobody is being more or less risk adverse by getting into the market vs standing on the sidelines.

If person A wanted to buy a house, they are not taking on any more risk than person B who has been waiting for prices to go down.

If person B has been waiting since about 04, that person has had an opportunity loss that is the same as person A's gain.

You cannot create nor destroy risk ... you can shape it in ways you might like but you have risk weather you like it or not.

The only thing that is important is your view of the future. My thoughts are that as long as prices are strong, you will see more and more internationals moving here who are used to prices way higher than this, vs what we saw in the 80's and 90's where U of S and U of L grads were moving to Calgary. Around the world, large cities with economys half hot as ours, prices can be way higher. I think the biggest risk of them all is continuing to wait for prices to go down ... every month you'll save a thousand or two for a house, but your entry house went up by 3-4 thousand.

[SaskaBushFire]

Sell in Calgary for 400k and buy a house the exact same in the same neighborhood in Saskatoon for 150k :)

Only catch is you have to live in S'toon!! But 250k in your pocket... omg!

[Flames in 07]

That stress doesn't come from having the equity in their home being used in another property, the stress comes from not knowing if they've done the right thing, not having any idea at all if their investment is going to grow or shrink.

That's the kind of investor that's simply rolling the dice and hoping for the best. Of course investing home equity in that situation is stressful! If I bet my house on black, I'd be stressed too.

Investors are people who've taken the time to understand their chosen area and find and use the methods that work. I couldn't do what SeeGeeWhy does; I don't understand businesses and all the things around them. Choosing one to buy would be like rolling the dice for me and would cause me no end of stress.

However with real estate I've done lots of research. I know the economic fundamentals that are driving the current boom in Alberta. I associate with others who are more experienced than me at it and have been successful for the right reasons, I find out what they did and why it worked, and reproduce it.

I'm not a big fan of Rich Dad Poor Dad and those books. While they are good motivation and are good for getting the point of how to look at money across, I don't necessarily think they're that great from an investors advice point of view. There's a lot of crap advice out there, and a LOT of people wanting to sell you their advice. It's better to work with people who actually do it, rather than people who want to sell you how to do it.

I read one of those rich dad/poor dad books several years ago, I didn't really like them either, but the book I read did do a good job of walking through the concept of 'cost of capital' for people who are not familiar with it. It's a good way to get out of Income statement type thinking about your finances and towards balance sheet type thinking.

[Slava]

He didn't tell them everything. He forgot to mention that most casuals lose money on the markets, are too knee jerk to sustain any flactuation, are not disciplined enough to make it work and for most part would never come ahead.

Only a few are willing to invest borrowed (against their home) money and even fewer can actually make money on it.

Well to be fair Red, this thread is about real estate and investing just kind of sprang up from there; fact is though that if you borrow properly and invest properly your break even is about 5.4%. A good mutual fund will eclipse that easily.

[V]

In the case of the house, the faster I pay down a house the more of my own money is in that house and the less of the banks money is in that house, so as the value appreciates it's my own money working for that appreciation, when my goal is to have other people's money working for me.


Now, are you talking about your principal dwelling here, or a rental? Because it's hard to borrow against your house if you don't owe a whole lot of it. I think I get what you're saying, though. You're of the school of mind that spreads your own money over as much as possible so as to increase your gains. Paying down a rental property with your own money means you won't have the cash to spend on another house. And another, and so on. That works if you have the cajones.

[V]

The only thing to add to the "leverage your debt" point is that if you are investing this debt into the right things then you can also write off the interest, so you really don't even need to earn as much to make it worthwhile (don't need to be as risky).

Is this correct? I've heard that if you use a HELOC to put a downpayment on a house the interest on the mortgage of the house is tax deductible, but the interest on the HELOC is not. I really gotta get a hold of an accountant.

[Flames in 07]

Is this correct? I've heard that if you use a HELOC to put a downpayment on a house the interest on the mortgage of the house is tax deductible, but the interest on the HELOC is not. I really gotta get a hold of an accountant.

If you invest in something you can claim any cost associated with the investment against any earning.

IE if you borrow money ( can use your house to back the loan ) all borrowing costs can be written off. That way if you have a 5% loan (or say a second mortgage) and your marginal rate is say 30%, all you need is a 3% return to break even.

It is rediculous to say most people don't have the stones to invest available capital collecting dust in a home. I don't have the stones not to.

[V]

Did you quote the wrong post?

As for your post there, of course people should invest that capital, but I'm talking about stretching yourself thinner than I'd be willing to do. Like guys that buy 13 houses in a year to start out. I couldn't do it. But that might be why I'm not a millionaire yet.

[Flames in 07]

No, the last sentance was in reference to others being 'risk adverse'

The rules I've always lived by are:

maximize RRSP contribution ... it's a free loan. The gov't gives you money now by way of reducing taxable earnings now, to be paid back later. You gain time value of money and maybe pay back when you are at a lower marginal rate
the second is to keep all of your money working. Including equity in a house and then structure it in a way where you can deduct the interest.

[Red]

That stress doesn't come from having the equity in their home being used in another property, the stress comes from not knowing if they've done the right thing, not having any idea at all if their investment is going to grow or shrink.

That's the kind of investor that's simply rolling the dice and hoping for the best. Of course investing home equity in that situation is stressful! If I bet my house on black, I'd be stressed too.

Investors are people who've taken the time to understand their chosen area and find and use the methods that work. I couldn't do what SeeGeeWhy does; I don't understand businesses and all the things around them. Choosing one to buy would be like rolling the dice for me and would cause me no end of stress.

However with real estate I've done lots of research. I know the economic fundamentals that are driving the current boom in Alberta. I associate with others who are more experienced than me at it and have been successful for the right reasons, I find out what they did and why it worked, and reproduce it.

I'm not a big fan of Rich Dad Poor Dad and those books. While they are good motivation and are good for getting the point of how to look at money across, I don't necessarily think they're that great from an investors advice point of view. There's a lot of crap advice out there, and a LOT of people wanting to sell you their advice. It's better to work with people who actually do it, rather than people who want to sell you how to do it.

All of that is true, but at the same time it's not easy to find help out there that's not looking to just make money off of you. Truth is, win or lose they still make money.

It's easy to invest someone elses money, even in a risky investment, if it pays off then great, but if it tanks it's your money going down the drain. That's the harsh reality of hiring proffesionals.

Flipping houses, investing on the markets etc has far more losers than winners. Always has and always will. But no one writes books about it so it's not getting much exposure.

BTW, I have some investments on the market and am thinking to buy land soon (retirement property) so I am obviously not against investing. I just don't agree with people risking their homes to do it. Most of those people don't have the funds to withstand any downfalls.

[Red]

No, the last sentance was in reference to others being 'risk adverse'

The rules I've always lived by are:

maximize RRSP contribution ... it's a free loan. The gov't gives you money now by way of reducing taxable earnings now, to be paid back later. You gain time value of money and maybe pay back when you are at a lower marginal rate
the second is to keep all of your money working. Including equity in a house and then structure it in a way where you can deduct the interest.

RRSPs don't always make sense. You need a good income to really take full advantage of them. For lower income people paying off their debt/mortgage will give them a better return. And it's guaranteed.

[V]

If you invest in something you can claim any cost associated with the investment against any earning.

IE if you borrow money ( can use your house to back the loan ) all borrowing costs can be written off. That way if you have a 5% loan (or say a second mortgage) and your marginal rate is say 30%, all you need is a 3% return to break even.

It is rediculous to say most people don't have the stones to invest available capital collecting dust in a home. I don't have the stones not to.

So here's my question, then. If I refinance my mortgage on my rental property, that's tax deferred income of course. So is the interest I'm paying on that new extra piece of my mortgage still tax deductible, even though I may not invest that money? It is, after all, interest from my rental property.

I don't know if I'm making this clear. Let's just say my one and only goal in all of this is to be able to pay off my principal mortgage, and never need to make another mortgage payment ever again. Let's say I have two houses right now, with mortgages of 200k for each of them (to keep it simple). I also have a HELOC of 125k (room to go up to 200k). I have a mortgage on my principal dwelling of 100k. What's to stop me from paying 75k from my HELOC onto my rentals, then refinancing my rentals and paying the money from that onto my principal dwelling? In the end, I have no mortgage, and all of that debt is now spread around my rentals and my HELOC, in essence, taking my non-tax deductible payments on my principal mortgage and turning them into tax deductible payments on my rentals.

[Flames in 07]

RRSPs don't always make sense. You need a good income to really take full advantage of them. For lower income people paying off their debt/mortgage will give them a better return. And it's guaranteed.

Only if you think your return on RRSP's is lower than your mortgage rate ... which over the long run means you'd have some brutal investments.

Now if you don't have enough money to both, then ya, get a house, watch it appreciate that is better than an RRSP because you have more money leveraged.

[Flames in 07]

So here's my question, then. If I refinance my mortgage on my rental property, that's tax deferred income of course. So is the interest I'm paying on that new extra piece of my mortgage still tax deductible, even though I may not invest that money? It is, after all, interest from my rental property.

I don't know if I'm making this clear. Let's just say my one and only goal in all of this is to be able to pay off my principal mortgage, and never need to make another mortgage payment ever again. Let's say I have two houses right now, with mortgages of 200k for each of them (to keep it simple). I also have a HELOC of 125k (room to go up to 200k). I have a mortgage on my principal dwelling of 100k. What's to stop me from paying 75k from my HELOC onto my rentals, then refinancing my rentals and paying the money from that onto my principal dwelling? In the end, I have no mortgage, and all of that debt is now spread around my rentals and my HELOC, in essence, taking my non-tax deductible payments on my principal mortgage and turning them into tax deductible payments on my rentals.

I'm not positive, but if I understand your question completely, if you are borrowing by way of a second mortgage on an investment property, the interest expense is deductable because the cost is associated to the rental property ... for which you will pay tax on when you sell it.

[V]

Oh, and in the vein of the thread title, I can't wait either. There are some people out there that are some kind of scary overextended. I can't wait to take advantage.

[Flames in 07]

So here's my question, then. If I refinance my mortgage on my rental property, that's tax deferred income of course. So is the interest I'm paying on that new extra piece of my mortgage still tax deductible, even though I may not invest that money? It is, after all, interest from my rental property.

I don't know if I'm making this clear. Let's just say my one and only goal in all of this is to be able to pay off my principal mortgage, and never need to make another mortgage payment ever again. Let's say I have two houses right now, with mortgages of 200k for each of them (to keep it simple). I also have a HELOC of 125k (room to go up to 200k). I have a mortgage on my principal dwelling of 100k. What's to stop me from paying 75k from my HELOC onto my rentals, then refinancing my rentals and paying the money from that onto my principal dwelling? In the end, I have no mortgage, and all of that debt is now spread around my rentals and my HELOC, in essence, taking my non-tax deductible payments on my principal mortgage and turning them into tax deductible payments on my rentals.

Thinking about this one some more, I'd just go get an accountant, good ones now how to structure this kind of stuff so that you can write everything off.

[Red]

Only if you think your return on RRSP's is lower than your mortgage rate ... which over the long run means you'd have some brutal investments.

Now if you don't have enough money to both, then ya, get a house, watch it appreciate that is better than an RRSP because you have more money leveraged.

If you average 6% on your mortgage then you'd need to top that plus some every year. Over long term that would be a good investment. Let's not forget that mortgages were at around 10% on the 90s. Not saying that they will get there again any time soon, but if they do go up to 8% then you'd need a pretty good track record to beat that. And that's not taking in to account the risk, remember, paying off debts is a guaranteed investment.

So in short if you can average 7% on your investments and that's a big if, you're only beating a guaranteed return by 1%. Year after year after year. Any down year puts you in a hole. You lose 4% one year the next you need to be up by 11% and so on. Is it worth the risk?

Not saying it's not possible to make a better return, but anyone who says that 6 or 7% long term is crappy has read too many crappy "get rich quick" books.

[Flames in 07]

If you average 6% on your mortgage then you'd need to top that plus some every year. Over long term that would be a good investment. Let's not forget that mortgages were at around 10% on the 90s. Not saying that they will get there again any time soon, but if they do go up to 8% then you'd need a pretty good track record to beat that. And that's not taking in to account the risk, remember, paying off debts is guaranteed investment.

So in short if you can average 7% on your investments and that's a big if, you're only beating a guaranteed return by 1%. Is it worth the risk?


No if your mortgage is 6% you'd need 6% less your marginal rate ... so more like 4%.

Further, even if it was 6%, just about everything does better than 6% in the long term. Shoot I think I get 6% by leaving money under the bed in a box.

Mortgages in the 80's are not relevant. Today is 2007. Mortgages are in the low 5's. Worst case 6. If interest rates rise well then re-evaluate.

[Flames in 07]

Not saying it's not possible to make a better return, but anyone who says that 6 or 7% long term is crappy has read too many crappy "get rich quick" books.

I don't have the data on this computer but I seem to remember that in the last 50 years the TSE has never done worst than about 7% over a 5 year period ... NEVER DONE WORSE. Pretty much anyone with a pulse can earn 6 or 7 percent ... but again remember it's not 6, it's more like 4.

Just checked, every mutual fund I am in has done better than 6% in the last 5 years. Each and every one.

[Red]

I don't have the data on this computer but I seem to remember that in the last 50 years the TSE has never done worst than about 7% over a 5 year period ... NEVER DONE WORSE. Pretty much anyone with a pulse can earn 6 or 7 percent ... but again remember it's not 6, it's more like 4.

Just checked, every mutual fund I am in has done better than 6% in the last 5 years. Each and every one.

4%? How do you figure? Include the management fees and put a cherry on top to make it worth it. Remember, you don't just want to break even with what a mortgage costs you, you want more.

And 5 years is not long term. I have a fund that's done double digits in the last 3 years, but that's not a rule for all funds. Also don't forget, some funds have up to 2% management fees.

[Flames in 07]

because you are going to write off a third of the interest expense if you are borrowing against your house to invest.

Making money is easy ... especialy Calgary in the 2000's. Just need to know the rules.

[Sylvanfan]

Making money is easy ... especialy Calgary in the 2000's. Just need to know the rules.

You also have to be able to get access to it. Granted this last real estate boom has suddenly given people 50% equity in houses they had less than 5% in 18 months ago.

[Slava]

4%? How do you figure? Include the management fees and put a cherry on top to make it worth it. Remember, you don't just want to break even with what a mortgage costs you, you want more.

And 5 years is not long term. I have a fund that's done double digits in the last 3 years, but that's not a rule for all funds. Also don't forget, some funds have up to 2% management fees.

You should be looking at your returns net of fees anyway. I don't see the point of including them into the equation! The long-term average of most funds is over 5% (as I mentioned earlier), so people can make money with leveraged investments, end of story.

The fact is that buying a house is the exact same thing as a leveraged investment. You put some money down, borrow a lot more and pay onto this every month. If the market falls out from under you then you have a few choices; buy more houses, sell at a loss, hold and pay the loan more in hopes that things go up. This is the same for an investment.

[Flames in 07]

Pretty hard to find an equity that has done worse than 5% in the last decade ... still haven't found one.

http://www.altamira.com/altamira_en/funds/performance/performance+history+chart.htm

[Red]

because you are going to write off a third of the interest expense if you are borrowing against your house to invest.

Making money is easy ... especialy Calgary in the 2000's. Just need to know the rules.

I was fortunate enough to buy a house here long before the craze which in turn gave me a very nice net worth, but I can't say that I made that money. It just happened. I'll never say that making money is easy.

As for the rules; if you borrow 100K and invest it you need to take in to account the tax you pay on the earnings as well. So you right off 5K of interest paid (5% for the sake of argument) at your income rate, but then you have to pay tax on 50% of your dividends which greatly reduces your tax advantage. Add the management fees and you're even worse off. Definetely not 30% saving like you say.

If you have the money locked in an RRSP then you don't pay the taxes now at your current tax rate, but you pay it later at a hopefully much higher tax rate. Afterall you will be older and earning a lot more money. Thus my comment about RRSPs not working that well for lower income people. They don't pay much taxes right now so there's not much gains. When you get older and earn more you jump to a higher bracket so unless you're really earning a lot on your investments in the end you're not really gaining that much.

I stick to my comment that people that aren't in a high tax bracket are better off paying off their mortgage. Save the RRSP room for when they have more to gain. By then they should be mortgage free and have cash to put away. Plus of course there is the freedom of not sharing your paychecks with banks and credit unions.

[Flames in 07]

I was fortunate enough to buy a house here long before the craze which in turn gave me a very nice net worth, but I can't say that I made that money. It just happened. I'll never say that making money is easy.

As for the rules; if you borrow 100K and invest it you need to take in to account the tax you pay on the earnings as well. So you right off 5K of interest paid (5% for the sake of argument) at your income rate, but then you have to pay tax on 50% of your dividends which greatly reduces your tax advantage. Add the management fees and you're even worse off. Definetely not 30% saving like you say.

If you have the money locked in an RRSP then you don't pay the taxes now at your current tax rate, but you pay it later at a hopefully much higher tax rate. Afterall you will be older and earning a lot more money. Thus my comment about RRSPs not working that well for lower income people. They don't pay much taxes right now so there's not much gains. When you get older and earn more you jump to a higher bracket so unless you're really earning a lot on your investments in the end you're not really gaining that much.

I stick to my comment that people that aren't in a high tax bracket are better off paying off their mortgage. Save the RRSP room for when they have more to gain. By then they should be mortgage free and have cash to put away. Plus of course there is the freedom of not sharing your paychecks with banks and credit unions.

True, investment earnings are taxed, but my point was that your break even rate is not whatever your mortgage is at.

Different strokes I guess. I've been quite assertive over the last 2 years and made about 1/2M. And I very much feel like I earned it, largely from utilizing 'dead money' in my primary residence.

Lastly for anyone keeping track of this thread that are looking to buy their first house, many people will get a 4 bedroom and rent out to three others. They pay a good part of your mortgage, and you are now 'long' real estate.

[Red]

Pretty hard to find an equity that has done worse than 5% in the last decade ... still haven't found one.

http://www.altamira.com/altamira_en/funds/performance/performance+history+chart.htm

Really? Look at some of the Global funds. Or the Precision Euro. There are plenty of them if you look around. And again with 5% return, why even bother?

[Flames in 07]

Really? Look at some of the Global funds. Or the Precision Euro. They are plenty of them if you look around. And again with 5% return, why even bother?

The first ten that caught my eye were all above ... and most above 10%.

at 10% + ... I bother.

[Red]

True, investment earnings are taxed, but my point was that your break even rate is not whatever your mortgage is at.

Different strokes I guess. I've been quite assertive over the last 2 years and made about 1/2M. And I very much feel like I earned it, largely from utilizing 'dead money' in my primary residence.

Lastly for anyone keeping track of this thread that are looking to buy their first house, many people will get a 4 bedroom and rent out to three others. They pay a good part of your mortgage, and you are now 'long' real estate.

3 tenants in your own home? Great, with all that stress you won't have to worry about retirement. You'll be a goner long before :-)

[Flames in 07]

3 tenants in your own home? Great, with all that stress you won't have to worry about retirement. You'll be a goner long before :-)

Well, if you were 25 and that was your only option then you just deal right?

Anyway, we have way different philosophies that fine, my original point was that you cannot create nor destroy risk. You just choose how you want to shape it.

Re-investing home equity is not 'risky' you are just choosing a different kind of risk. IE If I didn't reinvest money that was borrowed against my house in 04, I would have had a large opportunity cost. I wouldn't have seen it on a statement anywhere, so for some people that feels better, but it is still a loss.

[MoneyGuy]

So here's my question, then. If I refinance my mortgage on my rental property, that's tax deferred income of course. So is the interest I'm paying on that new extra piece of my mortgage still tax deductible, even though I may not invest that money? It is, after all, interest from my rental property.

I don't know if I'm making this clear. Let's just say my one and only goal in all of this is to be able to pay off my principal mortgage, and never need to make another mortgage payment ever again. Let's say I have two houses right now, with mortgages of 200k for each of them (to keep it simple). I also have a HELOC of 125k (room to go up to 200k). I have a mortgage on my principal dwelling of 100k. What's to stop me from paying 75k from my HELOC onto my rentals, then refinancing my rentals and paying the money from that onto my principal dwelling? In the end, I have no mortgage, and all of that debt is now spread around my rentals and my HELOC, in essence, taking my non-tax deductible payments on my principal mortgage and turning them into tax deductible payments on my rentals.

I'm a certified financial planner. In the situation you describe, the interest would not not be deductible. Deductibility is determined by the eventual use of the money. If it's for investment purposes (to buy stocks, mutual funds or income-producing real estate), then it's deductible. To increase your debt on a rental property and then use the money for personal purposes disallows the deduction.

[Red]

True, investment earnings are taxed, but my point was that your break even rate is not whatever your mortgage is at.

Different strokes I guess. I've been quite assertive over the last 2 years and made about 1/2M. And I very much feel like I earned it, largely from utilizing 'dead money' in my primary residence.

Lastly for anyone keeping track of this thread that are looking to buy their first house, many people will get a 4 bedroom and rent out to three others. They pay a good part of your mortgage, and you are now 'long' real estate.

1/2M? You must be doing something really wrong. Most people I've met on them internets have made much more than that in half the time.

:-)

Sorry, nothing personal.

[photon]

Now, are you talking about your principal dwelling here, or a rental? Because it's hard to borrow against your house if you don't owe a whole lot of it. I think I get what you're saying, though. You're of the school of mind that spreads your own money over as much as possible so as to increase your gains. Paying down a rental property with your own money means you won't have the cash to spend on another house. And another, and so on. That works if you have the cajones.

Both my principal dwelling and a rental actually. In a market like this, I'm trying to maximise my exposure to the market movements. When I can see things starting to become less favorable, I'll change my strategy to one that fits the economy, like maybe scaling back and paying off some properties entirely so I convert from gains through market value increases to income through rents on fully owned properties. Or some of the other strategies.

Someone said timing is important, and that's true. The nice thing is with the economy barring a significant event such as the discovery of free energy or a world war, you can usually see the economic indicators turn well in advance.

And really, as long as I watch it to not over-leverage, what's the risk? The bank isn't going to forclose because my house is worth less, as long as I can make my mortgage payments.

But the possibility is there I agree of overextending yourself and having it all collapse. But even then, take what you've learned and start over.

BTW, I have some investments on the market and am thinking to buy land soon (retirement property) so I am obviously not against investing. I just don't agree with people risking their homes to do it. Most of those people don't have the funds to withstand any downfalls.

It is possible to utilize some of the equity in your house without risking it entirely. As long as you can make the payments the banks not going to take it away. So just ensure that if you do borrow against your home, worst case scenario if you lose the investment totally you can still make your payments. Sure that would suck, but you'd still be ok (ie not homeless).

Or save up and start with capital not from a home.

I agree that many people overreach and don't have to funds to withstand downfalls (heck lots of people wouldn't be able to withstand a 3% interest increase!), but I wouldn't dissuade them from investing. They just have to start at the beginning and learn to do it properly.

Otherwise, what's the alternative? Work for someone your entire life with nothing to show except a dependancy on the government and your family? Yuck!

[Red]

Otherwise, what's the alternative? Work for someone your entire life with nothing to show except a dependancy on the government and your family? Yuck!

It's not that bad :-) If you really want to invest you could pay off your house quickly, save a few bucks and invest that. We are talking a few years of really buckling down. Short term pain for a long term gain.

You could work and save for retirement. Earning a lot of money in your young age doesn't gurantee you good retirement. You still need to save for the future. Just look at Mike Tyson for the extreme case of someone not thinking of the future :-)

Plenty of ways to not depend on the government. Ultimately it's not what you make, but what you keep.

[V]

I'm a certified financial planner. In the situation you describe, the interest would not not be deductible. Deductibility is determined by the eventual use of the money. If it's for investment purposes (to buy stocks, mutual funds or income-producing real estate), then it's deductible. To increase your debt on a rental property and then use the money for personal purposes disallows the deduction.

Yeah, I was afraid someone was going to say that.

First of all, I want to mention that I will be going to an accountant to discuss this all. It's not like I'm looking for all my information from CP (although any I get is appreciated), I'm just banging a few ideas around in my head.

Now, here's a situation. What I normally do with my rental properties is pay the mortgage payments of my rentals with my HELOC. Then the rent cheques go directly into the HELOC. It kinda breaks even, a little on the positive side, so the HELOC shrinks a little bit, and the rental mortgages drop as normal.

Now the key with the HELOC is that I only have to pay the interest on the balance in one month, about 500 bucks per month. So what if I still use the HELOC to pay the mortgages, but I take the rent cheques and deposit them into my savings account (which then pay off my principal mortgage). I then only pay the minimum requirements into the HELOC. In essence, I'm using the HELOC (borrowed money) to pay for expenses related to the rentals, so that interest is tax deductible. So the HELOC will baloon, since I'm only making interest payments, but my principal mortgage will shrink by over 3k per month. This sounds legit to me. There's nothing saying that I have to use the income from my rental properties to aggressively pay off my loans, is there?

[Lurch]

Now the key with the HELOC is that I only have to pay the interest on the balance in one month, about 500 bucks per month. So what if I still use the HELOC to pay the mortgages, but I take the rent cheques and deposit them into my savings account (which then pay off my principal mortgage). I then only pay the minimum requirements into the HELOC. In essence, I'm using the HELOC (borrowed money) to pay for expenses related to the rentals, so that interest is tax deductible. So the HELOC will baloon, since I'm only making interest payments, but my principal mortgage will shrink by over 3k per month. This sounds legit to me. There's nothing saying that I have to use the income from my rental properties to aggressively pay off my loans, is there?

Pretty sure you are still offside with this, unless the rental properties are negative cashflow. By letting the HELOC balloon, you are effectively saying you are increasing your investment, which could be true if the properties are bleeding money, or if you make improvements. You CAN hold the HELOC at a constant state to keep the maximum in deductible interest, but any increase in it would need to be a demonstrable investment.

[SeeGeeWhy]

RRSPs don't always make sense. You need a good income to really take full advantage of them. For lower income people paying off their debt/mortgage will give them a better return. And it's guaranteed.

So you put $100 in your RRSP on Feb 28. You get to claim that against your income for the year, and you get a 100% refund of the tax you originally paid on that $100. Another way to look at it is that you get to avoid paying taxes on a different $100 of income. Either way, you're saving roughly $18 in tax, which is an 18% return on your investment.

If you're paying 18% on your mortgage, you are in trouble. If you are paying 18% on your debt, it would be wise to put as much in the RRSP as you can, file early, and then put the return towards your high interest debt.

It is often wise to take on a line of credit large enough to:

1. Max your RRSP contribution
2. Pay a portion of your high interest debt with the tax return
3. Use the balance of the line of credit to take care of the high interest debt

Yes, you still have debt, but it is likely costing you less than the original debt and you also have a tax sheltered investment growing.

Accelerating your mortgage payments is a fine thing to do, but it will not get you wealthy. All it will get you is home ownership at a faster rate. That is all some people are looking for, though, which is fine, too.

What's the first thing people do when their mortgage gets paid off, anyways??

[V]

What's the first thing people do when their mortgage gets paid off, anyways??

I think I'm gonna take a trip.

I know what you're getting at, though. So many people so intent on paying the mortgage as fast as possible, and then they refinance for renos. Pretty funny, actually.

[SeeGeeWhy]

I was fortunate enough to buy a house here long before the craze which in turn gave me a very nice net worth, but I can't say that I made that money. It just happened. I'll never say that making money is easy.

As for the rules; if you borrow 100K and invest it you need to take in to account the tax you pay on the earnings as well. So you right off 5K of interest paid (5% for the sake of argument) at your income rate, but then you have to pay tax on 50% of your dividends which greatly reduces your tax advantage. Add the management fees and you're even worse off. Definetely not 30% saving like you say.

If you have the money locked in an RRSP then you don't pay the taxes now at your current tax rate, but you pay it later at a hopefully much higher tax rate. Afterall you will be older and earning a lot more money. Thus my comment about RRSPs not working that well for lower income people. They don't pay much taxes right now so there's not much gains. When you get older and earn more you jump to a higher bracket so unless you're really earning a lot on your investments in the end you're not really gaining that much.

I stick to my comment that people that aren't in a high tax bracket are better off paying off their mortgage. Save the RRSP room for when they have more to gain. By then they should be mortgage free and have cash to put away. Plus of course there is the freedom of not sharing your paychecks with banks and credit unions.

Quite the opposite my friend. Why would you plan for that? Hopefully when you are retired and withdrawing from your RRSPs you have minimised your expenses and can live comfortably within the lowest bracket.

Now we get into the argument of owning your house and maxing out your RRSPs vs investing for capital gains, etc.

My thinking is that it is all about avoiding taxes NOW, because you can do more with that money than 30 years down the road. If I can turn my money into passive income generated via shareholder dividends from companies I own, why do I have to worry about paying down my house as fast as I can? I will be getting high return on my invested dollar every single year that I am alive and in control of those companies, provided they still operate.