Re-Financing your $Property

[V]

People that have huge debts can't [sit on their investments in peace]

Well, that's a completely general, and extremely incorrect statement. People that are scared of debt and get into huge debt can never handle it. People that get into far more debt than they can handle can never pull the investment off.

People that realize what the issues are, and what they can afford to borrow more often than not are successful. They don't take risks they shouldn't take.

Talking about investing it and earning that kinds of returns is one thing, actually doing it is a whole other thing.

Well, I've done it, and I can tell you, I love it. I own one place right now that I haven't even taken possession of yet, and it's worth 10K more than when I bought it. Pretend, though, that the market crashes, houses are worth half of what they are now, I can't find a renter, and interest rates go up to 8%. I can still hold onto this property for 5 years, because I did the math, I did the research and I bought the correct property. And I don't have to worry about it for at least 6 months, because I had a renter lined up before I even bought the place. Oh, and none of it is coming from my own personal finances. So yeah, it's one thing to talk about it, and another thing to actually do it, but I've done it.

I'm not saying all this just to go "Oh, look at me, I'm so great, bow down to mr. rich pants!". I just can't stand the negative people that get in so many people's way, just because they themselves are scared of risk. I can guarantee you that I've done more research on investing in this sector than you. Yet you feel that you can tell people unequivocally that it won't work. It just doesn't jive.

"That's a fact". Actually, it's about as far from fact as you can get.

[V]

Originally Posted by Mike Oxlong

Amen Dom!!!

There is good debt and bad debt. Buying a car with your equity isn't a great idea. It is a depreciating asset. However buying a house is a great debt to get into. The house is going up in value, you have someone paying off the mortgage and the bank is lending you the money to buy it. It doesn't get much better.

Even if the housing market takes a bit of a dip which I don't expect for a LONG time it will recover and prices will continue to climb. Real Estate prices have always climbed over the long run throughout history. Your asset will continue to climb in value while the mortgage gets paid off. Debt that makes you money is not a bad thing at all. A very smart investment.

I'm surprised you got through all that without mentioning land!

[Red]

Agamemnon, it looks like you've already made up your mind. Leave it at that.

I read your original post and came to a conclusion that you are someone who has a hard time managing your personal finances to some extent (old beat up car, run down condo, NO CASH to fix either).

Most people that have issues saving money ( which requires them to be disciplined ) don't fare well in investing which requires nerves of steel and very strong discipline.

In the end, tt's your money. I just gave you a perspective from someone a little more old school. Someone who remembers when people were debt free and happy. I guess that way of thinking has no place in today's life. If you don't have $100.000 debt you're not a patriot

[Red]

Originally Posted by Dominicwasalreadytaken

Well, that's a completely general, and extremely incorrect statement. People that are scared of debt and get into huge debt can never handle it. People that get into far more debt than they can handle can never pull the investment off.

People that realize what the issues are, and what they can afford to borrow more often than not are successful. They don't take risks they shouldn't take.



Well, I've done it, and I can tell you, I love it. I own one place right now that I haven't even taken possession of yet, and it's worth 10K more than when I bought it. Pretend, though, that the market crashes, houses are worth half of what they are now, I can't find a renter, and interest rates go up to 8%. I can still hold onto this property for 5 years, because I did the math, I did the research and I bought the correct property. And I don't have to worry about it for at least 6 months, because I had a renter lined up before I even bought the place. Oh, and none of it is coming from my own personal finances. So yeah, it's one thing to talk about it, and another thing to actually do it, but I've done it.

I'm not saying all this just to go "Oh, look at me, I'm so great, bow down to mr. rich pants!". I just can't stand the negative people that get in so many people's way, just because they themselves are scared of risk. I can guarantee you that I've done more research on investing in this sector than you. Yet you feel that you can tell people unequivocally that it won't work. It just doesn't jive.

"That's a fact". Actually, it's about as far from fact as you can get.

So what are you saying? You just started this investing? Isn't it a bit premature to preach about it?

I am not disputing the fact that investing is good. I do it myself. I am just saying that borrowing to spend on customer goods or buying RRSPs are not the way to go.

"That's a fact". Actually, it's about as far from fact as you can get.

I read a study a while back about people that invested borrowed money. Those were regular people, not investors/businesses etc. Most withdrew the money at first site of losses. They were then reluctant to invest again. It's human nature. Can't argue with that.

[Mike Oxlong]

Originally Posted by Dominicwasalreadytaken

I'm surprised you got through all that without mentioning land!

LOL....There is no more land available to invest in! I have invested in land though and expect to do VERY well on it.

We have also purchased a few houses and made sensational returns already. Like Dom we haven't even taken posession of a few places and they are already worth significantly more than what we paid for them.

We borrowed that money to finance these places. Best decision we have ever made. Extremly glad I am in debt on these investments!

[Agamemnon]

Originally Posted by Red

Agamemnon, it looks like you've already made up your mind. Leave it at that.

I read your original post and came to a conclusion that you are someone who has a hard time managing your personal finances to some extent (old beat up car, run down condo, NO CASH to fix either).

I've been in school for the past 5 years, just started working a year ago. I think I'm doing very well considering I've been in the workforce for 15 months.

Most people that have issues saving money ( which requires them to be disciplined ) don't fare well in investing which requires nerves of steel and very strong discipline.

In the end, tt's your money. I just gave you a perspective from someone a little more old school. Someone who remembers when people were debt free and happy. I guess that way of thinking has no place in today's life. If you don't have $100.000 debt you're not a patriot

Well... your 'school' had no information, just some random opinion with no facts, math, or accouting. Still doesn't, even though you've been asked to provide details. Of course I've 'made up mind', you've presented no tangible alternatives. If you think debt = always bad, then you're not really qualified to give financial advice (not that I am).

[Agamemnon]

Originally Posted by Red

So what are you saying? You just started this investing? Isn't it a bit premature to preach about it?

I am not disputing the fact that investing is good. I do it myself. I am just saying that borrowing to spend on customer goods or buying RRSPs are not the way to go.

"That's a fact". Actually, it's about as far from fact as you can get.

I read a study a while back about people that invested borrowed money. Those were regular people, not investors/businesses etc. Most withdrew the money at first site of losses. They were then reluctant to invest again. It's human nature. Can't argue with that.

So your advice is 'what you're doing is wrong'. Where are your alternatives? Where are the counter-points? I'm having a hard time figuring out what you're doing in this thread.

Do you have advice on how/where to invest? Points to make about HE-LOC vs. Mortgage? Tax/Accounting issues? Specific reasons as to why RRSP's are a mistake (beyond badly mistaking your one 'fact' on RRSP returns)? Otherwise, thanks for nothing. This thread is mostly about trying to get people to contribute knowledge, if you've got any share it, if not... well, this seems to be where you are right now.

[DementedReality]

Originally Posted by Dominicwasalreadytaken

....Of course, the way interest rates are right now, every penny I put against the principal of my mortgage yeilds only a 5% ROR or so. ..

although, when you save a dollar outside an RRSP, the govt comes and takes $0.40 of all the interest you earn. whereas if you put that dollar down against your mortgage, you gain $1.00 of equity that can be used later via a HELOC if required.

i dunno, i got tired of paying extra taxes, so i saved up enough cash to ensure i wasnt living pay cheque to pay cheque, covered my RRSP's and then decided to ramp up my mortgage payback, instead of just adding more cash to my portfolio. since i am a rather unknowledgeable investor, i decided to use this route.

[Red]

Originally Posted by Agamemnon

I've been in school for the past 5 years, just started working a year ago. I think I'm doing very well considering I've been in the workforce for 15 months.


Well... your 'school' had no information, just some random opinion with no facts, math, or accouting. Still doesn't, even though you've been asked to provide details. Of course I've 'made up mind', you've presented no tangible alternatives. If you think debt = always bad, then you're not really qualified to give financial advice (not that I am).

No, debt is not always bad. But no debt is always better than having one.

What details do you need? Not sure what you are asking for.

Anyways, you're getting very offensive over this. I really don't care what you do so I don't know why you are so hot over this. It's just a difference of opinion, that's all.

[Red]

Originally Posted by Agamemnon

So your advice is 'what you're doing is wrong'. Where are your alternatives? Where are the counter-points? I'm having a hard time figuring out what you're doing in this thread.

Do you have advice on how/where to invest? Points to make about HE-LOC vs. Mortgage? Tax/Accounting issues? Specific reasons as to why RRSP's are a mistake (beyond badly mistaking your one 'fact' on RRSP returns)? Otherwise, thanks for nothing. This thread is mostly about trying to get people to contribute knowledge, if you've got any share it, if not... well, this seems to be where you are right now.

Maybe there is no alternative? Do you think that 'easy money' must exist?

My advise was to not borrow money to spend on a car and home renos. I'd keep my debt to a minimum and save cash for those things and buy them for cash, like anyone should. But what do I know?

[Agamemnon]

Originally Posted by Red

No, debt is not always bad. But no debt is always better than having one.

See, this logic I don't understand, and apparently never will. I don't get how 'no debt' is better than, say, borrowing 10k at 3%, and making 6% return on the 10k investment?

How would 'no debt' be better than this set up. Just because? Life experience? I need reasons and logic, not heresay.

I'm 'hot' because I assumed people would contribute facts to the discussion. MANY #'s have been thrown around in this thread... just not by you. Your total flop on the RRSP return has sort of degraded your credibility to me, so I'm trying to figure out what you're talking about.

[DementedReality]

Originally Posted by Red

Maybe there is no alternative? Do you think that 'easy money' must exist?

My advise was to not borrow money to spend on a car and home renos. I'd keep my debt to a minimum and save cash for those things and buy them for cash, like anyone should. But what do I know?

depending on the interest rate though, its not always better to use CASH if that CASH can earn more interest than the debt costs.

also, i tend to agree that life passes us by. we work hard and sometimes you need to invest in your life, even if its not the right financial ratio.

for instance, if you can afford a new car, then buy one if that is what add's value to your existance. so, you may be a few thousand dollar's poorer, but how many thousands does one need?

i will give you another example, my wife and i want to buy a travel trailer. if we wait until we can afford cash for it, our kids will probably have grown out of the age where they will want to join us. i am not going to spend the cash i already have on it, so i look at borrowing the money for the trailer as an investment in our life. yes it will be a debt, but not a burden. yes we could earn more money if we didnt do it, but is life all about having as much money as possible, but if you dont spend it on something, what kind of life have you lived?

i dont want to die with a big bank account, but having let life passed by while i made the right financial decisions.

such is the balance we all look for i suppose.

by the way, i hate debt, especially consumer debt. but i guess without being born wealthy, we all have to make decisions on how to live our life. i tell my wife all the time, we have the money to do ANYTHING we want, just not EVERYTHING we want. its all about priorties i suppose.

[Agamemnon]

Originally Posted by Red

Maybe there is no alternative? Do you think that 'easy money' must exist?

My advise was to not borrow money to spend on a car and home renos.

Property renovations increase a property's worth. You think its wrong to borrow 5k, renovate, adding 15-20k value to your property?

Do you think 'easy money' doesn't exist? You think 5% is a 'good return'? If so, you are really, really not looking hard enough.

Nuts.

[Red]

Originally Posted by Agamemnon

Property renovations increase a property's worth. You think its wrong to borrow 5k, renovate, adding 15-20k value to your property?

Do you think 'easy money' doesn't exist? You think 5% is a 'good return'? If so, you are really, really not looking hard enough.

Nuts.

Don't put words in my mouth. I never said that 5% return was enough. I invest myself, I have two different programs and I average about 10% on one. The other one is a work thing so it's a little better because of the company contributions. But the main difference is that I invest my money and have virtually no debt (small mortgage left).
I am just trying to give you a different opinion on this. If you don't like it then move on, but don't try to insult me. After all, it's not me trying to catch up with basic life expenses. I am doing well enough to not need advise from a message board infested with young know-it-alls that live in dreamland on how to refinance a house so I can buy a car

[V]

Originally Posted by DementedReality

although, when you save a dollar outside an RRSP, the govt comes and takes $0.40 of all the interest you earn. whereas if you put that dollar down against your mortgage, you gain $1.00 of equity that can be used later via a HELOC if required.

Extremely good point, and something that wasn't really touched on yet. Paying off your mortgage is not a bad investment, and most importantly it's extremely safe. There is nothing that can possibly go wrong (that I can think of) and it still gets you about 5% return, without you having to pay taxes on that 5%. Absolutely no risk + small reward + extra benefits = good investment for sure. That's why a good chunk of my personal finances goes against my mortgage. And that last part is very true as well. The guy at my office who owns 13 properties says that he could never have possibly done what he did if he didn't have so much of his mortgage paid off.

i dunno, i got tired of paying extra taxes, so i saved up enough cash to ensure i wasnt living pay cheque to pay cheque, covered my RRSP's and then decided to ramp up my mortgage payback, instead of just adding more cash to my portfolio. since i am a rather unknowledgeable investor, i decided to use this route.

I know some people my age who are in the same situation as me family-wise, who still live paycheck to paycheck and don't put a dime towards RRSPs or any other type of investment ever. I suppose that's necessary for them, unfortunately, although I see all of them buying vehicles that they have to borrow to buy and spending money that I'd never spend. I suppose it's a priority thing, but I'm always terrified of the idea of still living paycheck to paycheck when I'm 45, and still don't have any RRSPs.

Your way of doing things is probably what the majority of people do, at least those who have the inflow of cash that allows them to do something at least. And there's really nothing wrong with it. Risk-free, you're still getting ahead, and loving life. In fact, I do all of those things as well with my personal finances, but it's the borrowed money that I'm using to try something bigger and better.

[V]

Originally Posted by Red

So what are you saying? You just started this investing? Isn't it a bit premature to preach about it?

Do I seem preachy? That's text for ya. I really don't mean to. Yes, I'm new to investing in real estate with borrowed money. I've never been in the position before to do what I'm doing now.

I am not disputing the fact that investing is good. I do it myself. I am just saying that borrowing to spend on customer goods or buying RRSPs are not the way to go.

The first I agree with. I own two vehicles, one of them is an 87 Buick Century that I drive everyday and the other is a 95 Chevy Lumina APV minivan. I owe nothing on either because I refuse to pay car loans. Just a personal decision. As for the second, I borrow money every February to buy a schwak of RRSPs. I then pay the loan back when I get my tax return. I've picked up so much free money that way it isn't even funny. I know some people like the tax return because it's some kind of bonus, but I don't need it so I invest it. Why not?

"That's a fact". Actually, it's about as far from fact as you can get.

I read a study a while back about people that invested borrowed money. Those were regular people, not investors/businesses etc. Most withdrew the money at first site of losses. They were then reluctant to invest again. It's human nature. Can't argue with that.

I've stressed a couple of times in this thread that if you don't like risk, don't invest like I do. I would hazard a guess that the people in this study were looking for a quick easy buck, and didn't do enough research and math to figure out what they could handle. They probably hated debt, and only planned on being in debt for a couple of months before they raked in their millions. These people will always lose. Or maybe they'll get lucky and make their millions, but I'd attribute more of that to luck than proper investing.

Your statement I just found so ridiculous because I know so many people that have borrowed to invest and have made fortunes. I wouldn't have objected to your statement if it wasn't so absolute.

[Red]

Originally Posted by Dominicwasalreadytaken

Do I seem preachy? That's text for ya. I really don't mean to. Yes, I'm new to investing in real estate with borrowed money. I've never been in the position before to do what I'm doing now.


The first I agree with. I own two vehicles, one of them is an 87 Buick Century that I drive everyday and the other is a 95 Chevy Lumina APV minivan. I owe nothing on either because I refuse to pay car loans. Just a personal decision. As for the second, I borrow money every February to buy a schwak of RRSPs. I then pay the loan back when I get my tax return. I've picked up so much free money that way it isn't even funny. I know some people like the tax return because it's some kind of bonus, but I don't need it so I invest it. Why not?


I've stressed a couple of times in this thread that if you don't like risk, don't invest like I do. I would hazard a guess that the people in this study were looking for a quick easy buck, and didn't do enough research and math to figure out what they could handle. They probably hated debt, and only planned on being in debt for a couple of months before they raked in their millions. These people will always lose. Or maybe they'll get lucky and make their millions, but I'd attribute more of that to luck than proper investing.

Your statement I just found so ridiculous because I know so many people that have borrowed to invest and have made fortunes. I wouldn't have objected to your statement if it wasn't so absolute.

You're right, investing in Real Estate is good, but that's not what the original post was about. If he said that he was going to take out a loan and invest it in real estate I wouldn't say anything. I just have a problem with people that think that stock markets will make everyone rich. People quickly throw numbers like 30% as to what they should expect. That line of thinking will get them in trouble.

What I see is this. He borrows 50 K at 6% (mortgage) and invests it. He will be lucky to average 8-10% on stocks. Likely he will do worse, most people do. So in essense he is getting a debt at 6% to "maybe" make 2% more in very risky investments. He could do better, even a lot better, but again, most people don't and some lose a lot. Is the 2% worth the risk? Not IMO.
It would as effective as saving the extra $200 a month you now pay for your now larger mortgage and investing it on its own. But here's the kicker. No extra debt and risk of housing to go down.

Housing is insane right now in Cgy. But can it continue? How long before all those people from MooseJaw, Saskatoon, Winnipeg etc sell their homes here and move back home with a small fortune? You know what they say, home sweet home...I know a guy that did just that. Sold his crappy house in Abbeydale and moved back home to Saskatchewan. He bought a house for himself for cash and has enough to buy another one and then some. He is thinking to buy a B&B somwhere where bird watching is huge, it apparently is :-) Plenty of people will see that life in Calgary is too expensive and going back home with a small fortune will improve their lives. Some will go back, but how many? You hope for none.
What kind of housing market would that create? Not a good one, that's for sure. If you have as little equity as he does it would't take long to slash your net worth in half or more. Maybe a year or two? What then? Back to square one...

Your statement I just found so ridiculous because I know so many people that have borrowed to invest and have made fortunes.

Yes, and there were many more that didn't and lost fortunes. It goes both ways. It isn't THAT easy guys.

[MacDougalbry]

A couple of months ago we were checking out a used car on a car lot. The salesman was giving me the sales pitch on their in-house financing; I gave him the blow-off by telling him that I would finance it off our line of credit (a lie). He came back with a line for this right away: "Most people want to save their line of credit for an investment property." (And this was no fancy BMW dealership or something like that.)

It seems that everyone is doing this or trying to do this? Eavesdropping on conversations at Starbucks, it sounds like an epidemic, from housewives chatting over plans to invest in a townhome to young MBA types planning the purchase of a whole apartment building.

This is what you call a feedback loop: property values go up, people use this equity to invest in more property, driving property values higher, creating more money to invest again. It is no longer a mystery to me why prices have run up so quickly.

And Red is right, the latest trend is selling-out. My wife has a coworker headed back to Saskatoon, a neighbour is thinking of going to Vernon. Another has left the country. It is starting to sound appealing.

[Agamemnon]

Originally Posted by Red

Don't put words in my mouth. I never said that 5% return was enough. I invest myself, I have two different programs and I average about 10% on one. The other one is a work thing so it's a little better because of the company contributions. But the main difference is that I invest my money and have virtually no debt (small mortgage left).

Fair enough, thats fantastic for you. I don't see, though, how you having little debt means there is _any_ reason why I wouldn't borrow to invest in my RRSP's, deducting the interest from the loan. This is the 3rd time its been addressed to you.

I am just trying to give you a different opinion on this. If you don't like it then move on, but don't try to insult me. After all, it's not me trying to catch up with basic life expenses.

Are you serious? I just said that I'm a fresh-out-of-university worker who's just starting out in life. I'm not 'catching up with basic life expenses', I'm rolling in the money from my insanely well-timed investment. Who's putting words in who's mouth? You don't have a clue about my situation despite me posting it in entirety. You're speaking, but you're not listening.

I am doing well enough to not need advise from a message board infested with young know-it-alls that live in dreamland on how to refinance a house so I can buy a car

The reason I posted this stuff is because I respect the people on this board, and have been frequenting it for years. Just because you don't trust their opinions or believe they're helpful doesn't mean jack to me. As far as I can see, you've posted _ZERO_ advice in this thread. You've said don't buy RRSP's, and don't borrow money. Your contribution to the discussion is a net-negative. Thats probably why I think your input is of no value.

[Agamemnon]

Originally Posted by Red

Yes, and there were many more that didn't and lost fortunes. It goes both ways. It isn't THAT easy guys.

If you can borrow at 4%, and invest at 9%, it is THAT EASY. If you can't, you can't. Since I can, it makes a lot of sense. This isn't in 'fantasy-land' or 'dream-land' or 'young'un-land', this is in the real world.

Explain to me why borrowing at 4% and investing at 9% is wrong.