Housing Bust 2017

Leveraging, renting vs owning, making an investment or buying a home?
ig17
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Re: Housing Bust 2017

Post by ig17 »

Just a Guy wrote: 25 Dec 2017 18:59 I only told you about my real estate strategy, you missed the part where I also did quite well in stocks and own several businesses.
I didn't miss the stock story. I deliberately ignored it because, based on the information you shared, it was likely immaterial in the beginning. And likely remained immaterial for years.

You previously said:
Just a Guy wrote: 24 Dec 2017 18:45 I had a little bit of savings, but not much more than a couple of months.

<snip>

Next, I took about half my meaner savings and started learning about stocks.
Sounds like your starting capital was one month worth of savings. Unless you levered yourself to the hilt through options or something similar, this meager capital couldn't be a meaningful source of passive income. That's why I ignored the part about stocks.

And if you did lever yourself to the hilt: would you recommend your stock strategy to an average middle-class family?
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Re: Housing Bust 2017

Post by Just a Guy »

Housing price on its own is meaningless out of context. Depending on the year and city a house can be "affordable" or not. It's a regional thing. For example, my paying $100k for a rental in GTA today would be a steal, my paying that same amount for wilsonville (population under 50) Ontario would be dramatically overpaying, average income for that town is a lot less too. I did mention it was in a boom, housing prices had tripled in a few years, while wages (if you had a job) remained the same. I suppose that doesn't count as unaffordable since interest rates were declining making houses "affordable". They were certainly more than 2.5x average income which used to be the definition of "affordable". Also, when you have no income, nothing is "affordable", easy to forget when you take a regular paycheque for granted.

Actually my stocks outperformed my real estate and they both improved a lot faster than I expected (it was a real estate boom). I was either very lucky, or I just took advantage of the times. I usually buy on crashes (so when the government decided to tax income trusts, I got in, when the stocks crashed in 2007 I bought in, etc.). Many of my stocks more than tripled over a few years (high risk stuff like BMO) some were more than ten baggers. My strategy there was to only invest in companies I know and understand that I felt were undervalued. Most pay a dividend. You'd be amazed at how much say a $5000 investment can make.

My stocks were all bought in cash, no leveraging. No penny stocks, no gambling, not a single company you wouldn't recognize by at least what they produce, none were a recommended buy by he talking heads at the time I bought (some had been only months before however). I read up on the companies, as much as I could, and I use their products personally. The dividends for the ones I bought back then produce more than I invested in them initially. I use them today to buy new stuff I'm interested in.

I'm curious if you've ever even tried investing on your own. I don't mean putting money into a savings plan run by someone else, I mean actually tried to learn about a company, it's products, read the financial reports, evaluate it, see what it's price is, decide for yourself if it's got value or not and actually made a purchase.

Have you ever bought a rental? Evaluated the neighbourhood, figure out rental rates, screened tenants, made an offer, etc?

Ever come up with an idea, written a business plan, figured out what it would take to make the product or service a reality and actually implemented it?

I'm wondering if you've ever even tried to do any of this yourself. You seem convinced it's impossible, but have you ever even tried? Again, different from paying someone else, who's interested more in their commission than where their next meal is coming from, to do it for you.

Plenty of armchair quarterbacks out there in the world. Too afraid to step up to actually play the game, easier to sit at home telling people the way to be a pro? Are you one of those? Or have you actually gone out and put something on the line, done what is needed to succeed?

I had to succeed, there was no other option. That is an excellent motivator and a way to remain focused on what's important. I didn't have any special skills, my family was some of the worst people I knew for making financial choices. I learned, and learned quickly, because there was no other way. I had to be right, so there was no penny stock/day trading type gambles. I had to believe in what I was doing because I was living off of debt. There was no income other than what I could produce passively. It wasn't much to start, I had to be very frugal when it came to shopping, but it did grow. I saw value where others didn't, I spwent against everyone's advice (your putting yourself into more debt to buy a rental? Are you nuts you don't have any income and you can't work?).

If I'd listened to people like you I'd be divorced, bankrupt and living on welfare. Instead I now volunteer to help people who are in bad situations. I educate, I don't criticize. I've walked the walk, been dead broke, no money, living off credit cards. I know what people can do, and I know many don't even bother to try.

Go read the old "sour grapes" folk tale...are you the fox?

As for what strategy I'd recommend for someone else, I'd say that's something they need to discover for themselves. Each of us are different. Our investment strategy has to match our personality. I happen to be a buy and hold value investor. It matches my personality and I'm not fighting myself.

I know how to do day trading, but I don't have the personality to do it. I hate watching the market all the time. I won't do it, so I'll eventually wind up sabotaging myself even if I try not to. That doesn't mean I don't know some wildly successful day traders. It matches their personality and thus they are successful at.

Not everyone can do what I do, not anyone else. You have to discover your own path. There are virtually unlimited paths for people to follow, and no one will be more interested in their money than them (despite what salesmen will say). The problem is, you actually have to start walking down the path yourself, deal with the curves and challenges you'll encounter. The path is rarely smooth and straight.

Most people prefer the easy road that everyone else takes. Nicely paved, easy, no need to think, few potholes... If you go down that road, why would you ever expect to find anything different from what everyone else encounters on it? You rarely fine a Lamborghini driving down a regular street at 50, in and among the minivans. You may see a 4x4 wannabe though...one that's never been off road and likely never will be. Pretending to be different, but never veering.
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Re: Housing Bust 2017

Post by ig17 »

JAG,

I think you forgot why we are having this discussion.

Two days ago, I asked you a simple question:
ig17 wrote: 24 Dec 2017 16:59
Just a Guy wrote: 24 Dec 2017 15:11 The ability to earn more money through passive means, as well as bettering yourself, is also a reality, not some unachievable goal.

Participation awards aren't good enough in the real world, competition isn't evil...unless you expect everything handed to you.
http://www.financialwisdomforum.org/for ... 94#p605994

What *practical* advice would you give to an IT exec and a city hall supervisor with two small kids and one more on the way?

Since then, you posted one wall of text after another, touting your own success.

Did you offer any *practical* advice to the young couple? No. None.What.So.Ever.

The platitudes about hard work, ingenuity and perseverance is not practical advice.

The couple in question is a hard-working, successful couple. It's insulting to imply that they are not trying hard enough.

You had to overcome a serious health challenge, yes. Big kudos to you.

At the same time, you didn't have to struggle with unaffordable housing costs. In fact, access to cheap housing was one of the foundations of your success. Take affordable housing away... your landlording story falls apart. Maybe your financial recovery after the injury doesn't pan out. You can't deny this.

Yes, Canada is a large country. Yes, there are many pockets of affordable housing outside GTA/GVA. How does that help the young couple we are talking about?

They live in TO; they have two demanding, full-time jobs and three small kids. They can't run an absentee landlord business in Moose Jaw on the side. Maybe one exceptional couple can, but it's not a scalable solution that can work for everyone.

Your stock story? It's an absurd red herring. It doesn't offer any practical solutions to the young couple stuck in a shoe box with three small kids.

To build a stock portfolio that generates meaningful passive income, you need to save and invest for many years. You already owned your primary residence when you started to dabble in stocks. You didn't *need* your investment income to service a monster mortgage. It's the other away around: your housing cost were low, therefore you were able to save and invest. There is no teachable moment here for the young couples who can't afford a shelter.

Your businesses? You didn't share much about them. Whatever they are, what can the young couple learn from you? He is an IT exec. It's a demanding, full-time job, often requiring overtime. She is a city hall supervisor and a mom of three kids. Her job is even more demanding. What is your *practical* advice to them? Start a moonlight business on the side? Quit their high paying jobs in TO, move to Moose Jaw and start a business there?

Just a Guy wrote: 26 Dec 2017 01:35 I'm curious if you've ever even tried investing on your own.
My investment portfolio is large enough to sustain a very comfortable retirement. I build this portfolio myself from the ground up. No one else was involved in running it.

One of the reasons I was able to amass a nice portfolio: my housing costs were ridiculously low. Remember I told you, it took me less than two years to pay off a mortgage. Unlike you, I don't take this part of my success story for granted.
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Re: Housing Bust 2017

Post by Flaccidsteele »

I guess we've officially gone off topic.

Anyway, happy boxing day. No housing bust this year. Maybe next year.
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Re: Housing Bust 2017

Post by Just a Guy »

Again you always seem to miss the point. I was never trying to answer your specific question, I was refuting your claim that there was no way on earth anyone can afford a house or get ahead these days, oh and don't forget how it's all because of foreigners...

My advice, though not directed specifically at your example but totoally applicable, was quite clear. They have to try something different than just a paycheque. What that is, depends on their investment personality. They may have to do without cellphones for everyone (my kids don't even have them), and big screen tvs with 100+ channels, two cars, morning coffees from Starbucks, lunches out everyday, and what ever else they spend their paycheques on and divert some of that cash into building a passive income (be it business, real estate or stocks).

Do you think one can just go out and say "start a business selling rocks in a little box?" Or maybe "buy xyz stock"? There is no magic bullet. To start a business you need to want to do the business. I once considered opening a Tim horton franchise, even picked the town to do it in. Had a buddy who owned a number of them. The problem is, I don't like Tim Hortons, and I certainly don't want to run a franchise. Turned out they did open a Tim Hortons in the place I picked. Turned out to be one of the top sales locations in the province. Had I done what I set out to do, I probably wouldn't have run it well since I had no interest in it, even though the location turned out to be perfect. Someone else succeeded where I probably would have done poorly as it wasn't for me.

Same thing with stocks and real estate. Not everyone is cut out to be a landlord or flipper. Not everyone can handle losing half their investment because one can't time the market.

That doesn't mean one should avoid it all and complain there are no options. They have to go out and try something, something that interests them. They can't copy me, you or anyone else because they aren't us. To be successful at investing you have to be interested in it.

In time, yes it takes time, sorry life doesn't change overnight, it should grow. The more they invest wisely, the more quickly it'll grow. I don't think I ever said "work hard, ingenuity and perseverance", I said get off your butt and try something different. In my condition, I certainly couldn't work hard, I battled depression, which kills ingenuity, and struggled to persevere, but I didn't really have any other option.

Of course, if they never start, they certainly won't change. I'd tell them to start (yes I'm repeating myself, but you seem to miss the point). They need to start learning how to get money working for them instead of working for money.

P.S. My real estate was built on finding cheap properties over decades. In this current unaffordable market, I'm actually buying more properties than I ever have in the past. They are out there, and less people are looking because, like you, they think they don't exist.

My housing certainly wasn't cheap, it was never considered by the market I lived in to be affordable, but then you only believe the world works the way you want it to. I may not even be close to traditional retirement age. You probably assume we're of the same generation but, for all you know, i could be of the same generation as your example (I do still volunteer for every field trip with my kids), maybe even younger. Of course, I could also just be an old guy with a trophy wife too...
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Re: Housing Bust 2017

Post by ig17 »

Just a Guy wrote: 26 Dec 2017 13:14
<snip>
TL;DR Can't afford a home? Make more money.

Reality check:

Toronto is a city where even the "rich" can't afford an average-priced house

Let's agree to disagree and move on.
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Re: Housing Bust 2017

Post by longinvest »

Can't afford to buy a home? Rent and let the landlord assume the risk of owning a possibly overvalued asset. Or, move to a place where homes are reasonably priced. Or, stay in your parents' basement if they don't want you to move far away nor want to remortgage their home to provide the cash down on your wanted neighbouring home. :wink:
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Re: Housing Bust 2017

Post by ghariton »

longinvest wrote: 26 Dec 2017 15:38 Can't afford to buy a home? Rent and let the landlord assume the risk of owning a possibly overvalued asset. Or, move to a place where homes are reasonably priced. Or, stay in your parents' basement if they don't want you to move far away nor want to remortgage their home to provide the cash down on your wanted neighbouring home. :wink:
UBC was hiring assistant professors in the early 1970s when I graduated. Several of my classmates applied, but withdrew when they discovered the price of houses in Vancouver. One fellow did sign on. After five years, tired of eating spaghetti and drinking tap water, he quit academia and became a transportation consultant. Last I talked to him, he was still in Vancouver and quite rich.

I think AltaRed has posted in another thread that some firms are moving from Vancouver to the interior, so as to better attract employees. That seems to happen in many cities where housing becomes too expensive. Chunks of the financial industry moved from NYC to Newark. Tech firms went from California to Texas.

Others work from home, wherever that may be. I've met several people who live in Kingston but whose job is in Toronto. They mostly work on line, and go in for meetings once a week or so. One consultant operates out of Corner Brook, even though most of his clients are in Ontario, with the rest on the Prairies.

Heck, even in Ottawa, where house prices are more reasonable, I've had employees commuting from as far as Plantagenet to the east, Prescott to the south, and Renfrew to the west.

Inconvenient, I agree, but there are solutions.

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Re: Housing Bust 2017

Post by Mordko »

I think we are missing the point. That young family with kids HAS to own a HOUSE in downtown Toronto. Nothing else will be good enough. Nor should anyone offer any reasonable solution other than cutting down immigration from one arbitrary number to another, just as arbitrary.

Once we solve ig's problem, can we get onto mine? One of my kids NEEDS a Lamborghini while the other has to have a Maserati. The problem? They can't afford these vehicles. Before you come up with unhelpful suggestions, let me warn you that nothing else is going to be acceptable. Solution has to be found immediately. Help!

Clue: I blame the Chinese.
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Re: Housing Bust 2017

Post by ig17 »

Mordko wrote: 26 Dec 2017 18:37 I think we are missing the point. That young family with kids HAS to own a HOUSE in downtown Toronto. Nothing else will be good enough.
As expected. You didn't bother to read the original post that introduced the family.

Had you read it, as you plainly haven't, you would know the following:
They were quite willing to move to the outskirts and drive and take the GO train to their jobs. They have a good income. They had an agent. Everything they put an offer in on, they were outbid by several hundred thousand dollars. Happened several times.
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Re: Housing Bust 2017

Post by longinvest »

CROCKD wrote: 22 Dec 2017 15:23 Anecdote.
My son who is an IT exec and my DIL with a supervisory job at the City of Toronto were looking for a house in the spring. They were quite willing to move to the outskirts and drive and take the GO train to their jobs. They have a good income. They had an agent. Everything they put an offer in on, they were outbid by several hundred thousand dollars. Happened several times. With two small children and another one on the way a shoebox in the sky was not an option. Neither was as has been suggested moving to Moose Jaw, Riviere Du Loup, or Radium Lake.
As has been reported by AltaRed, young professionals are leaving GVR in droves owing to house prices. I suspect the growing digital industry in Vancouver will be hard pressed to find workers.
That's a typical case of confusing wants and needs. Others happen to be able to raise their kids in a condo: Why we’re raising our kids in a condo.

If they want something but can't afford it, they'll have to do like the rest of us: find a viable alternative.
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Re: Housing Bust 2017

Post by CROCKD »

They have a viable alternative but I won't be posting anymore about it on this forum populated as it is by people sorely in need of a course in reading and comprehension skills!
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Re: Housing Bust 2017

Post by longinvest »

CROCKD wrote: 26 Dec 2017 19:52 They have a viable alternative but I won't be posting anymore about it on this forum populated as it is by people sorely in need of a course in reading and comprehension skills!
I haven't read all the posts of this thread. I was commenting on the quote picked by ig17.
Last edited by longinvest on 26 Dec 2017 20:00, edited 2 times in total.
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Re: Housing Bust 2017

Post by ig17 »

longinvest wrote: 26 Dec 2017 19:26 Others happen to be able to raise their kids in a condo: Why we’re raising our kids in a condo.

Toronto's shrinking condos
A small fraction of Toronto condos have three bedrooms

Toronto faces shortage of family-friendly condos
The Greater Toronto Area's condominium boom is failing to produce enough larger, family-friendly units to accommodate a coming wave of millennials due to hit prime child-bearing age, a new report warns.

The market for multi-bedroom high-rise units in the Greater Toronto Area is becoming increasingly competitive
in the last 10 years in Toronto, condos have been made up predominantly of one-bedroom units, which won’t come as a surprise to anyone who has recently browsed listings.

From a developer’s point of view, multi-bedroom units are a risk since they have higher price points and therefore a smaller market of buyers. However, that market is becoming more competitive.

ADDED: To be fair, I searched MLS for 3 bedroom condos, priced under 500K, in the area between Oakville and Pickering south of 407. I found about 300 listings. Not sure how to interpret that number. Is it enough supply or not?
Last edited by ig17 on 26 Dec 2017 20:16, edited 1 time in total.
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Re: Housing Bust 2017

Post by longinvest »

ig17 wrote: 26 Dec 2017 20:00 Toronto's shrinking condos
A small fraction of Toronto condos have three bedrooms

Toronto faces shortage of family-friendly condos
The Greater Toronto Area's condominium boom is failing to produce enough larger, family-friendly units to accommodate a coming wave of millennials due to hit prime child-bearing age, a new report warns.

The market for multi-bedroom high-rise units in the Greater Toronto Area is becoming increasingly competitive
in the last 10 years in Toronto, condos have been made up predominantly of one-bedroom units, which won’t come as a surprise to anyone who has recently browsed listings.

From a developer’s point of view, multi-bedroom units are a risk since they have higher price points and therefore a smaller market of buyers. However, that market is becoming more competitive.
So what? When I can't afford something, I don't buy it. Complaining about its price won't make it more affordable.

Life is unfair. I deal with it.
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Re: Housing Bust 2017

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ig17 wrote: 26 Dec 2017 18:50
Mordko wrote: 26 Dec 2017 18:37 I think we are missing the point. That young family with kids HAS to own a HOUSE in downtown Toronto. Nothing else will be good enough.
As expected. You didn't bother to read the original post that introduced the family.

Had you read it, as you plainly haven't, you would know the following:
They were quite willing to move to the outskirts and drive and take the GO train to their jobs. They have a good income. They had an agent. Everything they put an offer in on, they were outbid by several hundred thousand dollars. Happened several times.
I see. The crazy market with houses selling for >100K over asking did happen but only lasted for 1 month (March 2017). Since then house prices dropped. And lately houses have been selling for under the asking price. If your young family thought it was a good idea to make offers in March, they can certainly buy their dream suburban house now for less.

Problem solved.
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Re: Housing Bust 2017

Post by ig17 »

longinvest wrote: 26 Dec 2017 20:15 So what? When I can't afford something, I don't buy it. Complaining about its price won't make it more affordable.

Life is unfair. I deal with it.
I just wanted to point out that your proposed solution may be not as viable as you think it is. That's all.
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Re: Housing Bust 2017

Post by ghariton »

I grew up in an apartment in Montreal. It only had two bedrooms and we were three generations. But it was all we could afford. But that was common back then -- we were a community of immigrants, and had very little money. We didn't see this as a problem.

If we are truly serious about climate change, urban densification will have to be part of the solution. We will be tearing down single family homes in major metropolitan areas, and erecting high-rise apartment buildings instead.

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Re: Housing Bust 2017

Post by BRIAN5000 »

Sometime in about 1980 I was trying to buy a house, prices were moving up $5000 a month. I put in a few offers but nothing over asking not in my nature. I decided I was never going to own a house and got on with my life. Before the end of 1981 I bought my first house, worked a normal 8 hour job and drove the three hours and worked till I dropped each night putting in a basement suite. Having not done this before it took six months. I had the house rented out and tenanted two months before closing, I used my RHOSP, picked up about $7000 (@10%) in government grants. Prices changed and they changed in a hurry your couple should be prepared and ready. I was a single income but had a good job and credit history. I'm working on a solution for my daughter no good ideas yet.
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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Re: Housing Bust 2017

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BRIAN5000 wrote: 26 Dec 2017 21:06 Sometime in about 1980 I was trying to buy a house, prices were moving up $5000 a month.
Yup.

We moved to Ottawa at the end of 1972 and started looking for a house. But the prices went up an average of 25.3 per cent in 1973 and another 21.8 per cent in 1974. I felt we could never afford to buy. But we saved and scraped for two years, and then borrowed from every relative we could, and finally bought a house in 1977. That was the year price increases fell to 4.4 per cent, 3.7 per cent in 1978, and have continued low ever since.
I'm working on a solution for my daughter no good ideas yet.
Lend her the money. That's way more tax efficient than buying a second house yourself and letting her live in it (or investing the money and leaving it to her in your will).

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Re: Housing Bust 2017

Post by ig17 »

ghariton wrote: 26 Dec 2017 22:18
BRIAN5000 wrote: 26 Dec 2017 21:06 Sometime in about 1980 I was trying to buy a house, prices were moving up $5000 a month.
Yup.

We moved to Ottawa at the end of 1972 and started looking for a house. But the prices went up an average of 25.3 per cent in 1973 and another 21.8 per cent in 1974. I felt we could never afford to buy. But we saved and scraped for two years, and then borrowed from every relative we could, and finally bought a house in 1977. That was the year price increases fell to 4.4 per cent, 3.7 per cent in 1978, and have continued low ever since.
To put this anecdote in perspective:

Average house price in Ottawa, 1977: $57,032 (nominal 1977 dollars)

Source
http://www.agentinottawa.com/1956-present-prices.php

Average family income in Canada, 1977: $52,340 (adjusted to inflation up to 1995)

Source
http://www.ccsd.ca/factsheets/fs_avgin.html

To make it an apples to apples comparison, I used Bank of Canada inflation calculator to adjust 1977 house price to 1995 dollars:

$57,032 (1977 dollars) = $144,634.47 (1995 dollars)

Price to income ratio: $144,634 / $52,340 = 2.76

Three times income is generally considered to be an affordable price.

At March 2017 peak, Toronto stood at 11.7 times income. Vancouver: 12.5 times income.

To be fair, price to income ratio tells only half of the story. Debt carrying cost is the other half. Bank rate was around 7.5% - 8% in 1977. It's 1% today.
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Re: Housing Bust 2017

Post by ig17 »

BRIAN5000 wrote: 26 Dec 2017 21:06 I'm working on a solution for my daughter no good ideas yet.
Well, real estate industry is here to help.

Surprise! Realtors want you to be able to raid your RRSP to buy your kid a house

The real estate industry knows buying a home in major cities is becoming prohibitively expensive for many Canadians. So it’s proposing to help. The Canadian Real Estate Association is lobbying the federal government to allow parents to dip into their registered retirement savings accounts to fund their children’s home-ownership dreams.

CREA, which represents more than 100,000 agents, brokers and salespeople, has made a 2018 pre-budget submission proposing changes to the Home Buyers’ Plan (HBP). That program allows a first-time buyer to withdraw up to $25,000 from an RRSP account to purchase or build a home. The realtors’ association suggests expanding the program so that parents can withdraw from their own RRSPs for their children to purchase of a home. Both parents would be eligible to take funds from their accounts, subject to a maximum amount. “Extending the HBP is a compassionate and fiscally responsible way to help modern Canadian families finance the purchase of a home, and also help close the gap for young Canadians,” according to CREA’s submission.
"compassionate" and "fiscally responsible" :evil:
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Re: Housing Bust 2017

Post by longinvest »

ig17 wrote: 26 Dec 2017 23:07
BRIAN5000 wrote: 26 Dec 2017 21:06 I'm working on a solution for my daughter no good ideas yet.
Well, real estate industry is here to help.

Surprise! Realtors want you to be able to raid your RRSP to buy your kid a house

[...]
"compassionate" and "fiscally responsible" :evil:
As if pumping ever more money into real estate wouldn't cause prices to go further up... (Or, maybe because it would! I see the self-serving interest of people paid a commission based on transaction price).
Last edited by longinvest on 27 Dec 2017 00:05, edited 3 times in total.
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Re: Housing Bust 2017

Post by ig17 »

ghariton wrote: 26 Dec 2017 22:18
BRIAN5000 wrote: 26 Dec 2017 21:06 I'm working on a solution for my daughter no good ideas yet.
Lend her the money. That's way more tax efficient than buying a second house yourself and letting her live in it (or investing the money and leaving it to her in your will).

George
Please correct me if I am wrong:

If the child can't service the loan extended by the parents and you don't demand the payments, the loan effectively turns into a gift. Should a divorce happen, half of the loan will be lost to the other partner. It will be too late to demand the repayment at the time of divorce; the court won't honour the request.

(I am starting to think about a solution for my daughter as well)
Just a Guy
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Re: Housing Bust 2017

Post by Just a Guy »

There are people in this world who only ever see the problems, and there are people in this world who look for solutions. I think, by the postings, it's easy to decern which is which.

Those who look for problems will probably find them because that is what they are looking for.

Those who look for solutions will probably find hem because that is what they are looking for.

The one type of person will never understand the other.
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